Military Financial Independence

Old-school frugal

Posted on April 12, 2012 by Doug Nordman

Frugality is hot again.

I’ll start this post at the end of the story: during the Great Recession, Americans rediscovered frugality. Only this time, the information had already been archived on the Web and a core of tech-savvy people had dedicated themselves to the lifestyle. Frugality and simple living had never gone away, but they certainly weren’t always popular with the media.

Let’s archive a bit more of that modern history so that you can rediscover it all over again for yourself.

The media contributes to the popular perception that these low-cost lifestyles are only practiced by people without money. (I doubt we’ll ever see an E! Network documentary about Kardashian frugal shopping tips.) Even local media tend to report the frugal lifestyle only when it attracts controversy or the wrong kind of attention from the authorities. You almost never see a network news story about how people achieve financial independence by bringing their own meals to work or by carpooling.

The public’s problem with the lifestyle is that it takes too much effort. People assume that it requires re-using plastic bags, saving scraps of soap, making your own clothing, and growing a backyard garden. If you bring up composting, they’ll stop listening. Frugality seems like drudgery, and financial independence is just a fantasy.

However, frugality actually helps you figure out what’s important to you. Just like tracking your spending and setting a budget, the frugal lifestyle can be adapted to match your values. Maybe you’re not going to install a wood stove in your house when the military transfers you every 2-3 years, and maybe you don’t particularly care to make your own bread. But you could choose to drive a cheaper, older car and shop thrift stores.

The advantage of frugality is that it will dramatically cut your expenses and allow you to boost your savings rate. If you call it “simple living” or “going green” then people will even think you’re ahead of an environmental trend.

Yet if you live near Lancaster County in central Pennsylvania, this attitude seems quaint alongside the Mennonite and Amish cultures. They’ve been living green for centuries, and they know all about sustainable lifestyles.

Let me start this modern frugal-living history with a an obscure reference that I haven’t read yet but heard all about from my father. My grandparents were in their mid-20s when the Great Depression hit, and Gramps became a big believer in self-reliance. His manual was the 1940 edition of “Five Acres and Independence”, which he used on a 58-acre farm. Gramps would do the animal chores in the mornings & evenings around his day job as a lineman for an electric utility. Crops were handled on the weekends. Grandma took care of the gardens, cooking, and “domestic maintenance”. Between the two of them they grew or made nearly everything they owned, including building a house and a barn. However, as they finished the major projects and built their savings, they also eased up on the frugal independence. Gramps made his own furniture at first (with power tools and other modern conveniences) but upgraded to “store-bought” as the years went by. Grandma churned out tremendous volumes of sewing and knitting but also turned those into hobbies as she grew older. They made the frugal lifestyle work for them when they had to, but as they grew their savings they eventually set aside most of the frugal techniques they’d begun with.

Dad thought “Five Acres and Independence” was pretty cool when he had his own horse. He was not quite so enthused when it came to milking cows twice a day, seven days a week, for what seemed like his entire life. I’m sure that the book and the lifestyle “inspired” him to get an engineering degree and an office career. He’s never grown a crop again in his life. However, he enjoyed doing his own small-engine maintenance, building his own furniture, and tackling every home repair on his own. He poured concrete patios and built wooden decks. As an electrical engineer he took it personally when an electric motor broke, and he’d repair components that today we’d just replace. During the 1970s recession and inflation, Mom & Dad would barter their skills with the neighbors for almost everything.

Dad’s reference library was Popular Mechanics. This magazine taught the 20^th century American male (and “housewives”) how to build or repair just about everything. When an issue came out with a “popular” project, it could cause a national retailing run on certain types of wood or concrete mixes or wiring or car parts. While you were building your own homestead, you’d also enjoy their articles on the flying cars and personal jetpacks of the 21^st century.

Frugality was also popular in the 1960s hippie movement to forsake a material lifestyle. However, I think young adults quickly realized that it was a lot of work, and that era still gives frugality a bad name. Forming a commune and making your own yogurt sounds pretty fun, especially when you can grow custom crops for “personal use only”, but there was nothing glamorous about the manual labor. The peer pressure and group strife practically guaranteed that the vast majority of these frugal efforts disbanded after a few years.

But Baby Boomers got another frugal nudge when Dolly Freed burst on the national scene in 1978. She wrote the short lifestyle manual “Possum Living” to explain how she and her father survived on just a half-acre lot outside of Philadelphia with no jobs and almost no cash. Her father seemed to be a curmudgeon who didn’t get along with society, but he homeschooled Dolly (her pseudonym) in an era when it was considered strange at best. She taught herself how to learn and gave herself a wide-ranging classical and scientific education that put her far ahead of her peers. Their “extreme frugal” lifestyle taught her even more skills about building a home and living off the land with very little money. Then she literally wrote the book about it.

