207. “I’m 40, burned out, and don’t know what’s next in my life”
In this episode of I Will Teach You To Be Rich, Ramit Sethi speaks with a couple facing significant life changes as they approach military retirement. With a net worth of $715,000 built over 20 years of service, Ray and Courtney have maintained strong financial habits, including consistent investments and careful budgeting. However, they struggle to define what their ideal life looks like beyond the practical aspects of money management.
The conversation explores the challenges of transitioning from military to civilian life, including the impact of frequent relocations on their family and the process of finding new career opportunities. Sethi helps the couple examine their relationship with spending and saving, encouraging them to consider how they might balance their prudent financial planning with experiences that bring them joy, such as travel and entertainment.
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1-Page Summary
Financial Situation and Planning
Courtney and Ray have built an impressive $715,000 net worth over their 20-year military careers, comprising $90,000 in assets, $590,571 in investments, and $34,782 in savings, all while remaining debt-free. Their monthly income of $17,000 is carefully budgeted, with 57% allocated to fixed costs, 20% to investments, and the remainder for discretionary spending. They consistently invest $1,900 monthly in post-tax retirement and $700 in their children's 529 plan.
Military Career Transition
After 18.5 years of military service, Ray approaches a critical decision point regarding retirement. While he never intended to stay in the military this long, he has found satisfaction in his service. However, the transition to civilian life presents challenges. Ramit Sethi suggests that Ray, who would be 44 at retirement, should network with companies he's interested in, such as Patagonia, using LinkedIn for informational interviews.
The couple's frequent relocations due to military assignments have particularly affected their children, with their youngest having lived in five different houses before age six. This impact on their children's stability has become a significant factor in their retirement decision-making process.
Lifestyle and Spending Priorities
Despite their strong financial foundation, Courtney and Ray struggle to define their "Rich Life" beyond practical financial planning. Courtney tends to view personal spending as wasteful, preferring to save for future family needs. However, through their conversation with Ramit Sethi, they're beginning to recognize the importance of balancing practical financial planning with joyful experiences, such as travel to Japan or concert attendance, rather than focusing solely on maximizing investments without clear intent.
1-Page Summary
Additional Materials
Clarifications
- Ramit Sethi is a well-known personal finance advisor and author who often provides practical advice on managing money, investing, and career development. In this context, his suggestion for Ray to network with companies like Patagonia using LinkedIn for informational interviews is aimed at helping Ray explore potential career opportunities outside the military as he considers retirement. Sethi's guidance emphasizes the importance of building connections and gathering information to make informed decisions about transitioning to civilian life after a long military career. His approach encourages proactive engagement with potential employers and industries of interest to facilitate a smoother career transition process.
- The concept of a "Rich Life" encompasses more than just financial wealth; it involves finding a balance between financial security and enjoying meaningful experiences. It emphasizes aligning your spending with your values and priorities, focusing on what brings you joy and fulfillment. A "Rich Life" can include travel, hobbies, time with loved ones, personal growth, and any activities that enhance your overall well-being. It's about living a life that feels abundant and fulfilling on a personal level, beyond just accumulating wealth.
- The financial allocations mentioned in the text outline how Courtney and Ray distribute their monthly income, with a significant portion going towards fixed costs, investments, and discretionary spending. They prioritize saving for retirement and their children's education through specific monthly contributions to post-tax retirement accounts and a 529 plan. This structured approach helps them maintain a debt-free status and build a substantial net worth over their military careers.
- Frequent relocations due to military assignments can impact children by disrupting their sense of stability, leading to challenges in forming long-lasting friendships and adjusting to new environments. This can result in emotional stress, feelings of isolation, and difficulties in academic performance as they navigate changing schools and social circles. The cumulative effect of multiple moves can also impact their overall well-being and sense of belonging.
- Ray, after 18.5 years of military service, is contemplating retirement at age 44. Despite not planning to stay in the military for this long initially, he has found fulfillment in his service. Transitioning to civilian life poses challenges, and seeking advice on networking and potential career paths is crucial for his successful transition. The impact of frequent relocations on their children's stability is a significant factor influencing Ray's retirement decision-making process.
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Financial Situation and Planning
Courtney and Ray have built a substantial net worth over their 20-year military careers, but they face uncertainty about transitioning to civilian life and how to prioritize their finances.
Strong Financial Foundation: Courtney and Ray's $715,000 Net Worth, Debt-Free, Achieved Over 20 Years In Military
Income Enables Retirement Savings and Comfortable Lifestyle
Courtney and Ray have worked diligently to achieve a commendable financial status without any external assistance, relying on a single income source throughout their careers. They boast an impressive net worth of $715,353, comprising $90,000 in assets, $590,571 in investments, and $34,782 in savings, all while maintaining zero debt. Their total income is $17,000 per month from which they allocate 57% to cover fixed costs. Additionally, they are currently investing $1,900 monthly in post-tax retirement and putting $700 each month into a 529 plan for their children's education. The mention of a substantial $15,000 tax refund from working overseas highlights prudent planning, as they consider allocating part of this windfall to their Individual Retirement Accounts (IRAs).
