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Military Money Manual Podcast Episode 64 Links

• Free 5-day course to maximize your travel benefits and learn all about military travel hacking
• The Military Money Manual book
• Episode #21 Doug Nordman: How to Live on the 4% Rule, Recover from Investing Mistakes, and Start a Kid's 401k
• Episode #33 Space A Travel with Luke
• Episode #58 Jesse Mecham (YNAB) 
• Thrift Savings Plan: Military TSP-Everything You Need to Know

Outline of Episode:

• Why doing an end-of-year review of your finances is beneficial
• How to respond when the market is down
• Big wins for Jamie and Spencer
• Reviewing purchases made this year
• Evaluating the biggest spending categories
• Spending on books and self improvement 
• Planning ahead for upcoming BAH, BAS, and pay increases
• Analyzing what and who did you spend time, money, and energy on that added value to your life 
• Finding what brought joy to your life and scheduling more of that
• Looking back to see if you accomplished last year’s goals

Military Money Manual Podcast Episode 64 Transcript

[00:00:24] Spencer: Hello podcast listeners, and welcome to the Military Money Manual Podcast. I'm Spencer Reese from militarymoneymanual.com. Today I'm joined by my co-host, Jamie. Hey, Jamie.

[00:00:35] Jamie: Hey, Spencer.

[00:00:36] Spencer: We are talking about our end-of-year review. Three main ideas we're going to cover today are why we conduct an end-of-year review.

Sounds like a pretty nerdy thing to do, but it is something that Jamie and I actually do. 

Number two, how to respond when the Market is down. The market is down year to date. We're recording this on 12 December 2022, so we still have a little bit, a couple of more market days, maybe like 10 or 15 left in the year.

But yeah, it's probably going to be a pretty rough year for the stock market when it closes on 30 December. 

Then finally, number three, the main point, how to set yourself up for success in the new year. If you find the podcast valuable and you are getting value out of the information that we're presenting here, the easiest way you can say thank you is by leaving us a five-star review on Spotify, apple, or wherever you listen.

So Jamie, end of the year.

[00:01:26] Jamie: Yeah, Spencer, it's been a great year in addition to the podcast, it's been a good year for the family, not so good for the stock market and a lot of our investments, But it's okay. We're not freaking out because we know that in the long run, the market's going to continue to go up.

On average, about 10% a year. I really want to think about 30, 40 years from now, I'm 35 now, so really 30 years or so for my money except for the gap fund if I do retire early. So I'm still thinking the long-run market's going to go up. I'm not super worried about this year, even though it is been pretty ugly.

[00:02:00] Spencer: Yeah. Yeah, it's definitely been ugly. Like you said, terrible year for the market. At the time of this recording, the S&P 500 is down almost 17% today. I think it closed down 16.8% year to date, which if it holds until the end of the year, is going to make it one of the worst years for stock market performance in the last 100 years.

But for most of our listeners, if you're young, if you're in the military, you're getting a steady paycheck, or you're married to someone in the military who's getting a steady paycheck, or you're a recent veteran and you're making money, this is a historic and amazing buying opportunity. I'm extremely jealous of anyone who's in their twenties or early thirties right now.

Even myself include, I'm the right bull age of 35, just like you, Jamie, and I'm pretty stoked actually. It seems almost like a “bloodless stock market loss” where we don't have the high unemployment that we saw back in 2008, or right when Covid kicked off and a lot of people got laid off.

So it's almost like nobody's really suffering unless you were super leveraged up or you had all your Bitcoin and FTX.

[00:03:06] Jamie: Right? And one of the things I love about this year is that when you look at the long-term picture of the stock market or the S&P 500, maybe a five or 10-year view, where you're getting your shares if you buy them today, gives you back two or three years of share prices.

So if you missed the boat or you're paying off debt, or you just found Spencer's book recently and you just started investing, you're getting them on sale at 2019, and 2020 prices in a lot of cases right now. So you're buying back a couple of years of your financial independence journey. if you're starting late or you're starting more aggressively now than you were back then.

[00:03:43] Spencer: Yeah. Awesome point. The entire global stock market's on sale at the moment, and there are tons of great companies out there that are extremely cheap. So if you enjoy a more active investment strategy, which I don't and you don't either, Jamie, we're just the classic passive index fund buy and hold investors, which is still tons of opportunity out there.

When you look at some of the all-time highs on these ETFs and mutual funds that we're buying, where you look at the TSP, this is the great opportunity to come in and buy some quality companies that are producing amazing goods and services, and they're going to keep generating profits year after year.

That's the crazy thing, I just did a big trip and we're going to talk about some of the travel that we did over the last year, but I just did a big trip through the US and we went internationally. We went to Chile, and we went to another special place, which I'll mention in a little bit.

But one thing I noticed was, everyone is like, “Oh my gosh, there's a recession coming. There's a recession coming.” You couldn't get a reservation at any restaurant, the hotel we were at was packed. All the flights I was on were completely full. They were asking to bump people.

