All posts in Work Lean

Finding Clarity in Simplicity. How to stop reacting and focus on what’s in your control.

By Brad Beckstrom

Have you noticed a big drop off in any part of your life?

I’ve been noticing a real drop off in the number of (non political) blog posts I’ve been seeing since November of 2016. At first I thought it was the election, the holidays etc. People have been distracted. I figured at some point we would stop discussing politics and get back to talking about anything but that. Well, the drop off has continued. You see, I don’t follow any political blogs or news publications in my feed reader. So, a lot of the blogs I do follow have dropped off, from maybe a post a week to less than one post per month. This is across a wide variety of blogs I follow, personal finance, photography, financial independence, minimalism, small business, creative writing etc. What’s going on? I feel like I already know the answer because my own writing has dropped off at about the same level, from once a week to once a month. It has a lot to do with many people, including myself, being totally distracted by all of the stuff outside of their circle of control.

The Circle of Concern vs. Circle of Control

A circle of concern is simply a big circle with all of the things you’re concerned about scribbled inside of it. Inside of that circle is a circle of control. The circle of control is things that you have direct control over, what you read, where you live, what you eat, essentially your actions and thoughts.

image credit Jamesclear.com

Focusing inside versus outside the circle of control

Stephen Covey, author of the 7 Habits series, said that people with a large circle of concern become reactive.  A person with a large circle of concern often spends a great deal of time and energy reacting to issues they can’t control. For example, the news, sex lives of celebrities and politicians, terrorist threats, the economy, political scandals. The list could go on and on. The one thing that all of these broad concerns have in common is that regardless of how much time we spend worrying about them or reacting to them, we cannot impact them directly.

When Stephen Covey created his version of the circles, the Internet was in its infancy and social media did not exist. While social media has been effective at building awareness of good and bad things around the world, it’s also greatly increased the number of things people think about, worry about, and naturally want to react to. For instance, if you looked at many social media feeds from a few years ago they look completely different than they do today. Funny videos, vacation pics, snarky comments have been replaced with a very large spoonful of politics and doom. Regardless of what side of the issues you are on most people would agree that this is a direct result of the actions of the 45th president and the U.S. Congress.

Reeling it back in

How do we keep from getting so distracted? How do we keep from clicking on and worrying about bad news, often things we have little or no control over?  I think it comes down to asking yourself a simple question: Is this something that I can control?  If it’s not then it’s in your circle of concern.

The good news is inside the circle of concern, there is a smaller circle called the circle of control. Inside the circle of control are things you have direct control over, what you’ve read, what you buy, where you work, people you interact with. The goal is to reduce the size of the circle of concern and focus on the circle of control. Many mistakenly think that this is a self-centered approach. Selfish in the sense that if you suddenly stop giving a shit about politics, wars, world hunger, then you’re only thinking only of yourself.  That’s not the goal here.

The goal is to focus only on things you can directly impact. In order to start moving in that direction we need to reduce our circle of concern.  Here are five steps to move in that direction.

  1. Write down everything you worry about, are angry or concerned about. Take a look at your social media feed for clues.
  2. After you created your giant circle of concerns, start putting lines through things you can’t control. This could be anything from the neighbor’s dog to North Korea.
  3. Identify things in this big circle that you could have an impact on. For instance, if you’re worried about healthcare you could decide to write your representative once a month.
  4. Put the important things in your circle of control, like what you read, how you treat people close to you, places you’d like to visit, a skill you’d like to learn.
  5. Put yourself on a high quality, low information diet.  We have the tendency to use social media and technology as a funnel to capture all kinds of things. Instead, we should be using it as a filter. You don’t need to unfriend people to hide (or mute) their posts on Twitter or Facebook. You can also use RSS feed apps like Feedly to only follow writers or subjects you enjoy versus visiting news websites and clicking on anything that catches your eye.
  6. Reduce the number of “things” in your circle of concern. If you can lighten the load and reduce the number of possessions you own, that’s less things to worry about. Travel light.
  7. When you’re done, your circle should look more like the one above on the right than the one on the left.  

If you take these steps, you’ll find that you’ve probably been wasting a good amount of time thinking, worrying, arguing about things that you have no control over.  Now you can take that time and spend it on something you have 100% control over, like going for a long walk daily, or finding something to read that will inspire you creatively, or improve your health.  All of a sudden your concerns start to look more like this.

