You are ultimately in control of your financial success. As a financial planner, I can help guide and motivate you, but in the end, it's up to you.
To achieve financial success, you must take ownership—extreme ownership.
How do you take extreme ownership of your household finances, though?
Utilizing the Laws of Combat to be a leader of your household and a good steward of your money is a good start.
Jocko Willink and Leif Babin, fellow Navy SEALs and business partners at Echelon Front, published Extreme Ownership: How U.S. Navy Seals Lead and Win in 2015.
The New York Times Bestseller describes the leadership principles aptly dubbed, The Laws of Combat. Throughout their careers, in training, and as a part of SEAL Team Three, Task Unit Bruiser, they used these principles to lead effectively and produce success on the battlefield.
As Leif says, "the Laws of Combat were the key to not just surviving a dire situation, but actually thriving, enabling us to totally dominate the enemy and win."
The Laws of Combat:
Prioritize and Execute
This post is a continuation of our break down of the Laws of Combat and how they apply to your personal finances.
Today's Law of Combat: Simple
Simple Money Rules
Spend less than you make (i.e., do a budget)
Save as much as you can (i.e., delay gratification)
Avoid financial ruin (i.e., avoid bad behavior and blow-up risks)
Live your life, not theirs (i.e., don't keep up with the Joneses)
The principles that lead to financial success are not hard to understand.
They are quite simple, actually. But, our human psychology can make them very difficult to implement.
"Life is really simple, but we insist on making it complicated."
Let's take a look at an example where we often overcomplicate things.
Keeping it Simple: Right Tool For the Job
Saving for your child's education should be easy. Right?
Yes, but firefighters—and I'm sure others too—often complicate the matter.
They try to fit a square peg into a round hole. In other words, they try to save for college in creative ways to avoid opening a 529 account.
Why do they do this?
Because paying a 10% penalty on money that they otherwise wouldn't have earned, deters them.
So, what do they do instead?
They put money in a savings account. They use their retirement savings. I've even heard of firefighters using cash value life insurance to fund their children's college.
But, what if there was a tool created specifically for saving for college that also gave you a tax benefit?
Well, there is. And it's called a 529 plan.
A 529 plan is a tax-advantaged savings plan designed to encourage saving for future education costs.
And this is where keeping it simple becomes applicable. If your goal is to fund your child's college education, use the 529 plan—simple enough.
Don't overcomplicate it. Don't overthink it. Decide how much you need to be saving and start saving.
Can you use a halligan to pull sheetrock? Sure. But, they make a tool for that. Keep it simple and use the right tool.
The Principle: Simple
In the book, Jocko states, "Combat, like anything in life, has inherent layers of complexities. Simplifying as much as possible is crucial to success."
"Combat, like anything in life, has inherent layers of complexities. Simplifying as much as possible is crucial to success."
Money can be complicated.
Just think about how many different retirement accounts there are: 401(k), 401(a), 457(b), Defined Benefit plans, IRAs (SEP, SIMPLE, Roth, Traditional), and the list could go on.
But wait, there's more.
Once you open an account, there are only thousands and thousands of stocks, bonds, mutual funds, index funds, and ETFs to choose from.
So, how do you find success in such a complex environment? You keep it simple.
If you have access to an employer-sponsored retirement plan, you should probably use that. Select a portfolio (3 to 5 funds) of low-cost index funds (if available), set a monthly savings rate based on your long-term retirement goal, and put your savings on auto-pilot.
Now you can check in once or twice a year to reevaluate your savings plan and see if you are on track.
It will take some planning and research to fully understand the benefits and costs of your retirement plan and your specific investments. So, take the time to ask questions, research answers, and clarify anything you don't understand.
But, once you understand the territory you are operating in, create a plan that is simple, clear, and concise.
Test the simplicity by explaining it to your children.
If your kids can't understand your investment strategy, it's probably too complicated.
As Jocko says, "Simple: this principle isn't limited to the battlefield. Following this rule is crucial to the success of any team in any combat, business, or life."
And if you'd like help defining your goals, creating a plan, and simplifying your financial life, I'd love to help.
Thanks for reading,
Your Friendly Firefightin' Financial Planner
Forward Focus Financial Planning wants to help you communicate and clarify your financial goals so that you can create a plan and take action. Take the first step and schedule a free planning call today. You only get one chance at living a great life. Define your goals, create a plan, take action, and be confident.
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