by Joe Hearn | Dec 26, 2012 | Lifestyle Design
Looking at the glass half full, the world did not come to an end on December 21st. Looking at the glass half empty, no apocalypse meant that my 40th birthday arrived as scheduled on the 22nd. Since I wasn’t otherwise preoccupied with the four horsemen, I had a few extra hours to reflect on the past four decades. Below are 40 things I’ve learned over my first 40 years. They are in no particular order and aren’t necessarily the most important things I’ve learned, just some that came to mind. I gave credit if I could remember where I learned something, but I’m sure there were some that I forgot.
1) Curate your life. Your life will largely be defined by what you let in and what you keep out. Choose everything—friends, hobbies, work, philanthropy, clothes, vacations, meals, gadgets, books, etc.—with a discerning eye. Show me someone with a remarkable life and I’ll show you someone who is a tough curator. For more, read this.
2) The most practical career advice I’ve heard came from Scott Adams, creator of the Dilbert cartoon. He sees two paths to an exceptional career: 1) Be the very best at one specific thing (also known as the Tiger Woods approach) or 2) Be very good (top 25%) at two or more things. By combining these “pretty goods” you eventually create a package that is very rare and likely valuable to a potential employer. The first path is very unlikely for most of us, but the second path is fairly easy and nearly as effective.
3) You are the average of the five people you spend the most time with (hat tip to Jim Rohn). Choose wisely.
4) One of the most important questions you can answer is: “What do I really want out of life?” Once you know the answer, take it very seriously (hat tip to Chris Guillebeau).
5) “What” is an important question, but don’t forget about “Why.” If you don’t have a good answer for “why” you won’t have much success with “what” or “how.” Have a strong “why.”
6) Worrying is a waste of time. Almost everything you worry about (95% +) will never happen. When something worth worrying about does happen, ask yourself “Will this matter in five years?” If the answer is no, then don’t lose much sleep over it.
7) Read. As Twain said, “A man who doesn’t read good books has no advantage over the man who can’t read good books.” The information that you feed yourself is just as important (and has pretty much the same effect) as the food that you feed yourself. Fill yourself with new, interesting and challenging information and you can expect a healthy mind. Fill yourself with the informational equivalent of Twinkies all day and you can expect a mind that is flabby and lethargic.
8) Climb the mountain so you can see the world, not so the world can see you (hat tip to David McCullough Jr.). Don’t go through life treating everything as a potential status update on Facebook.
9) Always be learning something new. A language. An instrument. A skill. A hobby. Challenge yourself. Have fun. Stretch your mind. Read this for more info on how and why to be a lifelong learner.
10) Don’t be afraid to screw up. As Will Rogers said, “Good judgment comes from experience and experience comes from bad judgment.”
11) Dream big. When you dream big, something happens. It changes how you think and how you act. It changes the types of questions you ask. It inspires and changes those around you. Dreaming big has led to things like cures, computers and space travel. Don’t limit yourself to those things that seem “reasonable” or “probable.” Take a risk and dream big.
12) The best parenting advice I’ve heard (hat tip to Stan Parker): Parenting is all about influence and influence is all about relationship. If you want to influence your kids, then you need to be consistently building into your relationship with them.
13) The number one key to success is consistency. Just like money compounds over time, so does effort.
14) Given the choice between spending on “more stuff” and “more experiences” you should almost always choose the experiences. A life spent in dogged pursuit of rich experiences will usually have a much better payoff than one seeking the latest gadget or gizmo.
15) Don’t wait for a roadmap. With most things in life you need to make due with a compass.
16) Don’t be afraid to take risks. “Sometimes all you need is 20 seconds of insane courage. Just literally 20 seconds of embarrassing bravery and I promise you something great will come of it.” Yes, that’s a quote from the movie We Bought a Zoo.
17) When it comes to new obligations, say “yes” slowly and say “no” quickly. When it comes to new adventures, say “yes” quickly and “no” slowly.
