by Joe Hearn | Dec 4, 2015 | Lifestyle Design, Retirement
When we think about compounding, we often associate it with financial success, but other areas of life—activities, travel, learning, ideas, marriage, friendships, clients, contacts, freedom, health, hobbies, religion—compound in a very similar way. Each time we get a small win in one of these areas, we can put it to work to help us grow and bring on bigger, better wins. It’s like earning interest on our interest, but the payoff is a richer life rather than just a richer portfolio. It’s lifestyle compounding rather than financial compounding.
This is a powerful idea and one you should keep in mind as you plan for retirement. The things you do with your life in the years leading up to retirement can have a huge impact on how rewarding your retirement will be. Why? Because with compounding, the really interesting payoffs come at the end.
That’s why Warren Buffett earned 99% of his wealth after his 50th birthday. Not because he somehow became a better stock picker as he got older, but because that’s when the big dollars started compounding. But he never would have gotten to that point if he hadn’t been a good steward with the small dollars.
He made his first trade at age 11 with about $200. Over time $200 became $400 and then $400 became $800. Pretty soon, thousands became tens of thousands, which became hundreds of thousands, which became millions and eventually billions. When you look at the chain of returns, you realize that the trade that got him from $1 billion to $2 billion wouldn’t have happened without the trade that got him from $10,000 to $20,000. The earlier trades weren’t as interesting because they didn’t have as many zeros, but they were absolutely essential.
Lifestyle Compounding
Since other areas of your life can compound in a similar way, then retirement is a time that can really be exponentially cool—IF—you spend the years leading up to retirement doing the things you need to do to build your “capital” of friends, skills, experiences, self-awareness, etc. Unfortunately, we often get wound up in one or two things at the expense of others during our pre-retirement years. For example, we focus on our stuff at the expense of our relationships or our careers at the expense of our health. We promise to get to the other things “Someday.” Then we get to retirement and rather than getting interesting payoffs in the areas that matter most, we’re stuck getting from 1 to 2, 2 to 4 and so on, without enough runway to get to the really interesting numbers.
This is why I’ve often said that delayed gratification is overrated. Not because I’m impatient, but because I know that if I only start to live when I hit some predetermined age (like 65), it will be like Buffett waiting until his 5th or 6th decade to start investing. He’d still be a brilliant guy, but he would run out of time before the numbers got interesting.
And no, it’s not lost on me that sometimes non-financial compounding is at odds with financial compounding. A dollar spent today on travel or a date night with your spouse is a dollar that you won’t be able to add to your compounding assets tomorrow, but if you spend it wisely, you’ll have something else—experiences, memories, strong relationships, skills, etc.—that will then be able to compound and produce greater and greater returns over time and bring you much meaning, happiness and fulfillment. It’s up to you to find the balance between the financial and non-financial that makes the most sense for your situation. Invest wisely in both.
Seneca once said: “Life is long enough, and it has been given in sufficiently generous measure to allow the accomplishment of the very greatest things if the whole of it is well invested. But when it is squandered…we perceive that it has passed away before we were aware that it was passing.”
Ponder that thought and the aforementioned ideas on lifestyle compounding as you reflect on your past and plan for your future. And if you’d like a little help planning for both the financial and non-financial aspects of retirement, check out The Ideal Retirement Design Guide.
Be Intentional,
Joe
by Joe Hearn | Jun 26, 2015 | Happiness, Health, Lifestyle Design, Retirement
I just finished reading Zen and the Art of Motorcycle Maintenance. It’s a bestselling classic, but I must confess that I wasn’t a huge fan. It did have a few great nuggets that made me think, however, and today I’d like to share a short passage from the book that could have a profound impact on how you approach retirement. Consider it Zen and the Art of Retirement.
In the passage, the main character is talking about the problem of value rigidity, which refers to our tendency to cling to certain preconceived ideas of what’s important and what’s not, even when events or circumstances change. To make matters worse, we sometimes put a high value on things that we shouldn’t and then stubbornly cling to our error. Here’s the text followed by a few takeaways for your life and retirement.