So when you see that and you're like, why is the stock market down so much when if you look at the state of the economy and the state of the world, I know there's giant, macroeconomic factors at play. There are interest rates. If you're trying to buy a house right now, I feel for you, it sucks.

But the sinew, the muscles of the economy, they're still there. They may have atrophied a little, but trust me, now is not the time to bet against the American or global economy.

[00:05:25] Jamie: Spencer, the market's been down before, you mentioned that. Since 1950, we have some data about a 25% or more downturn.

And I think that might help alleviate some concerns that the market's never going to recover from this year. So what do you say? Or do you have any proof that historically the market does recover from bad years?

[00:05:46] Spencer: Yeah, so it's definitely not proof, right? Like we could be a year from now, it could be down another 20%, and it's done that before.

If you go back and listen to our Doug Nordman episode, he retired in 1999. The stock market collapsed in 2000, and then it was down again in 2001, and then it was down again in 2002, three years in a row. The market closed January to December in the negative. That's painful. Fast forward 10 years later, you're going through the global financial crisis of 2008 to 2011.

So if you're an investor and you're throwing money into the stock market, especially if you're young and you haven't been through one of these cycles before. If it draws out and all of a sudden, it's not just a one-year bear market, it's not a two-year bear market, but it's a three-year bear market that requires some intestinal fortitude that you need to start building up now.

Because if you are in a position where you're checking your portfolio every day and you're seeing these red numbers, or you're seeing the down market and it's making you question your investment strategy, if your investment strategy is to buy and hold, you're all set. You're good. Just keep buying and keep holding.

But if you're day trading, if you're going after the get-rich-quick schemes, if you're looking at crypto trading or Forex or any of these like crazy investment strategies, if you are losing sleep over that, you need to reevaluate. This is a great opportunity to sit down and reevaluate. Okay. With that rant complete, let's talk about what you just mentioned, which was what happens when the S&P 500 is down.

So this was from Ben Carlson. He's got a website, aweaelthofcommonsense.com. I think he's a Ritz hold management wealth management guy. Super smart guy. To summarize his entire website, it's basically beating the market's hard, and that's what he does full-time. That is his job.

Even he admits that it is tough. It is really hard and I have double check this. I'm pretty sure he is a big proponent of passive index fund investing, but he also tilts a little bit more active as well because that's his job. That's what he likes to do. For the S&P 500, the 500 largest companies in America, when they're down more than 25% or more since 1950, he's generated this chart here.

On average the downturn is down 37.6%. So if you look at, let's say 1961 and 1962, it dropped 28%. In the eighties, from 1980 to 1982, it dropped 27%. From 2000 to 2002 it was down 49%. Ouch. Imagine the losses in your portfolio when you see that. But what's crazy is that he looked at all the downturns and then he looked at the one-year, three-year, five-year, and 10-year returns afterward.

So after that downturn, what happened? What he's found is that in the one-year returns after a 25% or more drop in the stock market, in every single instance that he found it was up except one, from 2007 to 2009, the market kept dropping after a year. But that was it. That was it. On average, it was up 21% from the market bottom to then.

If you looked at the data a year later, and if you looked at the data five or 10 years later, it gets even better. So on the 10-year scale, in every single instance when the S&P 500 was down 25% or more since 1950, on average, the market is up 200%, 10 years later. So this is an opportunity here that you don't want to miss.

If you're young, you're in the military. If you're not young, but if you have income, you need to be buying right now. This is a time to buy, and this is not a time to close your eyes and be like, “Man I don't want to be investing. The markets are scary right now. There's a war in Ukraine.” There's always a reason not to invest. Whenever the stock market is down, it's not down in a vacuum.

There's always something terrible and horrible going on in the world that if you start reading the headlines, you're going to say, “Ooh, I'll just wait for that crisis in Ukraine to resolve itself.” I'll tell you what, by the time there's peace in Ukraine, you're going to have missed out on it because the guys on Wall Street and the smart money is going to see that peace deal coming, six months ahead of time and you're going to have missed the boat.

[00:10:01] Jamie: Okay. We cannot control the stock market, though. We've talked about that before. What we can control with our finances is savings rate and ideally a high savings rate. So how does that affect our response to a year like 2022 has been, now I'll say for me, Spencer, even despite everything this year, my net worth is up.

And I believe yours is too, mine's up about 13% with some quick math as of the time of this recording. That's with maxing out the TSP, maxing out both the IRAs, for my wife and me, not maxing out, but contributing to a 403b for the job that she had for part of the year. So savings rate helped overcome some of this downturn.

[00:10:41] Spencer: Yeah, I'm in the same position where my portfolio is down over six figures from the start of the year, but my personal net worth is up 16% because we still, my wife and I still have income coming in and if you're in the military and you have income coming in, you're working a job. So if you can have a high savings rate, and it depends on the person, it might be 10% to start, but when I was a senior captain I set aside 40% or 50% of my paycheck, and we were spending the rest and living high on the hog in the United Arab Emirates. We didn't want for anything. But what we were able to do when we have that high savings rate is when the market's down, you keep buying.