18) We are often under the mistaken impression that we can add sin to our life, when in reality we can only trade for it (hat tip to Ken Wytsma). Cheating on your taxes or having an affair are not things that you add to your life. Choosing them will eventually force you to trade something else, like your spouse, kids, character or reputation.
19) If something is on your calendar, it gets done. Don’t just schedule the stuff you have to do. Schedule the fun stuff too and you’ll be much more likely to do it.
20) Respond well. If tragedy strikes, keep your head. If difficult times come or things don’t work out as planned, stay strong. If some jackass builds a bunker and says the world is ending on Tuesday, wish him well and invite him over for dinner on Wednesday.
21) Done is better than perfect.
22) Be a system thinker. Your life is a complex system with lots of different parts. Just like your car couldn’t function without a transmission your life can’t function if there’s a major problem with something like your finances, relationships or health. Each of those parts affects the whole. Handle each area well and the system functions as it should. Handle them poorly and you can expect problems.
23) When things don’t go as expected, don’t be afraid to make changes. As Derek Sivers said, “Success comes from persistently improving and inventing, not from persistently doing what’s not working.”
24) Ever wondered whether or not to take advantage of an opportunity or adventure? Put it to the 50-Year test. Ask yourself, “Will I remember this in 50 years?” If the answer is yes, you should probably do it. I think credit for this one goes to Tyler Tervooren.
25) Work on high priority tasks. Don’t get bogged down with maintenance (e.g. paying bills, worthless meetings, pushing paper). Focus on milestones (e.g. family, relationships, creative projects, meaningful work, education, adventure). When reflecting on your life, the milestones will be the things that stand out. They will be the things that you are most proud of. The maintenance will just fade into the background.
26) Most of what we do is unimportant and doesn’t need to be done. Eighty percent of our results will usually come from 20 percent of our effort (hat tip to Pareto and Tim Ferriss). Simplify as much as possible so you can focus on things that actually produce results.
27) Delayed gratification is overrated (hat tip to Chris Guillebeau). It’s great if it’s allowing you to work toward something, but bad if it’s an excuse that’s keeping you from something. Rather than starting now, we often come up with an excuse and say “Someday.” Unfortunately, the longer you wait, the less you believe yourself when you say “Someday.” Your dreams begin to atrophy. Your opportunities begin to vanish. You aim lower. You talk yourself out of things. Before you know it, it’s too late.
28) Don’t save the best for last. If you retire at 65 and stay healthy and active until 75 (a stretch for many), then you’ve got 10 years to do everything you’ve been putting off for the last 40. Ten years is not enough.
29) For the most part, happiness is a choice.
30) Get out of the lecture and into the lab. It’s easy to talk, speculate and dream. It’s passive. It’s like you’re an attendee at a lecture. Doing is difficult. Doing is getting out of the lecture and into the lab. It’s getting your hands dirty by experimenting and taking action. “Do not be too timid and squeamish about your actions. All life is an experiment. The more experiments you make the better. What if they are a little course, and you may get your coat soiled or torn? What if you do fail, and get fairly rolled in the dirt once or twice? Up again, you shall never be so afraid of a tumble.” (Ralph Waldo Emerson).
31) Focus on things you can control. When you do that, your productivity is high and your stress is low. If you focus on (or spend time thinking about) things you can’t control, your productivity is low and your stress is high. “The more concerned we become over the things we can’t control, the less we will do with the things we can control.” (John Wooden)
32) When making major decisions in life, think about the path that those decisions put you on. That path will likely lead you to some great new opportunities, but it will also lead you away from other opportunities, places, people and experiences. In that way, major decisions are directional and difficult to change. Don’t make them flippantly.
33) While we’re on the topic of decisions, most usually present you with an easy way and a hard way; a wide path and a narrow path. Paradoxically, narrow, difficult decisions that require discipline and sacrifice usually pay off by leading you into a place where the road is wide and our options are plentiful. On the other hand, taking the wide, easy path ends up funneling you down a narrower and narrower chute until all good options are gone and all that is left are painful consequences.