They didn’t just quit the rat race– she never even started it. She and her father grew most of their own food. They raised chickens. They hunted and fished. They made or repaired or recycled almost everything or just did without. They maintained a home, dressed well, and stayed healthy. They enjoyed their leisure and lived a middle-class lifestyle with only a few hundred dollars a year.

Dolly’s accomplishments, youth, and folksy writing style made her a national sensation. She wrote her text in pencil, taught herself to type, and used the local library to find an agent and a publisher. She even appeared on the Merv Griffin show to teach the nation how to value free time and control of our choices over an addiction to spending money. Public demand for her book led to a documentary.

Dolly dropped out of the public eye after her TV appearance– she wanted to go to college and start her adult life, and it never occurred to her to pursue celebrity status. She’s enjoyed a successful career (as a NASA engineer, no less) and raised a family near Houston. In 2010 a publisher re-issued “Possum Living” and a journalist tracked Dolly down for an update. Dolly herself even ran her own blog that year, then slipped back into her under-the-radar frugal lifestyle.

I still have six other people to write about from the 1980s to the present, so I’m going to break this post into two parts. If you’ve already read “The Military Guide” then you can probably figure out who they are and what they’ve accomplished– don’t spoil the ending for the rest of the readers!

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Translating Military Experience to Civilian Careers

Posted on April 11, 2012 by Doug Nordman

I spend a lot of time on Linkedin researching info for the book & blog. I’ve joined a dozen different groups and I’m enjoying the discussions. Every once in a while, though, an especially interesting topic comes up.

A month ago a member asked a seemingly simple question:

“What part of your military experience do you anticipate will carry over to your civilian career?”

Over 50 responses have already been posted. Ages & backgrounds vary, from newly separated enlisted & junior officers to gray-haired corporate veterans. Opinions are sharply divided, as usual, but some of the perspectives surprised even me. If you’ve wondered whether the military was such a good way to gain skills for a civilian career, these group members have the answers from both sides. I’ve edited some of them for clarity and military jargon.

The simple summary:

All of it converts! Most enlisted and officers become standouts in their organizations.

(This was one of the more common responses.)

Accountability and responsibility far beyond your peers and your age group:

“Concur with the comments on accountability and responsibility, they’ve served me well. In my current office several of us are veterans (primarily USAF and Navy) and when something comes up requiring extra effort or a duty watchbill, it’s not an issue– we do it.”

“I have found that the high level of responsibility and accountability forced upon me has helped me the most in my post-military career. I’m always surprised with the lack of civilians’ ability to take ownership of a project or problem. Also, the ability to make and keep a meeting agenda is something I’ve found lacking in the civilian sector. It leads to a lot of wasted time.”

“I’d say probably the attitude of ‘tell me you want it done, and it’s done with minimal supervision’. So it’s not a shock when we get things done.”

“Despite the fact that this is a USMC motto, but ‘adapt, improvise, and overcome’ are extremely important when you are isolated in the middle of the ocean, and you need to get something done. It’s up to you one way or another.”

“I have found that we ‘play by the rules’. We tend to accept the reality and work with it to excel. We adapt quickly. We are inherently ‘fair’ (a word I don’t use often) but we have learned to accept others solely on the quality of their work and to not play office games. Lastly, we have class and always will. I have often found that there are those who will attempt to use our military experience as a negative because they can’t follow all the rules, all the time. They will brand us as rigid and inflexible, but in times of distress, they will call upon us. We have learned not to panic and to assume responsibility regardless of the situation. Most have not.”

“Though dating back to Vietnam, I found my experiences as division officer on a destroyer, preparing for an extended deployment in a combat zone, helped me establish a vision, organize what needed to be done, allocate work to my division team and then execute to make it happen before deadline. Those steps are exactly what’s needed to start and effectively run a business. Exactly what I’ve done in my civilian career. Gaining general leadership and management skills were the benefit of serving. Preparation and practice were also positive lessons.”

Jack of all trades, now mastering one:

“I had a very diverse military career, so can’t say that my expertise in any one area helped me out specifically. It’s probably the fact that I was used to a wide variety of tasking, under adverse circumstances in many cases, and could look at things from a big perspective. It’s also helped that I learned how to ‘lead up’ as junior enlisted, Chief, and junior officer, so I could speak my mind candidly but respectfully. I have to thank my leadership in most cases: lots of learning when it was good, but even when it was bad it taught me. Getting to used to living on the learning curve is also a very handy trait, it allows me to spin up pretty quickly on new stuff.”