And what's interesting is if you look at my personal investment performance this year, I'm only down 9.2% for the trailing one-year period from 12 December 2021 to 12 December 2022. So how can I only be down 9.2% when the market's down 16%? Did I have this crazy grid investment strategy? No. All I was doing was buying the entire year.

So for instance, if you bought on 30 September of 2022, And you held your shares and we'll say you bought SPY, S&P 500 index fund, or the C Fund in the TSP, and you held it until today, 12 December, you're actually up 11%. So those kinds of returns can overcome the down market. 

If you have a lot of capital, let's say you got an inheritance from Grandma, and she left you $10 million, and that money's just sitting there, then when you see a 25% drop in the stock market like we did this year, that stings. That's two and a half million dollars out the door. You have to have a lot of income to make up for that in order to offset those losses. 

But when you don't have that much capital invested, and you are just at the beginning of your career or of your income-producing years, this is your opportunity to be throwing fuel on the fire.

This is your chance to put your money into the TSP. If you put money into the C fund throughout the year, there are going to be periods where that investment that went in, let's say, was like $1,600 a month, that could have grown to $1,800 now because of the timing when you bought it. 

And I'm not advocating for market timing, what I'm saying is just keep buying every month.

Every month you should have money going into your TSP. You should be maxing it out. In addition, you've got the Roth IRA as well, for most military service members are going to qualify for a Roth IRA. 

One of the ways, one of the strategies for a Roth IRA is dollar cost averaging into it and investing, let's say $500 a month. And in 2022, that would've maxed it out at $6,000, and next year it's going to go up to $6,500.

[00:13:35] Jamie: So Spencer I would just give another data point here that is similar to you. For my Vanguard account, not including TSP, I didn't run the full numbers for my whole portfolio, but just Vanguard, I'm down 13.1% in the last 12 months. Year to date, I'm down about 18 or 19%. So a little bit worse than you, 

But overall, as I said before, my net worth is still up. So that's the win. Then hopefully what we see next year, 5 years, 10 years from now, we see that recovery growth in the shares that we bought while they're down. Then we see a huge growth curve there.

I will say this year I experimented with front-loading our IRAs, which was a terrible mistake, only because now in retrospect the market's been down all year. My 2022 contributions have not even recovered a $6,000 balance yet from the January 2nd or January 3rd that I contributed to them.

Had I done $500 a month for each my wife and me, we would be way better off. But you don't know that at the time. I think in the long run, historically, the lump sum we've talked about comes out a little bit ahead. I generally lean towards dollar cost averaging, and I wanted to experiment a little bit. I did not like it. Lesson learned.

[00:14:48] Spencer: Your data point this year definitely backfired, but there was a Vanguard study performed and what they found is in 67% of the cases, it made sense to lump sum versus dollar cost average. But what was super interesting to me is if you looked at the 10, 20, 30, 40, and 50-year returns of either strategy, it was a wash.

When you're talking about your investments growing into million-dollar portfolios, we're talking about a difference of where the lump sum investing paid better by $10,000, like a 1% difference, between the total returns. 

So I would say for a lot of people, the dollar cost averaging just makes sense. You get paid monthly, invest monthly, just put the money into your Roth IRA, have a $500 that's going to go up next year to $540, but have a $500 deduction from your checking account that goes right into your Vanguard Roth IRA, wherever– Fidelity, Schwab, any of the big players. Wherever you hold your Roth IRA, just have that automatic monthly contribution, or you get paid on the first and the 15th in the military. Why not do it bimonthly? Then all of a sudden it's not, it doesn't sting that much, right? It's only $220 every two weeks. 

For me, dollar cost averaging, especially when you're getting started, is definitely the way to. It just stings a little less too. When you have a bad year like this and when you have a good year, you don't even notice, you might say, “Oh, I wish I had thrown in the $6,000 on 1 January,” but you don't know how the year is going to end up.

So like you, Jamie, my personal net worth was up 16% this year, my wife and I, and all of that is coming from the fact that we're continuing to receive income, and we're investing it into the market. It's painful because sometimes you throw money in and then you check in a month later and the market's down another 10% and yeah, that stings. 

But one remedy for that is don't check it. You don't need the money, and you have no control over the performance. One thing that we've talked about a lot on the show is focusing on what you can control. 

You cannot control stock market performances. No matter how many magic eight balls and how many chicken bones you throw on the ground. Nope. Sorry. There's no way. You can’t pray to Ben Bernanke. He's not going to save you. Or I guess it's Jared Powell. Now I'm dating myself. Just savings rate. 

It's just savings rate. That's it. That is what you can control. If you are noticing that if you're not putting in a lot of money during this historic buying opportunity, this is a great time to reevaluate your savings rate and look, “OK, where am I not getting value from my spending? Can I cut that and spend it on something I do value or can I redirect it to my investments, and so I achieve financial independence that much earlier?” 

