Write It Down!

Write it Down!!

A friend called me up this week and did a better job explaining to me what I am doing better than I could.   He asked what it was like to not go to work, then after the conversation, explained that I am still engaged in work, but in a completely kind of work.  

One thing I learned, but way to late in life, is to set an outcome based goal, write it down, then build the blocks that enable the result.  Sounds simple, but oh my, if you saw the workings inside an executive team, or take any time at all to watch our federal government, you see a host of people who confuse activities with outcomes.   Activities are soundbite items that make you feel good, but rarely deliver a final result.  Outcomes are quite simple; you either did or did not and its easily measured.  You did the work to deliver the result, or need to change.  A buddy who worked with me to implement this system across 9000+ employees explains it like this, using a football analogy:  counting first downs and tackles are activities.   The score on the board is the outcome.

I don’t mean to go on, but let me give you a positive example of an outcome based goal. Each  Christmas you see a story on an elementary school kid who is gathering and refurbishing bikes for poorer children, delivering toys, or giving backpacks with water and essentials to homeless people.   Those kids clearly defined a problem, took action to fix it, and can tell you exactly how many backpacks, etc they delivered.  They can tell you what their goal is for the next season.   Its a rare talent in todays day and age for sure.

Quite simply, for those in the second half of life, say 45 or older,  write some version of this down, filling in the blanks:   I want to work XX more years at my current job.  After that, I want to spend YY years in retirement and I am going to spend $ZZ per year.   You can break down each of those elements to infinite detail, except of course the years, which is a guess on mortality.   Put it down on a ledger, preferably a spread sheet if you can.   The complexity of your model is only limited by your skill set.  I recomend you do this yourself and not trust a Financial Advisor to do it for you.  Only you know about your plans to downsize, your willingness to work part time, and your intuition on how long you might be around.

I have never shared my financial information with anyone outside my spouse and my accountant.  But now its actually quite simple: I want to spend $60K per year for 30 years of retirement for my wife and myself.  It is everything, including taxes, insurance, utilities, food, travel, recreation, health care and medical, and incidental.  It started as a super simple model, but over time I added things like declining spend as I got older, income from downsizing, social security,  passive income from investments, income from rental property, and then looked at gaps I needed to make up through work, sale of personal goods, etc.  

After looking at the data, The biggest gap for me was the spend!  Having money that was replenished regularly at work, it had become too easy to buy this and that, and that extra debt would surely be paid off over time.  Across all income levels, people get confused that things buy happiness, not activities!  

The second biggest gap was health care.  I had heard about it, but doing research, moving from corporate provided health care to privately funded, was a huge shocker.  Due to some on going issues, I had averaged 2 outpatient surgeries and a multiple doc visits per year;  without corporate health care, this was going to be a huge problem.  Medical insurance for two, plus medical bills, was going to exceed $15K per year!

Now for the full disclosure part: I had an advantage that few get to experience.   In my mid 40s, I got to sit with an Oncologist who told me I had some nasty cancer.  At the time, I didn’t care what happened because I had already traveled the world, had a lot of fun, had a family, etc.   When I managed to make it out the other side, my mind set completely changed.   I decided right then than ‘Time is the only Precious Commodity’.    I did not exactly manage expenses for a few years and make the connection that the only purpose of money is to buy time,  but I can tell you the fun level increased exponentially.   I was doing things I used to think I was way to busy to do!  Over time,  I figured out I needed to manage the expense and income side more closely to enable even greater levels of fun.   Today if that Oncologist told me the same thing, I would do two things: kick his ass, and take off on a glorious spending adventure.  The goal statement would be modified to a shorter time and my yearly fun spend would skyrocket!  

I could go into infinite detail on the spend side, but quite simply I will recomend a process.  Challenge everything.  You hear the term Zero Based Budgeting in the corporate world.   This means you have no money, and every time you spend a dollar, it has to be justified.  That may appear extreme, but it is proven to work.   And of course I won’t leave a spend discussion with reminding everyone that there is no tolerance for long term debt in retirement.   

We also talked in an earlier blog about taking your tax strategy seriously. No mutual fund on the planet will ever equate to the amount of money the government would like to harvest from you.  This is a research project all its own, but basically you need to stash every penny you can using available pre tax options, and hopefully find a side hustle where you can put disposable income into something that generates value and reduces your tax burden, and employ any other strategies available.   A friend advised me to consult a Tax Advisor in favor of a CPA.  Wise advice.    

Now that you have a view of expenses, lets look at income.   To generate the income you want, you will need to look at passive income from pre tax and post tax money, income from side hustles like part time work, rentals, small businesses, and any other place you have value stored.  My strong opinion here is to get input from people actually doing this.   References like  Financial Samurai, Van Clan, Coolworks, and many others have tons of valuable info.  People who walked away from a corporate job and turned Side Hustles and passive income into amazing wages are everywhere!   I had a friend tell me his retirement plan was to keep working.  Crazy!  But wait, he is a Philosophy professor with months of vacation, and decent bennys.  I buy it! If you are out there putting in 50-60 hours a week to generate money for another company, you will probably come to a different conclusion!

So what is the lesson here?  Write down your top level outcome goals on spend and income, then build your bottom up execution plan.   Don’t wait for a Financial Advisor to do this for you.  Develop a plan that includes both income from passive investment, side hustles that may include small biz, rentals, or part time jobs, and the cathartic exercise of downsizing your existence.  Of course, the most important lesson is to maximize your time and spend on things you want to do, and minimizing your spend everywhere else.