Sea story: “Swim call!”

May 31, 2012 by · Leave a Comment

Here’s a frivolous topic for Thursday morning before the weekend.

A few weeks ago a shipmate asked a seemingly innocuous question:

Are there any rules or guidance on having a swim call on a sub? Can the CO take a swim? The Corpsman?

Submarines on local operations or doing exercises on weapons ranges occasionally have a few free hours before their next event starts.  If you’re shooting exercise torpedoes or entertaining midshipmen then (after you’ve run your weekly training drills and cleaned up the boat) you want to show everyone a good time.  When the weather’s good, the seas are calm, and the water’s warm, it’s a great opportunity for a re-enlistment seminar swim call.

Once the boat is on the surface, the OOD and the lookout take the bridge. A rifle-qualified crewmember is stationed as shark watch. Submariners don’t get a lot of practice time on firing ranges, so crew opinions are divided over whether the expended ammunition will end up in the shark or in the shark bait. But if you’re not afraid of the sharks (or the shark watch), then you can swim around the forward end of the boat. (Stay clear of the reactor compartment!) Of course if it’s a sunny day with calm weather, there may also be a topside BBQ and sunbathing.

I completed my submarine command qualification in the early 1990s and I’ve been assigned to a submarine staff HQ, but I don’t remember ever seeing any guidance on swim-call policy. So, I asked a submariner group on Linkedin:

Are there any current rules or guidance on whether the CO or the Corpsman can join the swim call? I never saw any of my COs or IDCs do it, but I don’t remember ever reading any rules against it. Sure, “good judgment” and all that, but I know headquarters staff was full of people who’d find it very hard to restrain themselves from providing a little friendly policy “help”.

If you’re not familiar with current guidance either, then feel free to share your own swim call sea stories…

I sparked some memories and got over a dozen responses. Their names and hull numbers have been omitted to preserve anonymity.

From way back in the “good ol’ days”:

“I was a department head on a boat off Vietnam during that war. Operations permitting we’d regularly surface about twenty miles offshore and hold a combination swim call/steak barbecue/beer drinking. (One can for nonrated, two cans for petty officers and officers.) Neither the CO or XO ever got into the water.”

——–

“It was a different life on diesel boats. Most of our operations and transits were in subtropical waters. On a surface transit, we would get ahead of our track and then stop for swim call while the track position caught up with us. Torpedoman with a rifle on top of the sail, extra lookouts, and I don’t recall the CO going in the water. We also retrieved exercise torpedoes at sea and loaded them into the forward torpedo room: we had swimmers in the water, but it wasn’t swim call.”

Here’s a couple of typical responses from more recent times:

“COs do not participate in swim calls. Not written but if something even small happens, CO’s days are numbered. My guess is that it probably started off as the admiral telling a new CO: “If it was me, I would never do it.” By the time the juniors officers became COs, having never seen the CO go in the water sent the message.”

———-

“When I was a department head my CO said no one on the Casualty Assistance Team could participate in a swim call. As such, no one at the department head level or above could ever participate because by definition we’re all part of the CAT. The CO had it in our shipboard instruction but I don’t remember if it referenced anything senior to him.”

This submarine had a bunch of good deals:

“I held two swim calls as CO. One right at the equator and one after leaving Singapore. I didn’t jump in the water because I was too busy being on the bridge biting my nails and letting the crew have a good time. To my knowledge, there are no rules regarding who can, or cannot, go in the water. I just enjoyed a cigar and made sure #in = #out.”

“For the first one the IDC definitely went in, since only shellbacks were permitted swim call. Come to think of it, everyone who was a newly minted shellback went in that day. It was a long swim call.”

———-

“My last swim call was a solo job. I had reported aboard in Santiago, Chile during UNITAS. When we crossed the equator northbound off the coast of Brazil, I was the only polliwog on board. I was the Navigator, but unfortunately for my polliwog status I couldn’t figure out a way to go home without crossing the equator again. I got a lot of individual attention that day.”

Other good deals:

“We only had one liberty port during my command tour, so swim calls were held at every opportunity. I would stay on board if the XO went in and vice versa.”

———-

“As CO I joined a swim call once. We had a SEAL Team and their boats with us so I felt we had lots of safety coverage. Besides that is what the XO is for: to take care of things when the CO is busy.”

———-

“Like some other COs who commented on this, when I was in command there were no written rules or verbal policies on this subject. Either the CO or XO remained on board and the couple of times I went into the water it was only for a few minutes and I remained close aboard. However, in today’s Navy with skippers being fired for things that seemed trivial years ago, I would not go for a swim.”

Other experiences:

“We had swim call and the CO went in for a dip. I also recall that he got caught on the windward side and needed help getting back aboard. It felt like a close call.”

———-

“I recall my one and only swim call as a junior officer. We surfaced at the weapons range after a torpedo proficiency shoot. Swim call and BBQ on the fantail. We played “King of the Bow” and I have to tell you that HY-80 hull steel does not give a millimeter when you fall. It leaves big, dark bruises.”

Some locations seem to be more dangerous than others:

“In command during the mid-90s, I joined our swim call off the coast of Okinawa. We had the advantage of a platoon of Marines and two RHIBs on deck. Another time and place we had the unique opportunity for a fresh water swim call while delayed by traffic during a transit of the Panama Canal.”

———

I guess he hadn’t heard this story:

“I grew up on Okinawa, and I remember the time some fishermen caught (or rather, beat to death with oars) a 15-foot tiger shark that had gotten caught in the reef when the tide went out. Marines or not, a swim call would have made me a tad nervous around there.”

———-

“In the summer of ’85 we were waiting to go to the shipyard for a refueling overhaul, and so we would carry other crews for torpedo firings or for what seemed like hundreds of midshipman cruises. The CO and the XO would join in, but not at the same time. At every swim call the crew would ask to jump off the fairwater planes and the CO would always say no. Until it was our last swim call before a change of command and the yards. CO said (literally): “What the hell, why not.” He was the first off the fairwater planes with the rest of us right behind him! We were under constant watch by a torpedoman with a rifle as our shark watch on the fairwater planes. A TM with gun…I can still see it in my mind!”

———-

“In the Caribbean, we had swim call or shark fishing depending on whether the sharks showed up. The fishing was really fun one time with someone who went on to become an admiral. No one was hurt. If it was too rough for swim call and there were no sharks when we surfaced, we would blow sanitary tanks– and then lots of sharks would show up. The CO never went over the side– he was head cheerleader.”

And finally, the unintended consequences of submarine swim calls:

“Never saw any written rules- pretty much up to the CO. I heard a great swim call story, though– a commercial airliner was flying into Honolulu (90′s, I think) and called the tower to report a sub was surfaced, on fire and had people jumping off of it. After a whole lot of frantic communication (you can only imagine) it was determined that the boat in question was snorkeling while conducting a swim call.”

———-

“As Engineer, I convinced the CO that we should do our nuclear reactor rod control programming change during free time on the transit between Santa Catalina and San Diego. We surfaced, started the diesel, shut down the reactor, and began the procedure. It was a nice day, but the water was so cold that the CO limited us to a “sunbathing call” instead of a swim call. Soon there were a lot of sailors laying on the hull with diesel exhaust coming out of the sail. Someone (we heard it was a Navy jet) called in a submarine in distress, surfaced and on fire with mass casualties. Next thing we know a Coast Guard helicopter was hovering overhead and radioing to ask what assistance they could provide. I don’t know what the Squadron Commander said to the CO, but all I know is that I got a tremendous earful for the mixup. Not sure how it was my fault!”

It’s been over 25 years since my last swim call, but I think you appreciate it more when you’ve been underwater for a few weeks. These days I’d rather be surfing.

Related articles:
Sea story archives

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Lifestyles in Early Retirement: Habits and getting things done

May 30, 2012 by · 6 Comments

 

 

Charles Duhigg’s new book, “The Power of Habit”, already has 120 people on the waiting list at the Hawaii State Library system. (That means it’s popular!) As part of his book marketing, last week he put up a guest post about spending habits on Get Rich Slowly. So while I’m waiting to read the book, I thought I’d blog about retirement habits.

One of the quotes from Duhigg’s guest post made an impact:

Most of the choices we make each day may feel like the products of well-considered decision making, but they’re not. They’re habits. And though each habit means little on its own, over time, how we spend our money — as well as the meals we order, how often we exercise, and the way we organize our work routines — have enormous impacts on our health, productivity, financial security, and happiness.

He doesn’t mention retirement, but habits have the same enormous impacts there too.

