Military Financial Independence

Top Three New USAA Products And Services

Posted on August 27, 2015 by Doug Nordman

It’s been a while since my last post about USAA, and they’ve churned out several new products. Individually they’re impressive enough, and collectively they’re making life easier for members.

Before I dig into that, the Federal Trade Commission wants me to disclose that I have a business relationship with USAA. My spouse and I have used their auto insurance since 1981 (and we recently filed a claim on a hit&run driver). Our daughter joined USAA a few years ago when she bought her first vehicle, and my father has some of his assets in their CDs. (Dad is a 1950s Army draftee, and I signed him up in 2012.) I’ve also been to USAA’s headquarters for three different conferences where they paid for our lodging & food. And last but definitely not least, USAA advertises on this blog. The advertising revenue raises the blog’s value so that I could sell it to the current owner for a very large donation to military-friendly charities.

Let me get right down to USAA’s long-term goals:

The company wants more members (“All who served honorably, and their families”), and
They want to keep their members after their military service.

It’s been nearly 20 years since they expanded their membership eligibility, and the data is conclusive: the newer members are buying more products and services while costing less to take care of. (Some of that is age-related, and technology has given a big boost to member service.) USAA is spending less of our premiums on direct marketing and gaining more paying members through partnerships like the NFL Salute To Service and Hiring Our Heroes. The company is stumbling badly in some areas (business checking) but racking up impressive numbers in others (claims processing, member financial readiness).

I noticed an interesting data point the other week. My spouse and I only carry liability insurance on our vehicles (no collision or comprehensive) and we’ve lived at the same address for 15 years. Unlike USAA’s active-duty members, our driving habits have been relatively constant since we’ve retired. During those 13 years (including a teen driver), our monthly premium has risen from $69.67 to… $70.28. It bounced around in the high $70s for a few months, but overall it’s been remarkably flat for more than a decade. Meanwhile, inflation has risen by 33% over the last 13 years, or an average of 2.2% per year. USAA’s core business– insurance– has held the line on price hikes.

Of course, I’ve paid enough premiums during those years to buy a good used car– yet the point of insurance is protecting yourself against catastrophic risks that could destroy your financial independence. I sure hope I waste several more decades of premiums.

But that’s just one data point for one member. If you’ve had the same policy and coverage for over a decade then I’d love to hear how your premiums have changed.

Let’s move on to USAA’s new products.

Savings Coach

First challenge coming up…

USAA is blatantly pandering to Millennials with a smartphone app that gamifies savings! As silly as it sounds, it works with geezer members too.

This app has been in their Innovation Center for a while, and I saw a beta last fall. They released Savings Coach a couple months ago and it’s free for any member with USAA savings and checking accounts.

In financial terms, it’s designed to monitor the changing balance in your checking account and then suggest places where you could save a little more money.

In gamer terms, the USAA eagle challenges you to cut your expenses and take your savings to the next level for valuable prizes, er, medals.

Last month I opened my first-ever USAA checking and savings accounts. It took about 10 minutes on their website and a few days later I was ready to go. I’d already downloaded the USAA Savings Coach app (it’s also in Android’s Google Play), and the first thing the eagle wanted me to do was the “Pay Yourself First” challenge. We decided that I could afford to transfer $10 every week from checking to savings, and the app set up the automated transfer.

… and build your own.

Next up are the “Coffee Challenge” and the “Pizza Challenge”. You can also build your own challenge by deciding what treat you’re going to skip once in a while to put the savings in your… savings account. Complete your challenges and earn a medal. Your dashboard shows yesterday’s total spending and your average spending, and you can also check your medal count.

Change your daily habits by putting the Savings Coach icon in the space currently occupied by your favorite smartphone game. Play around with the challenges. Gamify your net worth by earning medals. Nobody else has to know what you’re doing– it’s just between you and the app.

You may feel a little goofy about working with an animated eagle, but meanwhile, the app is helping you track your spending and figure out where you’re wasting money. In your spare time, you’re gradually moving money from your checking account (that you’d be tempted to spend) to savings (earning higher interest) and then you can invest it for your financial independence.

How does raising your net worth compare to your latest favorite smartphone game?

Financial Readiness Score

Next up is the Financial Readiness Score. (Sorry, no more animated characters.) It’s a classic financial-planning tool with data boxes for you to fill in your numbers. Depending on how well you already know your financial picture, it takes about 15 minutes to complete the initial data entry.

It pre-fills the screens from your profile, and you can link non-USAA accounts for a consolidated view of your finances. (“Link” means that USAA can log on to your other financial accounts to query the balances, but they can’t touch anything.) The tool quickly populated its spreadsheet with my accounts from Navy Federal Credit Union, Pentagon Federal Credit Union, Fidelity, American Express, Bank of America, and Chase. (It already knew about my USAA accounts.) It can even link to your Thrift Savings Plan account.

In the next few steps, you add information about your household budget and spending. It’s not as detailed as their retirement planner but it looks at how much of your spending is discretionary or debt payments. It also checks your retirement savings by tapping into your USAA retirement planner (if you’ve filled one out) and your other linked accounts.

Another step asks Yes/No questions about your insurance policies, your financial plan, your will, and your healthcare directive.

Then you click on the results button.

Your total score is broken down among those four areas. The heaviest weighting (43%) is having enough insurance (after all, USAA is an insurance company). I only got 28/43 in this section because my spouse and I don’t carry life insurance (a subject for another post) and we have minimal car insurance. I had 24/24 points for savings & retirement. (Whew!) I also scored 13/13 on our financial plan and our legal documents. I squeaked by on the household finances (16/20) because I need to update our budget in the retirement planner.

Best of all, this is not just a feel-good checkup. At the end of the process, you have an action list. You can add the FRS tile to your default “Account View” login page and see it every time you use the site.