[00:17:32] Jamie: That's a perfect segue. I was just about to transition and ask you why to do an end-of-year review. It might seem a little bit nerdy for some listeners. Maybe they're not into spreadsheets like you and I are. Will you share why you do one and then maybe I'll share why we do one as well?

[00:17:48] Spencer: I think for me, one thing is I feel like I have a pretty bad memory and sometimes I forget all the cool things that I get to do in life. I feel like I'm extremely lucky and extremely blessed.

First of all, I won the fetus lottery, right? I was born in America, so right there, boom, huge leg up on a lot of corners of the world. So sometimes for me, it's just remembering all the cool things I get to do and being grateful for them. Because of a lot of experiences, a lot of the joy that we get from experiences is anticipating them, planning them, and looking forward to them actually doing the experience itself.

And then afterward, looking at the photos, talking about it with friends, reconnecting with family or friends over a beer, and telling them the stories that they probably heard seven times before, they don't want to hear anymore. But it's still fun for you.

So to me, that's why I conduct an end-of-year review because I want to be grateful for the things that I accomplished in the year or got done in the year. Then I also want to look forward too. I want to think about what did I do in the year that was awesome and how can I replicate that again next year.

Because one thing that I've learned, and I just read this great book, Greg McEwen’s Essentialism, and he has this quote in there, “If you don't prioritize your life, someone else will.” That to me is the essence of conducting the end-of-the-year review. 

Figure out what went well in the year and then schedule more of that for next year.

Or schedule the same amount or similar activities for next year. If you don't get it on the schedule, if you don't plot it out, then you're going to find that they just don't happen. You have to go make your life happen, or life's just going to happen to you.

[00:19:35] Jamie: I would echo all of that with why my wife and I do one, and I’ll add a couple of things personally for us as well. 

I am the numbers guy in the relationship, the only guy in the relationship, but the numbers lover as well. She is aware of what we do with the money and we decide on the budget together and things like that. But she's not in the nitty-gritty details the same way that I am.

And a lot of couples are like that, where there's one person that loves the numbers and the other one doesn't. One person is generally the spender and one person is the saver. So there are all these differences in personalities, so it helps get us on the same page as well. When you sit down, schedule time, and do a review, ideally you do it monthly or sometimes weekly, depending on your stage of life.

But I really like what you said about analyzing last year, being grateful for all that we did, and then analyzing, “Is that what brought us joy? Is that what we want to do again with our money and our priorities next year?” 

And I'm just looking at this picture disc on my desk right now of photos we had taken in Orlando when we spent a few thousand dollars on spring break vacation. And the photo disc, I don't know, was like $180 probably, but am I grateful that I have pictures of my kids with the dolphins and all those memories solidified? Absolutely. Would I spend it again? Yes. Did it hurt to spend that much money on nine digital photos that I could have taken better on my own phone? Yes, it does. 

But in the long run, that is what makes our family tick, and it is very much aligned with our priorities and what drives us. So it's a time to look back and reflect like you said, and then take that to analyze what our goals are for next year. What do we want to do more of? Do we want to do more vacations? Maybe you didn't get a vacation of just husband and wife or spouses only this year. Is that something you want to do next year? And you prioritize that for example. 

[00:21:22] Spencer: Yeah, I love all that. One thing that you talked about there was making sure that both spouses are up to speed with what's going on.

And I think my wife and I have a monthly budget meeting where we go through, okay, what did we spend on the credit cards last month? And just checking in and making sure what we have coming up, and do we have enough cash set aside for our different goals and the different trips that we want to take.

But I think the end of the year is a great time to just reflect and review. You can do it in May. You could do it on your birthday, you could do it whenever. But for us, we've just settled on the end of the year. That's how the US tax year runs. It's just the time of the year that we've settled on to reflect, to review, to think about what went well, what didn't work so well, and then to make the things that went well happen more in the new year.

And this isn't for everyone, and some people like to be a little bit more spontaneous, but I think you can still be spontaneous with this as well. I don't think being overly reflective has ever really hurt anyone.

[00:22:26] Jamie: I agree. I don't think so either. As we look back and we reflect on the year, let's start with some big wins that we each had, and we'll just reflect on some things that came up in our end-of-year review, starting with some big wins that you had Spencer this year.

[00:22:42] Spencer: Thanks, Jamie. Number one for me was health and fitness. I started prioritizing kind of fitness and healthy living maybe a decade ago when I started flying the C-17, and I started to have back problems. “I was like, man, I'm 23 years old? 24 years old? I don't have, it's too early for me to start, have back problems.”

And I did some quick Googling and somehow I stumbled on functional fitness. People are basically like, “Hey, do you have back problems? Start deadlifting. Your muscles are weak and you're outta shape. Get into shape.” I took that to heart and have been doing weightlifting ever since. It wasn't something I did in high school or college really.

