Follow the 10-10-80 rule

Gavin finished his first summer job recently. He earned a fair amount of money and asked me about the process I use for managing my money. Gavin is just learning about money. I recommended that he keep it simple, and follow the 10-10-80 rule. This formula represents how you should allocate the money you earn – save 10%, give 10% (some call this tithing), and spend the remaining 80%. I cannot remember when I learned this rule, but I have tried to use it over the years. It seems to work well, although it can be tempting to spend more than 80%, especially if you experience a windfall.

1. Save 10% for yourself – there are multiple reasons to save 10% of your paycheck. First, it is helpful to have an emergency fund to deal with surprise situations that may arise. Opinions vary about how much money you should have in an emergency fund. One month salary is a good starting point. Second, you may want to save money for a specific purchase so that you don’t have to borrow money and pay interest. In general, I like to stay out of debt as much as possible, but I think it is okay to borrow money for some purchases. For example, you will likely need a loan if you decide to buy a house. Third, you will need money for retirement. In fact, you will likely need a lot of money. Start saving early for retirement, so that you don’t have to play catch-up later on. I did not save nearly enough early on in my career and am paying the price now. Avoid this mistake if you can. Most companies offer employees ways to save for retirement. Take advantage of these savings opportunities. Here is a video that talks about various ways to save for retirement.

2. Give 10% for a worthy cause – it honors God and helps those in need. I would love to say that tithing is easy, but it can be a challenge to give away 10% of your money. I recommend starting early so that it becomes a habit. Don’t tell yourself that you will give money away when you earn more and can “afford it”. I think it actually becomes more challenging the more you make. Once again, keep it simple. If you are a member of a church then you should tithe to that church. The tithe is intended for the church to operate and support the local community. If you are not a member of a church then look for a worthy cause to support. Plenty of them exist. I have taken different approaches when it comes to charities. One year I decided to support as many as possible – even with only a small amount. More recently, I decided to focus my donations to a few specific charities that I am passionate about. For example, this year I am focused on the Lead the Way Fund. They do great work. Lastly, some charities are not worth supporting. They spend too many resources fund raising, or other events, rather than making sure the money gets to those who need it. For example, I used to send money to the Wounded Warrior Program, but stopped due to a recent scandal about how they were wasting donor’s money.

3. Spend 80% to live your life – this part covers the rest of your expenses like housing, food, utilities, clothes, and other bills. 80% sounds like a lot. Not spending more than that seems easy, but I will warn you that it is not easy. What is easy is spending more than you earn by using credit cards and other methods for borrowing money that you do not really need. Trust me, it is really easy to buy stuff, esecially nowadays. You don’t even have to leave your house to shop and they will deliver many things straight to your front door. I am a big fan of online shopping, but it can be a slippery slope when it comes to spending money.

Lastly, I have warned you before about the dangers of credit cards, and will reiterate to be careful. At one point in my life I wracked up over $10K in credit card debt and had to refinance our house to pay off the debt. Really big mistake on my part. You should not be shocked to learn that the credit card company never called me to ask why I was spending so much money. The reality is that we had just moved and it cost a lot more money getting the new house set-up than I anticipated. The credit card company did not care because they make money out of the deal. The more I borrow, the more they make.

Managing your money can be tricky. I recommend keeping it simple, following the 10-10-80 rule, and avoiding debt as much as possible.

Here is another video in which Dave Ramsey and Chris Hogan answer a question about retirement from someone who is 23 years old.

Lessons from the Tour de France

July is here and that means it is summer time. A major international sporting event that happens every July is the Tour de France. It is the most important bike race in the world, and it is brutal. It always has been. Basically 200 bike riders race all over France until the winner is declared. This year the race includes 21 different stages that cover over 3500 kilometers. The graphic above shows even more statistics about the race. I like the Tour, and enjoy watching the race, even thought cycling is generally boring. Just a bunch of bike riders peddling around the countryside. One of the reasons I enjoy the tour is that it teaches many lessons that you can apply in life. Here are three that come to mind.

1. Life is a team sport. Many people think that the Tour de France is an individual event due to the fact that there is a single winner. The overall winner is awarded the coveted yellow jersey. The reality is that every rider belongs to a team, and it takes a team to win. No single person will outperform everyone else. Instead you need the help of your team whether it is drafting off them on the flats, or following behind them on the climbs. I think life is a team sport also. You will need help along the way, and be willing to help others. To go it alone would be a tragic mistake, and lead to misery. Life is tough. Don’t go it alone.