Budget: 57% Fixed Costs, 20% Investments, Rest For Expenses/Savings
Courtney and Ray’s budget carefully divides their expenses, with 57% directed towards fixed costs and 20% channeled into investments. Their savings account stands at $34,782, which equates to approximately four and a half months of their fixed expenses. They feel comfortable with this amount, preferring to let their money grow in investments rather than sitting in a savings account. Meanwhile, they have set aside a 23% allotment for guilt-free spending, which translates to $3,616 a month—an amount they do not always spend in full.
Courtney and Ray Uncertain About Civilian Transition Despite Financial Success
Hesitant to Retire From Military Due to Lifestyle Change
Despite their financial success, Courtney and Ray are apprehensive about the prospect of retiring from the military. Ray is unsure what he might qualify for in the civilian job market and is uncertain about the potential lifestyle change that comes with leaving the structured military environment. He is currently enjoying his military service and does not feel ready to make the decision to retire just yet, preferring to contemplate this following his next tour. Ramit Sethi recognizes the challenge Courtney and Ra ...
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Financial Situation and Planning
Additional Materials
Counterarguments
- While Courtney and Ray have a strong net worth, it's important to consider the liquidity of their assets. Investments and savings are not as readily accessible as cash, which could be a concern in case of an emergency.
- A single income source, even if substantial, can be a risk if that income is disrupted. Diversification of income streams could provide additional security.
- Allocating 57% of income to fixed costs might be efficient, but it could also indicate a high cost of living. It may be beneficial to review these costs for potential savings.
- Investing in a 529 plan is a proactive step for their children's education, but they should ensure it doesn't come at the expense of their retirement savings or other financial goals.
- A $15,000 tax refund may indicate that they are overpaying taxes throughout the year. They might benefit from adjusting their withholdings to have better use of their money throughout the year.
- Having four and a half months of fixed expenses in savings is a good emergency fund, but some financial advisors recommend having up to six months, especially if facing a potential career transition.
- Hesitation to retire from the military is understandable, but exploring civilian career opt ...
Actionables
- You can diversify your income streams by exploring part-time work or passive income opportunities. By not relying solely on one source of income, you reduce the risk of financial instability in case of job loss or unexpected expenses. For example, you might rent out a room in your home, start a small online business, or invest in dividend-paying stocks to create additional income.
- Create a visual representation of your "rich life" to clarify your financial goals and priorities. Use a vision board or a digital collage to depict what you want your life to look like, including experiences, possessions, and milestones you aim to achieve. This can help you make more informed decisions about spending and saving, as you'll have a clearer picture of what you're working towards.
- Conduct a monthly "financial f ...
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Military Career Transition
Courtney and Ray are a military couple considering the implications of retirement from the military after nearly two decades of service. They now face the complex decision of whether to continue in service or move to civilian life.
Courtney and Ray Consider Military Retirement With Ray's 20-year Pension Opportunity
Ray has reached 18 and a half years of military service, and with the 20-year pension mark approaching, he and Courtney contemplate retiring. While Ray never planned to stay in the military this long, he continued because he enjoyed it. Now, the couple considers whether to continue for another contract. Their upcoming decision is particularly significant as they express a ready desire to move on and start making life choices for themselves, something they have never done before.
Leaving the Military Marks a Big Change After two Decades of Structure and Stability
The thought of retirement and navigating life post-military experience is daunting. Having been in the military since he was 22, Ray has had a structured and secure career. Ramit Sethi, the host, emphasizes that transitioning to civilian life would represent a significant lifestyle change and require a shift from short-term contract thinking to long-term life and financial planning.
Navigating the Civilian Job Market and Finding a Fulfilling Career For Ray Is Daunting
Finding a fulfilling career in the civilian job market after retirement is a concern for Ray, who would be 44 at the time of leaving the Navy. Ramit Sethi advises him to network with individuals at companies he is interested in, such as Patagonia, using platforms like LinkedIn to set up informational interviews and gain understanding of possible career paths.
Courtney and Ray's Kids Frequently Relocated For Ray's Military Assignments, Making Settling Appealing
Having relocated multiple times due to Ray's military assignments, Courtney and Ray are also considering their children's needs. The older their children grow, the more the challenge of moving increases, especially as it affects their friendships and stability.
Challenge Increases With Children's Age When Relocating
Courtney, speaking with Ramit Sethi, mentions that their frequ ...