But I'd say that's really been a huge net positive in my life. In fact, right now I'm recording this podcast episode and I have a Rogue squat rack about 10 feet away from me with a bar sitting on the ground waiting for me to go do some deadlifts after this podcast. So I think some of the biggest wins that we had this year were health and fitness, both for me and my wife. And that was reflected in our spending and that was reflected in what we spent time on as well. 

Number two, I would say my big win for the year was traveling with my wife and also personally as well. I got to do a lot of solo travel, which is not something I'd really had any time for when I was in the military.

Got to do some really cool trips, and maybe we'll talk about some of those coming up. Yeah, we are about to talk about one right now because my number three big win for the year was the awesome whitewater rafting trip that you and I got to do, Jamie with my friend Eric as well. I think that whole trip was just super special to me.

It really brought home that everybody, and this is going to get a little personal, everybody has problems. Everybody has issues that they're working through, and when we go through them alone, it sucks. But when we go through them together, it might still suck, but at least we're going through it with someone else.

And I'm at the ripe old age of 35, right? So there are probably some 25-year-olds out there listening to this thinking, “OK, boomer.” But we're at that age now, Jamie, where people have gotten married, gotten divorced, gotten remarried, and gotten divorced again. Or they've had tragic deaths in their family, or they've lost jobs and not been able to get back on their feet.

The trip really just emphasized like it's, it is all about the journey, and it's all about the companions you take with you on that journey. I know that's like a Hallmark card, but I think that trip really drove home that point for me. Oh, and then there's a note here that I also PR’d ( personal record) in the half marathon, and I beat Jamie's time by about five seconds.

[00:25:35] Jamie: Okay. Onto my big wins now. In addition, I did run my first half marathon, I think I may have mentioned it before, over the summer of ‘22. That was my first one ever. My first half marathon was in Rockaway Beach, outside of New York City. I did pretty well and I was pretty happy. That was my first time training for that. Not traditionally been a big runner since I used to play soccer. It just, all of that came naturally through team sports for me. But helped, it was a big win for me this year. I lost some weight, got back in shape, and had really nice quality of life, especially for the first half of the year. Now it's a little bit busier again, but through this summer, had a great quality of life. 

Plenty of time with the family and it was really nice. The guys' trip was definitely a highlight. The last one I want to add is that even though my wife stopped working full-time, we still had a great savings rate. We'll talk in a minute I think about that, but spoiler alert, we were at 35

Percent-ish give or take right around 35% again this year. Even though she stopped working full-time outside of the home, we still maxed out our TSP. We still maxed out our IRAs and contributed to her 403B while she was working. So these things that we're talking about on the podcast are not things that we haven't experienced.

Spencer and I both have high savings rates. We've both been through economic upswings and downswings. We've both been through periods of only one spouse working, one source of income, and all kinds of things like that. So that's why we hope to share our experience and not necessarily do this and give investment advice, but just here's what we've learned and here's what we've experienced.

And that it's a huge win to me that we're still able to max out and have a high savings rate despite the economy being down this year and despite my wife not working full-time. So that was a really big win.

[00:27:12] Spencer: Yeah, I think so many people out there love to find excuses, right? And love to play the victim and be like, “oh inflation's up 10% so I'll just give up and roll over and never open up that at Roth IRA or never start contributing to my TSP and at least getting the 5% match.”

But those are all external factors. You can't control those. You have to focus on what you can control. If you don't, then you can't be surprised when life doesn't go the way that you want it. I think that's, Just like you said, Jamie, I mean we've been through good times economically. We've been through bad times, and one thing the military actually is really good about insulating you from is good and bad economic times because when times are bad, you're still getting a paycheck.

Don't worry about it. When times are good, you're not getting a raise, like all, or a bonus like all your buddies who are in the civilian world. So yet the good comes with the bad and the bad comes with the good. You just have to play the hand that you're dealt and then recognize that if you're in a situation that you are not enjoying if you're living a life that is not the life that you want to be living, the only person who's going to be able to change it as you.

Okay. Jamie one, we talked, about our three big wins and there were some themes in there, relationships and quality of life, and health. Let's pivot just for a second here and talk about some toys and some gadgets. You and I are both big gadget nerds and was there anything that we bought this year that kind of has stood the test of time, at least for this year?

[00:28:47] Jamie: I have a few that came to mind immediately. Bose headphones. I got a new set of noise-canceling really nice headphones. I love them. I still use my AirPod Pros a lot, but just different uses at the desk. I really like the bows over the ear. I think these are the QC 700 I think is the model I have, and I really enjoy them.

We also spent a decent amount of money on a new MacBook laptop, and that's primarily for my wife and some of the side hustles that she's doing, but it's been a really good use of money to buy a good laptop that's easy to use and fast and does not have issues that sometimes a cheap Chromebook or something like that would have for you.