2. Keep peddling, especially in the mountains. The Tour is a really long race. Day after day the riders have to cover hundreds of miles. Some have compared riding the Tour de France to running a marathon everyday for three weeks straight. Ouch. One of the things that makes the Tour so difficult is the mountain stages. All the riders have to navigate up and over towering mountains to include rides in the Alps and the Pyrenees. I have driven a car over some of these mountains and they are really tall – up in the clouds. Some riders specialize in climbing, but these stages are tough for everyone. If you are a sprinter, the mountains are especially difficult, but they still have to ride over them. They are not allowed to skip these stages and wait for the next flat course. I have watched these stages for years, and I remain amazed that anyone can make it through the mountain stages.

I think there is a parallel in life in that we all will face tall mountains, obstacles that we have to get over. How do riders get over the mountains – they just keep peddling. They use different techniques, different gears, and different approaches to make it over. It is not always pretty. In fact, for many it is rather ugly, but they make it. Sometimes we have to do the same thing in life – head down and just keep peddling. Don’t quit, keep moving forward, dealing with what life throws at you. The easy way out would be to quit. Many people do. But, I want to encourage you to keep peddling, even when it gets ugly. You will find joy after you reach the peak, and enjoy the ride down the back side of the mountain.

3. Play by the rules. It is well known that cycling has experienced many scandals over the years. The most famous is Lance Armstrong, who used to be a hero of mine. Lance “won” the Tour more times than any other rider, and became a sporting legend around the world. But, the reality is that all those victories are tainted. They were taken away because he cheated to win. He broke the rules repeatedly, lied about it, and was finally caught years later. He has been dealing with the shame of these revelations the past few years. Many years ago, I was a big Lance fan. I wore a live strong bracelet, read the books he wrote, and really enjoyed watching him ride. But all that admiration was based on a lie. Learn a critical lesson from Lance, and that is to play by the rules. No victory is worth breaking the rules, and cheating to win. In life, you will be tempted to cheat, to bend the rules to your favor. The reality is that many cheaters don’t get caught. Even so, don’t fall into this trap. It will take away the joy of victory, and you will always know what you did, even if others never find out.

For anyone not familiar with the Tour this video helps provide some context about why it is the most challenging bike race in the world.

Hit the reset button – New York blunder

As you know, this past weekend Gavin and I visited New York City. It was a great trip, and every thing was going really well until we arrived at the airport for our trip back home. Once at the airport I noticed that our flight was not listed on the arrival board which seemed strange. I should have stopped there, but we went through security and on to the departure gate. At this point, I could tell something was wrong. Our flight was not listed at the gate, so I checked my ticket. Crap – our flight did not depart at 9 AM…but 9 PM. I made a huge blunder, a really big error. We were at the airport twelve hours early with nothing to do, and no other flights available.

What to do next? Gavin and I pondered the situation and we decided to hit the reset button on the day. We trekked back to NYC, found a place to store our luggage, and spent another day exploring NYC. The weather was not great, but we had a good time being tourists. We went to the top of the rock, hung out in Times Square, visited the wax museum, explored Ripley’s, and an array of other attractions. The day was topped off with New York cheesecake at a diner. Not a bad day considering we had not planned any of it beforehand.

As this experience shows – sometimes you have to hit the reset button on a day. The bottom line is that I messed up big time. But, we could recover from it. Rather than spending the day beating myself up over my mistake (Gavin did a nice job reminding me about it), I decided to get on with it, and make the most of what was left of the day. The ability to “hit the reset button” is an important skill in life. Many times, you will make stupid mistakes, or have things not go your way. It is easy to get really upset about the situation, and even pout about it. But, a more mature response, is to get over it, and then get on with it. You will be amazed at what will happen when you hit the reset button – you will meet new people, see new places, and gain new experiences.

Keep this lesson in mind the next time you travel, and things take a turn for the worse. I have traveled a fair bit, and trust me, these kind of things happen. Flights are delayed, and your plans will need to change. Hopefully, I will avoid making this kind of big blunder again. But, if it does, I know what I will do. Hit the reset button, and start all over again.

Standing in the middle of nowhere,
Wondering how to begin.
Lost between tomorrow and yesterday,
Between now and then.

And now we’re back where we started,
Here we go round again.
Day after day I get up and I say
I better do it again
– Do It Again by the Kinks

Thank your mom – today is her special day

Today is a special day for women. Today is Mother’s Day. Make sure you take time to thank your mom for all she has done for you over the years. I know I will. For a long time I was not very close to my mom. Some things happened in my youth that strained our relationship, and I did not see a compelling reason to do anything about it. Neglecting my relationship with my mom was a big mistake – one that I regret to this day. The reason that I regret it is that my mom is awesome. When I think about why my mom is great, three words come to mind.