34) Live with a sense of urgency. Someday you’re going to die.
35) “Good” is succeeding at something. “Great” is being able to repeat that over and over.
36) Explore. “The world is a book and those who do not travel read only one page.” (St. Augustine)
37) Solve problems early, when the solutions are usually less painful. To summarize Frank Lloyd Wright, you can solve problems on the drafting board with an eraser, but you need a wrecking ball at the building site.
38) Always look for opportunities to help other people.
39) Be curious. It will lead you to some interesting people, places and experiences.
40) You will be who you are becoming (hat tip to Gavin Johnson). You’re never going to wake up one morning and be something that you haven’t been becoming little by little, day by day, for years. Take a small step today that moves you in the right direction. Then do it again tomorrow and the next day and the next. Before you know it, you’ll wake up one morning and you’ll be the person you’ve been becoming all along.
Do you have any life lessons to add to the list? I’d love to hear them. Just share in the comments section below. Thanks!
~ Joe
by Joe Hearn | Dec 17, 2012 | Asset Allocation, Investing, Retirement
If you work with a financial adviser, it’s a good idea to get together at least annually to review your accounts. As we get ready to transition into a new year and as our government grapples with the issues surrounding the “Fiscal Cliff,” now may be a good time to call your adviser and schedule that meeting. Below are seven questions you can ask to make sure that your retirement planning stays on track.
Are there any actions I need to take before the end of the year? Most of the questions below can wait until next year, but for obvious reasons, you need an answer to this one before December 31. With changes expected to both dividend and capital gains taxes in 2013, review your holdings and ask your adviser what actions, if any, you should be taking before yearend. Also, if you are 70 ½ or older you will likely need to make a Required Minimum Distribution (RMD) from your retirement accounts before the end of the year.
How did my investments perform relative to their peers? It is difficult to gauge performance by returns alone. If your stock mutual fund drops 20 percent does that mean that it’s bad? Not if similar funds dropped 40 percent. When monitoring performance, it’s important to have either a benchmark or peer group that you’re measuring against. Your adviser should be able to review your holdings and see if the managers you’ve hired are earning their fee. If so, great. If not, changes may be in order.
Is my asset allocation still appropriate? Your portfolio is likely made up of a variety of different asset classes such as U.S. stocks, foreign stocks, small cap stocks, government bonds, corporate bonds and municipal bonds. How much you have in each area is referred to as your asset allocation. The balance will vary based on a number of factors such as your age, risk tolerance, goals and outlook for the global economy. As your circumstances change and as market movements alter your allocation, it is important to meet with your adviser and rebalance your holdings to get them back in line.
Is the amount of risk I’m taking still appropriate? Investing too aggressively can result in significant losses to your portfolio. Investing too conservatively can mean that your investments don’t keep pace with inflation. Either of those outcomes will reduce the purchasing power of your money in retirement. Work with your adviser to make sure that the amount of risk you’re taking is still appropriate for your circumstances.
Am I saving enough? There are a number of assumptions that go into calculating how much you need to save in order to retire. Even small errors in those assumptions can have drastic changes in the predicted outcome. Rather than making a plan and then waiting 20 years to see if it works, it’s important to make small adjustments along the way. With each new year, you have new information relating to things like investment returns, savings rates and taxes. It’s important to evaluate that new information and ask your adviser “Based on these new realities, am I still on track to reach my retirement goals.” If the answer is no, talk through any needed changes.
Is my withdrawal rate sustainable? Of course, this question is only appropriate if you’re already retired and drawing income from your portfolio. Running out of money is a major fear for many retirees. To avoid that problem, it is important to have a sustainable withdrawal rate. A suitable rate depends on a number of factors including investment returns, inflation, longevity and even luck. A popular rule of thumb is to limit withdrawal rates to 4 percent, but everyone’s circumstances are different, so work closely with your adviser to make sure your income lasts.