We also have some great microphones for podcasting. Spencer got us some good mics and they sound really good. When I go listen to other podcasts and I'm like, man, you need to put some pillows in the corner of your room because all I hear is Echo. I listened to an audiobook the other day that I think I gave it a two-star review because the audio was so bad. So I think these microphones were a great purchase. 

Then lastly, I've made a couple of subscription purchases that just make my life easier. Organizing my credit card rewards, things like that. I continue to pay for YNAB, a big win for me. So those kinds of things that I can throw some money at a problem to give me some time back and take away problems and make my life easier so I can focus on my priorities.

We’re at the stage now where that's worth doing. That's been a nice gadget, even though it's not really a gadget. Some software tools though.

[00:30:10] Spencer: Yeah, that's, if there's any time I can pay somebody to give me a little bit of time back, I'm probably going to be signing up for that service. One of the big wins I had when I was first starting my journey to financial independence was cutting my subscriptions and making sure that what I was spending money on was actually adding value to my life.

And I think I probably got it down to where I just had Netflix, and it was like the cheap Netflix that actually back then still delivered DVDs. That was seven bucks a month or something? That was a pretty good deal. The other thing we did was we used to go to Redbox.

Do you remember the Redboxes? You used to have them outside Walmart.

[00:30:49] Jamie: They still have those, Spencer.

[00:30:50] Spencer: Oh, they still have, okay, of course. Okay. Sorry, I didn't know they still have those. Yeah, Redbox was great and we would always look up for a coupon code and we would get like a movie for free for the night and then we'd have to drop it back off the next day or we'd be charged a dollar.

But yeah, that was, Redbox was not a subscription, but that was a big value add for us early in our journey of financial independence. But cutting the subscriptions and figuring out where I wasn't getting value. Now I just have so many subscriptions, I can't even keep track of them.

But one of the nice things with the Amex Platinum card, you're actually getting credit for a lot of those subscriptions. So I've subscribed to the New York Times for, I don't know, years and years now, but now Amex is covering the subscription for me. So that's nice. I can get my Wordle all in my crossword puzzle and I don't have to pay for it.

Jamie, you mentioned a quality laptop. That's definitely near and dear to my heart. I just went through the process of purchasing a new laptop, the MacBook Air, and the M2 Chip that came out this year. It's awesome. It's amazing. I just haven't been an Apple or Mac user my entire life, so I actually went with the Microsoft Surface Laptop 5, which is what I'm recording this podcast on right now.

Seems to be working pretty well. Its lightweight battery, lasts a while, so been pretty happy with it. Also got a Pixel 7 Pro to upgrade my Pixel 6 Pro. Probably for phones I don't like doing one-generation increments. I think usually two-generation is good, but it was on sale Black Friday, so went for it.

In terms of audio, I got this new Polk Magnify AX audio system, which is pretty cool in the shed here. It's only got, it's like a really mini soundbar and then a big subwoofer. It puts out some pretty good sound. Then I've been using my Jabra Elite 75ts to run with. Those are earbuds and then the Bose headphones for flying on planes and stuff.

And those are the classic, the QC 35 2’s. So those are getting pretty dated. Actually, the ear, I might have to replace the ear cups at some stage, but they're still pretty awesome. 

Then on the other gadget side is fitness. I'll just mention two gadgets there that I've been using almost every day.

And one is the Garmin Phoenix 6, it's the triathlon GPS watch, but you got Spotify on it, which is pretty awesome when you go for a run because you can download stuff to it and then beam it to your wireless Bluetooth headphones. Yeah. Then it's even got a Garmin pay on it. So if you have to run in and grab that cheeseburger at mile 6, you can pay for it right off your watch.

Pretty sweet. Then the other thing I'll mention is Peloton, I know you're a big fan of Peloton, Jamie. Yeah. My wife and I are as well. I think it's the Chase Sapphire Reserve that had a $120 credit on that annual free?

[00:33:35] Jamie: They did last year. It's no longer a benefit.

[00:33:39] Spencer: Hopefully the company can recover and not go into bankruptcy.

I'm a big fan. It's a great way to, especially when it's raining outside or I don't want to take my bike out, it's a great way to get a quick workout in and the classes are super entertaining and yeah, I think the pelotons are a big win. It's a little bit of an investment upfront. Hey, if you're in debt, if you're just starting out in the military, you have a free gym.

But if you're at the point where you got the house and the burbs with the wife and the kids, maybe it's, or the husband and the kids, maybe it's time to think about a little investment in your health. I think it's definitely contributed to a lower heart rate, lower weight, and better mood. Better mood.

Yeah. Honestly, you get the endorphins rush when you hop off that thing. You're a nicer person. Yeah. Your wife's nicer to you. Your kids are better.

[00:34:26] Jamie: Yeah, and it's fun too. It makes working out fun and it's fun. Yeah.

[00:34:30] Spencer: Yeah. I love talking about gadgets, Jamie. We could do that all day and I'm sure we've got a lot more that we could bring up.

But what were your, I'm sure gadgets weren't your biggest spending category. What was your biggest spending category for 2022?

