Soldier of Finance (11 page)

But I couldn't run anymore. I ended up on the back of a five-ton truck with everyone else who dropped out—not exactly the place I wanted to be. As soon as we got back, I went to sick call to see a doctor, who diagnosed a stress fracture in my leg. I had been running for weeks on a broken leg. I limped out of there with a full-leg cast.

Devastated, I was only five weeks shy of finishing Basic and certainly didn't want to repeat the first seven weeks. I reported to my drill sergeant, who was a little surprised when he noticed my cast; he certainly wouldn't say the words, but I suspected he felt bad for me. After looking at it for a minute, he said, “You know, you could go as far as you can with the cast. That will increase your chances of not having to go back to the beginning.”

The remaining five weeks involved many tasks I could do. It would be challenging, but it was worth taking a shot. A lot of the training required firing different weapons in order to qualify for them. I didn't need to run to fire a grenade launcher; I just had to get to the firing range.

I gained a lot of respect from my drill sergeants when they saw me hobble up to the range on two crutches, dragging my cast. Showing up for field maneuvers, lugging an M-16 along with my crutches, I completed every element of the training that my cast allowed, and it worked.

With this newfound respect, I got the okay to sit out the beginning of the following training cycle to allow my leg to heal, and was able to pick up where I left off and complete the training. Basic and Advanced Individual Training took six months instead of three, but I made it through and earned a great deal of respect in the process.

Not everything will go as planned, but setbacks are not an excuse to give up on your plans or goals. The setback in Basic Training affected more than just my time there. By the time I finally healed and returned home, I had missed the opportunity to enroll in a full load of classes. I managed to take some courses at Santa Monica Community College that summer, and I avoided parking tickets this time! After that first semester, I moved back to the Midwest and finished my associate's degree at John A. Logan College in southern Illinois. It took me four years to finish a two-year degree. But I got the degree and I was that much closer to my life goals.

During our pre-deployment training at Fort Dix, New Jersey, we were put through a ton of different exercises and drills. Many times the instructors set us up for failure, not for their own satisfaction (although it definitely felt that way at times), but to see how we would react under pressure.

Our squad failed miserably at the onset. It would have been easy to be hard on ourselves, but after each mission we would do a recap of all the items that went well and all the items that needed to be improved. This was called the After Action Report (AAR).

The concept of an After Action Report is to analyze what happened, what worked, and how the next operation can be improved. In both the military and business worlds, such analysis is practiced frequently and consistently.

As a Soldier of Finance, frequent AARs give you the opportunity to constantly improve your financial strategy. If something is not working, adjustments can be made. Flexibility plays an important role in success.

1. Mission Name: _________________________________________________________________________

2. Analysis:

a. Goals that were met: _________________________________________________________________

b. Goals that were not met: _____________________________________________________________

c. Reason for failure: ___________________________________________________________________

d. Changes: ___________________________________________________________________________

 

Go / No Go

• No matter how much you want to succeed, nothing happens until you begin to act.
  
• Keep your goals fresh in mind by reviewing them regularly.
  
• Automate your plan as much as possible. Set up automatic payments. Arrange to have savings taken directly out of your paycheck.
  
• Make changes in your lifestyle to provide more money to accomplish your goals, such as eating at home more often.
  
• Watch for opportunities to reach your goal sooner. For example, if you have dead time in your schedule, use it to read material that will help you grow toward your goals.
  
• Identify bad financial habits and work toward changing them, one habit at a time. Write down what the habit is. Plan a support system to help you and keep you accountable. If you miss a day, start again right away.
  
• Everyone meets with setbacks. Do not let a setback stop you from persevering. Adjust as you need to and persevere toward your goals.
  

Debt is your enemy. When you want something more than anything in the world and the only way you can get it is to set up a payment schedule, debt seems like your friend. But it's not. Debt is your enemy. It robs you of the resources to invest. Fortunately, I learned that lesson through a 1998 champagne-colored four-door Chevy Lumina sedan.

What I wanted more than anything was a sexy car. Ideally, that would be a BMW sports car. When I first moved back to Illinois to attend junior college, I got as close as I could with my budget—a red '96 Pontiac Grand Am. It was the first car I was responsible for paying for.

Fortunately, my grandmother paid it off as a graduation gift. I was supporting myself at the time, with the help of the National Guard, and I didn't need a $350 a month car payment. But I still dreamed. A Grand Am was nice, but hardly what I pictured myself driving when I imagined my future.

Unfortunately, when people fantasize about sports cars, they fail to recognize the reality of what it will cost them. The truth came to me in my Finance 361 class. The professor asked one question, followed by the statement that changed my life to the tune of more than $2 million.