Do you recommend any other changes? A good adviser is realistic and honest. Rather than telling you what you want to hear, he or she is paid to give you straightforward advice that will help you accomplish your goals. Not only that, but a good adviser should be able to look at your total financial picture and offer comprehensive advice. Take advantage of that knowledge and experience and ask what, if any, other changes are necessary.
The annual review is an important element to the client-adviser relationship. It is an ideal time to evaluate performance and make necessary adjustments to help you reach your retirement goals. Pick up the phone and schedule a meeting today so you can start the New Year off right.
~ Joe
I originally published this article at www.fpanet.org.
by Joe Hearn | Dec 7, 2012 | Lifestyle Design, Pursuits
I was looking at my calendar the other day and it’s loaded with things like meetings, lunches, conference calls, article deadlines and doctor/dentist appointments. I put those things on my calendar for one very important reason: If it’s on my calendar, it gets done.
If I schedule a meeting, I’m there five minutes early. If I have a lunch appointment with you, don’t expect to get stood up. If I tell my trainer I’ll be there at 4 o’clock on Monday, Wednesday and Friday, then the gym bag is packed and in the car on those days.
I’m sure I’m not alone in this. Most people are disciplined with the things on their calendar. As I thought about that, it occurred to me: Why don’t we schedule our fun stuff? Too often in life we have hopes, plans and dreams that we want to pursue, but they get crowded out by the tyranny of the urgent. In a cruel bit of cognitive dissonance, we pack our schedules with all the things that we HAVE to do, and then try to fit the things that we WANT to do somewhere in the cracks.
What if you started scheduling the good stuff? What if you actually blocked out time on your calendar for a date night with your spouse, time with your kids, time to read, time to learn a new hobby, time to go for a walk or time to take a trip? My guess is that if it was on your calendar, you’d treat it like all of your other appointments and actually show up to do it. Not only that, but you would gradually get better at using your time to accomplish the things that you wanted to in life, which is a skill that will come in handy during retirement.
Year End Review
While we’re on the topic of using our time wisely, I wanted to point you to a few articles in the Intentional Retirement Archives. As many of you know, I spend time each December thinking about the past year and planning for the next. You can read about the process I use in these two articles:
I’d encourage you to set aside some time this month to think about the coming year. Whether you follow my process or create one of your own, don’t underestimate the importance of planning. The type of life you want to live—one filled with meaning, accomplishment, and purpose—does not happen by accident. You need to be intentional.
Have a great weekend!
~ Joe
by Joe Hearn | Nov 28, 2012 | Happiness, Lifestyle Design, Pursuits, Work
Late last month an advertising executive (a real life Mad Man) named Linds Redding died of esophageal cancer. After being diagnosed in 2011, he would regularly write about the disease, his treatments and his thoughts on life at his blog.
Earlier this year he wrote a post called A Short Lesson in Perspective in which he reflected on how wholeheartedly he had thrown himself into his career over the years. As he rapidly approached the premature end of his life, he wondered aloud if it was worth it.
His insights and conclusions were so raw and honest that I wanted to excerpt a small portion of his post below so that you and I could reflect on our own priorities as we live life and plan for retirement. One day (hopefully not soon) we will be where Linds was when he wrote that essay. How great would it be if we could heed his words of warning so we could look back on our life with pride, satisfaction and few regrets?
A quick note: Linds refers to something called “The Overnight Test.” When creating advertising campaigns, he and his team would often let ideas simmer overnight. If it still seemed like a good idea the next day, they would say that it passed “The Overnight Test.”
From A Short Lesson in Perspective:
“Countless late nights and weekends, holidays, birthdays, school recitals and anniversary dinners were willingly sacrificed at the altar of some intangible but infinitely worthy higher cause. It would all be worth it in the long run…
This was the con. Convincing myself that there was nowhere I’d rather be was just a coping mechanism. I can see that now. It wasn’t really important. Or of any consequence at all really. How could it be? We were just shifting product. Our product, and the clients. Just meeting the quota. Feeding the beast as I called it on my more cynical days.