In a future post, I’ll do a deeper dive on the FRS and report my progress.

“My Credit Score”

Finally! A credit score without having to jump through hoops!

USAA has rolled out their credit-scoring service over the last few months, so if you’re a member then you may already have seen that tile pop up on your accounts summary page. If you don’t see the tile then go to their “Credit and Identity Monitoring Tools” and sign up for Experian’s free CreditCheck service. (Don’t get suckered into the paid services– “free” is good enough.) It’ll ask you a few questions to confirm your identity (including your Social Security number) and then the tile should pop up in your accounts window.

You need to be a USAA member to sign up for this service, but you don’t need a USAA credit card.

Experian’s CreditCheck VantageScore is different than the FICO score, but it’s the same scale and your credit scores would be within a few points of each other.

The real value of the credit-scoring service is pointing out where you may be helping or hurting your own credit. My score is apparently a few points lower than it could be due to:

“Lack of sufficient credit history on bankcard or revolving accounts”
“Open real estate account balances are too high compared to their original loan amounts”
Very few loans
Too many inquiries

In other words, I tend to close credit-card accounts that I’m not using (especially when their terms change or I encounter bad customer service) and I’m making the minimum payments on my mortgages. I apparently need to have more credit cards (three is “very few”?!?) but I don’t know who’s making the “too many” inquiries.

The algorithm says that my credit score dropped a few points for each issue.

You’ll see what’s affecting your credit score, and you’ll learn how to improve it. This not only affects the amount of money you can borrow and the lender’s interest rate, but it will also affect your insurance premiums and your ability to rent an apartment or a home. Even better, Experian’s system predicts how much you’d be able to improve your score. A few points might be enough to move you from one borrowing category to another and save you a lot of money on interest rates.

My score is what I expected to see: it’s in Experian’s top “Super prime” category, and a lot higher than the Hawaii state average of 689. (Not that I’m hyper-competitive about it.) I could raise my score by opening a few more credit cards (earning tens of thousands of free frequent flyer miles) but I feel that my financial life is already complicated enough. However, I’m going to keep an eye on mortgage rates, because knocking another half-percent off our current interest rates would free up quite a bit more cash.

Experian’s free service also offers a free annual credit report, so that’s one less time you’ll have to visit AnnualCreditReport.com.

A traditional product: member service

Image of 2005 Prius car with collision damage from pickup truck hit&run driver | The-Military-Guide.com

The hit&run destroyed the hatchback latch, too.

Speaking of USAA member services, a couple of months ago our 10-year-old car was rear-ended by a hit&run driver. (Nobody was injured and we’re fine.) We reported the other vehicle’s license plate number to the police to confirm that we’re not at fault for anyone else’s damage.

It cost us $500 of hardware to get the car back on the road. (The cosmetic dents could easily cost another $2000 to hammer out, but we’re not fixing those.) We haven’t carried collision insurance in over 30 years, so we’ve saved more than enough money to pay for a busted hatch latch and a bumper mount. I was very impressed by the USAA mobile app– I was able to notify them of the accident in less than 10 minutes, including iPad photos and a collision diagram. I strongly recommend downloading their mobile app on your smartphone or tablet. I hope you never need to use the claims feature, but if you’re stuck on the side of the road then you’ll probably be able to submit your claim before the tow truck shows up.

I’m returning to USAA next month for DigitalMilEx. If you have questions about the products and services described in this post, I can get the answers directly from the program managers. If you have questions about anything else at USAA, I can research those answers too.

Posted in USAA | 2 Comments

Surprising Secrets Of Slow Travel

Posted on July 30, 2015 by Doug Nordman

Earlier this year my spouse and I spent three months in Spain visiting our daughter. (She’s stationed on a guided missile destroyer in Rota.) It was the longest trip I’ve taken since a 1991 submarine deployment. We roamed all over Andalusia and took hundreds of photos (no selfies!). We really enjoy slow travel and we’re going back at the end of September for another three months.

I learned a few lessons during this trip about financial independence and slow travel.

Military retirement Space A flights

Space A has come a long way in the 25 years since we used to have to show up for every roll call (or else get dropped off the list). Today you can sign up at most passenger terminals by e-mail (retirees get 60 days), which makes it a lot easier to connect to flights. You can check a terminal’s 72-hour departure schedule on Facebook and call in “present” up to 24 hours in advance of the passenger muster. There’s even a long-range schedule that requires a classified login with a Common Access Card. (Thanks for the tip, Keith!).

This means that military retirees can sign up for Space A travel all over the world as early as two months before their roll-call date, and be on the waiting lists at multiple bases before even leaving home. My spouse and I might try to fly Space A to FinCon15 this September, and after that, we’re going to Norfolk or Charleston to hop a military flight to Spain for another 75 days. In early December (before the holiday rush) we’ll hop back to Hawaii. We signed up for these flights in July and we’re tracking the departure Space A seats to figure out the best route.

An image of author Doug Nordman at top of Medina Sidonia Andalucia Spain. | The-Military-Guide.com

A 2000-year view. (Click to enlarge.)

We’re financially independent, and we can add commercial airline tickets to our budget. However, we’ve learned that we prefer Space A even more than first class. We find very little value in flying commercial. We have a flexible schedule, and Space A helps you slow down to appreciate where you are. We really enjoyed hanging out with other servicemembers and retirees during our trips, and you can’t get upset about a flight when it only costs a $6 box lunch.

Maps and smartphones

My spouse and I are great travelers after 35+ years together, but we need to do the next trip with digital maps. If you miss a turn in your car in America, you eventually turn around. If you miss a turn in an Andalusia pueblo blanco then you eventually get stuck going uphill on a one-way street, and suddenly the street becomes too narrow for your car to continue. Impatient Spanish drivers (in small European cars) stack up behind you. Pedestrians offer helpful suggestions. Patrons at sidewalk cafés start taking pictures. Hilarity ensues (NOT) as you try to back down to an intersection for the downhill exit. Let’s not get into how I learned this.