“How many of you plan to buy a new car every three to five years?” he asked. “Raise your hand.” The image of me wearing sunglasses behind the wheel of a BMW flashed through my mind, and my hand went up. Over half the class raised their hands with me. Then the professor made a statement that has stuck with me ever since:

“Enjoy making your car payments for the rest of your life while I take my family to Europe on vacation whenever I want.”

He allowed the comment to settle before explaining it. For the first time, I began to understand the concept of the time value of money and compounding interest. I realized what the debt incurred in buying a new car would rob me of in the future. Because I put money into a Roth IRA and a 401(k) instead of a car payment, my money began building early.

A few years into my career, my grandmother passed away. Among the things I inherited was that Chevy Lumina. My wife and I called it “the Lu.” It was fully paid for with only 11,000 miles, in excellent condition, clean and reliable. Though it was six years old, it looked brand new. But it was a grandma car. Dreams of a BMW didn't include anything with four doors.

Before college, I would have sold the Grand Am, sold the Lumina, and used the money on a down payment for the car I really wanted. But now, instead of an image of a BMW flashing through my mind, I saw car payments robbing me of the benefits of compounding investments. My thinking had changed.

I sold the Grand Am and drove the Lu. With no car payment to worry about, I started putting money into a Roth IRA until I maxed it out. Then I started a 401(k). I was able to put a minimum of $400 a month into investments, often more.

What does that mean in the long run? I used a Roth IRA savings calculator to project my earnings. With a $5,000 investment each year, assuming a 10% annual return, by the time I reach 65, I will have $2,683,185. If you think that's too optimistic, then what if I'm off by 50 percent? I still will have well over $1.4 million!

Suppose I had opted to sell the Lu and buy a BMW. Not only would my money have gone into payments every month and been gone, but I would not have started serious investing until three years later. Using the same calculations, I would only have $2,002,239, a difference of $680,946 for simply delaying three years before I started investing.

As significant as that difference is, I also realize that if I had not started at age 24, I would very likely not have started at 27 either. That is typical of most people. Ultimately, a sports car would have translated into a debt. A few years later, most likely before that debt was paid off, I would have traded the car in for a newer model and perpetuated the debt. When I began to understand that debt was my enemy, the car didn't seem so exciting anymore. It cost far more than I was willing to pay in the long run.

Whenever I think of that car, I recognize that it was a turning point in my life. I call it the “Lu Trap.” On the surface, it appeared to be a choice between driving a Lumina and driving a BMW In reality, it was a choice between paying interest to a creditor or collecting interest from investments. The Lu Trap enabled me to clearly see that I would not have acquired a sports car; I would have acquired a debt.

Understand the importance of the Lu Trap in your life. If you have debt, you absolutely have to get rid of it and begin investing…The sooner the better. Every year you delay costs you many thousands of dollars, perhaps millions.

Any guy who says he doesn't enjoy blowing stuff up is probably lying (that's true for a few women I know, too, but it's a universal truth for men). As kids we're fascinated with firecrackers. As adults we can join the Army and play with real guns and grenades. I took it a step further.

When I moved from California back to Illinois, the closest infantry unit was more than three hours from my home. Instead of making the long drive for weekend drills, I transferred to a closer field artillery unit. I didn't do that just so I could blow stuff up, of course, but since I was there, why not enjoy it?

The mission of infantry is to be on the front lines, engaging the enemy directly. As a member of the field artillery, I took on a different mission: to destroy, neutralize, or suppress the enemy by cannon fire from afar…otherwise known as blowing stuff up.

We had a variety of ammunition to choose from. High Explosive rounds (HE) and Rocket Assisted Projectiles (RAP) were lethal anti-infantry weapons. White Phosphorus rounds (WP) could start fires to burn targets and create smoke for concealment. Illumination rounds fired a flare into the air with a parachute attached. There were rounds designed to scatter land mines, both anti-personnel (ADAMS) and anti-armor (RAAMS). Other rounds exploded in the air and scattered small-shaped charge explosives that can penetrate two inches of steel. The type of shell selected depended on the target and objective.

When it comes to taking on your debt load, be as methodical and deliberate as if you were firing a howitzer. A variety of strategies are available to you. Which type of ammunition you employ depends on the size and type of debt you have accumulated. It also depends on your personality and which approach you will best implement and stick with. Your SIT Report has all the necessary information to help you.

