I hope your New Year is off to a good start. If you’re like most people, you’ve probably made some goals or resolutions for the year. The sentiment behind resolutions is a good one: How can you become a better version of yourself? The difficulty arises with the follow through. It’s tough to change, create new habits and overcome years of inertia in certain areas of life.
So today I want to give you two simple ideas to help improve your odds of success. I didn’t come up with either idea. I’ve heard versions of each from multiple authors, including Greg McKeown (Essentialism), Jim Collins (Good to Great) and Tim Ferriss (The 4-Hour Workweek). While I didn’t come up with either idea, I’ve used them extensively in my life, to great benefit. And I’m confident you can too.
Idea #1: Focus on your easiest, most valuable problem first.
Progress is hugely motivating. That’s why when paying off debt, financial advisers often recommend that you start with your smallest liability first, pay it off, then roll that payment into your next biggest payment until that is gone and so on. It’s usually referred to as the debt snowball because your momentum builds, just like a snowball rolling down a hill as it gathers snow and speed. This idea of quick progress and increasing momentum can work with pretty much any area. You solve a small problem, which frees up resources and adds motivation. You apply your added resources and motivation to the next biggest problem and so on. Your momentum builds and you eventually start dealing with major problems and making enormous progress. Give it a try.
Idea #2: Look for the one decision that removes hundreds of other decisions.
What decision can you make that, by the simple act of making it, will keep you from having to make tens, hundreds or even thousands of other decisions? Maybe it’s making a decision to downsize or minimize your possessions, thereby eliminating the many inevitable maintenance related tasks and decisions associated with those things. Maybe it’s simplifying and automating your investments so they just happen every month. Maybe it’s making a decision to outsource a particular chore or task. Maybe it’s deciding to give something up, like drinking. Maybe it’s buying a particular tool or piece of technology that simplifies or automates a task. Maybe it’s deciding on a rigid set of rules for potential time wasters like email, meetings or television. Maybe it’s choosing to purge your life of a high maintenance person or time-consuming technology (e.g. social media). Maybe it’s doing a better job at identifying what you want out of life, so you can stop spending so much time and brainpower on things that aren’t important to you. Whatever it is, look for the domino decision that simplifies your life and improves your odds of success.
Two simple ideas, but they can make a huge impact on your life. How could you use them?
Well, it’s December 1st. One month to go in 2021. Just a few busy weeks and then Christmas. And shortly after, New Year’s. And then…2022. Which means (hopefully) another bite at the apple. Another round of birthdays, holidays and vacations. Another opportunity for meaningful pursuits, work and volunteering. Another chance to invest in and spend time with friends and family. How many more chances will we all get? Who knows? I turn 49 later this month. Maybe my turn on this ride will last another year. Maybe another 30 years. Again, who knows?
But, barring something unexpected over the next few weeks, I know that I at least have THIS opportunity. This holiday season. This time with family. This chance to help others. This chance to mend fences. This chance to give generously. This chance to relax and recharge. This chance to reflect on the past year and plan for the new one. I don’t know how many more chances I’ll get, but I have this one. So I’m going to make the most of it. You should too. Make a conscious effort to slow down. Focus on what matters. Be intentional with your time. Reallocate your bandwidth toward the things that matter. Don’t let the season pass in a whirlwind of stress, strife and credit card debt. Who knows how many more chances you’ll have, but you have this chance. Make it count.
Happy weekend! I just posted a few new videos to the Intentional Retirement YouTube channel and wanted to share them with you. They’re just a few minutes each and offer some great insights on how to live an intentional, meaningful retirement.
To watch, just click on the two links below or you can go directly to our channel to see everything available. And please do me a huge favor and click “Subscribe” when you visit our channel. That way you’ll be sure to see the latest content when it’s available and it will help more people find us, because the more that people subscribe and watch, the more YouTube will suggest the videos to others. Thanks a ton. You’re awesome!
YouTube Video #1: Easy choices, hard life. Hard choices, easy life.
In this video I discuss financial decision making and how making disciplined, hard choices can lead you to a place of financial security and abundant options. If you ever wanted a little motivation to swim against the financial mainstream, this video is for you.
YouTube Video #2: Curate your life.