Our digital dashboard map will involve an unlocked GSM iPhone and T-Mobile’s pay-as-you-go service. We’ll get through most of Europe with the same SIM card, but that’s a separate tech thread.

Home maintenance hassles

We had the typical homeowner problems during our trip, but they were amplified by being 8000 miles away. Next time we’re going to empty the fridge and shut if off instead of trying to preserve $50 of groceries. Our housesitter had to deal with a dead 12-volt battery on our Prius.

When we returned home, I was also disappointed to see that our photovoltaic inverter had burned out. It was 10 years old and had paid for itself over five years ago, but we missed out on stockpiling hundreds of kilowatt-hours (~$200) of free solar power with our electric company while we were gone. The new inverter actually cost less inflation-adjusted money for a huge upgrade, and I have to admit that I enjoyed installing it. Once again we’re making our own power.

My biggest frustration, ironically, was our local newspaper publisher. Nothing screams “Burgle me!!” like the Sunday paper sitting on the driveway… on Wednesday evening. I haven’t had a hardcopy subscription since 2001 so that was no problem, right?

Not so fast. For the first time in 14 years, while we were away the Honolulu Star-Advertiser circulation manager “awarded” us an unsolicited free trial subscription. How did they notify us? By a letter, of course, which was added to our pile of mail that was held in the post office for our entire trip. Luckily a neighbor noticed the papers on our driveway (lots of us got the “free” offer) and picked them up on her morning walks. We filled our recycle can with newsprint.

Daily lifestyle changes

It finally happened. After nearly 13 years of retirement, I stopped taking afternoon naps. When you’re out all day seeing the world, you’re not going to indulge in a post-lunch snooze. Not even when you’re in the country that invested the siesta.

The first few weeks were a bit of a struggle. I needed more than my share of cafés con leche at lunch, and some late afternoons I’d nod off in a recliner. My body gradually made the change, though, and now I get a solid seven hours at night without waking up halfway through. I’m much more productive during the day, especially when lunch has more protein. But at home, I can still take a nap if I don’t get a good night’s sleep.

Speaking of newspapers, while we were in Spain I went on a daily low-information diet. It seemed pointless to spend mornings catching up on the Business Week or Reuters websites when the whole Iberian peninsula was just begging to be explored. I’ve been home for three months yet my only hard “news” comes from Twitter and Facebook. I no longer go down media rabbit holes for hours.

I’ve stopped balancing my checkbook

I’m going to express some fairly radical financial thoughts here. This could be heresy.

If you’re just starting your career, or if you’re still saving for financial independence, then don’t do this. (Not yet!) If you’re financially independent, though, you’ll consider new habits. Maybe one of those habits will be less financial tracking.

When the value of your brokerage account is rising, your net worth is also rising. You just rebalance your asset allocation and minimize the index fund expenses. But when you’re retired and your checking account keeps rising, that means you’re spending less than you forecast. If that happens almost every month in retirement then you might stop tracking every dollar.

Let me put this in perspective. I opened my first checking account in 1978 and balanced it every month for over 36 years. I did that even when I was deployed for six months (or underwater on a 90-day submarine patrol) and I had to wait for the statements to catch up to me. In 1992 I upgraded from a ballpoint pen to Quicken. In the early 2000s, I went online and stopped the paper statements, but I still reconciled the Quicken register.

Balancing my checkbook in Spain would’ve been a hassle. (I travel with an iPad, and Quicken for iOS is awful.) I decided that I’d rather enjoy family time so… I skipped a few months on the checkbook. We’ve been back home for three months and I haven’t bothered to catch up on the register.

I still check the activity in my account. In Spain, I used my credit union’s mobile app to make sure that the bills were paid. Now that I’m back on Oahu, I still log in a couple of times a month to check the transactions or transfer money to our investment portfolio. But I’m not downloading or reconciling or categorizing or balancing.

I’ve taken it even further: I hardly use Quicken at all. I’m still entering the (tax-deductible) expenses for our rental property, and I’m still logging major purchases in case someday we wonder “When did we buy that?” But I’ve stopped tracking every dollar of spending.

That’s a humongous change for a submariner. I used to enter every penny, and after 22 years of Quicken, our database has over 150,000 transactions. During the 1990s I knew how much spare change was in my pocket just by looking at our the register’s cash balance. Yeah, I’m a nuke.

I still have binders full of annual expense summaries and detailed comparisons of spending versus budget. I’ve stopped updating all of that, and in a few years, we’ll probably shred most of it. It certainly served its purpose, but there’s no longer a need to hang on to it.

“Well, this is awkward.”

Dropping track on spending seems a little hypocritical, doesn’t it? After all, my first piece of advice on the blog’s “Start here!” page is “Track your spending”. It’s the only way I’ll know whether I’m wasting money and reaching my goal of financial independence. It’s the only way I can monitor a safe withdrawal rate and make sure that our assets last longer than we do, right?

Maybe not.

You still have to track your spending when you start saving and investing for financial independence. It’s the only way to line up your spending with your values. Tracking is also important right after you stop working and begin withdrawing from your portfolio to pay your expenses. You have to pick a safe withdrawal rate (however you decide on that) and make sure that your portfolio will survive the risks. One of those issues is the “sequence of returns” risk of bear markets and recessions. That makes the first decade of retirement the most susceptible time for portfolio depletion.

But I’ve been financially independent for over 13 years. Our high-equity portfolio has been volatile (especially during the Great Recession) yet overall it’s risen faster than inflation. More importantly, our cash flow has risen too. That’s a pretty important point, and it’s taken me a few years to appreciate it. I didn’t really think about it until our Spain trip.