“All kinds of examples from cycle maintenance could be given, but the most striking example of value rigidity I can think of is the old South Indian Monkey Trap, which depends on value rigidity for its effectiveness. The trap consists of a hollowed-out coconut chained to a stake. The coconut has some rice inside which can be grabbed through a small hole. The hole is big enough so that the monkey’s hand can go in, but too small for his fist with rice in it to come out. The monkey reaches in and is suddenly trapped…by nothing more than his own value rigidity. He can’t revalue the rice. He cannot see that freedom without rice is more valuable than capture with it. The villagers are coming to get him and take him away. They’re coming closer — closer! — now! What general advice…not specific advice…but what general advice would you give the poor monkey in circumstances like this?
Well, I think you might say exactly what I’ve been saying about value rigidity, with perhaps a little extra urgency. There is a fact this monkey should know: if he opens his hand he’s free. But how is he going to discover this fact? By removing the value rigidity that rates rice above freedom. How is he going to do that? Well, he should somehow try to slow down deliberately and go over ground that he has been over before and see if things he thought were important really were important and, well, stop yanking and just stare at the coconut for a while. Before long he should get a nibble from a little fact wondering if he is interested in it. He should try to understand this fact not so much in terms of his big problem as for its own sake. That problem may not be as big as he thinks it is. That fact may not be as small as he thinks it is either. That’s about all the general information you can give him.”
Here are three important takeaways from this story:
Sometimes, especially during times of change or major life transitions (e.g. retirement), we need to revalue things so that we can realign our actions and beliefs with our new life. Said another way, the types of things that are important to us in the new life stage are likely different from the things that were important to us during the previous life stage. We need to decide what those new things are and elevate them to their proper position. If we don’t, we’ll cling to things that used to be important to us (e.g. work, certain relationships, houses, how we spend our free time, hometowns, etc.) and our tight grip on those keeps us stuck in the monkey trap, unable to pursue our new plans.
Sometimes holding the tangible thing can cause you to lose the intangible. There’s nothing wrong with having nice things, but everything we own takes some of our time and some of our money. If we focus too much on the tangible (houses, cars, gadgets, etc.), that leaves little time and money left over for the intangible (travel, experiences, hobbies, relationships, pursuits, etc.).
Sometimes we don’t understand how much we value the intangibles until we lose them. I was reading a study recently that listed out the types of things that were important to retirees. Number 1 was financial security (no surprise there). Number 2 was health. In the story above, the monkey got the rice, but it cost him his freedom. I don’t know about you, but I’ve definitely made sacrifices to my health as I pursued wealth (a.k.a. career). I’m sure you have too. We work hard. We’re busy. No time for a healthy lunch. No time to exercise. No time to get enough sleep. We take our health for granted. In our own way, we’re grabbing for the rice, but if we’re not careful it could cost us a major intangible like our health, and consequently our freedom to pursue many of our retirement plans. We may take it for granted now, but it will be sorely missed when it’s gone.
How can we avoid monkey traps?
What that question is really asking is this: How can we tell if we’re hanging on to something trivial at the expense of something important? How can we tell the genuine from the counterfeit? To answer that, let’s look at an example from the Secret Service. In addition to protecting the President, the Secret Service is in charge of protecting against counterfeit currency. When they’re training new agents to recognize counterfeits, they don’t sit them down in a room with a bunch of counterfeit bills and point out the flaws.
Instead they sit them down in a room with currency experts and pristine examples of genuine bills. They go through every detail. Why it’s there. What it represents. How it deters counterfeiters. How difficult it is to reproduce. How to look for it. They learn what the ink looks like. They learn what the paper feels like. They learn what the bill smells like.
By studying what makes a bill genuine, a funny thing happens. Without ever studying the counterfeits, agents can spot them from a mile away because they know what the genuine bills look like. We can do something similar. If we sit down and decide what’s genuinely important to us—what we value above all else—then when imposter opportunities come along, we will be able to recognize them for what they are. Then rather than shoving our hand inside and grabbing for the rice, we’ll keep right on walking because we have a clear idea of what we really want out of life and we’re taking those plans very seriously. If we can all do that, then we’ll be well on our way to an intentional, meaningful retirement.
