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.
I was driving past a large cornfield the other day—I live in Nebraska after all—and had a few thoughts on sowing and reaping. We’ve all heard the phrase “You reap what you sow.” That’s true, but it doesn’t tell the whole story. Yes, if you plant corn, you’ll get corn. No surprise there. But there’s also an element of time and quantity. Time in the sense that it takes time for the seeds you plant to germinate, grow and yield their crop. Quantity in the sense that you often yield much more than you plant. With corn, for example, 10 pounds of seed typically yields 7,280 pounds (130 bushels per acre) of corn. So we reap what we sow, but it takes time and the output usually exceeds input.
As I’m sure you’ve deduced, I’m not talking about corn. I’m talking about living a secure, purpose filled, meaningful life. You won’t get a crop that you didn’t plant. If you want security and meaning, you need to plant “seeds” that will yield those things. Seeds that yield financial independence. Seeds that yield quality relationships. Seeds that yield a healthy body and mind. Seeds that yield meaningful work. Seeds that yield unique experiences and lifelong learning. Seeds that yield satisfaction, contentment, happiness and fulfillment. And once those seeds are planted, you need to nurture them just like the farmer waters, fertilizes and weeds his crop. And then one day, you will have a bountiful harvest. Some of your crops will mature quickly. Some will take more time. Either way, don’t wait. Start planting today with tomorrow’s harvest in mind.
“It’s an ill wind that doesn’t blow some good.” – Pa Ingalls in Little House on the Prairie
COVID-19 has been a tragedy. There’s no disputing that. Thousands dead. Millions sick. Millions more jobless. It’s hard to overstate the negative impacts of the pandemic. And yet, to paraphrase Pa Ingalls, even terrible situations can produce some good. As difficult as this time has been, I can’t help but think that many of us will look back on it as one of the best things to happen to us. Not in a “I just won the lottery!” sort of way, but in a “Painful, but positive” sort of way. Keep reading to see what I mean and to see how you can make sure that this “ill wind” blows some good for your retirement.
It forces us out of routine. It’s easy to get in a rut. Easy to put life on autopilot and live the same day over and over. Even if we don’t like the rut we’re in, we’ll often stay there because it feels safe. Human nature is such that we will often choose being unhappy over being uncertain. One thing this virus has done in spades is forced us all to live life in a different way. It grabbed the steering wheel and yanked us out of the rut. That’s not necessarily a bad thing. In fact, it’s almost certainly a good thing. It gives us a fresh perspective. It helps time pass more slowly (because routine is the enemy of time). It opens us up to new experiences and new ways of thinking about things. It presents new opportunities. Yes, it brings uncertainty, but hiding in all that uncertainty is opportunity. Look for it.
It forces us to reexamine our priorities. Priorities are the things in life that are most important to us. They are the people, activities or things that we really care about and that bring us meaning. When life is going along swimmingly and we’re healthy and have plenty of time and money, we tend to get lazy. We allow things in that clutter or confuse our priorities. When life gets hard, however, and one or more of our priorities are threatened, it refocuses our mind on what’s important. Hard times force us to cut and say “no.” They force us to get back to the basics. That means a life less cluttered with filler and more focused on the things that bring you joy and meaning. That’s a good thing.
It forces us to think differently about debt. When the economy is strong and interest rates are low, it’s tempting to add debt. You almost feel foolish if you don’t. “One percent interest? Why wouldn’t I buy a $60,000 car?” But when hard times hit, servicing that debt becomes difficult if not impossible. Debt increases risk and reduces cash flow. It adds stress. It can derail your plans and dreams. It weakens your financial “immune system.” The pandemic is a good reminder to use debt sparingly.
It shows the fallacy of “appearances.” On a sunny day, a house built on the sand doesn’t look any different than a house built on rock. But when the storms come, the difference is pretty clear. It’s easy to get caught up in appearances. It’s tempting to keep up with the Jones’s. But even in the best of times, that strategy can be stressful and unfulfilling. In bad times it can be catastrophic. Machiavelli once wrote “The great majority of mankind are satisfied with appearances, as though they were realities.” Don’t be one of those people. Build a life that is happy, secure and fulfilling, not one that only looks good on Instagram.
It exposes our weaknesses. Warren Buffett once said “It’s only when the tide goes out that you learn who has been swimming naked.” There’s nothing like a combination global pandemic + financial crisis to help expose your weaknesses. Too much risk in your investments? Too much debt? No rainy day fund? Strained relationship with your spouse? Underlying health issues you’ve been ignoring? Settling for a life that isn’t what you want? If the tide went out and you find yourself a bit overexposed, maybe it’s time to go shopping for a swimsuit.
One of the most important ingredients to a successful retirement is to decide what you really want out of life and to start taking those things very seriously. COVID-19, while terrible, has likely helped you in that regard by forcing you to reexamine your habits, routines, priorities, purpose, relationships, finances, lifestyle and any number of other things. Embrace that process and you’ll likely come out the other side a stronger, more resilient, more self-aware person.
What are some practical ways to apply all this? I’ll put a few ideas below along with links to articles and resources at Intentional Retirement.