  • Your personal economy versus “the economy”
  • Your personal health versus “healthcare”
  • Your personal political actions versus “politics”
  • Your personal relationships instead of “scandals and gossip” in the news
  • Expanding your mind versus the list of things you own

In the end, the ideal circle of control would simply focus on your thoughts and actions, Finally letting go of all those things in the world that you have no control over and realize that it’s not all on your shoulders.

The Frug

This post was originally published by Brad Beckstrom on the TheFrug.com
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Tap into the power of habit. How to design your ideal day then duplicate it.

The working world has changed. The traditional thirty-year career, company loyalty, great health plans, company cars, and pension plans are all but gone. More people are working from home, pursuing side gigs. They are taking a more entrepreneurial approach to work. Entrepreneurial adventures have become the new pension plan.

There’s some great news here. For those of us who are stubborn, who refuse to live life by someone else’s rules, who are comfortable with uncertainty, lies opportunity. If you’re one of those people, it doesn’t matter if you’re 25 or 55: if you can do these things, you can redesign your life to take advantage of the current uncertain environment.

Reinvention, one day at a time

Yeah, that sounds easy, just redesign your life. No problem, right? As anybody who’s tried it knows, completely reinventing yourself is extremely hard. I’m recommending a different approach. In his book The Four Hour Workweek Tim Ferris talked about designing your week so that there were only four hours of work (that you didn’t enjoy). A lot of people misunderstood the title of the book to think that this meant only working four hours a week and sitting on the beach of the rest of the time. The book’s cover even had a guy on the beach in a hammock! The book’s actual premise is that If you’re doing something you really love then that is not work. Make no mistake, you will be doing something. A lot of something, often for less than you’d make in a traditional commuter/cubicle job. This doesn’t necessarily mean quitting your job, it means redesigning your entire workday to eliminate the distractions and poor use of time that are getting in the way of your perfect day.

Let’s look at a slightly different approach. Instead of trying to figure out what type of lifestyle, business, or new invention would be needed to support a four hour workweek, we should start smaller. Let’s start by simply designing a perfect day. Read more…

Tax-Free Investing. The True Secret Behind Health Savings Accounts.

By Brad Beckstrom

Why would I waste a perfectly good Thursday morning writing about health insurance and health savings accounts? Well, politics has made paying for healthcare a national obsession.

There’s been a lot in the news recently about the spiraling costs of healthcare and Republican promises to cut the costs of health insurance for individuals and families. While no formal plan has been presented, one key component mentioned by both Republicans and Democrats is the Health Savings Account or HSA. The fact is, tax-advantaged HSAs have been around for years. In many ways they are also one of the best ways to save for retirement. I’ll explain why.

What is an HSA?

An HSA used in conjunction with a high deductible health insurance policy allows users to save and spend money tax-free to use for medical expenses. Contributions to an HSA can be made pre-tax directly from your paycheck or you can make contributions on your own that are 100% tax-deductible, up to $3300 for individuals and $6550 for families and, if you’re over 55, you can contribute $7550 per year. For example, a family in the 25% marginal tax bracket could save you over $1600 a year in taxes.

How does it work?

Once you have money in your account, you can then use it to pay for all types of medical expenses, including things like new glasses, prescription drugs, medical and dental visits, and any medical expenses not covered by your high deductible health plan. To be eligible, you need to have a health plan that qualifies as a high deductible plan. (Example a minimum deductible of $1300 for singles or $2600 for families). A high deductible plan means you will pay more out of pocket before meeting your deductible. The advantage is that the premiums on these plans are lower. Due to the high cost of health care, many employers are now offering only high deductible plans, or versions of it, as an option.  For entrepreneurs, these plans are also available through healthcare.gov and labeled as HSA or through most health insurance brokers at comparable rates.

Simplify the process

When I first started researching HSA’s,I felt they were a bit complex. I had to set up a pretax deduction from my paycheck, then set up a HSA account with a participating bank and assure that these pre-tax deductions were transferred into the account. Once the account was set up and funded however, I found it was easy to track medical expenses in Quicken or online using Mint.com or PersonalCapital.com.  Once a month I can pull up my non-reimbursable medical expenses then simply pay myself back from the HSA account. I don’t see a need to save paper copies of the bills as the transactions applied to my deductible are saved by our health insurance provider and they are documented in both the credit card bills and online tracking. The HSA bank account allows you to track reimbursements paper free. You’ll get a year-end statement showing the exact amount of all transactions.

Using an HSA like a turbocharged tax free retirement account.