Keeping an eye on the priorities:

“The ability to put things in perspective is a trait I learned in the Navy that has served me well running my business for the past decade. The ability to keep focused on the important issues is key to success. Kind of like standing watch while transiting the English Channel.”

Attention to detail:

“One of the things that I notice day in and day out that helps me succeed from my military training is attention to detail. I’m constantly surprised when I’m finishing a report under time pressure to the point that I’m satisfied but with more time would like to add MORE detail and go further. Yet, often the review of the report will come back with great appreciation for the length of detail and comprehensive view that I have given. It’s just interesting at times to see how in some civilian segments there really is a different and often lower standard for detail, discipline, and responsibility.”

“One thing I picked up in the military that paid a HUGE dividend on a recent project: POA&M (Plan of Action and Milestones). Many civilians have never heard of one, and looked at me like I was some sort of genius for putting the project into that format!”

When things go wrong:

“How about: Always be thinking about what can go wrong, and plan for the worst. In the military it starts with simple casualty training and drills. Or: How to sort out reports and data during an emergency. The neophyte takes them in the order received while the veteran handles them by priority.”

Humility:

“In the military as soon as you reach the top of one ladder, you find yourself at the bottom of another. Promotions and rotating tours provide a gut check every few years that (a) You don’t know it all, and (b) There are people who are more knowledgeable and experienced than you. I’ve found this trait beneficial as I make the transition from military to civilian. You have to be humble, because even though you were once responsible for troops, equipment, and an important mission, you are now a small inexperienced fish in a big pond. You may find yourself working under someone several years younger than you who’s been in your industry since undergrad or MBA school.”

“I went into the private sector. I have been with three companies doing completely different jobs and endeavoring to learn and catch up with my (younger) civilian peers who have been in their positions for 10-15 years. As you said, they are the younger experts. It has been a challenge. You walk into a senior position with zero industry knowledge and experience… there is nothing to do but muscle thru it and endeavor to excel. Honestly, I miss the comfort of the service and being established in the ‘system’. However, in the long run, this is better. The idea of being a DoD contractor was compelling and the easier route, but I wanted to contribute to the country’s GDP. You you need a good dose of humility & humbleness.”

However, humility is a two-edged sword:

“I help veterans transition to a civilian career, and something that seems to come up repeatedly is that former servicemembers are horrible at selling themselves and their ideas. Perhaps because of the military ethos emphasizing group achievement over individual achievement, or perhaps because military job descriptions don’t always translate perfectly into existing civilian organizations, it seems that some former servicemembers have a hard time communicating the value they bring to the table. For instance, a few weeks ago I introduced an attorney (former officer) to another lawyer who had an opening. The former officer’s legal specialty was different from that other lawyer’s niche practice. I was stunned to sit at the table and witness that the former officer didn’t emphasize how quickly he had to learn new roles and new jobs and how versatile his skill set was. 20 minutes later the prospective employer had lost interest.”

My spouse and I have noted a few other military skills that are in short supply everywhere, both in the corporate for-profit and non-profit worlds. We have a combined 50+ years of military service, and we’ve learned that what’s considered common in the military is not so common outside of it.

Above all else, no matter what your rank or whether you were in the infantry or in a very small specialty community, you have still been taught leadership and management skills. You have been trained to be responsible, to take charge, and to get things done. Even if your skills aren’t considered to be “operational”, you’ve still had to learn how to adapt to changing situations and to respond in emergencies. The civilian world is full of people who have been able to specialize in ever-narrower fields for years or decades. However, you’ve repeatedly been forced outside your comfort zone and taught how to generalize. You can’t compete with the depth of knowledge and experience of these specialists, but you can help them form a team. Then you can help them by removing the obstacles in their path while they teach you new knowledge & skills.

Whether you’re an officer, an NCO/Chief Petty Officer, or a corporal: you have learned how to take initiative and make decisions. When you encounter the inevitable “This is how we do it“, you’ve learned to be inquisitive about all parts of the process. You’ve learned to ask “Would this go better if we did it another way?” You’ve seen things done differently, and you can imagine the possibilities. You’ve learned not to tolerate unsafe or even dangerous working conditions. You know how to make the workspace a nicer place to spend your time– even if it’s just with better lighting, less clutter, and clean floors. You’ve learned how to bring in an expert to solve a specific problem and estimate the cost: and then to get it done.

Leaders have learned how to gather a team, find the resources, and execute the task. Officers and senior enlisted have been promoted for developing this skill. In fact the more senior you are, the more important it is to gather and motivate a team than it is to know how to perform a task. There will always be a co-worker who knows your civilian job better than you do, but you know how to get everyone on the team working together.