In the following, I've identified each strategy with a type of ammunition. Your goal is the elimination of your debt. Select the right shell and prepare to start firing:

• HI Round (High Interest)—The Mathematical Formula.
  People who like numbers and formulas (I know there are some of you out there) often prefer this method, because it makes the most sense mathematically. List all of your debts in order, with the highest rate of interest at the top. While making the minimum payment on each debt, focus extra attention on the first debt on the list. Put as much extra as you can on that debt each month until it is paid off.
      Once that debt is gone, focus on the next one, moving gradually down the list. As you pay off a debt, take the money from that payment and apply it to the next debt, rather than spending it on something else. The further down the list you go, the faster the debts will disappear.
      Over the long run, this plan will save you the most money because you're eliminating the most expensive debts first. It's simple math.
  
• IM Round (Increasing Momentum)—The Snowball.
  This is a popular method introduced by radio host and author Dave Ramsey. List all of your debts in order of the remaining balance, beginning with the smallest and ending with the largest. Like the High Interest plan, you pay the minimum on each debt, but in this case you put as much extra as possible on the smallest debt. By paying the smallest off first, you build confidence each time you cross something off your list.
      I've been a big fan of Ramsey's snowball method for years and often suggest it to people trying to overcome piles of debt. There are critics who wonder why people should pay off a smaller amount that has a low interest rate, when they have a larger balance with a higher rate that will ultimately cost them more.
      But experience has shown me that many people have difficulty jumping into the big debts without feeling some sense of accomplishment first. The High Interest method requires a certain level of self-discipline, and if most people had that, they probably would not be in serious debt to begin with. By taking baby steps and getting used to checking debts off your list, you're likely to get more excited about the bigger targets.
  
• HE Round (High Emotion)—The Debt Tsunami.
  Proposed by Soldier of Finance Adam Baker, who coined the term “Debt Tsunami,” this plan makes one aware of the emotional impact of certain debts. This method taps into a true hatred or vengeance you might feel toward certain debts, and uses that energy as incentive to make progress.
      First, prioritize your debts with the smallest balance first, including the interest rate with each entry.
      The next step is what gives the High Emotion attack its impact and uniqueness. After you've listed all of your debts, close your eyes and visualize each item on the list. Which one weighs on you the most? Which obligation ignites a fire inside you so voracious that you will do anything to eliminate that debt? Open your eyes and put a big “X” next to that debt. You've identified your first target.
      Repeat the process until you've rearranged the list according to the emotional impact the debts have on you.
      The beauty of the High Emotion approach is that if you're in really hard financial times and creditors are calling several times a day, you can get the biggest monkey off your back first. It's the old principle of the squeaky wheel getting the grease. When you wipe out the debt (and the collector) that is hounding you the most, you can breathe that little bit easier and focus on the next target.
      (To learn more about Baker's Debt Tsunami method, go to
  http://manvsdebt.com/debt-tsunami-the-ultimate-method-for-paying-off-debt
  .)
  
• SB Round (Short Burst)—The Tabata Method.
  When I was serving overseas, a buddy of mine introduced me to one of the toughest workout programs I've experienced: Crossfit. It remains my primary workout program today. To demonstrate how tough it is, the program's mascot is called Pukie the Clown. Suffice to say, I've met the mascot a few times following some workouts.
      A significant element of the Crossfit regimen is Tabata, a variation of high-intensity interval training. The idea is to alternate short bursts of high-intensity exercise with brief periods of rest.
  

Tabata is one of the most efficient and intense workouts I have ever put my body through. Ironically, it's also one of the shortest workout regimens. Each workout lasts four minutes.

To commence a Tabata workout, you choose an exercise. If you select push-ups, for example, you set a limit of twenty seconds. During that time, you do as many push-ups as you can. Then you rest for ten seconds. Immediately after that, you do as many more push-ups as you can for twenty seconds, followed by another ten-second rest. Repeat the process for four minutes.

What makes Tabata so effective is the concept that your body can only perform at high intensity for so long before it starts to wear down. The intervals of rest enable you to cram a lot of high-intensity exercise into a very short time, allowing enough recovery to continue to the next round.

Similarly, if you try to attack too much debt too fast, you run the risk of burning out. By applying the Tabata method, you can allow yourself breaks from the stress of hitting a debt hard. It works this way: Let's say your mission is Operation Discover. You have a balance of $10,000 on a Discover card that you maxed out when you were in college. Planning your attack on debt, you've identified this card as your first target.

To prevent early burnout, use the Tabata ratio of 2 to 1, focusing for two months and then taking a one-month rest. Make double payments for the first two months to knock a substantial amount off the principal. After hitting it hard for two months, take a month where you pay only the regular payment. Then go back to double payments for two more months. Keep repeating that cycle until the debt is eliminated.