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Military Career Transition
Additional Materials
Clarifications
- The implications of military retirement involve decisions on whether to continue in service or transition to civilian life, considering factors like stability, financial planning, and career opportunities. Military personnel often have the option to retire after completing a certain number of years in service, typically 20 years, which makes them eligible for a pension. This pension provides a source of income post-retirement, but transitioning to civilian life can involve challenges such as finding a new career, adjusting to a different lifestyle, and considering the impact on family members. Military retirement decisions are complex and require careful consideration of personal goals, financial security, and family well-being.
- Transitioning from military to civilian life involves moving from a structured, regimented environment to a more flexible civilian lifestyle. It often requires adjusting to new routines, responsibilities, and ways of thinking. Veterans may face challenges in finding employment, building social connections, and adapting to a different pace of life. Support networks, career counseling, and resources are available to assist in this transition.
- Transitioning to a civilian career after military service can be challenging due to differences in work culture, skills translation, and networking requirements. Veterans may struggle to articulate their military experience in a way that resonates with civilian employers. Additionally, adjusting to a new work environment and career path can be overwhelming after years of military structure and routine. Support programs and networking opportunities can help veterans navigate these challenges and find fulfilling post-military careers.
- Frequent relocations due to military assignments can impact children's stability and development by disrupting their social connections, causing emotional stress, and hindering academic progress. The constant upheaval can lead to challenges in forming lasting friendships, adjusting to new environments, and maintaining a sense of consistency in their lives. Children may experience feelings of isolation, struggle w ...
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Lifestyle and Spending Priorities
Courtney and Ray's approach to finances reflects a cautious and calculating mindset towards money, prioritizing savings and investments over spending frivolously or on debt-laden extravagances.
Courtney and Ray's Aversion to Debt and Extravagance
Mindset Favors Saving and Investing Over Spending
Courtney and Ray live conservatively, treasuring each dollar earned and considering additional income earned by Courtney as savings for specific future goals rather than for day-to-day expenses. They exhibit a strong aversion to debt, echoing Courtney's principle instilled by her parents that one should not spend money they don't have.
Courtney Views Spending On Herself As Wasteful, Preferring to Save For Her Family's Future
Courtney's resistance to spending on personal items like skincare treatments illustrates her view that such expenditures are wasteful when weighed against potential future family needs. This internalized belief likely stems from a protective instinct over her earnings and a robust intention to stay out of debt.
Courtney and Ray's "Rich Life" Remains Undefined, Centering On Practical Financial Planning
Courtney and Ray have a strong foundation in saving and investing but seem stuck in a cycle of indecision when it comes to defining their "Rich Life." They miss out on potentially joyful experiences due to their uncertainty and conservative spending habits.
Missed Opportunities for Joyful Experiences and Purchases
Their hesitation to spend has led to missed opportunities, such as Courtney's thwarted birthday trip or choosing second-hand items over new ones. However, Courtney and Ray are gradually recognizing the need to balance practical financial planning with joyf ...
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Lifestyle and Spending Priorities
Additional Materials
Counterarguments
- While saving and investing are important, overly cautious spending can lead to a lower quality of life and missed experiences that could provide value and happiness.
- A calculating mindset towards money may sometimes lead to stress or anxiety, as it can create a sense of scarcity even when there is financial stability.
- Treasuring each dollar earned is commendable, but it can also lead to an unhealthy relationship with money where spending any amount causes guilt or discomfort.
- A strong aversion to debt ignores the potential benefits of leveraging debt responsibly, such as investing in a home or education, which can lead to long-term financial growth.
- Viewing spending on oneself as wasteful might overlook the importance of self-care and personal well-being, which can be crucial for overall happiness and productivity.
- The concept of a "Rich Life" is subjective, and the lack of a clear definition may not necessarily be a problem; it could allow for flexibility and adaptability in financial planning.
- Missing out on joyful experiences due to spending hesitation might lead to regrets later in life, as experiences often contribute significantly to one's sense of fulfillment.
- Prioritizing moments of joy is important, but it should ...
Actionables
- You can create a "Joyful Experiences Fund" by setting aside a small percentage of your monthly income specifically for activities that bring happiness. Start by determining what percentage of your income you're comfortable dedicating to this fund, and then automate a monthly transfer to a separate savings account. This way, you'll have a dedicated pool of money for experiences like concerts or travel without impacting your regular savings goals.
- Develop a "Happiness Ledger" to track the emotional return on investment for your purchases. Whenever you spend money on something that's meant to bring joy, jot it down in a notebook or digital document along with how it made you feel. Over time, you'll be able to see which expenditures truly contribute to your happiness and which don't, helping you make more informed decisions about future spending.
- E ...
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