You’ve learned to bring order out of chaos. You’ve learned where to start fixing a situation, even if it’s only with small changes, and how to be persistent. You know that it’s best to spend a few minutes every day on each of the tasks that have to be done, and your “20 minutes a day” skill helps keep everything else on track when the emergency interrupts the routine. You’ve learned to break down big projects into bite-size chunks, to train frequently, and to do it in small doses so that everyone can learn new skills and become confident with them.

If you’ve wondered what to do on Linkedin after you’ve filled out your profile and posted a résumé, then look for members with your military specialty. Start with LinkedIn’s “Groups” menu and choose “Groups you may like”. Linkedin uses your profile keywords to recommend 40-50 groups. Join the ones in your specialty, especially if you have to apply to join a private group by documenting your background or skills. I also recommend “U.S. Veterans“, MOAA, and, if you’re seeking a bridge career, “Jobs for Veterans“.

You’ll quickly encounter some off-topic rambling, as well as the usual whines and complaints. Don’t waste your time. Focus on the discussions that deal with your concerns about your transition, and read the posts of those members who seem to be making recommendations or solving problems. Don’t even worry about making connections or contributing to the discussion. Sign up for the group’s daily e-mail digest so that you get small frequent doses of information. (Sort of like subscribing to this blog!) You’ll soon be reading about the lessons learned by people like you who have found bridge careers that they like. After a few weeks, you’ll know enough about the topic to start asking your own questions and leveraging the advice of those who’ve had to make the transition.

One more point: whether you’re earning a military retirement or leaving the service after one obligation, the closer you are to financial independence then the better you’ll do at the transition. You’ll have more time to seek out the bridge career of your dreams and you won’t feel pressured to take the first offer.

By the way, if you’re one of those servicemembers who struggles with spellcheckers, grammar, and punctuation, don’t worry about a civilian career filled with those challenges. If anything, a written product starts out worse in the civilian world and then gets better with each revision. My old XOs have been perpetually surprised by how much my writing skills have improved over the years, and I bet they’ve all wished that they could have given me more opportunity to practice…

Related articles:
Get on LinkedIn, get a job
Starting your bridge career after the military
Should you join the Reserves or National Guard?
The “fog of work”

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Do you have affluenza?

Posted on April 4, 2012 by Doug Nordman

Last week I posted about military retirees who are exploring bridge careers and others who are planning to retire with adequate cash flow but low savings. “The Military Guide” is packed with more real-life stories from people who have solved these challenges.

One of the themes behind these stories has been making sure that their families were on board with their transition plans, and that everyone could support their new “after the military” lifestyle. Many of us servicemembers have lived with deprivation during our careers, and for some of us it can be a challenge to make sure that our financial independence is based on a balanced lifestyle. Frugality is only meaningful if it matches your values, and nobody wants to live a life of deprivation.

But every once in a while I encounter someone with a problem at the other end of the bell curve.

As some of you may have noted by now, I spend way too much a lot of time reading and posting on Early-Retirement.org. I wish I’d found it before I hung up my uniform, because it helped me analyze retirement financial & lifestyle issues about which I’d only been guessing.

In fact the roots of “The Military Guide” book came from a comment made in February 2004 by another military retiree who had also decided to retire early: “Where are all the early retirees with military pensions?” I’d heard plenty of anecdotes about people who retired from the military and never started a bridge career, but “GDER” was the first I’d ever met. He drifted away from the board a couple of years later, but maybe someday he’ll see the book and realize what came out of that conversation.

Today there are over 60 servicemembers & veterans among the board’s 300+ active posters. (The board has more than 18,000 members but only a minority regularly read the threads– let alone post to them.) A few more veterans have joined its early-retiree ranks since 2004, and many more servicemembers seem to be adding to the discussions every month. Even if they’re planning to start a bridge career after the military, they’re still pushing hard for financial independence. The closer you are to financial independence when you leave the service, the easier it is to find a bridge career you can enjoy. It’s also a lot easier to decide whether that bridge career is what you want to do for the rest of your life. Financial independence gives you choices.

Last month a new member introduced himself with the typical questions about retiring. This member had the usual problems: unhappy with his career, feeling too burned out to switch occupations, not yet financially independent. His annual spending was $230K but he would only have $3M in savings.

Yeah, you read that right. Two hundred and thirty thousand dollars of annual expenses. Three million dollars in cash savings. No mortgage and no other debt. This member just wanted to know what high-yield asset classes would reliably support their expenses. (Hint: none.) From his perspective, anything less than $230K/year would be crossing the line from frugality to deprivation. Yet he wasn’t sure that he could endure the stress of working for long enough to accumulate the savings necessary for their desired 4% safe withdrawal rate: $5.75M.

Take a reading break if you want. I understand if you need a few minutes to regain control of your reactions. I used to feel the same way. But after reading a few dozen of these posts over the last decade, these days my reaction is no longer spewing coffee on my monitor incredulity or laughter. Instead I feel sad.