When my active-duty pension started in 2002, our withdrawals were barely within the 4% rule. Our daughter was nine years old and we were still contributing to her college fund. We were carrying a 30-year home mortgage at 8% annual interest (!) and our rental property had poor cash flow. We had a lot of home improvement to catch up on.

But over the next 13 years, our expenses dropped and our income rose.

Our daughter has launched her military career and she’s off our payroll. We refinanced our mortgage to 3.625% and its payment is 40% lower. (I’ll pay it off in 2040, just before my 80^th birthday.) Our rental property now has reliable cash flow (with a vacancy rate under 3%). The COLA on my military pension has risen over 28% while our spending has declined. The dividends on our equities have risen faster than inflation (as they’re supposed to do). We’ve spent a staggering sum on home improvement during the last decade, but we did lots of sweat equity and our home’s value has risen more than we’ve spent on it.

Maybe someday I’ll start tracking every dollar of spending again. Maybe I’ll archive our Quicken history and start a clean database. But first, let’s travel some more.

Minor travel problems.

We had the usual logistics issues, but they’re exacerbated (and exasperating) by middle age. I managed to break a pair of reading glasses during the very first week, and they’re surprisingly expensive in Spain. I packed a 90-day supply of disposable contact lenses, cleaning fluid, vitamins, and Ibuprofen– but at least we didn’t have to haul it home. It turns out that I need to keep a magnifying lens handy around the house and hotel rooms, too.

I needed to pack more business cards and copies of the book! I gave away a few copies (you can now find “The Military Guide” at the Rota naval base library) and I sold even more.

My iPad is a marginal blogger tool. After a half-dozen trips I’ve concluded that posting to a blog from the road requires a laptop (or an Internet café). An iPad is a great tool for writing and browsing, but it’s borderline useless at formatting WordPress posts. WordPress for iOS is buggy, unreliable, and slow– and Safari ain’t much fun either. Posting photos to Facebook went fine, but I’m still seeking good image-editing apps for sizing photos and creating Pinterest pins. iPad audio and video are also good enough for chats but not for a media event. During our next trip, I’ll load up the blog posts before we fly and then stick to Facebook updates. I won’t guest on podcasts or record video while I’m away from home, either.

Maybe a (used) Macbook Air will solve these problems. I’m skeptical.

Paperwork

When you travel from January to April, tax returns are a challenge. I filed for extensions and my advance payments were surprisingly accurate. I sent in my father’s conservator report for the probate court before we left home, and then I (in Spain) had to pester their clerk (in Denver) until it was approved. (The probate court only responds by postal mail and support calls.) I had my Dad’s financial records with me if I needed them but I’m relieved that the court didn’t ask me to resubmit anything. My new conservator appointment letter was waiting for me in the mail when we returned to Hawaii.

Credit cards were flawless. I used a Chase Visa (no currency transaction fees) and paid in euros. I also earned frequent-flyer miles on my charges, but that loses relevance when you’re traveling on Space A military flights. (Chase wants $395 to renew the card at the end of the year, but if they don’t waive that then I’ll close it and shift to another no-transaction-fee card. *) I had a USAA chip&PIN Mastercard (with currency transaction fees) for backup but I never needed it. I also used my NFCU card at a couple of ATMs (with a 1% fee) but I only spent cash for taxis.

My biggest paperwork problem? My passport expires in 10 months. When we return from Spain this December I’ll have to hustle to get a new passport before our 2016 trips. The rest of Europe awaits, and we should enjoy travel while we’re mobile.

However, one of the best parts of travel is still coming home and relaxing for a few weeks of surfing while planning the next trip. We tremendously enjoyed ourselves in Spain, but Hawaii no ka oi!

*[March 2016 update: USAA has just eliminated the foreign transaction fee on all of their credit cards (including vets and retirees, not just active-duty servicemembers), so we’ve closed the Chase account and we’re going to use our USAA card on overseas travel from now on.]

Posted in Travel | 4 Comments

Finding Your Military Work-Life Balance

Posted on July 9, 2015 by Doug Nordman

[February 2019 update: My friend retired a few months ago. There’s way less stress and they’re much happier. They’re working on their health with a new energy, yet their advice is the same.]

I answer a lot of reader questions here, and I also get good advice. Today’s guidance comes from a friend I’ve known for decades.

“Unlike you I decided to make my government pension my primary means of retirement, with O-6 and 30 years as my goal. Ironically I ended up making flag officer but what I didn’t count on is the impact that stress and a sedentary life would yield. Now I have emerging health problems that may be unresolvable. (Hypertension is one of my new chronic diseases.) This sort of dampens the retirement plan. I’m thinking my major focus will be on health and an exit plan– maybe in two years if I can swing it.

“By the way I tell your story to my children. At the end of the day life is about, well, enjoying life. Sitting behind a computer at the beck and call of the bosses is not my idea of the stress-free life I was hoping to achieve.

“Please let your readers know that rank does not equal quality of life. Quality of life is the absence of insane stressors and enjoying life while you have health to do so. While I’m fairly certain I could retire and be a professor or an administrator, I think retiring and teaching kayak lessons is more my speed.”

Financial Independence Gives You Choices.

When you reach financial independence, you can choose the life you want to live. You could simply stop working for a paycheck and surf all day, of course. You could spend more time with family, develop your entrepreneurial side-hustle projects, or travel the world a few months at a time. You can also seek out fulfilling work. You can stay on active duty, or transfer to the Reserves/National Guard, or you can retire from the military to start a bridge career.

Photo of man working hard and pausing to wipe off sweat | The-Military-Guide.com

“Hang in there”?

Personally, I learned that you should not grimly clench your jaw and hang on for the pension. It may seem like the simplest answer, especially when you haven’t made the time to learn about the alternatives.

Staying on active duty may seem like the only way to take care of yourself and your family, especially if your frequent transfers mean that you have the household’s only paycheck. If you’re handicapped by ignorance and fear then the status quo (with stubborn perseverance) may seem to be the only option.