One of the most important jobs at any museum is the Chief Curator. It’s his or her job to choose what goes in and what stays out. In a similar way, you’re the Chief Curator of your life. Your life (and retirement) will be defined by what you let in and what you keep out. So be a tough curator.
Thanks for reading (and watching).
How much does your ideal life cost? Not sure? Don’t feel bad. You’re not alone. I’d be surprised if 1 in 10 people know. Which is unfortunate, because knowing the price of something is usually a prerequisite to buying it. Think of every purchase you’ve ever made. Every car, house, computer, shirt, subscription, meal, concert ticket, vacation and even book. Price was an important data point, no? At some point, you considered the price, weighed it against things like affordability and how bad you wanted that thing and then made the decision to either move along or reach for your wallet. Funding your ideal life is no different. If you want to “buy” it, it’s important to figure out how much it costs. Here’s how.
Step 1: Figure out what you’re spending on your current life.
Begin by listing out your current spending. Feel free to use our budget worksheet. Just go through the categories and write down everything you spend, from your phone bill to your car insurance. And don’t forget about the other side of the ledger. Write in your income sources as well.
Step 2: Figure out what your ideal life looks like.
The next step is to outline what your ideal life looks like. To get started, just write down, in as much detail as possible, what your ideal day (or week or month) would look like. Where do you live? Are you renting or do you own a home? Do you live there year-round? When do you wake up? Who are you with? Does family live nearby? Friends? Are you working? Do you have a car? What types of things are on your agenda? Do you have any hobbies? What kind of pace is important to you? What types of activities do you do in the area where you live? When you travel, where do you go and why (e.g. to see family, to go skiing, etc.)? Do you eat out frequently or mostly at home? How is your health? Do you spend time exercising and being active? What are your sources of income? The goal with this step is to get clarity about what you want your ideal life to look like.
Step 3: Make an “ideal life” budget.
Now it’s time to start making a budget for your ideal life. Some things will be easy. For example, if your ideal house is the one you’re already living in, then you have a pretty good idea of what the costs will be. If, however, your ideal home is a cabin in Montana and you live in Florida, it’s time to get on Zillow and start doing some research. Again, use our budget worksheet to help. How much do you need for your housing? Hobbies? Travel? Insurance? Taxes? Food? Utilities? Be as specific as you can, but also feel free to give yourself an amount for certain categories. For example, rather than detailing every restaurant meal, maybe you prefer to just allot $300 per month to eating out. Look at your ideal life and make a budget that funds it.
Step 4: Compare your ideal life budget to your current life budget.
Now compare your current budget with your ideal life budget. Where do they differ? Are there places you need to trim or eliminate? No need spending money on things that aren’t important to you. Or maybe something needs to get added. Or maybe you see debt payments on your current budget, but in your ideal life you’re debt free. Time to make a plan to get out debt. Budgets reflect priorities. In Step 2, you outlined your priorities. In Step 3, you calculated what they’d cost. Now it’s time to align your spending with your priorities. That likely means change, but it’s good change. You’re moving from imperfect to ideal. You’re becoming who and what you want to be. That should be incredibly motivating.
One thing that might surprise you when you do this exercise is that your ideal life is probably not wildly more expensive than what you’re making and spending right now. It’s just better directed and more intentional. So start bringing things into focus. Cut where you need to cut. Add where you need to add. Set goals for making incremental progress.
Step 5: How much does it take to earn your freedom?
Was there a shortfall between your current and ideal budgets? Maybe your expenses are higher in your ideal budget. Or maybe your income is less, because you don’t plan on working. Regardless of the reason, that shortfall is what you need to make up in order to earn your freedom (a.k.a. doing what you want to do instead of doing what you have to do). If where you are isn’t where you need to be, then you need to make a plan for how to get there. The best way to do that is by creating a detailed financial plan that incorporates all relevant variables (e.g. age, income, spending, life expectancy, taxes, investment returns, market volatility, Social Security, pension, risk tolerance, etc.). That’s a lot of moving parts. Unless you’re capable of doing it yourself, I’d encourage you to find a qualified adviser that you trust. If you don’t have one, feel free to touch base with me. We can chat about your situation and I’ll let you know if I can help.
Alright, time to get out of the lecture and into the lab. Grab a piece of paper and get to work.