I know, we should all have to feel sorry for more people struggling through that situation.

The answer seems ludicrously straightforward: cut expenses. So why can’t he accept that response?

I think the issues are rooted in fear and affluenza.

It’s hard to believe that it’s been 15 years since the documentary “Affluenza” was first released on PBS. Back then the stock market was perpetually rising, the media was crowing about permanent prosperity, Congress was paying off the national debt, and a new Gilded Age was at hand.

At the time, the documentary seemed like a lone voice crying in the wilderness. Life was good– why would anyone have to worry about enjoying too much?

The problem is painfully clear in retrospect: affluenza’s not sustainable. Even if you make enough money to afford it in the short term, you have to have an awful big pile of net worth to be able to retire with it.

The PBS “Affluenza” website goes into excruciating detail of the issues behind the affliction. One of its most valuable resources (for you and your family) is the affluenza quiz. Of course it’s not a medical diagnosis– it’s a springboard for a thoughtful discussion about the life you really want to lead. In some cases your spending decisions may be based on a fear that you “need” to live in the right neighborhood, dress your kids in the right clothes, and send them to the right schools. You may “need” to entertain yourself by spending money or by being seen with others in all the right places. There’s an element of truth in all of those wants, but it doesn’t require spending nearly $20K/month.

The trick is to figure out what’s really important to your lifestyle, and then to design your spending around it. You may not need to live in an expensive urban city, but you have to assess the benefits (and costs) to your lifestyle. Are you willing to earn and save the extra assets needed to live in a high-cost area? Can you find a lower-cost area that offers the same benefits? It’s the same decision for schools, clothing, transportation, and food: are you willing to work to earn the money to spend on expensive choices, or do want to make other choices? What do you value? Is it really worth the expense?

Sometimes the answer is “Yes, I really do want to spend all of this money.” Other times it’s more ambiguous: “I want what’s best for my kids.” Maybe that requires an eight-year-old to wear designer jeans and carry a cell phone at a private school. Or maybe that’s just what the parents think is important, and the kid doesn’t really know one way or the other. How do the parents figure it out?

Two other quizzes may help start a family discussion. The University of Minnesota asks: “Are You Affected by Affluenza?” and Westwood Public Schools has an affluenza quiz designed specifically for 21^st century kids (scroll down below the slideshow to the transcript).

The hardest part of overcoming affluenza is dealing with your own fears. If you’re surrounded only by people who are also afflicted with the syndrome then you’ll never see the reality of millions of families who do just fine with smaller houses, modest cars, public schools, and inexpensive clothing. (Some of them don’t even “need” their own cell phones, let alone phones for their kids.) One of the tremendous advantages of discussion boards like Early-Retirement.org is being able to read the stories of those other families, and to find the other resources that will help you deal with your fears.

Many times it’s just a matter of test-driving a different lifestyle. You don’t have to sell all your possessions and stuff the family into an RV for a two-year nationwide tour. You don’t even have to leave the big city for a small town. Instead you can start by making small lifestyle changes and seeing how you feel. This may sound silly, but you could start by skipping Starbucks coffee (or other “gourmet” choices) for Dunkin’ Donuts– or even, heaven forbid, for making your own. Instead of running daily errands in a big SUV, try to group the errands to twice a week. Instead of eating out or bringing fast food home, try cooking for yourself a few nights a week. If you can make your own breakfast and a lunchtime sandwich, then you can figure out how to make a family dinner. Instead of spending thousands of dollars to vacation at a resort in a different time zone, revisit the local attractions that you haven’t been to in at least a year.

The key is to take small steps so that you can assess how you feel about the difference. Small steps don’t add up very quickly, but when you take a lot of them then you can see the difference in your spending. A small step won’t disrupt your lifestyle and leave your family in an uproar, but in a year you’ll notice that a series of small steps adds up to some big changes. You may not see the benefit of trying to reach financial independence by eliminating a $5/day Starbucks habit, but eventually you’ll find yourself replacing $5000 blowout trips with local family staycations. Now you can appreciate how $5/day adds up, especially if you change six or seven of those $5 habits in your daily routine.

Compare it to the trite analogy of eating better food and getting more exercise. When you’re sprawled on the couch in front of the TV, trying to wipe the Cheez-It stains off your face with a beer-soaked napkin, you’re not going to be very enthusiastic about jumping into the kitchen to whip up a nutritious family meal and then go out together for a two-mile walk. You’re certainly not going to go vegan or train for a triathlon.