My friend’s situation can happen all too easily. When I was nearing the end of my active duty, during a routine physical exam the corpsman suggested that I might want to take a look at my blood pressure. A dentist noted that I’d been grinding my teeth enough to show signs of excessive wear. At physical fitness tests, I was above the height/weight tables (my thick Navy neck helped me stay within the bodyfat limits). I had minor headaches and occasional allergy flare-ups. I had a history of respiratory infections that often deteriorated into ear infections, bronchitis, and occasionally pneumonia.

When these warning signs came up I wasn’t on sea duty or at a high-pressure staff job– I was teaching at a submarine training command. I had two great COs and two outstanding XOs. I worked with over 40 of the best instructors I’ve ever seen (many of whom I still keep in touch with 15 years later). I was enjoying the aloha spirit in Hawaii.

I had everything that Malcolm Gladwell says we should have in our careers: fulfillment, complexity, and autonomy. Compared to my other submarine duty stations, my work stress was so far down the bell curve that I could hardly believe I was still earning submarine pay.

It might have been lower stress than I was accustomed to, but it was still too much.

I was not living a sedentary lifestyle, either. I was bicycling a 24-mile commute more often than I was driving it. (Yes, I kept track of the mileage!) I was running on the days that I didn’t cycle, and I was working out on the weights almost every day. My daughter and I were training in martial arts.

I never figured out why my health was getting worse. I just gritted my teeth, tightened my grip, sucked it up, <insert military metaphor here>, and persevered as only servicemembers can.

Ironically while I was teaching submariners how to operate nuclear reactors within their safety limits, I was pushing my personal physical limits. A few months before I retired, a doctor threatened to put me on blood-pressure medication.

In hindsight, the really interesting changes came when I began terminal leave. For the first couple of months, if I took a “nap” then I’d sleep for 2-3 hours. My jaws stopped being sore and my headaches gradually disappeared. The allergy attacks and ear infections stopped.

During the first year of retirement, I dropped 10 pounds. More importantly, I exchanged another 10 pounds of fat for muscle. I lost several inches on my waist and added four inches of surfing muscles to my chest & shoulders. My old pants, shirts, and suitcoats didn’t fit anymore so I donated them to Goodwill.

My blood pressure dropped 30 points after retirement, and it’s still dropping. Today, even with white coat syndrome my BP is a little below normal.

When you’re in your 20s and 30s (especially when you’re in the military) then you learn to tolerate high levels of stress– both acute and chronic. However, as your body ages, you gradually lose the excess physical capacity that gave you a margin of safety between “stress” and “physical damage”. In your 40s you might be more accustomed to chronic stress than you were in your 20s, but your body struggles to keep up with the repairs. In my 50s, I’m keenly aware that I start each day with a certain energy level from my sleep, exercise, and diet. My recovery takes nearly twice as long as it used to. If I push too hard and use up too much of my daily energy– whether it’s surfing or working on other issues– then my body can’t recover overnight anymore. I’m still searching for the magic talismans that will help me raise my energy and level up my game, but the margins are getting thinner.

How Can You Avoid Stress Health Problems?

First, save and invest for financial independence. It’s not just for years from now. It’s going to give you peace of mind today. When your career derails or there’s a family crisis, you won’t be crippled by student loans and consumer debt. You’ll handle the problems better because you have an emergency fund and your net worth is high enough to survive the transition.

Next, stay in shape. (If you don’t then I’m sure the chain of command will be happy to help.) The habits and discipline that you learn in the military will not only improve your financial and physical condition, but they’ll help you maintain it for the rest of your life. This is simple but not easy, and you have to make the time for it. That time investment pays off in your 40s and 50s when you notice that some of your classmates are dealing with lifestyle diseases.

Finally, be aware of your work-life balance. Understand that it may change when you get married (or divorced), start a family, have a health crisis, or help support aging elders. The graph is never a flat line but rather a series of curves.

What About the Work Part of Work-Life Balance?

Stay on active duty as long as you’re having fun. (Check with Malcolm Gladwell on your fulfillment, complexity, and autonomy.) When the fun stops, it’s time for you to think about leaving active duty. For most servicemembers that could be drilling with the Reserves or National Guard until you qualify for a military pension. For some, it might mean going completely civilian (or in the IRR for a year or two) and continuing to save your own retirement assets.

This means you’ll have to learn about the Reserve/Guard, and you’ll have to keep track of how your military skills will translate to a civilian career. Hundreds of readers have told me about their transitions, and I know that employers want your military skills. When you’re saving and investing for financial independence, you’ll be a lot less worried about moving to the Reserve/Guard and civilian careers.

How will you know when the fun stops? I’m pretty sure that you’ll recognize it when you see it, even if you’re as stubborn as I was. Your body (and your physical, mental, and psychological health) will let you know how it feels about the situation. Don’t just clench your jaws and keep going. Pay attention to the symptoms and be ready to make changes.

My friend and I will be happy that you’re taking care of yourself.

Posted in Career | 5 Comments

“The Military Guide” Sales Update (The GSA Schedule Rocks!)

Posted on May 14, 2015 by Doug Nordman

This update took a few extra months to put together. It’s even more outdated than usual.

When I talk about book sales with my writing friends, I get confused looks and pitying smiles. Most of them have self-published their manuscripts as eBooks, or used a service like Amazon’s CreateSpace for both hardcopy and eBooks. They can see their sales reports 24/7, and big companies like Amazon update them nearly in real time. We share our tactics for using sales data in our marketing campaigns, but my data is almost useless by comparison.

Image of The Caxton Celebration with William Caxton showing specimens of his printing to King Edward IV and his Queen | The-Military-Guide.com

How hardcopy publishing feels today.