~ Joe
by Joe Hearn | May 22, 2015 | Lifestyle Design, Pursuits, Retirement
I think it’s fair to say that most of us believe we are rational beings and we make rational decisions. I just finished reading a book, however, that calls that premise into question.
In Predictably Irrational, professor Dan Ariely uses cleverly designed experiments to show time and again that many of the daily decisions we make—from the mundane to the monumental—are completely irrational. His point is that these irrationalities are so systematic and predictable, that we can understand them and then compensate for them so we can make better decisions.
The section of the book that really caught my eye related to the concept of anchoring. Anchoring is our tendency to rely on the first piece of information we are presented with (the “anchor”) when making decisions. As the name implies, the anchor influences all of the related decisions that come after it. If you examine your life—how you spend your money, how you spend your day, where you buy coffee, who you hang out with, how much television you watch—you can likely trace those habits or repetitive behaviors back to some sort of anchor.
What does this have to do with making retirement decisions? Again, our first decisions on a particular matter tend to act as anchors for the subsequent decisions we make in that area. When you enter retirement you make a whole bunch of new decisions. Those decisions—the who, what, where, when and why of retirement—will resonate for years to come. You should be very intentional as you make them. Professor Ariely:
“We should also pay particular attention to the first decision we make in what is going to be a long stream of decisions. When we face such a decision, it might seem to us that this is just one decision, without large consequences; but in fact the power of the first decision can have such a long-lasting effect that it will percolate into our future decisions for years to come. Given this effect, the first decision is crucial, and we should give it an appropriate amount of attention.”
In other words, the first weeks and months of retirement are critical. Many people enter retirement with the best of intentions, but because they don’t understand this concept of anchoring, one of two things happens. First, they are so deeply anchored to previous decisions that when they are confronted with the new paradigm of retirement, they talk themselves out of things, even if it is something that they have been dreaming about for years. For example, “I’d love to travel, but that’s just not me.”
Second, they transition into retirement without a lot of intention or urgency and they assume that they will have plenty of time to figure things out as they go. But while they’re waiting for the dust to settle, they make decisions early on—the first 30 days, 60 days, a year—that end up acting as anchors for years to come and that prevent them from pursuing their ideal retirement. So what are some ways that we can avoid this fate?
Stop. I’ve talked many times before about a “stop doing” list. Never is that list more critical than when you transition into retirement. By cutting out old obligations that are no longer relevant to your new phase of life, you allow yourself space and breathing room to focus on your new pursuits, activities, obligations and commitments and give them the time and attention they deserve.
Shake things up. If you find yourself in a rut and anchored to decades of old habits and routines, it’s helpful to have big, new plans—like moving, traveling, or volunteering—that will force you to steer off the well-worn path you’ve become accustomed to and proactively pursue your new goals. If you don’t have specific new plans, it’s easy to fall into a routine that doesn’t look much different from your working years, save for sleeping in a little bit and having more time to run errands.
Keep a journal. As you transition into retirement, spend a little time at the end of each day journaling. Write about the emotions, feelings, experiences and changes related to the transition. Most of all, write about the decisions you’re confronted with. If you take time at the end of each day to think and write about those decisions in the context of what you want the next 20 or 30 years of your life to look like, then you’ll likely make decisions that put you on the path to where you want to go.
Have a response ready. When you retire, you will be confronted with a number of people and organizations that will want a piece of your newfound time and freedom. Rather than hastily committing to something you might later regret, have a ready response that defers any decision. Here’s the one I suggest: “Thanks for asking. You know, I’m new to this whole retirement thing and I’m still trying to figure out what my schedule will look like, so let me think about it and then I’ll get back to you.” If it isn’t something that fits with your plans, follow up later with a quick call or email to decline.
Remember, the decisions you make in the first weeks and months of retirement will resonate for years. Therefore:
- Have specific plans.
- Be intentional.
- Have a sense of urgency.