Apparently the human brain has evolved to favor running on autopilot. If we don’t have to think about every little thing then we use less energy and we respond faster. Regrettably we don’t wake up each morning, look at the schedule on our nightstand (the one we wrote the night before), and spend the entire day carefully measuring our accomplishments against the clock and the list. Instead we start our morning habits that get us going while we’re trying to wake up. Instead of focusing our entire attention on a specific task like fixing breakfast, we’re thinking about other things. All day long we respond almost unconsciously to behavioral cues around us. Habits don’t just derail our train of thought– most of the time there’s not even a train on the thinking tracks.

Part of “habit” is avoidance. If you have to do something during your “routine” that you’d rather not do, then you’re going to unconsciously keep finding other “higher priority” things to do first. Eventually your unpopular task becomes a priority only because it’s a deadline crisis. We don’t want to live that way, but somehow there’s always something that we know we should be doing and yet don’t get started on until it’s almost too late.

Luckily for most of our lives, an externally imposed autopilot routine keeps us more or less on schedule. When we’re kids, it’s our parents and the school system. When we transition to the workplace, it’s an extension of the same routine with slightly different tasks. Even when we’re out of the workplace for the rest of the day (or a weekend, or a vacation) and we decide that “We don’t want to do anything!” we’re still carrying out our own personal routines. They may involve TVs and frosty beverages instead of workplace reports, but they’re still a habit.

You can see where this is going. For most of your life, your daily routine is imposed upon you by life’s priorities. You fill in the rest of the time with your habits. You only spend a few minutes a day planning the schedule for tomorrow, and you may not ever get around to changing your habits. What happens when you retire?

The popular joke about retirement is that you have to be responsible for your own entertainment. Well, the reality is even harsher than that: When you retire, you have to be responsible for your own habits.

If financial independence really gave us control of our own time, then we’d have our lives squared away. We’d spend an hour a day at the gym, we’d be eating a healthy diet, we’d be learning our fourth language, and we’d have read all those books on our “great literature” list. The reality is that retirement gives us even more time to spend on the habits that we’ve developed during our lives. If we tend to have the “habits” of eating too much food, drinking too much alcohol, and watching too much TV… then in retirement we’re going to be spending our time on those habits.

The other side of “making new habits” is trying too hard. If you decide to overhaul your life and fix all of your bad habits at once, then you’re rapidly going to wear yourself out. Part of that is the problem of “decision fatigue“– instead of living by habit, every new situation that you put yourself in requires you to make a new choice. Before long you’re tired of making the “right” choice, you use up all your willpower, you revert to your old bad habits (unconsciously or deliberately!) and you feel like a failure.

Retirement is still a great time to fix all those bad habits, but take it slow. Focus on one habit at a time. Make a list if you want, but only work on one habit from the list at a time. Once you’ve created that new habit and it’s really working for you then you’re ready to start on the next. Be ready for setbacks, too. You’re still learning how to be a retiree, and it may take you some time to figure out your new life. You may need different habits than you expected, or you may take on a new role in managing your household or your family duties.

I thought I had my new retirement habits all figured out, but I’m still learning.

Six months ago we completed a major demolition renovation of our familyroom. We’d been planning it for nearly a decade, and when the time was right we made it happen. In retrospect the project went very well and the contractors did a great job, but life was total chaos for several months. Every day was noisy, sweaty, and cramped. We completely exhausted ourselves trying to keep up with the daily cleaning and painting and problems decisions, and at night our sleep would be interrupted by plastic flapping in the breeze– or by a rodent exploring the new work. We stopped working out. I even dropped out of taekwondo training for a few months.

I eventually stepped on a weight scale realized that I needed to get back to taekwondo. I actually missed it and wanted to get back to it. However after seven years of training I’d seen a number of martial artists go through that same restart, and I’d watched most of them fail at it. They literally tried to jump right back in to a workout, and they’d quickly wear out or even injure themselves.

By this point I was writing every morning for at least 20 minutes, and that habit was going well. However I needed to add the taekwondo habit back into my life. Instead of starting each morning with the computer, I started it with basic stretches. After 10 minutes of that I’d get on the computer and start my usual routine of writing.

Some mornings that daily stretching would take 15 minutes, but I knew I needed to keep working on it. After two weeks I was surprised to notice how good I felt when I started writing. I used to sit down at the computer while I was still waking up, perhaps favoring a sore muscle or even just yawning for a minute. Now I was relaxed, awake, and ready to work.

For two more weeks, I kept stretching. I also added in a few minutes of practicing my taekwondo forms. By now I’ve learned over a dozen forms, but I still needed to spend time with my training books and videos.

I also deliberately told my instructor the date that I’d return to training. Now I was committed, and I had a deadline. There was no way that I’d try to make up an excuse to avoid it.

I returned to taekwondo two months ago, and it’s going well. Surprisingly, the break let my body heal a chronic injury. The month of stretching and forms practice helped me avoid starting any new injuries. I’m much more flexible and I’m (finally) able to hit a couple of advanced moves. I’ve learned my fifth black-belt form, too.

But more importantly, I’m still stretching most mornings and I’m still reviewing my forms. I’ve “cut back” that morning routine to just 4-5 times a week, but I look forward to it. It’s become part of what I do… and it’s a habit.

Another indulgence I carried into retirement was Windows Solitaire. It’s actually a minor rebellion because my military commands forbade even having these little casual games on workplace computers, let alone using them.

However even that little amusement can become too much of a good thing. When I’d be waiting for my computer to start up a program or a website to load up, I’d distract my impatience with a little Solitaire. After a few years I noticed that my competitive nature meant that I’d spend 15-30 minutes getting my score up instead of doing my computer work. If I was tired or if the writing wasn’t going well, then I’d spend an hour pondering the writing problem playing Solitaire while I was waiting for inspiration to strike.

I inadvertently got rid of the need for the habit: I finally upgraded our PC to Windows7. It’s much faster. There’s no need to play Solitaire while I’m waiting for the operating system or the Web browser to catch up.

I was curious whether I could break the habit, so I deleted the Solitaire shortcut from my desktop. I could still go find the file and start it up, but that would take more effort than just clicking the desktop icon or the Start menu.

However having to find the file was a huge revelation: I’d been clicking that little icon a dozen times a day. Sometimes it had been frustration with the computer, but mostly it was a habit that had grown out of control. It’s been three weeks so far, and I miss it less every day, but I still miss it. I know now, though, that I’m going to break the habit. I’m going to add a couple more gigabytes of RAM to this old machine to help speed things up even more, but I’ve also learned that I need to take an occasional writing break to do something else.

Next week marks my 10th year of retirement. You would think that I’d have it all figured out by now, but apparently I’m still learning.

Those little successes over the past few months have added up, and I’m clearing out a lot of the project backlog. Letters are getting written, research is getting finished, new plans are being developed. I feel much more productive. I enjoy seeing all the things that I’m getting done, and I’m looking forward to more.

Now I just have to wait for those other 120 readers to finish Duhigg’s book…

 

Related articles:
Retirement: relax, reconnect and re-engage
Update to “Just Write It”
Retirement: don’t recreate your old environment

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Marine Corps offers early retirement

May 28, 2012 by · 8 Comments

 

 

Let me interrupt Memorial Day with some late-breaking news: Stars and Stripes reported last week that the Marine Corps will be offering a 15-year retirement.

The program is expected to begin this fall for Marines and officers, but the actual program details and start date haven’t been released yet.

Both the Marines and the Army experienced the greatest growth over the last decade, and both services are expected to bear the brunt of the personnel drawdown. The Marines are expected to reduce their strength by at least 5000 per year for the next four years, a total reduction of nearly 10%. Although some of this additional attrition will be handled through voluntary early discharges and selected officer retirements, an early retirement program will be part of the reduction.

The finances of the 15-year retirement are expected to be similar to the Navy program, which is taken from a DoD instruction. For those eligible for a High-Three retirement, the service multiplier will remain 2.5% per year of service. However that total will be reduced by one percent for each year of service less than 20. (One percent, not a percentage point.) This means that a Marine with 15 years of service would receive a pension of 36.625% of the average of their highest 36 months of pay.

Actual reduction factor calculations are done in units of months instead of years, and the resulting reduction factor is taken from a table in the DoD instruction. Any fraction of a month of service for a reduction is rounded up before subtracting the result from 20 years of service, which results in slightly more retirement pay. For example, a Marine with 16 years and 10 days of service would have a reduction factor of only three years and 11 months, or 47 months short of 20 years. The reduction factor applied to the pension would be .96083 instead of 0.96, and their pension service multiplier would be

(16 years * 0.025) * 0.96083 = 38.433%.

The 1990s TERA program offered some additional benefits that aren’t included in the 21st-century version. There is no credit for entering public service after retiring from the military, so there’s no recomputation of retired pay later in life. TERA retirees will continue to be eligible for the Survivor Benefit Plan, but SBP will still be based on the lower pension amount instead of a 20-year figure.