I might be one of the last dinosaurs woolly mammoths to use old-school royalty reports. So first I’ll talk about the royalty process for a traditional hardcopy publisher.

This post is full of advice for writers and bloggers, but not much military personal finance. If you just want to see the numbers then skip down to the end of the post.

Old-school publishing

I get the royalty payments twice per year. The first sales period is May-October and the second is November-April. After each period ends, the publisher (by contract) has another 60 days to gather the data and do the accounting. This allows the retail stores to report their sales (or to return unsold copies) to the distributor, and then the distributor sends a consolidated report (with a payment) to the publisher. This means that by the time the publisher is ready to send out a royalty payment, the data is already at least two months old.

My payments arrive during the first weeks of January and July. They’re literally sent through the postal mail in an envelope with a paper check (!) and a one-page printout of the sales data. My first action is to deposit the check via my credit union’s iPad app, and it takes less time to clear the banking system than it did to move through the U.S. mail. After that, I electronically transfer the funds to Wounded Warrior Project and Fisher House through Fidelity’s Charitable Gift Fund.

Then I sit down with the printout to write this post. The numbers are broken down among:

hardcopy sales through retail stores and websites,
hardcopy sales directly from the publisher’s website,
eBooks sales through Amazon and other sites, and
pocket guides sold by the publisher.

Impact Publications is smart and efficient. (They have to be– all the inefficient publishers were killed off by Amazon a decade ago.) However, the reporting process still uses old e-commerce systems (and even e-mail) to compile the summaries. Some databases use codes instead of actual numbers (reporting “100 copies” as “1 unit”) and numbers get transposed when the data is transcribed. Multiply this by the hundreds of titles in Impact’s catalog, and nobody there has the time to sit down with each individual report to analyze whether the data makes sense.

But I have the time.

As royalty reports go, this is a good one. (See the table down below.) Book sales and eBook sales both went up. But pocket guide sales were a puzzling number: “5”. Five?!? Nobody orders just five pocket guides during a six-month period, especially not when they can get bulk discounts.

So I heaved a heavy sigh (again) and sent an e-mail to the publisher. A few weeks later the accountant finished the forensic analysis, untangled the database errors, and re-issued the report. (Oh, and they sent along a second check too!) By this time I was in Spain (visiting my daughter) so the updated report (and check!) were waiting for me in the postal mail pile that I picked up last month.

By now you writers are ready to use electronic publishers, and it’s hard to disagree with that.

However, Impact Publications has turned out to be a Very Good Thing with The Military Guide for three reasons:

the pocket guides,
the publisher’s catalogs, and
the GSA schedule.

Writers, read on and see whether you’d like to try this with your next book.

Pocket guides

The pocket guides are an Impact innovation. At just 4″x6″ and only 64 pages, they’re an abridged book without the checklists or the personal stories. (It was extraordinarily painful to edit 200+ pages down to the pocket-guide format.) They’re cheap to print great freebies to hand out at military family support centers, financial seminars, and even job fairs.

Impact sells nearly two dozen different pocket guides. They’re little tastes of what you could get from the full buffet. After you’ve read one, you’re ready to order the whole book.

Impact Publications catalogs

Instead of randomly shotgunning catalogs to readers across the nation, Impact markets to military-friendly “retailers”: military family support centers, VA offices, state veterans’ bureaus, and even veteran’s advocacy groups. These people all have computers and Internet access, too, but if you’re sitting in an office and a catalog lands on your desk (instead of your home mailbox) then you’re more likely to skim it before someone else takes borrows it.

We’ve also sold a ton of pocket guides to military commands. If you’re a leader or a command financial specialist, it only costs a few bucks to get these pocket guides in the hands of your troops. Of course you’d prefer to use command funds, but for the price of just one liberty night you can help 50 servicemembers raise their financial literacy. It’s a quick shot of virtual financial training without having to haul everyone into a classroom.

The GSA schedule

This is the holy grail of government publishing. When you get your book onto the GSA catalog, it’s considered official merchandise sanctioned by the bureaucracy for you to spend their money. A big mahalo nui loa to Carl Savino of the “Corporate Gray” empire for shepherding this project and including the Military Pocket Guide to Financial Independence and Retirement.

Once the pocket guide showed up on the GSA schedule, it became a lot easier to order– and commands bought over a thousand copies in the next few months. We haven’t seen a spike like that since the first printing.

Take a look at GSAadvantage.gov Contract Number GS-02F-0146X. You’ll find the pocket guide and the book at great discounts for command funds.

If you end up using your own funds, contact me or the publisher for your personal bulk discount. Of course you can still buy a Kindle version direct from Amazon.

The sales numbers

Over the six months through the end of last October, we sold 344 books, 79 Kindle versions, and 1002 pocket guides. It’s the best sales period since the first edition came out!

Date	Paperback	Kindle	Pocket	Royalties
Jun-Oct 2011	599	6	2929	$1136.15
Nov 11-Apr 12	232	35	232	$524.59
May-Oct 2012	97	96	228	$264.55
Nov 12-Apr 13	26	50	150	$145.48
May-Oct 2013	332	64	200	$231.50
Nov 13-Apr 14	118	55	20	$197.27
May-Oct 2014	344	79	1002	$501.87
Totals	1748	385	4761	$3001.41

Adding all the royalties together, along with the blog income and the funds from the sale of the site, we’ve donated nearly $11,000 to Wounded Warrior Project and Fisher House. Thanks again!

[earnist ref=”the-military-guide-to-financial-independence” id=”70177″]

Posted in Entrepreneurship | 2 Comments

Stay For 30 Or Retire At 27?