When I say the word “freedom,” what do you think of? Freedom of speech? Self-determination? The freedom to choose your own spouse, friends or career path? Or maybe you envision an open road. Or a favorite pastime. Or winning the lottery. Freedom is not just one thing. There are many different types, states and levels of freedom. When it comes to retirement, I think there are five key types of freedom you should strive for. Those are:
Financial Freedom. Things cost money. If you have enough money to pay for the things you want and need, you have financial freedom. You don’t need to be rich, but you need enough money to fund your ideal lifestyle. Obviously, that’s a different amount for everyone. Find out how much it is for you and get to work. Save more. Be a good steward of your resources. Stop spending on things that aren’t important to you. The more financial freedom you have, the less beholden you are to a job or lender and the more flexible you can be in your life decisions. Of course, money won’t solve all your problems, but it will usually solve your money problems (to paraphrase Naval Ravikant). It’s often the table stakes for the other freedoms we’ll discuss below.
Time Freedom. Think of life as a pie chart that is divided between time you control and time controlled by others. The goal is to gradually shrink the piece of the pie that is controlled by others. The smaller that piece becomes, the more time freedom you have. The more time freedom you have, the more retired you are. Be careful, however. The most common way to achieve the money freedom we discussed earlier is to trade your time freedom for it. That can work while you’re building your nest egg, but it’s not a good long-term trade. The goal is not to be cash rich and time poor. That’s just prison with a fancy zip code. The goal is to have financial freedom while simultaneously controlling your time.
Location Freedom. Location independence is a key theme at Intentional Retirement. Being location independent means that you’re not tied to a specific geographic location for work or other reasons. You are free to move about, explore and experience while still staying on top of work or other obligations. Pre-pandemic, this was a rarely used and somewhat radical concept. Post-pandemic, it has become almost normal. We have the tools and technology to facilitate it and fewer gatekeepers telling us no. Location freedom is important for obvious reasons. If the things you have to do are tied to a specific location, they will prevent you from doing the things you want to do that are not. A caged bird isn’t free.
Health Freedom. Think for a minute about how your health can affect your freedom. For starters, getting sick is expensive. Health issues often sabotage your financial freedom and can force you to continue working, which undermines your time freedom. Even worse, being sick or unhealthy will often get in the way of everything else you want to do. I’m sure many of your plans involve some level of activity. The worse your health is, the less you’ll be able to do. Said another way, your health can act as either captor or emancipator. Better health = More freedom.
Lifestyle freedom. Having the first four types of freedom enable you to achieve freedom number five: Lifestyle freedom. This freedom comes from deciding what you really want out of life and having the time, money, independence and health to pursue those things and make them a reality.
How are you doing so far? Any particular area that still needs work? You can do it. Just keep in mind that freedom can be tricky. When you look at the list above, it’s easy to see how acquiring one freedom can cost you another. That’s less than ideal, obviously. Figure out all five and you’ll be well on your way to a remarkable retirement (and life).
The Observer Effect is the tendency for people to change their behavior if they know they’re being watched. The interesting thing about it is that it seems to work even if you’re both the watcher and the watched. In other words, monitoring what you do seems to change what you do. Management guru Peter Drucker said it this way: “What gets measured gets managed.”
Intuitively this makes sense. If you weigh yourself regularly and track what you eat, it will likely impact what and how much you eat. And it works with more than just diet and exercise. It can have a positive impact on your finances and lifestyle as well. What do you think would happen if you started to consistently track what you spend? Or how much you save? Or your progress toward paying off your debt? Or how close you are to your retirement goals? Or how much progress you’re making on that particular hobby. Or how intentional you are with your holidays and time with family?
At Intentional Retirement, we help clients with money and meaning. The money helps them sleep at night. The meaning gives them a reason to get out of bed in the morning. Since those two things are part of our DNA, we’re always looking for ways to not just educate and inform, but to actually prompt people to make positive changes in their lives. We want you to take action. To change for the better. To become the person you want to be. To have a secure, meaningful life doing the things you want with the people you love. The Observer Effect might just help. Give it a try. Start watching yourself. Decide what you want to do or what you want to change and start tracking your progress. I think you’ll find it will help you be more disciplined, focused, consistent and…yes…intentional.