Like the 1990s TERA program, Marines will have to apply for this 15-year retirement program. Servicemembers in critical skills or in specialties with personnel shortages may not be approved for early retirement. Once the program is offered, though, the quotas will fill up quickly. If you think there’s any possibility that you’ll be interested in the program, then calculate your pension amount now and review your finances. You want to be able to apply immediately when the program is announced.

When the 1990s TERA program was announced, some Navy officers were required to retire. O-4s who had failed to promote to O-5 had been “continued on active duty until eligible for retirement”. Before TERA, it was understood that this would allow them to serve up to 20 years. When TERA was announced, though, these officers were informed that they were now considered eligible for retirement. If you’re a Marine officer who’s failed to select for promotion but been continued on active duty until 20 years of service, it’s possible that you’ll be required to retire under TERA. Plan for being retired sometime during 2013, estimate your pension, and review your finances.

Even if continued officers are not required to retire, you may want to consider whether serving out another tour is a good idea. Those questions are discussed in an earlier post: “Retire at 17 years of service or 20?”

Marines who have already accepted a Career Status Bonus (the REDUX retirement option) have an even harsher reduction to their pensions. Their service multiple is reduced by an additional percentage point (not just a percentage, but a percentage point) for every year that they’ve served less than 30 years. In the case of the 16-year Marine, that would mean that their service multiplier started at 40% (= 2.5% x 16 years) but would be reduced by an additional 14 percentage points to only 26%. (Another sample calculation is included in the TERA retired pay computation instruction linked above and also linked at the end of this post.) Even worse, a REDUX retirement means that the pension’s annual COLA is reduced a percentage point below the High Three pension’s annual COLA. The REDUX pension is “reset” at age 62 to the amount of a High Three pension, but the COLA reduction continues throughout a retiree’s life.

DoD is allowing CSB/REDUX retirees to keep the bonus. Of course DoD is “saving” far more from the reduced pension & COLA than they’re “losing” in the $30K amount of the bonus, so they can certainly afford to be generous. The CSB/REDUX system has always been a bad financial decision for the vast majority of retirees, and for TERA retirees it’s even worse.

TERA was a popular force-shaping tool during the 1990s. Ultimately, however, the 15-year retirement program was regarded as less successful than anticipated. Annual TERA retirements only made up about 0.5% of each year’s average 10% reduction. Most of the drawdown was achieved by voluntary separations (nearly 12 times higher than TERA) and reduced recruiting. Meanwhile TERA is much more expensive. Separations were a one-time lump-sum payment, but TERA pensions will be paid out for decades of inflation-fighting COLAs and survivor benefits.

I’ll keep an eye on the media for the formal TERA announcement, but if you’re an active-duty Marine then I’d appreciate a link to the actual message or instruction when it’s released.

 

Related articles:
Retire at 17 years of service or 20?
Military pay & benefits cuts
Congress changes military careers and retirements
Congressional Budget Office: The Drawdown of the Military Officer Corps (page 20)
High Three Retirement Calculator
TERA Retired Pay Computation Guidance
The military drawdown and benefits cuts

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Retire at 17 years of service or 20?

May 24, 2012 by · 7 Comments

 

 

I read another good question on a Linkedin group:

I am a Marine O-4 who has been passed for promotion and is looking for some advice on early retirement. I will have 17 years  of active duty by the time I am eligible for the early retirement next year. I am a pilot with experience in operations and safety. I will also be close to completion on my MBA, DAU Level II acquisition certified and Lean Six Sigma Green Belt. Do I make the jump or stick it out?

This is the first mention I’ve seen of the Marines using the early retirement program. Congress has authorized it for this year’s defense budget, but the services can use the program at their own discretion. Please leave a comment if you’ve seen any message or other information, especially if you can link to an announcement.

Money is not the only question here. “Quality of life” is still as much of an issue as the finances. Servicemembers who aren’t being promoted but who can’t retire yet might end up being sent wherever the assignment officer has a hot-fill billet. If you’re not approved to retire then your only “negotiating option” is to resign from active duty for the Reserves. That might evade the assignment issue, but even if you’re financially independent then you’re still giving up over $500K of potential O-4 active-duty retirement income before the Reserve pension kicks in. If you’re not financially independent then it’s hard to find a bridge career which will make up for that loss. It’s also very difficult to convince yourself that “It’s only money!”

Unfortunately, staying on active duty and grimly clenching your jaw to get through those years is risking your physical, emotional, and mental health. The stress fatigue can lead to respiratory infections, elevated blood pressure, higher cholesterol, and other unhealthy conditions. Being separated from family is another set of problems. Even retirees who stuck it out for 20 would advise taking care of your health before taking care of your pension.

If you’re offered a good assignment then you might be able to convince the chain of command that you should stay there until 20. Yet even at the best duty station you’re still trading some quality of life for the prospect of future financial security.

Financially, the conventional wisdom is that retiring before 20 years of service is a significant pension cut. Or is it? The “good” news is that retiring at 17 would avoid gutting out three years for a few more percent on a pension. A 17-year pension would work out to just under 40% of High Three base pay instead of 50%. An O-4 High Three pension at 20 years is just over $41K/year*, and an O-4 TERA High Three pension at 17 years would be just under $34K/year. Yes, a 17-year TERA pension is nearly a 20% reduction from the 20-year retirement. However it’s a difference of only $7225/year. Is it worth the extra $7K/year (and three years of salary) to push for three more years of active duty? Why not take the retirement and avoid a potential hardship tour?

* (Starting that $41,167/year High Three pension in 2012 is also 1% higher than my current $40,788 Final Pay pension that has received a decade of COLAs.)

In my opinion, servicemembers can be made to suffer an inferiority complex. The military’s constant pressure to train and promote (which is good) can lead to a zero-defects mentality (not so good). High-quality personnel can be made to feel as if they’re barely capable of serving in their current rank, let alone be promoted, and in a drawdown everyone is struggling to stay competitive. When one mistake can kill a promising career, you learn to play it safe and avoid big risks or unknowns. We’re also constantly reminded of veterans encountering high unemployment in a vicious job market, and even Linkedin can leave the impression that the job search is a dangerous jungle filled with predators and pitfalls. As difficult as military service may be, it still seems a lot “safer” than the risky unknown of trying to find a civilian job. 

Yet that safety can be a trap. Aviators with these skills are quickly employed. If you chose to retire at 17 with those skills (and with a smaller pension) then you’d immediately find a job and start your bridge career in a new avocation that makes you feel challenged and fulfilled. Would you feel the same if you tried to hang tough for three more years of active duty? You’re the only one who can determine the “right” answer to that question, but I’m pretty sure that you’re going to be pelted with civilian or civil-service employment offers.

I think the real value of a military retirement comes from its inflation-fighting COLA and cheap healthcare. (It’s not easily done with TIPS, I bonds, or annuities.) TERA’s 20% reduction in the amount of the military pension– just $7K/year– is easily made up by a civilian paycheck. The safety net of financial independence is to have some “guaranteed” income from reliable sources (military pension, Social Security, TSP annuity) and some control over expenses (Tricare and Tricare For Life). These are the biggest financial challenges faced by people retiring in their 40s and 50s, and the discussion board at Early-Retirement.org has tools and advice to help solve those challenges. You can save up the rest of your retirement funds from your civilian paycheck, and your financial independence might be closer than you think.

Personally, I applied for the 1990s TERA three times but ended up being continued on active duty to 20. Luckily my retirement assignment was a great billet (I’d made myself very valuable to the training community) and I worked with great people. Even so I would have happily retired for a smaller pension, a few years of a part-time job, and more family time. Staying on active duty was a major physical/emotional stress, and retirement was an immediate improvement in my health.

In retrospect I’m really glad that I didn’t learn how to surf until I’d retired, because I’m not sure I would have been able to make the right decisions every day about work versus surf…

 

Related articles:
Military drawdown brings new career, pay, and benefits changes
Military experience to civilian careers
Military retirement with low savings
Starting your bridge career after the military
How many years does it take to become financially independent?

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Retirement planning: “Just tell me what to do!”

May 23, 2012 by · 4 Comments

 

 

Thanks to my spouse, we’ve always been do-it-yourself investors. We had no debt when we got married in 1986 and we lived a fairly frugal life, so we started investing right away. She already knew the basics from her family, and my Dad gave me a “how to” guide. After that it was all reading and research, and I gobbled it up. When the time came to plan exactly how we’d fund our retirement, I was ready.

Retirement-planning resources have improved tremendously during the last generation, and today’s DIY retirement planner has more tools than a 1980s investment firm. Websites, blogs, and books make the reading easier than ever. Competition among investment firms has dropped expenses by at least an order of magnitude. Personal computers, spreadsheet software, and screening tools have greatly simplified the process of figuring out where you want to invest and what you want to buy.