Posted on April 30, 2015 by Doug Nordman

Last month I had a 2400-word e-mail conversation about financial independence. A reader asked:

“I’m on active duty and struggling with the idea of getting out at 27 years to start a bridge career. If I wait three more years to get my full 30, the longevity pay raise and my extra years of service mean that my pension would be 15% higher. If l get out at a full 30 years I’ll be 58 years old. I have a better opportunity now to get what seems to be a great civilian job. The money will be good and I’ll be able to contribute to another 401(k) but I’ll still be taxed heavily. I’ve saved a few hundred thousand over the years.

Is is it better just to stay the extra three years to get the full 30 or break ranks now to start the bridge career? Very interested in your thoughts.”

Every retirement plan has several moving parts. The more of them that you control, the happier you’ll be. I just turned 54 years old so I keenly appreciate this situation. I’m going to focus on the lifestyle issues before I get around to the financials, and then I’m going to conclude with more lifestyle recommendations.

Lifestyle

I frequently hear from active-duty servicemembers who’ve been given an “unrefuseable offer” from the assignment officer. Their only other option is to retire (before they’re really ready) or even resign for the Reserve/Guard. If you’re having fun and you think that you (and your family) will be treated fairly well for the next few years, then I’d keep going to 30.

Image of a road sign with two directions | The-Military-Guide.com

Looking back, how will you feel?

If the fun is dwindling (or if your family is tired of the transfers) then it’s time to retire. For some servicemembers that epiphany is a blinding flash of the obvious, and for others, it’s decided over several months of conversations with family & friends. For a few parents, it’s their teen in high school who would mutiny and find a foster family rather than move to a new school.

In these situations, I suggest retiring now instead of 30 because of the mental, emotional, and physical stress on you and your family— in both military and civilian careers.

I hear many stories about servicemembers & civilians struggling with high blood pressure, weight, stress headaches, and more medical issues. When they retire (and remove the stress), suddenly their BP drops 40 points and they drop 20 pounds without even trying.

If you grimly clench your jaw and hang on for another three years for an extra 15% pension, you would not feel that it’s worth it. Even worse, while you’re hanging on you might have a health emergency (or a family crisis) with long-lasting repercussions.

Before retirement, everyone worries about what they’ll do all day. Six months after retirement they’re all wondering what the heck they were worried about. Ernie Zelinski’s “Get-A-Life Tree” is a great thought-provoking way to rediscover the interests that will keep you going for years.

One of my good friends used to worry about how he’d spend his time after active duty. He’s now a military retiree who’s worked a bridge career for the last three years because he was concerned about how he’d fill his days without a job. However, during those three years, he’s realized that the job is interfering with his retiree lifestyle. The months of his bridge career have given him the time (and self-confidence) to figure out what he wants to do all day.

Commitment and Service

Once you retire from active duty (at 27 years or at 30), you could consider part-time and consulting work instead of leaping right into another full-time job. When you have time & energy to pursue your interests, the money frequently follows. These part-time jobs rarely show up in the hiring manager’s databases, but you’ll develop an extensive contact network.

Some occupations (doctors, lawyers, university professors, serial entrepreneurs) have little reason to stop working– they’re doing what they love and they don’t want to stop.

However, it can also be extremely difficult to find a job in your 50s unless you have a niche skill set or a firm offer already on the table. If someone’s already trying to hire you at 27 years before you’re even on terminal leave, then you won’t have to balance the security of three more years in uniform against the uncertainty of prolonged unemployment during a job search. In that case, I’d base my decision on the merits of the jobs. As Malcolm Gladwell wrote in “Outliers”, I’d place more weight on the factors of the job’s fulfillment, complexity, and autonomy. I wouldn’t place as much weight on the salary.

Maybe you plan to work after the military regardless of your finances. In that case, it’s definitely easier to get hired now than at age 58. Job-seekers call it age discrimination, but employers only see it as the number of years that you’d be working until the traditional corporate retirement age of 65. They’d rather hire once every decade than once every seven years. Hiring managers don’t care whether you plan to stop working at age 65 or 85– they just know that they have a hard time retaining people past 65.

Some veterans still feel a strong commitment to serve and to take care of others. Some may want to see what they can do in a civilian career. A few may even worry whether they can hack it in the civilian world.

Those few might have a military inferiority complex: they don’t have any civilian workforce experience so they assume that their military skills are worthless.

Everyone in these groups could immediately go out and nail down a civilian career for a few years, but they might be able to achieve the same results by volunteering with non-profits or by serving on corporate boards. The advantage of these alternatives is that it’s much easier to find a volunteer or part-time job than it is to launch a civilian career in your 50s. It also gives you the flexibility to adjust your level of commitment instead of locking yourself into a full-time workweek.

One more point about job autonomy: when you retire then you (and your family) may want to spend more time on recreation, leisure, and travel. You may find that you want a few months off every year to travel or pursue other interests. If you feel comfortable with your finances then you may develop a strong preference for part-time or consulting instead of a full workweek.

Finances

There are several other reasons why people choose to work after retiring from the military. The financial reason is pretty straightforward if the servicemember had large student loans, or an excessively consumerist lifestyle, or a divorce, or several kids to put through college. If you’re feeling uncomfortable with your current finances, then three more years of savings (and the higher pension) will definitely cover any gaps.

But how would you feel if you worked for all those extra months and then realized (during retirement) that you’d overshot the mark? It’s probably better to analyze your finances now and see whether you can retire now instead of slaving away for three more years just to build your confidence. The real value of your pension is not the 15% difference.

The real value comes from the pension’s cost of living adjustment and the cheap health insurance. Unless you’re planning to buy an airplane or join Pebble Beach Country Club, you’ll probably be fine with your current finances– and perhaps some part-time work during retirement.

Do you feel financially compelled to work after the military? You’ve mentioned your retirement income and your assets, but another critical variable in retirement math is your spending. If your retirement expenses (including taxes) are less than your military pension then you have no financial reason to stay on active duty. If your retirement expenses are a little higher than your pension then you still have enough savings to retire now. You have to be very familiar with your current spending and then figure out what expenses you’d change in retirement.