- Understand the resistance you’ll feel if your new plans conflict with your old anchors and be prepared to push through it.
- Keep a journal to help you think through your daily decisions
- Cut old commitments that aren’t a fit for your new phase of life
- Be slow to make new commitments.
To all of my readers in the U.S., have a great Memorial Day Weekend! And to those outside the U.S., just have a great weekend. 🙂
~ Joe
by Joe Hearn | Apr 29, 2015 | Happiness, Health, Lifestyle Design
If you’re like me, you want to live a long, healthy life, filled with purpose and surrounded by those you love. What are some practical ways to make that dream a reality?
Best-selling author Dan Buettner, along with a team at National Geographic, think they have the answer. They scoured the world for communities of people that lived longer, healthier lives and then researched those people to determine what they were doing differently than the rest of us. His team came up with 9 key traits.
Move naturally. None of the people studied by Buettner exercised in the way that you and I have come to think of exercise. They didn’t run marathons, lift weights or do CrossFit. Instead they moved naturally. They walked, climbed stairs, gardened and/or road their bike for transportation. Movement was a regular, natural part of their day.
Have a purpose. Apparently, if you have a reason to get out of bed in the morning, you’re much more likely to be alive to get out of bed in the morning. Buettner points out that the people in the Blue Zone of Okinawa Japan have even given this a name. They call it Ikigai. It means “a reason for being” or “a reason for getting out of bed in the morning.” What is your Ikigai?
Find ways to relax and shed stress. Buettner’s researchers found that when you’re in a hurry and stressed, it triggers an inflammatory response in your body. That inflammatory response can lead to all sorts of health problems and diseases. By finding ways to relax and de-stress, Blue Zone people live longer.
Eat less. Those who live longer tend to eat less than the rest of us. Buettner points out that it takes your stomach about 30 minutes to tell your brain that you’re full. Blue Zone people naturally recognize that and stop eating before they’re full. The Japanese even have a name for it: Hara Hachi Bu. It’s a Confucian teaching to stop eating when your belly is 80% full.
Eat more plants and less meat. Blue Zone people aren’t typically vegetarians, but they tend to eat a more plant based diet, especially beans. They eat meat, but usually only 4-5 times per month.
Drink in moderation. Those who drink in moderation tend to outlive teetotalers. The antioxidants and resveratrol in red wine, for example, have been shown to improve artery health and increase good cholesterol (HDL). Consume too much, however, and the negatives outweigh the positives.
Have faith. Buettner and his team found that those who attend some sort of faith based service four times per month tended to live, on average, about 14 years longer than those who didn’t.
Live close to and be committed to loved ones. Blue Zone people tend to live close to their loved ones and they are committed to those relationships. They have a healthy marriage. They keep parents and grandparents close by and they help them as they age. They have their children nearby and have a good relationship with them.
Have a strong social network. Blue Zone people tend to have strong friendships. Not only that, but their friends tend to support healthy behaviors and they are a positive influence—both mentally and physically.
On the surface, Buettner’s research seems like common sense—eat right, get exercise, have friends—but I think that misses the main point. The power of those behaviors only shows up when they become lifestyle habits. The people in the Blue Zones do those things every day for a lifetime. So if you want to gain some of the same benefits (regardless of where you live), consider how you can design your lifestyle, environment and daily life to incorporate those 9 things regularly.
If you want to read more about Blue Zones, Buettner has two books based on his research:
~ Joe
Note: I periodically recommend books to readers and I belong to the Amazon Affiliate Program. That means that, at no additional cost to you, Amazon will pay me a few cents if you purchase a book through one of my links. Obviously I’m not doing that to get rich, but because I believe in the things I recommend. Please don’t buy anything unless it will help you accomplish your goals for a meaningful retirement.
by Joe Hearn | Apr 16, 2015 | Income, Lifestyle Design, Retirement
This week is National Retirement Planning Week, so I thought it would be good to give everyone a quick reminder of what it takes to get ready to retire. Sure, saving enough money is important, but retirement is more than just a math problem. There are plenty of other things involved as well. With that in mind, I made a handy retirement readiness flow chart that will give you an idea if you’re ready to retire or if you still have some work to do. To see the chart, just click on the image below.
