by Joe Hearn | Oct 31, 2012 | Income, Pursuits
Have you ever daydreamed about what you’d do if you won the lottery? Maybe take that trip around the world you’ve always wanted to take. Buy that little red sports car. Retire early.
For some reason, we’re conditioned to think that there isn’t a dream, desire or problem that a seven figure payday couldn’t solve. We’re guilty of this same thinking when it comes to retirement. We have a million things we want to do, but we tell ourselves that we can’t really do them until we’re worth millions.
Well, today is your lucky day, because you just won $10 million in the Intentional Retirement Lottery*. Woo-hoo! Time to call work and tell your boss you won’t be coming in today (or any day for that matter). Go ahead. I’ll wait.
OK, with that pesky day-job out of the way, let’s get down to business. Like most lotteries, we give you the option for a lump-sum payment rather than a lifetime annuity. If you take the lump-sum (which most do), you end up with half of the jackpot amount, which in this case is a cool $5 million.
Of course you need to pay taxes too. Now that you are officially part of the 1 percent, you are in the 35 percent tax bracket (congratulations!). That, combined with a typical state tax of around 5 percent, will lop another 40 percent from your winnings. Painful, but hey, that still leaves you with $3 million.
Of course your extended family is going to come out of the woodwork and want you to spread the wealth a bit. You’ll probably also want to take care of a few of your favorite charities. Drop around $500,000 on those and you end up with $2.5 million in the bank.
Since you just quit your job, you want that money to last. To make sure that happens, I would advise you to take no more than 4 percent per year from your portfolio. That comes out to $100,000 per year. “Hey, wait a minute,” you might be saying. “That’s close to what my spouse and I make right now.”
Exactly. You may not have a seven figure nest egg, but if you make at least $40,000 per year, you have the income that a seven figure nest egg can generate. What’s my point? Don’t use your portfolio as the scapegoat that keeps you from pursuing your goals and dreams.
You likely have the same income now that you’d have if you had millions in the bank. The only difference is in who signs your checks. Said another way, you have the same (or better) income now that you’ll have in retirement. Are you living that way? If not, then maybe—just maybe—money isn’t the key problem after all. Maybe it’s deciding what you really want to do with life and getting intentional about making it happen. Don’t defer the very best until the end. Keep building that portfolio, but until you get there, let your paycheck be your portfolio.
~ Joe
* Not really, but go with me on this one.
Photo by Paul Sapiano. Used under Creative Commons License.
by Joe Hearn | Oct 25, 2012 | Learning Challenge, Lifestyle Design, Pursuits
Before talking about discipline and motivation, I want to give you a quick update on the most recent 30 Day Challenge. As many of you know I do periodic learning challenges in life and then write about them here at the site. So far I’ve learned all the countries of the world, gotten SCUBA certified (followed by some amazing diving in Anguilla) and learned to make croissants with my wife.
My next challenge was to learn how to use a new presentation software called Prezi. I’ve spent some time teaching myself to use it, with mixed results. I have the basics down, but the presentations I have created so far are less than mind blowing. Not only that, but my typical 30 day window has grown to about 90. In today’s post, I go into a few of the reasons why this challenge has been less than successful so far and what key lesson we can learn from my struggles that will apply to any big goals we set in life.
Discipline vs. Motivation
“If you want to build a ship, don’t drum up people together to collect wood and don’t assign them tasks and work, but rather teach them to long for the endless immensity of the sea.” ~ Antoine de Saint-Exupéry
As I thought about my struggles with the most recent challenge, I realized that there was a significant difference between it and the first three: I actually wanted to do the first three! For example, I had a desire to learn to SCUBA dive. I practically skipped to the classes each week. The same is true for the countries and croissants. They were fun, interesting and things I wanted to do. On the other hand, Prezi was something that I felt like I should learn so that I could communicate my ideas more effectively when presenting, but it wasn’t really something that I had a burning desire to do. At the core it came down to a difference between discipline and motivation.