1. German – my mom was born and raised in Dresden Germany. She met my Dad in Berlin and came to America with him in the early 1960s. Even though mom spent the rest of her life here, she is still very German. You hear it in her voice, and will notice it in her mannerisms. Mom speaks her mind when talking with others. This trait is unsettling for some. She expects excellence. Why do something if you don’t plan to be the best. And she is not physically affectionate. Germans are just not big at hugging. What I have learned by watching my German mom is to be myself, and not worry about what others think about me. I encourage you to do the same. Be who you are, not who others think you should be. I know a lot of people who drive themselves crazy trying to please others all the time.

2. Tough – my mom has dealt with a lot in her life. Dresden was bombed to the ground during the war, and conquered by the Russians. Her family was wealthy before the war, but not so much after Dresden become part of the communist DDR. Mom went to Berlin to find work, and met Dad there. The Berlin wall went up while they were there. As a result she would not see her family, or her home, for many, many years. She raised two young boys while Dad served in the Army, deploying to Vietnam for three combat tours. We moved many times before finally settling in the DC area. She dealt with all of these challenges, and many more. I have never heard my mom say, I cannot handle this. Her toughness set a great example for me to follow as I deal with the challenges of life.

3. Generous – my mom has given me more than I can ever repay. Both your Uncle Perry and I played multiple sports growing up. Mom drove all over God’s green earth making sure we made it to swim practice, swim meets, and soccer games every weekend. Dad did a lot of coaching, Mom did a ton of driving. Also, she has never hesitated to help you boys. I have not told this story before, but I will now. When your mom and I divorced it cause a lot of financial challenges to me. I was paying a large mortgage, rent for a townhouse, and for a divorce lawyer all at the same time. I was spending more than I earned, and on the road to financial ruin. I mentioned this challenge to my mom, and bemoaned the fact that I had to stop saving money to pay for your college. Without saying anything, she quietly went upstairs, wrote a check, and then handed it to me. It was enough money to pay for your first year of college. I told mom that I had no idea when I could pay her back. She did not want the money back. She wanted her grandsons to succeed in this world, and that meant going to college. Her generosity inspires me to do the same. I am in a much better place financially these days, and will do my best to help both of you, and your families.

Take a moment to reflect today about your mom, and what she means to you. Make sure you express your thanks. I bet she will appreciate it.

I got to grow up with a mother who taught me to believe in me.
– Antonio Villaraigosa

Be a learner – avoid repeated mistakes

It is impossible to always make good decisions. Everyone makes mistakes – some big, some small. What is important is that you learn from your mistakes, and avoid repeating them. One of the reasons I enjoy traveling so much is that you get to see the world, and you learn a lot about life. Unfortunately some of it is due to mistakes I make, bad decision, or short sighted judgments.

For example, it was a mistake not to use the free wi-fi that was available at the resort on our trip to Cancun last year. As a result, we wracked up hundreds of dollars in extra roaming charges – a costly mistake. Another example – it was a bad decision to return a rental car in Germany without the gas tank full. The customer service person was not thrilled, and it cost me a lot of grief and money. Lastly, I was short sighted when I received a parking ticket in Rothenburg and “forgot” to pay it. The rental car company added a hefty fee for dealing with the ticket when they billed my credit card.

These mistakes were learning experiences. I will make sure these mistakes do not happen again. Be a learner – avoid making the same mistakes over an over. Pay particular attention to your mistakes that result in loss, waste, or destruction. You want to avoid mistakes that create broken relationships with family and friends, results in losing large amounts of money, or wasting your time. Instead learn lessons from your mistakes and apply those in future situations. Smart people learn – fools don’t…and none of want to be a fool.

“Wisdom comes from life experience; life experience is the result of repeatedly taking corrective action while courageously learning from mistakes.” ― Ken Poirot

Avoid Making Decisions in the Late Night

One rule for you to consider – do not try to have serious discussions (especially if they involve big decisions) really late in the day (consider late after 10 PM).  Tired minds tend to make poor, or shortsighted decisions.  If you need time to contemplate different options, investigate alternatives, or discuss serious matters, then plan your day accordingly.  I generally get up early in the day, and do some of my best thinking then. Don’t wait until the last minute, late at night, to try and accomplish these kinds of things in haste. You might not like the poor results this generates.

Early to bed, early to rise, makes a man healthy, wealthy, and wise.  

Benjamin Franklyn