Anecdotally, most senior officers and enlisted who’ve retired with more than 26 years of service are now happily living within their pensions. Admittedly my data is coming from people who were burned out and who would rather trade a little money for a lot more control over their time.

However, when you’re retired you’ll have the time (and the energy) to figure out precisely which spending brings you value. You’ll live where you want to, not where you’re stationed. You’ll shop for bargains and buy at a discount. You’ll review all of your insurance policies and your utility bills and get only what you really want. You’ll decide what parts of home maintenance & yardwork you care to do on your own, and what parts you want to outsource. You’ll travel more cheaply because you’ll be flexible on airfare (or Space-A) and you’ll stay longer– living local in apartments for weeks instead of a few days at high-priced resorts. You’ll have the free time to do more of your own cooking (if you want to) and spend less on convenience foods.

Lifestyle again

Here’s a final thought: I’ve been retired for over 12 years. I do a lot of volunteer work. I’m not even seeking paid employment, yet I still get an offer or two every year. If I decided to put some real effort into my writing then I’d be earning $25K/year with only 10 hours/week. Yet I have enough money, and I value my time more highly than wealth. I don’t mind work but I insist on the flexibility to travel without deadlines and to surf whenever the waves are passing through.

He responded:

“I met with my financial advisor. Even with the bridge career’s higher salary and maximizing its 401(k) and matching contributions, he demonstrated that going to 30 is more beneficial to my very long-term finances. I have no family or health issues with the extra three years but I am feeling a little burned out. We enjoy the outdoor recreation at this duty station. We bought a home that is not extravagant and I could simply move back here after the three more years and pick up on the activities that we’ve enjoyed. However, we are leaving a lot of family and friends and I’d lose some of my network upon returning in three years.

The bridge career is good, but I feel that it is a very long-term commitment. If I retire at 27 years instead of 30, the financial model suggested that I should work all the way out to 62 years old… This could be a little bit of a grind even in the most ideal circumstance since it’s corporate America style work and all the trimmings that come with it.

It’s funny how I can go years without a thought about such things and then all of a sudden it’s crunch time in dealing with a difficult decision. I think the best answer is to stay the 30 and then get out with a renewed sense of controlling lifestyle spending. Easier for me maybe a little bit more difficult for my spouse. If I took the job and decided after two years it wasn’t for me (or got laid off) I would definitely look back and say I should’ve stayed in uniform until 30.

So I’ve made a decision to re-up with the military for three more years. I think I’ll fulfill this obligation pretty easily. Your perspective helped sway me. Even though my retirement cash flow may not be optimal, if I take your suggestions on spending I should do quite well.”

I think you have the right idea on looking back later and deciding that you’d rather have 30 years.

Everyone worries about losing their network if they’re away for three years, but that might also show you who your real friends are. You’ll keep in touch with your friends (especially through social media) and then you’ll pick back up when you return.

If you have the chance before you transfer, try to attend your service’s senior transition class or a Ruehlin seminar. It’s even better if your spouse is able to sit through it with you to hear the same concerns and questions. When you get to your new duty station, try to make the time to do it again (and with her if possible). You guys both want to know all about your finances (and be comfortable with your choices). Then you can make the decisions on whether she wants the Survivor Benefit Plan and when you’ll start Social Security.

There are two schools of thought about controlling the lifestyle spending in retirement. One is that you’ll have three years of paychecks to build up a bigger retirement entertainment fund, and you could fence some of that off for “his” and “hers” portions. That way each of you spends their fund without having to feel the obligation to justify it to the other. When your fund is gone then you’d have to either raise more money (part-time work?) or make up the expenses somewhere else.

The other school of thought is “spend it while you can”. Financial planners have claimed for decades that retirement spending follows a predictable three-phase curve of “go-go”, “slow-go”, and “no-go”. In your situation, I’d feel comfortable spending every penny of your pension for the first few years of retirement and 4%/year of your savings too. Your spouse’s Social Security survivor benefits will be much higher if you can hold off SS until you’re 70 years old, and if you have that higher income (pension + SS) in your 70s then you could spend a little more of your savings during your 60s.

In my 12 years of retirement, our spending has been relatively flat. Part of that was launching our college daughter from the nest, so we’re spending a lot less on groceries and a lot more on travel. But the most important part of retirement spending is finding what activities really bring you value and budgeting around that.

Let us know how it goes over the next three years!

Posted in Military Retirement | 10 Comments

Military Financial Independence

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Home maintenance hassles

Daily lifestyle changes

I’ve stopped balancing my checkbook

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Minor travel problems.

Paperwork

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“The Military Guide” Sales Update (The GSA Schedule Rocks!)

Old-school publishing

But I have the time.

Pocket guides

Impact Publications catalogs

The GSA schedule

The sales numbers

Stay For 30 Or Retire At 27?

Lifestyle

Commitment and Service

Finances

Lifestyle again

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Top Three New USAA Products And Services

Savings Coach

Financial Readiness Score

“My Credit Score”

A traditional product: member service

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Surprising Secrets Of Slow Travel

Military retirement Space A flights

Maps and smartphones

Home maintenance hassles

Daily lifestyle changes

I’ve stopped balancing my checkbook

“Well, this is awkward.”

Minor travel problems.

Paperwork

Share this:

Finding Your Military Work-Life Balance

Financial Independence Gives You Choices.

How Can You Avoid Stress Health Problems?

What About the Work Part of Work-Life Balance?

Share this:

“The Military Guide” Sales Update (The GSA Schedule Rocks!)

Old-school publishing

But I have the time.

Pocket guides

Impact Publications catalogs

The GSA schedule

The sales numbers

Share this:

Stay For 30 Or Retire At 27?

Lifestyle

Commitment and Service

Finances

Lifestyle again

Share this:

Order the book now:

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