However the choices have also expanded by several orders of magnitude, and the answers aren’t always very clear. If you’re hard-wired for a certain style of investing, or if you find a book or a website that really resonates with you, then you’re all set. You can make a choice that’s probably “good enough” to get you to a successful retirement, and all you have to do is follow through. Jack Bogle’s books and the posters at Bogleheads.org are famous for their simple “stay the course” approach to retirement planning and their process for making it happen.

If you want to learn everything about investing and retirement planning before you start, well, my condolences. The trap of “paralysis by analysis” is easier than ever. One of my retirement goals was find my “investing style”, and after a decade of reading & discussion I’ve come almost full circle. I’m much smarter, and I’m much more likely to stick to a plan, but if I’d waited 10 years to get started then we’d still be at least another 10 years away from financial independence. Starting early gives you more time for compounding to work its magic, and delaying to craft the “perfect plan” could significantly extend your working years.

Luckily the military has trained us to make decisions without waiting for all the data. We’ve all seen that a “perfect plan” is the enemy of “good enough”. We’ve all learned that plans have to change and grow with the situation, and that it’s usually better to make a reasonably prompt decision than to wait for more info. Surprisingly, the military can make us better retirement planners!

Unfortunately servicemembers face another set of challenges: time and priorities. You have to make the time to figure out your plan, even if it’s only a few hours of reading and a few more hours of discussion every year. It also has to be a priority, and some are more interested than others.

Regardless of your retirement planning, you should still try to maximize your TSP and IRA contributions. After that, try to save more funds in taxable accounts.

Even if you feel capable of planning your retirement withdrawals, you’ll always wonder if you’re missing something or should be doing it differently. Self-confidence can wither in the face of a bear market. Although servicemembers have the skills to be DIY investors, many just don’t care to tackle the task. A financial advisor is another option, yet finding a trusted advisor (who knows the special issues of military clients) is an entire other post.

Hence the title of this post: “Just tell me what to do!”

Steve Vernon is an actuary, not a CPA or a CFP. However he’s written four books on retirement planning and he’s helped large companies design and manage their retirement plans. He’s also a behavioral-finance researcher, so he’s keenly aware of how investors fail to carry out their plans. He’s heard plenty of elders wishing they’d started investing earlier. He’s published on the CBS Moneywatch site, which is clogged with ads and other distractions, but Vernon’s four articles are largely text with links to more details. Stick with it– this is good information.

Keep in mind that this is simple advice. Because it’s simple, it’s not always applicable to every retiree. It’s “one size fits almost everybody”, and it’s not tailored for your personal situation. This is the bare minimum advice you need to get started on your financial independence. Once you’ve started this process then you should take the time to read, learn, and tailor it to your situation.

If you’re a DIY investor then I recommend that you just stop reading here. Seriously. You’ll disagree with almost everything Vernon suggests, because you know a less-expensive way to do it. You’d be absolutely right, but you’d be missing the point. This plan is for people who don’t care about the details, who don’t want to do more of their own work to save on expenses, and who… just want to be told what to do.

Vernon’s plan sets up several streams of income (“paychecks“) to last you the rest of your life. They’ll come from Social Security, pensions (military or civilian, if you have either), the Thrift Savings Plan or other 401(k) plans, and employment.

His advice from his first column is:

    • Delay Social Security as long as you can.
    • If you’re offered a pension or a lump sum, take the pension.
    • Delay taking payments from your pension as long as you can.
    • Take the survivor benefits plan that’s offered with the pension.

Some readers are already snorting and thinking “Delaying Social Security doesn’t make sense if you’re a physically disabled veteran!” You’re right. However we’re just telling you what to do with your retirement planning, and most veterans will need the “longevity risk” insurance that comes from Social Security. Vernon offers simple advice and, as the decision point arrives, it has to be tailored to your situation. But to get started, a retirement plan needs longevity insurance to avoid running out of money.

His next column suggests a strategy for IRAs and the Thrift Savings Plan:

    • The earliest you’ll plan to start withdrawals is age 59½.
    • Set aside an emergency fund for medical expenses or home/car repairs.
    • Put half of the rest in a managed payout fund.
    • Put the other half in an immediate annuity (the TSP offers a great selection).

The next two columns dig into the details of managed payout funds and annuities. From Vernon’s third column, a “managed payout fund” refers to Vanguard’s Managed Payout Funds or Fidelity’s Income Replacement Funds. These funds invest in conservative stocks & bonds. Every month they pay out the dividends and a portion of the principal at a minimum level expected to last the rest of your life. There are no annuity guarantees in managed payout funds, but unlike an annuity if you die early then there’s still money for your heirs. Of course a managed payout fund is a much simpler “Just tell me what to do” option, yet you’ll still pay extra fees for the service & convenience. Another option would be low-cost index funds where you withdraw 3-4% per year until age 70, when your withdrawals from your conventional IRA will start using the IRS Required Minimum Distribution tables. Roth IRA withdrawals can continue at 3-4% annually.

Vernon’s fourth column suggests ways to buy an immediate annuity and what options to consider. I’ll make this even simpler: buy your annuity with your TSP account, and consider buying a survivor option with your TSP annuity. If your TSP account isn’t big enough, then use some of your IRA to buy a second immediate annuity from another company.

That’s it. Vernon doesn’t discuss what to do before age 59½ because he doesn’t expect that you’ll be retired until your 60s. Frankly, if you’re not a DIY investor then you’ll probably have a hard time feeling secure with retiring sooner.

When you start your retirement, you’ll have “paychecks” coming from an annuity and from the managed payout fund. You may have pension payments from the military and your bridge-career employer. You’re also looking ahead to Social Security.

 

Vernon’s advice breaks down into three categories for military veterans.

If you have a military pension, TSP, IRA(s), and no other bridge-career retirement funds:

    • Build up your emergency fund before you retire from the military.
    • Your spouse should take the maximum Survivor Benefit Plan.
    • Delay Social Security as long as you can.
    • Delay TSP & IRA withdrawals until age 59½.
    • Put your IRA in a managed payout fund, start withdrawals at 3-4%, and later take required minimum withdrawals.
    • Buy an immediate annuity with your TSP.

If you feel that you have enough inflation protection and longevity insurance from your military pension and Social Security, you could consider not buying those features with your TSP annuity.

Your military pension and your savings may cover your expenses until you start TSP/IRA withdrawals, but you may need more income from part-time employment or even a full-time job.

 

If you have a military pension, TSP, IRA(s), and a 401(k) or a pension from a bridge career:

    • Your spouse should take the maximum Survivor Benefit Plan.
    • Build up your emergency fund before you stop working.
    • Delay Social Security as long as you can.
    • If your civilian retirement funds are offered as a pension or a lump sum, then take the pension.
    • Delay taking payments from your civilian pension as long as you can.
    • Delay TSP & IRA withdrawals until age 59½.
    • Put your IRA in a managed payout fund, start withdrawals at 3-4%, and later take required minimum withdrawals.
    • Buy an immediate annuity with your TSP.

If you feel that you have enough inflation protection and longevity insurance from your military pension and Social Security, you could consider not buying those features with your TSP annuity. You could also consider not using the inflation protection and survivor benefits of your civilian pension.

 

If you have no military pension, with a TSP & IRA(s), and a 401(k) or a pension from bridge career:  this is Vernon’s default advice.

By this point, you’re probably thinking “Sheesh, Nords, I could do better than this.” You’re right. As Vernon suggests, now you’ve just been told what to do. You can consider this your default retirement plan, the version 1.0 that you’ll use if you don’t learn a better way. Now you can read and learn about retirement asset allocation and safe withdrawal rates to build your own retirement plan. The resources are here in these related posts and in the Recommended Reading list!

 

Related articles:
Military retirement spending: how much will I need?
Retiring on multiple streams of income
Retiring without a military pension
Tailor your investments to your military pay and your pension
How many years does it take to become financially independent?
Military pension inflation protection
Asset allocation considerations for a military pension
TSP annuity options

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Filed Under: Finances · Tagged With: , , , , ,

WordAds from WordPress

May 21, 2012 by · 7 Comments

 

 

 

If you visit this blog every Monday, Wednesday, & Thursday for the usual posts, then you missed a “bonus” Friday-night post. Scroll back one and take a look at “Welcome to WordAds!”

If you’re subscribed through an RSS reader then you’ve already seen that news.

WordPress apparently used to run Google’s AdSense on their WordPress.com (free hosting) blogs for several years, although I doubt the ads got past browser ad blockers. I’ve never seen an ad on this blog, and I’ve never had a reader comment about any blog ads. WordPress stopped running AdSense last fall.