[00:34:44] Jamie: So part of our end-of-year review is looking at where we spent a lot of our money. So for us, it came up to Costco. We spent a lot of money at Costco. Then when you divide that by 12 and look at what that means monthly now, some of its groceries, some of its furniture, some of its clothing.

Yes, I'm at the point in my life where I buy clothing at Costco, don't judge me. Target, Aldi, and vacations. So a lot of groceries there, a lot of kind of all-purpose store. But a lot of vacations as well, which I was happy with. That felt good to look back and see that we wanted to have a lot of quality family time and that we did that.

I didn't mention giving as well, but that was a big category for us. But then we look at Costco and say, okay, they get us in the door and we mentioned this last year in our end-of-year review with the $5 rotisserie chicken, and then we walk out with a $400 bill. Is that adding value to our life? Is Costco really adding value to our life?

Is target adding value to our life? And my wife would say, yes it is. I would say there's probably some room to cut back, but if we're still saving 35%, do we care that much? Probably not. 

[00:35:53] Spencer: It's always the like how much juice you're going to get from the squeeze of analyzing. Okay, where can we cut Costco purchases, right? Because maybe you go back and you look at it and you're like, it's all groceries and we eat it all, but there's probably a surfboard or two that snuck its way in. 

[00:36:11] Jamie: I could definitely fund an IRA with our Costco budget.

[00:36:13] Spencer: Yeah it's crazy, man. So I'm here in New Zealand and they just open up a Costco here, and I still haven't managed to get in the door because people are queuing, waiting in line for an hour just to pick up their Costco card. They're not even shopping yet, they're just picking up their card. Oh, it's painful for me. I'm definitely not that into Costco that I need to wait in line for an hour. 

But yeah, my biggest spending category is for 2022 taxes.

So I left the military, left active duty in April 2020. Guess what, when you make money in the civilian world, you have to pay taxes on it, a lot of taxes, and you do in the military as well. But I don't think you realize, especially, if you're a senior captain or a major and your BAH is a big portion of your paycheck.

And so when you're in the military, recognize that fact and make sure that you are prioritizing your tax advantage investments like the Roth TSP and the Roth IRA. because when you get out, you're going to have to be paying a lot higher taxes than what you're paying in the military. Now there are advantages, not advantages to that, but you just have to pivot and then start using traditional IRA, and traditional 401K accounts.

So that was our biggest. Taxes definitely made up the biggest portion of our spending. Charity was number two, which I was pretty proud about. So we gave a lot of money to our donor-advised fund, also known as DAF, which is a pretty sweet way that you can donate money this year, get a tax deduction when you file your taxes, but you can just let the money sit in there and invest it.

So like right now is a great time to be investing because the market's down so much, and so hopefully next year we can give away more money, but we get the tax benefit this year. So that's an interesting tool. It's not a tool that you probably need to be using if you're an E-3 or an E-4 or even if you're an O-1 or O-2.

But hey, if you're listening to this and you're a dual mil O-4 and your wife's a doctor and you're a pilot and you're pulling in $300,000 or $350,000 a year, maybe even more potentially, then you might want to think about using a donor advised fund because that's going to open up some opportunities for you to save money on taxes and then to direct money towards organizations or charities or nonprofits that you care about.

And then finally number three, travel was our biggest spending category. A lot of that was the fact that I just took my grandfather to Antarctica. We had just got back from that trip. It was super cool. He's 86 years old. He was the oldest person on the boat, and we got to fly into Antarctica and cruise around for five days.

I saw more penguins than I could ever count. I saw whales, seals, a lot of icebergs, a lot of glaciers, a lot of ice, and a lot of snow. Antarctica is a wild place. I felt like we were, traveling for thousands of miles. I look at the map and we were like, just in this like a little sliver. Antarctica is huge.

It's massive. It's 1.5 the size of the US. So I’m super passionate right now about Antarctica and the ecosystem down there and just the terrain and the beauty of it. That was only made possible because we spent a lot of money on travel this year. So I think, for us, like you, Jamie, we look, I look back and like there, there's a part of me that's “oh, that's a lot of money that we spent on travel.”

But then you like amortize it over, 12 months and you're like okay, we spent this much a month on travel. It still seems like a lot of money. But then you start looking through your photos and you start to conduct an end-of-year review like this and you realize would you not want to have these stories?

Would you not want to have those memories? And what are they worth? What do they value? So I would say even if you are in debt, you're trying to get out of debt. Even if you are, first of all, I would say come up with a plan and then start executing that plan. Don't go into debt to travel.

But you still, if you haven't been home for a year or two to see your family and that's something that's important to you. You have to do that. You have to take the opportunities when you have them. To travel, to go see friends and family, especially when you're in the military.

And if you're stationed overseas, you might be far from family and friends and there are organizations out there that'll actually buy a plane ticket. If you are a young enlisted service member, they'll actually pony up some money and get you a plane ticket home. Or Space A travel is coming back.