If you find yourself on the “No” side of the chart and you’ve still got some work to do, visit the Archives Page where you’ll find dozens of articles on every topic mentioned in the flow chart. A few additional free resources you might find helpful are A Brief Guide to Retirement Bliss and the Financial Checkup Checklist.
Thanks for reading and touch base if I can ever help.
~ Joe
by Joe Hearn | Apr 3, 2015 | Happiness, Lifestyle Design, Retirement
In 8 Habits of Successful Retirees I talked about what actions, habits and behaviors make for a great retirement. But sometimes being successful at something is as much about avoiding the bad as it is about doing the good. With that in mind, here are 5 behaviors that will ruin your retirement.
Poor time management. Legendary basketball coach John Wooden once said “I keep track of minutes like a banker keeps track of money.” He wasn’t just referring to games either. His practices were scheduled down to the minute too. His reasoning was simple. He had 5 two-hour practices each week over the course of a 21 week season to coach his players. That is 210 hours or 12,600 minutes of practice. That time is easy to waste if you’re not very, very intentional. The same is true for your retirement. You will have a very limited time in retirement, even under the best of circumstances. If you’re not careful, it’s easy to waste days, months or even years (See also: The surprising truth about how retirees spend their day). Keep an eye on the clock and be very intentional with your time.
Waiting for permission. Too many of us sit around in life waiting for someone to tell us it’s ok to do something. Call it the inertia of permission. It can kill your retirement. Chances are good that you don’t need anyone’s permission to do what you want in retirement. You’re a responsible adult. You live in a free country. You (hopefully) have financial independence. As long as what you do doesn’t break the law or hurt someone else, just do it. Don’t wait around for someone to give you a green light. You don’t need it. Give yourself permission and get going.
Assuming. We make lots of assumptions. We assume that we won’t develop crippling arthritis in our feet. That we won’t have a heart attack walking to the front door. That we won’t be diagnosed with a life changing illness like cancer or diabetes. That we won’t get divorced. That a friend or loved one won’t die. That we won’t lose our job. Those are all things that haven happened to clients of mine over the last year and when they happened, they wiped out dozens of opportunities from each person’s “To-do” list. If you assume that the opportunities available to you today will also be available to you tomorrow, a year from now or ten years from now, then you’ll tend to put things off. One of the most valuable insights I’ve gained from working with hundreds of retired clients over the years is that these “unexpected” things happen to everyone. Don’t assume that you’ll always have time. Live your life like your opportunities have an expiration date, because they do.
Confusing “Past” you with “Future” you. Retirement should be a time in your life when you do the things that you’ve always dreamed of. For you that might be travel, leisure, adventure, volunteering or learning a new skill or hobby. When given the opportunity to actually do those things, however, people will often talk themselves out of it. They say something like, “I’ve never been one to…” or “That’s not me.” Well guess what. That might not have been you when you were working 60 hours a week and raising 3 kids, but your circumstances have changed. You need to get rid of limiting beliefs and redefine how you see yourself. Maybe you ARE the guy who becomes an expat to Ecuador. Maybe you ARE the lady who takes up skydiving. Maybe you ARE the couple that sells everything and starts a B&B in Oregon. Past you does not equal future you.
Not leveraging the first half against the second half. I have a friend who works at IBM. Early in his career he changed positions within the company as often as possible so that he could get a broad set of skills and experiences. His goal was to take that varied set of skills and experiences from the first half of his career and leverage them into a successful management position during the second half of his career.
We should all be doing something similar in life. By the time you reach retirement you’ll have about sixty years of hard won knowledge, skills, wisdom, insights and experiences. Use those things as leverage to define, shape and create a successful retirement. You know what works and what doesn’t. You know what makes you happy and what doesn’t. You know who matters to you and who doesn’t. Put that knowledge to good use.
Have a great weekend!
~ Joe
Photo by Nick Kelly.
Page 10 of 17
«<...9101112...>» 