WordAds has been around for nearly six months, and I don’t know if I’ve ever seen one of their ads either. Part of the problem is that bloggers (me included) tend to spend their time on their blog editors & control panels, and we spend a little time proofreading our blog posts on the actual blog page, but we rarely log out of our blog and then come back to read it anonymously. A (very) few bloggers actually pay WordPress a small fee to remove all ads from their blogs. I haven’t bothered paying the fee– I can’t tell whether any of you readers have seen an ad here, and you probably don’t care.

I like to write, but I missed out on most of the growth of the blogging industry. I migrated from old-school dial-up bulletin boards to discussion boards and I found plenty of source material there. By the time blogging really caught on, I’d already started writing the book and wasn’t interested in blogging. When we were finally done with the editing and ready to start the marketing, blogging’s “Wild West” days had started to settle down. Search-engine manipulation has nearly been stamped out, and blog advertising has largely been absorbed by corporate aggregators. WordPress claims that over 50,000 blogs are started every DAY on their site alone, although I doubt that more than 50 of them survive the first year.

The blogging gold rush may be subsiding but I still like to write, and WordPress works very hard to make writing fun. (Where were you guys during my high-school English classes?!?) When you put up a post, their control panel rewards you with a congratulatory message and suggests other goals. Their statistics package breaks down your site’s traffic by time and by post, and you can see what keywords & websites are bringing your readers. WordPress runs “PostADay” and “PostAWeek” support groups with badges and suggestions and ideas from other bloggers. Their support forums are great. Their Zemanta plugin will helpfully suggest images and related links to go with your post, and you hardly ever have to edit HTML or muck around in the formatting. You can run a blog devoted just to your own photos or videos, and you can even blog from a smartphone. Everybody can blog!

WordPress has so many fascinating levers & buttons, and so many interesting blogging topics to explore, that it’s easy to forget why the heck you’re blogging in the first place: to answer questions, to sell books, and to send money to military charities.

 

Answering reader questions

I get a lot of reader questions. (Thanks!) This is my favorite part of the whole project, and I don’t think I’ll ever run out of that material. There’s always something in the news about military retirement or benefits, and I still read about financial independence. I enjoy the challenge of presenting the same topic in so many different ways (from “beginner” to “total geek”) that eventually everyone finds something to pique their interest. I can do that no matter where the blog is hosted, and no matter who’s running the ads. I can also do it without the restrictions found on discussion boards, although a popular blog eventually turns into its own discussion board.

 

Selling books

Blogging helps publicize the book, but I have no clue how many book copies the blog sells. I can’t track how many of you click on the link at the top of the sidebar, and the publisher’s website doesn’t track how many of you come there from this blog. I can’t use this blog to tinker with different types of ads or their location or any other parameters. I can’t tell how book sales change when I blog about a particular topic or when a pile of readers visit from a guest post or a media interview. I’d get a little more data if I took the blog out to its own host, but even then I’d just be splashing around in the shorebreak. The heavy lifting comes from the publisher, the distributor, and Amazon putting the book in front of the eyeballs of book buyers.

I could ramp up my marketing with speaking engagements, book tours, and book signings. I’ve done a little of that, and about the only part I enjoy is… the part where I get to sit down with people and answer their questions. I spent plenty of my military career talking in front of a crowd, and now I’ve done a few book signings. Ironically the book signings go best when I bring my laptop and write blog posts between customers. (When you’re banging away on a keyboard, the passing crowds get curious and stop to chat.) I haven’t made the time for more of that. I’d rather write, and a good book-signing afternoon requires about five(!) hours of prep for every hour of sitting behind the table. I think I can use that time more productively on the blog– answering reader questions for an audience of millions, not just one at a time.

So a blog is essential to a writer who self-publishes, who does their own marketing, and who sells the book on their site. In my case, though, the blog is a sideshow to the publisher’s marketing efforts. The real purpose for this blog is answering questions, and I think it’ll be that way as long as I’m using a publisher.

 

Sending money to military charities

Blogs can make lots of money. That’s the real reason I care about taking the blog to its own host. Earning the money is pretty straightforward, and it works very well. If you’re willing to put in the thoughtful time and the daily effort, and if you’re persistent, then you will make money. If you’re efficient with your time and if you learn how to scale your efforts, then you’ll make lots of money.

I’m a sucker for a challenge, and I’ve enjoyed researching the best ways to make money from a blog. However I’m financially independent, not a starving author, and so the fiscal incentive is not as strong. A beach-bum lifestyle is cheap, and I already have a longboard. Whether I take the blog to its own host today or next month or next year, it’s all the same effect on my income: zero. Sending money to military charities is the right thing to do, and it’s a great publicity hook. Luckily I also have the time to experiment with different ideas, and this gives me even more to write about.

Now I’m (finally!) circling back to WordPress and WordAds.

On Friday I was literally less than 24 hours away from signing up with Bluehost and going to WordPress.ORG. I can’t draw any conclusions about WordPress’ timing of their approval of my WordAds request, but I think this is a one-time opportunity. When I take the blog out to its own host, I lose the chance to see what WordAds can do for us. I still think that Google AdSense and other display ads will make more money than WordPress’ hosted WordAds, but WordPress is worth the attempt. They’ve certainly supported us bloggers everywhere else, and it’s nice to have a chance to see what they can do here. I’d rather be part of the WordAds beginning, when they’re pushing hard and willing to try new ideas, than to circle back in a few years after it’s settled down.

 

WordAds terms & services

WordPress certainly approved my WordAds application at an awkward time, but this is a great opportunity. The WordAds terms of service are pretty clear. When I parse the text, one big difference from Google AdSense is that WordAds doesn’t try to tell you what you can do with your share of the profits. AdSense does not allow bloggers to advertise that they’re sending the money to charity, because (*gasp*) people might click on the ads for the wrong reasons. WordPress doesn’t seem to care whether or not I advertise that the blog revenue is going to charity. Points to WordPress for this one.

WordAds is also a diversified stream of revenue. Google AdSense has been known to kick out a few very popular bloggers for “violating the terms of service”, although it’s not clear what terms were violated. It’s very difficult to reach a human being at Google to help figure out what went wrong, let alone appeal the decision. WordPress is certainly much more accessible about user support. More points to WordPress.

If I start with WordAds now, I’ll be a “valued customer” to help them grow the program. It’s possible that WordAds could someday be available as a plugin (instead of strictly on WordPress.com) which would allow self-hosted blogs to display WordAds. There’s actually some benefit to hanging around with WordPress now in hopes of eventually carrying WordAds to a self-hosted blog.

Some parts of my expansion plan for the blog can continue on their own schedule. I’ll have to see what I can do. Unfortunately the Thesis theme doesn’t appear to be supported on WordPress.com, so that upgrade will have to wait until the blog is on its own host. Also unfortunately, WordPress still won’t allow other forms of advertising. I’m probably stomping on thin ice if I’m trying to sell e-books or do other e-commerce on WordPress.com.

WordAds may be fairly straightforward to set up, but Federated Media needs to step up their game a little. I doubt that this blog has the traffic (this month) to make more than a few bucks a month from WordAds. WordPress would rather focus on blogs that have 100x my traffic. However I think that one of the reasons this blog was approved for WordAds is because it straddles a couple of very lucrative niches: military and personal finance. All we need now are ads targeted to military and personal finance.

Here’s the complete list of Federated’s ad categories.  Bloggers are asked to pick five:

    • Anime (Yeah, that made their top 35. Go figure.)
    • Arts and hobbies
    • Automotive
    • Business & finance
    • Communication
    • Dating
    • * Education & employment
    • Entertainment
    • * Family & Home
    • Food & drink
    • Gadgets
    • Games
    • Green
    • Health
    • Local
    • * Men
    • Mom & baby
    • Music
    • News & Reference
    • News political
    • * Outdoor & recreation
    • Pets & animals
    • Photography
    • Photos & videos
    • Real Estate
    • Shopping
    • Social networking
    • Sports
    • Technology
    • Travel
    • * Young Adult

The asterisks mark my choices, but of course that’s not much of a choice, is it? Seriously, Federated? That’s the best you can do? What about categories like “Military”, “Military spouse”, “Military families”, “investing”, “financial independence”, and “retirement”?!?  Where are the ads from MOAA, NFCU, PenFed, and all the other military supporters? What about USAA, Vanguard, Fidelity Investments, and all the other brokerages? Military.com? Military Times? How about financial advisors who want to take care of servicemembers & veterans? Heck, I’d even make fun of entertain advertising from annuity companies. And while roughly 85% of the military is male, there are millions more military spouses of servicemembers & veterans. Nearly all of them are women, and darn near every one of them has to make the decisions that advertisers would dearly love to influence.