So was it worth it?
Well of course not. It turns out it was just advertising. There was no higher calling. No ultimate prize. Just a lot of faded, yellowing newsprint, and old video cassettes in an obsolete format I can’t even play any more even if I were interested. Oh yes, and a lot of framed certificates and little gold statuettes. A shit-load of empty Prozac boxes, wine bottles, a lot of grey hair and a tumor of indeterminate dimensions.
It sounds like I’m feeling sorry for myself again. I’m not. It was fun for quite a lot of the time. I was pretty good at it. I met a lot of funny, talented and clever people, got to become an overnight expert in everything from shower-heads to sheep-dip, got to scratch my creative itch on a daily basis, and earned enough money to raise the family which I love, and even see them occasionally.
But what I didn’t do, with the benefit of perspective, is anything of any lasting importance. At least creatively speaking. Economically I probably helped shift some merchandise. Enhanced a few companies bottom lines. Helped make one or two wealthy men a bit wealthier than they already were.
As a life, it all seemed like such a good idea at the time.
But I’m not really sure it passes The Overnight Test.”
by Joe Hearn | Nov 20, 2012 | Retirement, Taxes
Do you keep hearing the phrase “Fiscal Cliff,” but don’t know exactly what it means? Well, get ready to impress your friends at the next cocktail party, because here’s a short cheat sheet on what it is as well as a few thoughts on how it might affect retirees.
The Fiscal Cliff is a combination of tax increases and spending cuts that will automatically occur on December 31 unless Congress and the White House come to some sort of compromise.
The tax increases include:
- An increase in Federal income taxes. We will go from six brackets to five, and the rates will go from 10%, 15%, 25%, 28%, 33% and 35% to 15%, 28%, 31%, 36% and 39.6%.
- The maximum long-term capital gains tax rate will go from 15% to 20%.
- Dividends will go from being the same as long-term gains (usually 15%) to being taxed as ordinary income (up to 39.6%)
- The temporary 2% reduction in the FICA payroll tax will go away.
- Itemized deductions and dependency deductions will be phased out for high wage earners.
- The earned income tax credit, child tax credit and Hope tax credit will revert to their old (and less generous) limits.
- People with student loans will no longer be able to deduct loan interest beyond the first 60 months of repayment.
- Estate and gift tax provisions will change drastically. The amount that can be excluded from an estate will drop from $5.12 million to $1 million and the top tax rate will increase from 35% to 55%.
- The alternative minimum tax (AMT) exemption amounts will fall significantly, subjecting many more people to this tax.
- In addition to the above, high wage earners will see a 0.9% increase in the Medicare portion of their payroll tax as well as a new 3.8% tax on some or all of their net investment income.
The spending cuts include:
- The failure of the “Super Committee” to reach a deal to cut spending in 2011 means across the board cuts will happen automatically in 2013. The cuts will total about $1.2 trillion ($109 billion of that in 2013) and will be spread evenly between defense and non-defense spending.
What this means for you:
There’s good news and bad news if all of these things are allowed to happen. The good news is that, according to the Congressional Budget Office, the deficit will be significantly reduced (i.e. We will go into debt more slowly). The bad news is that the country will likely go back into recession.
I’m assuming that Congress and the White House will come to some sort of agreement to avoid at least some of the things outlined above. That will grab the headlines and cause the markets to rally, but don’t let that obscure the larger point.
Our country has promised and spent far beyond its means for many decades. That cannot go on forever. If you filter out the “noise,” the major themes of the next decade or two will likely be higher taxes, more reserved spending and less generous benefits (think Medicare, Social Security, etc.). That’s not doom and gloom, it’s just reality. Keep that in mind as you plan for retirement and do your best to build a margin of safety into your planning.
~ Joe
Photo by Victoria. Used under Creative Commons License.