However, if you start by drinking one less beer, or eating a more nutritious snack, then you’re beginning to learn how to live healthier. In a few weeks you may even be willing to skip the TV for yardwork or a family bicycle ride. You may forego the unhealthy snacks for more nutritious food that actually leaves you feeling less hungry with more energy. If you make the time to research healthy lifestyles then you’ll find even more things to try, and you can decide what works for you. In a few months you’ll notice that you’re eating less, exercising more, losing weight, and generally getting healthier. You could still crash on the couch with a bag of fat-fried sugary carbs and carbonated alcohol, but you might no longer find that very compelling.

In another year you may have completely abandoned those aspects of your former lifestyle– not just because it’s the healthier thing to do, but because you no longer enjoy them. You’ve taught yourself to live better and enjoy life more.

When you figure out how to live better by spending less, your financial life also gets healthier. You no longer feel the job stress of “needing” to earn more money to support your affluenza lifestyle. You can cut your expenses and make huge strides toward financial independence. You can relax to your own living standards instead of racing to keep up with the proverbial Joneses. A year ago you might have felt hugely deprived to have cut out those expenses. You’re right– it would have been deprivation because you didn’t value those changes. Today, though, you have new values that happen to need a lot less money. You no longer have those unhealthy aspects of your finances– you’re living better and enjoying life more.

The Early-Retirement.org poster who started that $3M thread only stuck around for a couple of weeks. He didn’t really like any of the answers he got about cutting expenses, and nobody could tell him how to reliably earn 7.7% annual withdrawals from his retirement funds. I think he’s moved on to search for the asset classes and the financial advisors who can make it happen, and I think he’s going to be looking for a long time. He said that he’d probably sell his company and take a year to spend time with his family, but then he’d start another company in order to save enough to retire in the style to which he’s accustomed.

Maybe during that year he’ll reflect on his own values and how long he’s willing to work for them. Once he aligns his values with his spending, then he’ll be able to find his own solutions to his financial independence. Until he does, he’s not going to be happy with his choices.

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Book report: “The Mindset List”

Posted on April 2, 2012 by Doug Nordman

“What is happening to our young people? They disrespect their elders, they disobey their parents. They ignore the law. They riot in the streets inflamed with wild notions. Their morals are decaying. What is to become of them?” — Plato, 4th Century BCE

I ran across this book of lists during my research on college expenses, and I wish I’d read it before our daughter was in high school.

The original “Mindset List” was launched by an informal faculty & staff group at Beloit College in 1998. Several faculty were bemoaning how “out of touch” their freshman students had become over the years, and how little appreciation they had for American history & culture. It looked as though the Internet generation had more bandwidth than any other time in history, yet less awareness than any other time in history. Professional Baby Boomers educators everywhere despaired that they’d be able to show these youngsters what was important in life and modern culture.

That first list explained what had “always” or “never” been true for students born in 1980, who turned 18 in 1998, and who would graduate in the third millennium. It tried to show that these students had just begun their lifetimes of serious learning and could only be reached by appreciating what little life experience they already had. When it was posted on Beloit’s website, it shot to the top of the college’s most-visited list. Now on its own server, the Mindset List is updated every year and gets over a million hits a year.

During their lifetime, the class of 2002 had never had a polio shot and probably didn’t know what it was. Sony Walkmans had “always” existed, as had personal computers and CDs. Elvis Presley has always been dead, along with eight-track cassette players and “dial” telephones.

It turns out that the students were doing just fine, thank you. It was the professors who were out of touch with modern American culture. The students had never studied late-20th-century sociological trends and events because they didn’t see how those had any relevance to their personal lives.

The website is great for a pleasurable hour or two, but the book digs deeper: all the way back to 1898. Education was a little different back then, and only one out of 400 (mostly white upperclass males) would have actually gone to college. Back then it was “normal” to leave school after eighth grade to start a career, and only about 10% graduated from the new “high” schools. (Especially out West, high schools were only common in big cities with a reasonably short commute– by carriage or by foot.) Civil War veterans were everywhere when this generation was born in 1880, and a few veterans of the War of 1812 were still around. High-tech advances produced better brakes (which meant that trains could go faster) and telephones. This generation was accustomed to tech because phonographs and lightbulbs had always existed, although not necessarily in their houses. They also worried that the Wild West would be domesticated before they were able to go there to make their fortune.

Each chapter spends 20-30 pages covering that generation’s attitudes and experiences with burgeoning equality in race, gender, and religion (all three still have a long way to go) along with sociological and technological trends. The book covers the high-school classes of 1918, ’31, ’44, ’57, ’70, ’83, ’96, 2009… and 2026.