WordPress’ WordAds lead responded quickly to my questions:

A lot of bloggers want to pick the ads. I’m afraid, however, that online advertising today doesn’t work that way. WordPress.com is a top 10 global site and for the most part we don’t get to pick ads, rather the advertisers pick us. We do have a process where we pick ad partners and we have screened out a number whose quality standards are not up to our standards.  We can block offensive ads but currently it’s not possible for us to give each blogger the ability to pick ads.  In the US and Europe for the most part we run broad brand campaigns as they pay better than contextual ads. Rest of world we tend to run ads that are contextual to your site.

Fair enough.  Hundreds of thousands of bloggers must have been approved for WordAds by now, and it’s a challenge to tailor each ad to each blog.  Yet Federated is still missing the targeted military demographic, and it’s one that could be quite profitable if the blog was on its own host with its own advertising.

WordAds might turn out to generate more revenue than AdSense.  I’ll collect the data and we’ll see what happens.  I think we can probably collect more ad revenue from other display ads by taking this blog to its own host. But I love a challenge, and this one offers plenty of blogging material. If WordAds is willing to take a chance on this blog, then I’m willing to give them a few months to figure out what they’re doing.

We can always take the blog to its own host later this year. FINCON12 is 6-9 September, and by then I should have plenty of WordAds data to network with other rock-star personal-finance bloggers.

I can still use all the help I can get with the Thesis theme and with WordAds. If you have any experience to share, please post a comment or send me an e-mail!

 

Related articles:
Taking the blog to its own host for more money to military charities (part 2 of 2)

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Filed Under: Books & publishing · Tagged With: , , , , , ,

“Welcome to WordAds!”

May 18, 2012 by · 5 Comments

 

 

That was the subject line of the e-mail I just received this Friday afternoon.

What the…?!?

Howdy!

Thanks for applying to WordAds for your WordPress.com site! You’re part of an exclusive group of sites that have been approved into the WordAds Beta.

WordAds is now live on your site. If there is an issue you can report it by replying to this email, and you can pause the ads.

WordAds is a partnership. On our side, the WordAds team will focus on maximizing your earnings potential. On your side, the more traffic you get, the more you earn.

Please let us know if you have any questions or feedback at this point. We are looking forward to working in partnership with you.

Thanks for flying with WordPress.com.

 

“Welcome to the exclusive group” indeed. The timing couldn’t be more suspicious auspicious.  Call me cynical, but 24 years of military service always makes me wonder why the authorities are being so nice to me.

Last November, WordPress announced that they were introducing WordAds. (The term “AdWords” had already been taken by some other SEO entrepreneur.) I dutifully filled out the WordPress contact form and waited eagerly for Federated Media to respond.

And waited.

And waited…

This is a relatively tiny blog with a niche audience, and Federated is probably targeting blogs with at least 20,000 views per month. I eventually wised up and decided that I wasn’t going to make the cut.

For the last two weeks, I’ve been blogging about leaving WordPress.com for WordPress.ORG.  Tomorrow(!) I was going to sign up for Bluehost and pull the trigger on WordPress’ guided transfer service.  I couldn’t see any reason to delay, and I was expecting a couple of days of frantic scrambling to finish the transfer and clean up the broken pieces.  Might as well do it over the weekend, when the rest of the world is crowding up the surf breaks.

I’ve seen a lot of coincidences in my life, and I’m pretty sure that karma eventually catches up with people. However I try not to ascribe to conspiracy what could be credited to bureaucracy.

It’s taken somebody 171 days to get around to deciding that this blog is ready for WordAds. I don’t know if WordPress has really been paying attention to bloggers using the keyword “Bluehost” or if this is just one of those coincidences.

My initial reaction is that I could make more money carrying out the original self-hosting plan. However I can implement that plan any time.  I can’t just hop back & forth between self-hosting and WordAds.

I’m inclined to let WordPress & Federated Media bribe persuade me to stay with WordPress.COM. I’m not in any particular hurry and I can give them a few months to see who clicks.

I’m going to spend the weekend refreshing my memory on the WordAds terms of service and digging through whatever user feedback I can find. This is a beta, and last November Federated Media did not have a military-oriented ad category. Frankly I have no idea what ads you’re going to see, and I don’t know whether we’re going to like it. Please let me know your thoughts, and tell me if you object to an ad.

I’ll follow up this stream of consciousness with a real post at the usual Monday time.

And let’s all have a good weekend!

 

 

 

Filed Under: Books & publishing · Tagged With: , , , , , , ,

Taking the blog to its own host for more money to military charities (part 2 of 2)

May 17, 2012 by · 2 Comments

 

 

If you’re coming here from a search engine, the first post in this series was put up last week. It described the options among website hosting services, plugins, search-engine optimization, and blog themes. Those three steps sound pretty straightforward but can still suck up many hours of one-time setup and configurations. Those three steps also start the revenue stream moving in the wrong direction– monthly hosting fees, (mostly) free plugins, and (mostly) free themes.

Now it’s time to earn the income to turn a profit. How do we handle all that income?

When I wrote the book, the contributors were motivated to share their stories & advice because they’re helping donate all the royalties to military charities. Since we split the royalties between two charities, and because we might donate to other charities, it’s easier to use my charitable gift fund to make the donations. Unfortunately that flexibility adds a layer of complexity. Instead of just endorsing the royalty check to the charity, it goes to the CGF first and then gets forwarded to the charity by the CGF. I get to take a personal income tax deduction for the donation to the CGF, but I also have to report the royalty checks as income on my tax return. It all balances out.

Because the IRS considers the royalties to be “my” business income, I deducted some business expenses in writing & marketing the book– mostly paper, printer cartridges, and postage. I did the same when I paid WordPress to register the blog URL “The-Military-Guide.com”. A self-hosted blog has additional expenses (to generate the revenue) but I think I can support those too. (I’m financially independent. I can budget for it.) Because I’ll also be taking those business expenses as a deduction, I plan to donate all the blog income to military charities too. Not just “net profits”, but all of the income.

I’m going to experiment with several income streams:

    • Google AdSense
    • Display ads
    • Affiliate links
    • Marketing to a contact list

Google AdSense

Google is the 800-pound gorilla of blog advertising, but luckily it’s also the simplest to add. I get to specify where AdSense puts the ads, and I have a little control over what types of ads are displayed. Google does the rest: setting rates, working with advertisers, invoicing, and distributing the profits. From what I’ve read, I’ll be spending some significant time poring over statistics of results from ad placement, keywords, advertisers, and traffic.

I’ll have to tread lightly with Google AdSense about how the earnings will be used. One of their program policies forbids placing text on the site promising to donate earnings to charity. On the other hand I can document where the earnings are going, and I don’t think Google has the time or inclination to stomp all over a tiny military-friendly blogger. I’ll continue to advertise that the book royalties are going to charity, and (except for this post!) I’ll minimize the mention of donating the blog revenue. We’ll see what happens.

One other blogging requirement comes from Google: the FTC’s mandatory disclosures and the blog’s privacy policy. Plugins can help generate these for the site, and many bloggers just copy the text from someone else’s blog. You won’t notice it unless you’re looking for it, but it’ll involve the usual notifications about beacons & cookies– plus a promise to never sell your e-mail address to other marketers.

 

Display ads

These are a little more complex. Companies like PulsePoint (ContextWeb), AdClickMedia, and Adbrite promise to deliver ads to the right spots on your blog– and in the right context. Some of the ads only pay when readers click on them, others are display ads that pay per thousand site visits.

Frankly, I’ll seek professional help here. In the hour I’ve spent perusing these advertisers, they’re long on promises and short on specifics. It seems as if you have to sign up for an account before they’ll discuss ad rates or services. They certainly make Google AdSense look more attractive for its simplicity and its standardization. I’ll talk to other personal-finance bloggers who are using display advertisers and see what’s working for them.

I was surprised to learn that some bloggers have become ad brokers. They’re generally one-person entrepreneurs instead of large display-ad companies with all the automation and corporate overhead. Instead of striving to dominate the globe as the next PulsePoint or AdSense, they’re making a living wage from a lifestyle business. The advantage to a newbie like me is that they already know their way around the business, they know how to put together a rate sheet, and they offload a lot of the negotiating in exchange for a commission. It’s perfect for bloggers who feel that their time is better spent writing quality content instead of making sales or running a marketing campaign.

 

Affiliate links

This is a lot easier than display ads. Every time a reader clicks on an affiliate link and buys the product, the blog would get a slice of the revenue. One of the most popular affiliates is the Amazon Associates program, where the blog earns money for anything a reader buys off Amazon’s website. I’m not likely to advertise electronics or games, but this is a slam-dunk for the books on the “Recommended Reading” list. I’ll have to tweak that page a little to reflect the disclosure about the affiliate commissions, and I’m not sure how the formatting will affect its readability, but this could be a gold mine. I’ll also do the same for posts on book reviews.