In my mind, discipline is consistently doing what you don’t really want to do, but know that you should. Motivation is being impelled to do something that you actually want to do. One is forced and the other is natural.
Not surprisingly, I feel like we will all have more success in life if we actually focus on the things that we’re motivated to do rather than trying to find the discipline needed to overcome our lack of interest or desire. Sure, there will always be a place for discipline. It will help us eat right and get to the gym. It will help us set aside for the future. But we will be much more effective if we can actually focus our time and efforts on things that we’re already motivated to do.
The more motivation you have, the less discipline you need. The less discipline you need, the more likely it is that you’ll actually stick with it and accomplish what you’re trying to do. So as you think about your own life, don’t litter your day with things that you’re not already motivated to do. Focus on those things that you’re excited about. And if you come across something that you need to do, but you’re not excited about, try to come up with ways to inject motivation instead of just discipline. Find some friends to do it with you. Make it into a contest. Promise yourself some sort of reward. Do that, and you’ll achieve more than if you just rely on willpower alone.
I’ll cue up the next challenge soon, but for now I want to finish up with Prezi. My wife actually just learned to use it for a presentation that she needed to give. I told her that if she teaches me everything she knows I’ll finally get around to that guest bedroom remodeling project I’ve been promising. Hopefully, that will be all the motivation she needs.
How about you? Are you running into roadblocks with your to-do list? That could be a sign that you’re spending too much time focusing on things that you don’t actually want to do. Life is too short for that.
~ Joe
by Joe Hearn | Oct 12, 2012 | Pursuits
Today I have something a little different for you. As you know, a few of the major themes here at Intentional Retirement are to focus on a life full of rich experiences and to always be learning. About a year ago three guys went on a 44 day, 38,000 mile, round the world trip and used the footage from their trip to create three short films encouraging people to move, eat and learn. As we head into the weekend, I thought they’d be a fun reminder to get out there and enjoy the world.
You can’t embed video into these emails, so I put links to each below. They are only about a minute each.
Enjoy!
Move: http://vimeo.com/27246366
Eat: http://vimeo.com/27243869
Learn: http://vimeo.com/27244727
Have a great weekend!
Joe
by Joe Hearn | Oct 5, 2012 | Pursuits, Retirement
We spend a lot of time thinking about how we’re going to retire. “How” is an important question to ask, but don’t forget about “Why.”
If you don’t have a good answer for “Why,” you won’t have much success with “How.” That’s because we’re much more effective at doing things when we have a motivation for doing them. If you asked me to lift up a car to simply test my strength, I wouldn’t even try. If you asked me to lift a car that had rolled onto my daughter, I promise you I’d find a way to get it off the ground.
So as you make those 401(k) contributions, review your quarterly statements and meet with your adviser, don’t forget to ask “Why?” Why are you saving and sacrificing? Is it so you can have more money? Money is the means, not the end. It will enable you to retire, but then what? Why do you want to retire? The stronger your “Why” the more successful your “How.”
How strong is your “Why?”
~ Joe
by Joe Hearn | Sep 18, 2012 | Happiness, Hobbies, Pursuits, Retirement
When I was in college, I rented my body to science so I could have enough money to buy groceries. There was a medical testing facility not far from my apartment and they would pay you around $500 to check in on Friday, check out on Sunday and allow them to test some new wonder drug on you in the interim. I didn’t have much in those years (as you’ve probably already deduced), but I was happy.
After graduating, I was able to leverage my finance degree into a career that no longer required me to spend my weekends subjecting myself to Hunter S. Thompson style pharmacological testing. I got married and moved into a nicer apartment. We eventually moved into a house and continued down the path of pursuing the “American Dream.”
Given that little bit of information, you’d think I would be happier now than I was 20 years ago, but that’s not really the case. I’m happy for sure, but my level of happiness doesn’t seem to have grown in tandem with my standard of living. I was happy then and I’m happy now.