Our daughter graduated high school in 2010, so we’re all too familiar with her blissful ignorance lack of appreciation for our version of “history”. She always marveled at our corded telephone (for hurricane readiness) and was skeptical about our stories of Grandma & Grandpa owning one that you could “dial”. She was one of the last kids in our neighborhood to ride a car where you could “roll up” a window. She’s never seen the point of driving a standard transmission (although she’s managed to operate one). Her library never had a “card catalog” but she grew up with Harry Potter. The Cold War has always been over and Sesame Street has always existed. TV shows were constantly mangling the rock&roll ballads that we parents felt were so important to our lives, so we homeschooled her on “AP Classic Rock”. (It’s amazing what curriculum you can find from YouTube videos of our favorite late-night TV shows.) She actually had to buy her own cell phone to demonstrate to her clueless parents that all the fuss was worth the expense, and she was absolutely right.

Wait until our daughter has to work with the class of 2026: they’ve never needed a key for anything. They’ve never used a folded roadmap, a printed telephone directory, or a paper check. Mobile wallets are taking over for credit cards, photo IDs, dollar “bills”, and coins. They’ll never understand how many people it takes to change a lightbulb– why would anyone need to do that? And why would they need to use a “light switch” anyway?

Some mindsets haven’t changed: every generation has always been preoccupied with its own lives, obsessed about their own version of the present, and mostly indifferent to the past. Change is also insulting: readers of the Mindset List who are only in their mid-20s report that they suddenly feel old when the latest version is posted. They have to hang up their membership in the “young & cool” club and start trudging down the road to history. But before they get too much further on that journey, they’re seriously going to Google this Plato guy, whenever the 4^th century BCE was– and this time they really mean it. Maybe he can tell them what to do with these clueless kids.

As usual with these book reports, you should be able to find The Mindset List at your local library.

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Military retirement with low savings

Posted on March 28, 2012 by Doug Nordman

Here’s a question from a reader:

OK Nords, I need a sounding board.

Background: I retired two years ago with 21 years. I was recently found 80% disabled by the VA. After I retired I immediately shipped over to teach JROTC– which I love.

Present: While I love my job, it has incredible demands. To make a difference on kids, you must get them after school hours and that means 12+ hours a day, and many weekends. I make a huge difference, but medically it’s crushing me. The VA is good here, but all the medical stuff is its own full-time job.

I own a house in the west near my wife’s family that we both love. We live in the east without any nearby family. I’m contemplating pulling the plug in a couple of years to live in the house near family, especially as our kid enters high school. (I missed a lot due to deployments). However, the last thing I want to do is trade a job I love with bad hours for a job I hate with bad hours.

Here’s his financial info:

Assets:
$18K in TSP. (Wish I could still contribute!)
$7K in other IRAs & teacher’s deferred compensation plan.
$10k emergency fund.

Home in west: $600/month mortgage, rented out, breaking even.
Current home: we have ~$40k in equity due to buying with 20% down. $1200/month mortgage. If I get what I paid for it, I lose $15K on the selling costs. Since there are so many variables to selling, I’m not counting on the cash in it. If it works out, that’s great, but there’s also 2500 miles of moving expenses.

No other debt.
$800/month goes into a short-term savings fund for short trips, car repair, and medical/dental expenses beyond Tricare.
Our kid’s college is covered by my GI Bill.

I earn $4400/month as a teacher. This contributes $1200/month to the deferred compensation plan and pays our $2500/month living expenses. Anything extra goes into savings.
$2500/month military retirement. $1200 pays the mortgage on the home we live in now. Another $800 goes into savings. Anything extra also goes into savings.
$1700/month VA disability: we save all of this.

Here’s his plan:

I’m looking at “popping smoke” in two years (the summer before our kid enters high school), selling our current home, and moving the family to our home in the west. We initially would live off my military retirement & VA disability. This would easily cover our monthly living expenses in the west, but we wouldn’t be able to save any more than the $800/month that I’m saving out of my pension. My big concerns are trying to forecast savings for various unknowns.

In the next two years we could save another $70K. After moving west our savings rate would drop to about $10K/year. In other words our cash flow is good but our savings could be eaten up quickly if we have an expensive problem or if I need long-term care. The only “affordable” premiums are the Federal Long Term Care Insurance Program. Due to my medical history, the cost is extremely high. This part concerns me a bit.

I have Survivor Benefit Plan coverage on my pension, so my spouse has that income after I’m gone.

Any ideas on collectively working to lower cost of living and boost our savings, especially for the short term? It seems that the entire family has to be dialed in to the methods and lifestyle changes in order to meet the goals. Any recommendations on this part?