Of course I’d prefer that readers track down these books at their local libraries, and I’ll continue to add that reminder along with the affiliate disclosure. However readers are pretty smart and they don’t usually need the hint. One part of the reader group already starts with the library (by reflex and long-term habit) while another group finds it easier to buy the book. E-reader programs haven’t really taken hold at most public libraries, so I expect the majority of the affiliate sales revenue to come from people buying the Kindle version of the books.

I’ll keep looking for other affiliate links with products like budgeting tools (both paper and electronic) retirement-planning software, and spreadsheets. Any other product ideas?

 

Marketing to a contact list

Every professional blogger gets excited about building a contact list, which is why every blog begs you to sign up with an e-mail address. The idea is that the blogger builds their very own marketing list of hot sales leads who are willing to at least read a product pitch, and possibly even buy it.

There’s an element of paranoia behind the contact list, too. What if your blog host goes down or (even worse) loses the blog and your backups? What if Google changes their search-ranking algorithm and dumps your blog onto the tenth page of results, or even de-indexes your blog? What if all the website advertisers go through a recession or even get out of your business niche? All of these catastrophes have happened to bloggers before– it’s not so paranoid after all.

I haven’t worked on a contact list, but 12 other bloggers already follow this blog through WordPress. Another 26 readers follow it through e-mail, although one of those is my daughter. (Sign up at the top of the sidebar, just below the orange icons for the RSS feed.) 58 people “Like” The Military Guide Facebook fan page, and another 105 follow the @TheMilitaryGuid Twitter feed. All of this has happened with minimal effort from me, so thanks for taking the time to share the social media love.

One of the best ways to build a contact list is with a static landing page and an “Opt-in” plugin, and I’ll eventually use those approaches. It’s one more way to build an income stream. Once I have a contact list, I can send out additional product: VIP subscriber newsletters, spreadsheets, PDF guides, surveys, polls, and draft chapters of the book. It’s a great place to experiment with reader preferences before going out to the blog’s entire audience.

 

Text links, YouTube, and paid content

I don’t know how much revenue I’ll get from “text links”. These come from a guest poster who pays you to put their post on your blog, with a link back to their blog. You’re helping another blogger build their traffic by creating more links to your bigger, more popular blog. If they do a good job then to Google it looks as if they’re receiving a lot of exposure from other (highly ranked) blogs, which raises their search rankings. They’re paying you to build their search ranking, however, and search engines don’t approve of those tactics. If it happens a lot then it’s a good way for Google to de-index the blog, or at least penalize it in the rankings. It’s a good way to get your own blog penalized, too.

YouTube’s website monitors the views of their videos. When a video gets above ~4000 views then it’s flagged as a candidate for YouTube advertising. YouTube controls the ad content and shares some of the revenue with the blogger. Of course this only happens when you produce videos, and I haven’t taken that step yet.

Writing paid content for other blogs is an income stream, but it’s pretty much the same as “freelancing”. You get paid to write a post for someone else’s blog and they pay you for your content. Most bloggers do this as guest posts, which don’t directly give you money but will generate more traffic for your blog.

 

Diversified income streams

How many of these options should I try? Well, all of them. Each one by itself may not be a majority of the blog’s income, but together they’ll add up. More importantly, they’re coming from diversified sources. Just like an investment portfolio for financial independence, if something happens to one part of the income stream then it won’t have a huge impact on the total income. I can tinker with one part of the income stream while the others (hopefully) continue. I can also experiment with each one to see if I can raise its revenue while not worrying about accidentally killing the blog’s income.

The interesting aspect of advertising is that a blog filled with ads won’t earn much money. It won’t hold on to its readers, either. An in-your-face ad that distracts you from the post you’re trying to read will guarantee that you won’t be spending much more time on the blog. The ad has to be placed where it’ll come to your attention because it’s integrated with the content that you’re reading. If it works right then you’ll click it because you want to, not just to make it go away.

I think another challenge will be avoiding inappropriate advertisers: payday loan companies, high-fee debit cards, Ameriprise reps, and similar military-unfriendly companies. I can ask for certain types of ads and turn down other categories, but advertisers are pretty clever too. Especially for the companies that rotate ads in a certain spot on the blog, I probably won’t know about an unsuitable ad until a bunch of you have complained to me.

So, when does this all happen?

Last week’s post was about the mechanics of moving the blog to its own hosting service and sorting among plugins & themes. By now I hope to have heard the feedback of other blogging experts to make sure I haven’t overlooked something.

By the time you’re reading this post I’ll be moving the blog to its own hosting service. Once things look stable then I’ll start adding plugins. A few days after that I’ll upgrade to a new theme and then tinker with more plugins to make sure everything plays well together. I sure hope that process takes less than a couple of weeks, but there are always glitches. There could be outages or service interruptions, but nearly all of the choices will be reversible. The blog may not look the same from one day to the next, but after a couple of weeks it’ll settle down. Hopefully readers will come to the blog for more quality content, but I’m happy if a crowd gathers just to watch me scramble around fixing problems.

After I’m done tinkering with the themes & plugins then I’ll turn on AdSense, and I’ll reach out to other bloggers for advertisers and advice. Niche blogging is not a zero-sum game. I’m not competing directly with other personal-finance bloggers, and an advertising company will happily spread their marketing budget among more blogs. Other bloggers will share their advertisers with me and we’ll share links to each other’s blogs. Building off each other’s blogs will grow our own traffic, which will raise the rates we charge for advertising.

It’s quite possible that this transition will take the rest of May and drag on into June. I want to have everything running smoothly (and hopefully growing) by August. FINCON12 starts on 6 September, and by then I want to be able to show off a finished product (or at least a work in progress) to the other bloggers.

 

Related articles:
Taking the blog to its own host
ProBlogger checklist for a profitable blog
Pat Flynn on switching to the Thesis theme

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Filed Under: Books & publishing · Tagged With: , , , , , , , ,

Book review: “Why We Buy”

May 16, 2012 by · 2 Comments

 

 

 

I came across this classic while reading about frugal lifestyles and debt payoff. The author talks about retail stores and merchandising and marketing, but he unintentionally offers another benefit. If you understand how the stores are marketing to you, then you can understand why you buy. You’ll have more control over what you buy.

When Paco Underhill started his shopping research back in the late 1970s, he used college students to carry out anthropology field studies with clipboards and video cameras. They tracked shoppers moving through the stores, watching how they interacted with the layout and the products. Underhill’s teams used their video and data to prove to the disbelieving store executives what problems the shoppers had– and then they used the same tools to see how the solutions were working.

That last paragraph makes it sound so simple, but unless you’re obsessed with human behavior then the study of shopping is actually mind-numbingly boring. Underhill’s biggest challenge in the early days was finding staff who could observe all the significant aspects of the customer’s behavior and get the data. Later, when they’d go over the raw information, they’d discover that they needed other details or that they needed to study new aspects of consumer behavior. Back to the store to generate more data!

Then there’s the whole problem of observing the customers without affecting their behavior. (Underhill says that alert kids are usually the first to figure it out.) On the rare occasions when researchers actually talked with the customers, they’d find out that their subjects don’t remember their own behavior either. If Underhill’s staff asked customers how long they’d shopped or what drove their decision, the customer would happily tell them– and it would usually be a different answer than what had just been observed on video.

Underhill’s biggest challenge was proving to skeptical retailers that they could do it better. The store managers usually felt that they knew their stores better than any consultant. (Usually the data proved them embarrassingly wrong.) Even the cashiers and stock clerks, who are at the forefront of the daily discovery, would lack the experience to realize how their front-line decisions would attract some customers and turn others away. Advertisers and graphics designers were the worst to convince– their products looked great in the studio and during the CEO’s review, but their flaws weren’t usually detected until they were already out on the sales floor.

Underhill’s company, Envirosell, barely scraped by for a decade. (When you’re schooling your customers on their own stores, they’re not eager to tell everyone about your business.) Even when he was able to prove what could be done better (by before-and-after observations and sales data), retailers didn’t want to hear the news. Executive egos, headquarters politics, corporate bureaucracy, logistics expenses, and cultural bias usually conspired to subvert all but the most easily adopted fixes. Underhill could rarely persuade the execs to try anything really innovative, and that always led to a protracted debate over how the corporation would pay for the capital expense of experimenting with something new.