And we have a whole episode about that if you search “Space A travel” and you can listen to that episode. 

[00:40:54] Jamie: All right, Spencer.

Another thing we both love is reading and investing in ourselves. So I'm going to share a couple of my favorite books this year and then I'll pass it to you for Best Books of the year.

And again, this is not just a time to talk about money, although money's a big part of it, but investing in yourself, advancing your knowledge, increasing your earning potential, great use of your time. So in 2022, I read 62 books so far, which is the most I've ever read. I blew through my initial goal on Good Reads, so I set it to 70.

I don't know that I'm going to make that, but I'll probably end up about 65 or maybe a little higher. Three to four books I really want to highlight that I really enjoyed this year. The first one is, Thanks for the Feedback by Douglas Stone. That one talked about how to give feedback, but more importantly, how to receive feedback and how feedback can be hard to get, but it's really important to be able to receive feedback in the proper way as well.

The second category is going to be two books that go together. One book is called Find Your People by Billy Baker. The other one was, We Need To Hang Out by Jenny Allen. Jenny Allen's book is from a religious standpoint, and Billy Baker's is from a secular standpoint with many F words, so same theme, but very different approaches to the same topic.

And it is what, Spencer, you mentioned earlier about our trip together is that you need friends, you need connection, and we were designed to be connected in groups. In today's age, it's hard, especially at our age, it's hard to stay connected truly to our friends. As you move between bases, we know that is difficult as you leave the military as you experience, it's hard.

So those were two really good books I enjoyed. The last one was Indistractable by Nir Eyal, I think is how you say his name, but Indistractable, a bright yellow cover. A really good book about prioritizing being present with your family, and with your kids, getting rid of technology distractions, scheduling distractions, outlook popups, setting your cell phone to send fewer notifications, all those kinds of things that help you focus on what's most valuable in your life.

What about you, Spencer? Any good books that you want to highlight for this year?

[00:43:04] Spencer: Yeah, so I just looked at, of course, because it's us, I keep a spreadsheet. This spreadsheet, let's see, goes back to 2009. Wow. That's pretty cool. What I've tried to do is just every time I finish a book or I read a book, even if I don't finish it, that's another thing that I'd really encourage our listeners to do is you don't have to finish every book you start. 

I don't know where that started. I'm always like, maybe the punchlines at the end? But if it is, then that's a poorly constructed book. As an author, when I wrote my book, I tried to put the bottom line up front and I tried to keep it short and succinct because there are so many books out there that could really just be summarized in three pages.

But that's not what sells. You have to pump that up to 300 pages. Actually, one example of that is a book I just finished, which I do recommend Essentialism by Greg McKeown, and I mentioned it earlier, and it's basically just about doing less, but doing it better. That's something that I know in the military we really struggle with.

We just do things to do things, right? It seems like a lot of the Army and the Marines because sometimes they don't have a current operational mission, so they're just in training or in Garrison, there's just a lot of just, okay do things because we have to do something while we're waiting to go do the thing that we're supposed to do.

Whereas I felt like in the operational Air Force there wasn't so much of that because we were always, like in a C-17, we were always moving cargo, we were always moving people, we were doing operational missions. But yeah, it was, and so there was more of a focus on doing what we're doing better.

But no, there was never a focus on doing less. It was always, do more with less. That's just impossible. You literally cannot do that. It's something that we ask our troops to do and it's a fool's bargain because we're going to end up with a poor defense product if you will.

Okay. So, Essentialism. It was one of those books that could have been done in three hours, but the audiobook was six hours. So make sure you just listen at 1.5x, then can knock it out. 4,000 Weeks by Oliver Burkeman. Really loved that book. Time Management for Mortals is the subtitle.

It's just one of those books that, we'll talk about this actually in the Ben Miller episode, ChroniFI, which we're going to be releasing next month in January. That book is, the 4,000 Weeks, it's not a Tim Ferris, here's how to four-hour work Week. Here's how to maximize your life by getting more things done.

It's really about you. You have to choose, you have to make decisions and you have to prioritize what's important to you. Oh, by the way, you've only got 4,000 weeks to do that. He gets that number by rounding it down to 50 weeks in a year times 80 years for the average lifespan.

And when you think about it, 4,000 weeks, I mean think back to last Saturday or our last Monday, a week ago, that was one of them. You're down one and you've got, I don't know, maybe depending on how old you are, you might have 2,000, 2,500, or 3000 weeks left, and then that's it. You're done. So better make them count.

A couple of other books I'll just mention quickly, Why We Sleep by Matthew Walker. That's a good one. Yeah, super. It's very helpful, especially coming from the military, which a lot of times does not emphasize sleep and getting good sleep and good sleep habits and good sleep hygiene, and you are just suboptimally performing if you're not getting a minimum of seven hours at night.

But most people cannot function at their optimum level on seven hours. Most people need eight or nine. That's something that I've prioritized in the last couple of years where I go to bed at