This situation is all too common among veterans. It’s easy to finish a military career with low savings yet enough income & medical benefits to be very close to financial independence– without a safety margin. For those who are physically able to work, part-time employment can go a long way toward supplementing savings over the coming years. “The Military Guide” profiles one servicemember (“Boxkicker”) who did exactly that. He retired with a military pension yet almost no other savings. He had nearly finished his college degree on active duty (tuition assistance). After retiring he went back to college on his GI Bill. Along with part-time work at a golf course and refereeing for youth leagues, Boxkicker completed a master’s in sports management.

But let’s get back to our reader’s questions. As we swapped e-mail, he seems to feel that he can continue to work these hours for another two years. However, six years (until his daughter finishes high school) is medically not achievable.

Spouse employment is another option, especially after they move. However, military spouses sacrifice a lot of potential income during their servicemember’s career, and finding a job might be a challenge. Of course there are plenty of other employment options but it may be easier for a spouse to spend time on frugal efforts at home instead of earning income. The two of them could look into employment (or self-employment) opportunities now and see what they could devote more time to after the move.

Another option would be to transfer his GI Bill benefits to his spouse now, not his daughter. If his spouse wanted education or training for her “dream career” then she could achieve that certification before their daughter started college. His spouse would probably be able to earn more from a career than their daughter would receive from the GI Bill, too, so there’d be a net positive return on their investment in her employment skills.

One extra factor is Social Security, although he’s nearly two decades away from starting benefits. “When to start SS” is a tough decision when there are medical issues. Taking SS at age 62 ensures that you’ll have some extra income now to enjoy life, but your spouse’s survivor benefits will be lower. Taking SS at age 70 will max out benefits and spouse’s survivor benefits, but if the recipient dies before breakeven (in the late 70s) then that income is permanently lost.

One (risky) option would be to start spending a little extra money at age 62 (using more savings) in anticipation of starting SS at age 70 and rebuilding those savings. It’s a losing strategy if the recipient dies before breakeven. A “middle ground” would be to reassess the health situation at age 62 and possibly hold off benefits until age 66 or 67 when full benefits can be drawn.

Of course the best solution would be to reduce lifestyle expenses to the point where Social Security isn’t necessary. All of the eventual SS income could support long-term care and survivor’s benefits.

His spouse’s longevity insurance seem to be supported by the military retirement Survivor Benefit Plan and Social Security survivor’s benefits. Both of those programs include a cost of living adjustment, making them one of the world’s best annuities. As they approach their 60s they’d want to review the amount of these benefits against her expected spending to make sure she’s provided for.

Long-term care insurance is a another difficult situation with low savings. If medical factors are driving up the premiums then it’s not even an option. The only cost-effective solution is to maximize whatever geriatric and long-term care programs are available from the VA. Eventually an elder would spend down their savings (with allowances for spouse’s home and other assets) and become eligible for Medicaid.

My personal knowledge of military disability & VA benefits is weak, so I’d work from the links in the “Military medical” portion of the sidebar. (Especially the “Veterans Benefits Network“.) “The Military Advantage” benefits guide is another outstanding resource. If he’s unable to work due to his disability, another low-probability possibility is Social Security Disability Income (SSDI). This is difficult to apply for and not easily approved, so it would probably require significant assistance from military legal services and the VA.

Frankly, he seems to have it all under control. Even after he retires his income is higher than his spending, and he seems to be able to keep it that way. Medical expenses and long-term care are major issues, but their costs are almost impossible to predict. He seems to have sufficient benefits in place for now, with Medicaid as an eventual long-term care program. I’ve written several posts on that, and I have a book review coming up on another excellent reference.

Frugal living will help him and his family save more money, and they can make it match their lifestyle. The Internet is full of sites for cutting expenses and living more simply, but two of the oldest and best cost-cutting websites are The Dollar Stretcher and BankRate.com.

What other lessons can readers take from this story?

Being in the military teaches life skills. He’s extraordinarily motivated, persistent, focused, and determined. He knows he can do this. His main concern is providing for his family and having their support for his plan to stop working while he can still enjoy life.
Play good defense. Don’t live a materialistic, consumer-driven lifestyle. His financial situation is already stable because he has low expenses. They don’t need to spend a lot of money on possessions or entertainment or “hobbies”. He already knows how to tolerate deprivation, so a frugal lifestyle is easily achievable– even satisfying.
Save as much as you can as soon as you can for as long as you can. You never know what’s going to happen to you or your family, and the closer you are to financial independence then the better you’re able to handle these surprises.

He’s also going to post his financial questions at Early-Retirement.org. I may lack experience in some of the areas when he has specific concerns, but that’s a big discussion board. Eight thousand E-R.org readers (including over 50 contributors to the book) will quickly identify anything I’ve overlooked and come up with ideas we haven’t thought of.

Do you have any other ideas, suggestions, or references for this reader?

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Posted in Military Retirement | 1 Comment

Military Financial Independence

Old-school frugal