Envirosell was finally “discovered” by the media in the 1990s. Eventually a young writer, Malcolm Gladwell, wrote a hugely popular profile of the company before going on to become a hugely popular author in his own regard. As the business grew, Underhill began researching overseas retailers for new ideas to use in American stores. After a few years he began licensing Envirosell teams in those other countries to apply some aspects of American practices. The payoff was leveraged when he was able to use other country’s retailing techniques across borders and even across continents. American executives might argue endlessly about how Wal-Mart was doing a better job than Costco (or not), but they had to defer to Underhill’s experience on Tesco or Kojima.

The 2009 edition of “Why We Buy” (at your local public library, of course) has an updated section on Internet retailing. It just scratches the surface of social media marketing, but Underhill has a wealth of experience to share about online selling and how websites entice customers into an actual store. It turns out that Internet marketing & retailing is not being done very well, either, but it succeeds because brick & mortar operations are doing it so much worse.

Once Underhill has taken you through Envirosell’s research and the mechanics of shopping, he covers the demographics. You’d expect his gender descriptions of the differences in how men and women shop, but he also explains how middle-age folks, elders, and kids go shopping. Everyone wants to have “their” products at the right height and within easy reach, and everyone wants information on labels or signs. However the similarities end there, and retailers have to decide what customers they’re marketing to. It’s not always obvious, and it’s not easy to execute.

However it’s not just the store’s layout and its selection of merchandise. It’s also how the employees interact with the customers, whether clerks help shoppers make decisions or ignore them, and how quickly the purchase moves through the cash-register line.

It’s a fascinating story of human behavior. It’s an interesting tale of how an entrepreneur invented a whole new category of research and consulting and then grew the business to a worldwide powerhouse. However the book is also a self-defense manual for shoppers.

After reading “Why We Buy”, you’ll understand your own shopper behavior– especially if you haven’t even been aware of it. You’ll understand why some stores always make you feel at home and why others annoy you the moment you enter the parking lot. You’ll appreciate the store’s efforts to make it easier for you to buy. You’ll also be more wary of how your “shopper emotions” are being manipulated while you’re occupied with looking, listening, and touching. You’ll know when you’re in the “wrong” store for your behavior and preferences, and you’ll know how to get the customer service you want. You’ll be a better negotiator and you’ll feel more in control of your impulses. You’ll learn better ways to shop over the Internet, even if you have to go to the physical store for the actual buying. If you’re a parent then you’ll be keenly aware of how your kids are affected by the marketing, and you can even show them how the tricks are done.

When you’re saving for financial independence, you’re already trying to track your spending and figure out your budget. You may be able to see where the money is going, but you may not understand how to change your behavior. You won’t get rich by cutting out the daily latte, but this book will teach you how to avoid being manipulated by marketing. You’ll even enjoy observing the retailer’s tactics, both in the store and online, and you’ll learn how to find the bargains that are important to you. Not only will you be a more efficient and effective shopper, but you’ll actually spend less. Once you’ve figured out how retailers are pushing your buttons, you’ll be able to align your spending to your own values– not theirs!

Now I need to reserve my library copy of “What Women Want”.  No, not that book.  I’m talking about Paco Underhill’s latest, “The Science of Female Shopping“…

Related articles:
Completely worth the money
A complete waste of money
Book review: Stop Acting Rich
Five Money Missteps
Frugal living is not deprivation
Simple ways to start saving

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Filed Under: Finances · Tagged With: , , , , , , ,

Military drawdown brings new career, pay, and benefits changes

May 14, 2012 by · 4 Comments

 

 

I try to avoid posting breathless blow-by-blow accounts of every little detail of the legislative negotiations that go into the military drawdown and budget debates. However there’s recently been some movement in these discussions, along with changes to guidance and benefits.

First, the House Armed Services Committee has started a bipartisan effort to restore some of the military’s budget cuts that were made earlier this year. The result is that the HASC is eight billion dollars over the spending cap of last year’s budget control legislation as they attempt to rebuild the military into a smaller peacetime force. However the additional military funding would come from changes to the federal civil service retirement system and reduced funding for some unemployment programs.

MOAA reports that the HASC approved this FY13 defense bill late last week, including the following provisions:

    • A 1.7% military pay raise.
    • A five-year pilot program requiring Tricare For Life beneficiaries to refill maintenance medications through the mail order pharmacy.
    • Congress’ view that servicemembers pre-pay their retirement health care premiums through decades of service and sacrifice.
    • Transition benefits for involuntarily separated servicemembers, including six months’ extension in family housing and two years of commissary/exchange benefits.
    • 180 days of days of TRICARE Reserve Select health and dental insurance for members involuntarily separated from the Selected Reserve.
    • Extended refinancing help for qualifying servicemembers who can’t sell their homes in conjunction with a military-ordered relocation.

Although Congressional sentiment is attempting to provide more support to military servicemembers and families, the committees still need to shepherd their proposals through the full houses. The Senate Armed Services Committee will probably draft its version of the bill later this month, and the negotiations may not really begin until after the November elections.

In the meantime the Navy is continuing its drawdown cuts through the Enlisted Retention Board. However BUPERS NPC is still offering a Temporary Early Retirement Authorization to those who will reach at least 15 years of service before 1 September 2012. Sailors who were not retained by the ERB but who will qualify for TERA have to apply by 15 June (next month!) and must retire by 1 September. Of course that’s not enough time for the transition process, let alone a search for a bridge career, but those retiring under TERA are still eligible for the extended transition benefits offered by the ERB. The smaller inflation-fighting TERA pension is almost always worth more than a large lump-sum involuntary separation payment.  If you’re eligible, that military retirement goes a long way to assuring lifetime financial independence.

Sailors who have already separated under the ERB process during 2012, but who would qualify for the TERA program, can petition the Board for Correction of Naval Records to have their involuntary separation revoked and approved as a retirement.

The TERA application process was updated last month, and an updated TERA FAQ discusses the details. (This link opens a Word document instead of a web page.) The Navy has also published the “reduction factors” used to calculate the exact amount of TERA retirement pay. TERA offers the same service multiple as a regular military retirement (2.5% for each year of service) but reduces retired pay by 1% for each year short of 20. The math challenge is that these calculations are actually in terms of months of service, with the number of months for the service multiple rounded down (the standard for regular military retirements) and the number of months of service for the reduction factor rounded up. This calculation produces a slightly smaller reduction factor and a few dollars more of monthly retired pay. The document includes the formula along with the reduction factors so that servicemembers can precisely determine their retirement pay and verify their calculations against the estimate provided by the Defense Finance and Accounting Service.

Along with ERB and TERA, the Navy is shifting some housing utility costs to its residents in Public Private Venture base neighborhoods. Although this requirement has been around for over a decade, construction and renovation of the housing finally includes electricity and fuel meters. Residents are permitted an average consumption amount as part of their housing allowance, they’re provided monthly utility bills, and they pay extra if they exceed the upper limit. On the other hand they’re given a rebate for significant energy savings, so they have a financial incentive to reduce their consumption. The program was piloted here on Oahu last year with nearly a 10% reduction in costs. Although it’s a Navy program for now, PPV housing is being implemented by all the services and the conservation incentive program will spread quickly.

The Department of Defense announced last week that over 14,000 more billets will be open to women. The specific rule change now allows women to be assigned to ground combat units at the battalion level instead of being restricted to the brigade level. The Army also intends to open six occupational specialties to women (see page 4 of the link for the MOSs). The other services aren’t opening more occupations to women, but women are eligible to fill billets in more units.

I’m a military spouse and the parent of a woman servicemember, so I’ve followed the issue for over three decades. This DoD policy change shines a spotlight on career discrimination. Although women are over 14% of the 1.4 million active duty servicemembers, they’re less than 11 percent of the senior enlisted force and just seven percent of flag officers. There are a number of reasons why women leave the military before competing for senior ranks, but a significant reason is that they’re smart enough to recognize when they’re not given a fair chance. This policy change is an important step forward but there’s a lot of work to be done in infantry, armor, special forces, and the submarine force. The 18-page policy report to Congress (February 2012) linked at the bottom of this post is worth reading for the details of each service’s changes.

And finally, on a lighter note, you know that the American military drawdown is gaining worldwide attention when the Royal Australian Navy announces that it’s hiring. They’re specifically interested in U.S. veterans who are submariners, medical specialists, and AEGIS radar experts. This program has been around sporadically for at least the last two decades, and it always gets a lot of attention in the U.S. Navy because the Australian Navy allows alcoholic beverages at sea.

 

Related articles:
Military pay & benefits cuts
Congress changes military careers and retirements
Military careers and retirement at risk
Military drawdown predictions
The military drawdown and benefits cuts
Report to Congress on the Review of Laws, Policies, and Regulations Restricting the Service of Female Members in the U.S. Armed Forces

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Filed Under: Military · Tagged With: , , , , , , , , , , ,
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