Behavioral psychologists refer to this phenomenon as the hedonic (or happiness) treadmill. It is our tendency to quickly return to a relatively stable level of happiness despite changes to our standard of living. Basically, our expectations rise in tandem with our income. The more we have, the more we think we need.
Because we want to be happy, we (somewhat predictably) deal with the hedonic treadmill by constantly upgrading our “stuff.” We buy the new iPhone, television or car and it makes us happier for awhile, but we eventually get used to those things so we upgrade to the next gadget or gizmo. The more we have, the tougher it is to move the needle on our happiness meter. We run faster and faster without really getting anywhere.
Is there a way to get off the treadmill and actually derive some lasting happiness from the resources that we’ve been blessed with? Yes, according to behavioral finance expert Dan Ariely. “The best way to maximize happiness is to spend money on things you won’t get used to,” he says. Here are three examples:
Travel: I’ve written before that it’s better to spend your retirement dollars on experiences instead of assets. After learning about the hedonic treadmill, I understand why. We quickly get used to stuff, but the happiness that comes from experiences sticks with us long after the stuff has gone to the Goodwill. Travel is a great example of a purchase that has a longer happiness shelf life. As Ariely says: “If you’re deciding between a sofa and a vacation, go for the vacation. You’ll quickly get used to the sofa, but the vacation will bring long-lasting memories.”
Learning: Another way to spend your money on things that result in longer-term happiness is to invest in learning. For example, signing up for tennis lessons or learning to play an instrument will likely yield more lasting happiness than if you spent those same dollars on a new flat-screen T.V. Learning something new will keep you challenged and will give you a sense of accomplishment. It will also give you a skill that will stick with you. If you’ve been around here for awhile, you know that we’re big on learning here at Intentional Retirement. Follow along with our learning challenges or start one of your own to boost your happiness quotient.
Relationships: One of the side effects of a stuff heavy life is less time for your spouse, kids, grandkids and friends. How so? Everything we own requires some of our time and money. Columnist Ellen Goodman described it this way: “Normal is getting dressed in clothes that you buy for work, driving through traffic in a car that you are still paying for, in order to get to the job that you need so you can pay for the clothes, car and the house that you leave empty all day in order to afford to live in it.”
Rather than being a slave to your stuff, focus your time and resources on building relationships instead. Go on regular dates with your spouse. Take the grandkids fishing. Go on a guy’s (or girl’s) trip with your friends. Those things cost money, but they will pay dividends for years to come.
How about you? Are you stuck on the hedonic treadmill? If so, think about how you can start spending your money in ways that will actually bring more lasting happiness.
Joe
Note: See Part 1 of the Happiness Series here.
by Joe Hearn | Aug 30, 2012 | Pursuits, Retirement
A major problem I have with how retirement is currently practiced in America is that it doesn’t give you enough time.
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. To be blunt, 10 years is not enough.
How can we deal with that problem? The most obvious solution is to start retirement sooner. We don’t do this, though, because in our minds we’ve coupled retirement activities with age, work status, and assets. If we haven’t saved enough or we’re still working, then our dreams stay on the drawing board.
I’m putting the finishing touches on a free guide (you’ll be the first to see it) that will show you how to re-imagine retirement and jettison the idea that it can only start after the retirement party. The guide will be ready soon, but for now, I thought I’d point you to a few articles from the IR Archives that address this issue.
We have quite a few new readers since our London Calling article got exposure on the front pages at Yahoo and MarketWatch, so to many of you the above articles will be new. For the rest of you they’re a good reminder.
Spend a few minutes reading them and then ask yourself this question: “What is one thing that I’ve always wanted to do in retirement that I can actually start doing now?” Maybe there’s something you’ve always wanted to learn or a trip you’ve always wanted to take. There are four months left in 2012. Set a goal to do that one thing before we ring in the New Year. Then once you’ve done it, set a goal to do something else. Why save the best things in life until the very end?
~Joe
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