What happens if I don’t use up my budget? Any leftover dollars stay in the HSA account and can be invested in index funds. This is the true secret behind an HSA account. Unlike an IRA or a 401K, the money in an HSA account is not taxed when you make withdrawals during retirement. After you turn 65, you can also withdraw the money tax-free for any purpose, making it an ideal bookend to a traditional retirement account. Here is a great graphic from The Mad Fientist showing the cash flow.

Setting it up.

Here are some steps you should take if you’re considering an HSA account.

  1. Don’t wait until open enrollment period start researching health savings accounts. Find out what your options are now. Healthcare costs in the US are skyrocketing, and many employers, entrepreneurs and government agencies are switching to high deductible plans. You don’t want to be stuck in one of these without an HSA account.
  2. Choose which financial institution you’ll use for your HSA account. I was able to quickly set mine up with Bank of America, making it easy to handle transfers between checking and my HSA account. Most HSA accounts offer bill pay and transfer features even if you don’t bank with them.
  3. Find out if pre-tax contributions can be made from your paycheck. This lowers your tax bill and gives you tax-free dollars to spend on health expenses you’re going to have anyway, even if it’s new pair of glasses or a root canal.
  4. Don’t get HSA plans mixed up with other types of savings accounts like HRAs or FSAs  the key difference is that you own the HSA account and the dollars don’t need to be used up by the end of the year. Make sure it’s specifically HSA approved.
  5. Max out your tax-free contribution whenever you can. This money grows tax-free in your HSA account until you use it. The HSA account is especially useful for individuals who have also maxed out their retirement contributions.
  6. Another key difference with HSAs is that they have investment options for your leftover funds. Check a balanced index fund and put your extra cash in there at the end of the year. Over time this will grow tax-free.
  7. Once you start using your HSA account, pay your providers directly then reimburse yourself from the HSA. Some HSA accounts include debit cards but I found it easier to use a credit card with points and then reimburse myself, which is allowed under the plan.
  8. HSAs are great for the self employed you save an additional 7.65% on (employer paid) social security and medicaid taxes.
  9. Check out this article with more info about turning your HSA into a souped up retirement account.
  10. Call your congressmen and let him know that 100% tax deductible, affordable health care, and HSA accounts, are a good thing that should be improved on, not eliminated.

 

I’d love to hear about your experience with HSAs. A quick disclaimer — Any concepts presented on this blog are simply opinions and should not be considered as professional investment advice.  As with most other things in life, you are solely responsible for your own choices, make them thoughtfully.

 

The Frug

 

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The Secret to Running The Business of You.

haveasmallnut

By Brad Beckstrom

“Have a small nut; that’s the key to life.”

Graham Parker.

What’s an aging rock ‘n roller to do, the once big recording contracts, the limos, seven-figure tour revenue all start to trickle away? Graham Parker, a British punk rock pioneer, knows exactly what to do: enjoy life, have a great time, and keep making music. Graham’s quote “Have a small nut; that’s the key to life” sums up one of the core principles of financial independence. The small nut he’s referring to is not assets, but monthly expenses. Rock stars, athletes, entrepreneurs, everyday folks all hit the same wall. We hear these stories all the time, from the extreme, like Mike Tyson blowing through $400 million and ending up homeless, to the highflying salesperson that overextended themselves, justifying their current expenses on future income fantasies, only to be chop blocked at the knees by a corporate reorg or downsizing.

Professional athletes know this story all too well. The average career in the NFL is about four years. In major league baseball, it’s a little over five years. Knowing this, it seems crazy when you see young athletes, blowing their entire signing bonus, borrowing against it before they even get a check. The secret is to do the opposite, save the entire bonus along with any windfalls, and keep your monthly expenses to a minimum. Read more…

A Short Guide to Lean Investing.

taking-the-simple-path-to-wealth

By Brad Beckstrom

Have things gotten too complex?

Today we have more savings and investment options than ever before. Online tools and investment options that give us access to over 10,000 mutual funds and exchange traded funds, with another 40,000+ publicly traded stocks worldwide. Most of these investments are accessible without setting foot in a brokerage firm or bank. Online banking, trading, and mutual fund supermarkets give us access to sophisticated investment tools available only to professionals just a decade ago.

Yet, despite so many options, the US personal savings rate is hovering between 5% and 6% and has been in steady decline since the 50s. The retirement savings picture is even worse, one in three American adults has zero saved for retirement and 62% have less than $1000 saved. Many Americans like to blame the government for this predicament but in fact many countries with significantly higher taxes have savings rates that are 2 to 3 times ours.  On top of our tax advantages, we have a wide selection of pre-tax and post-tax savings options many other countries don’t have, including 401(k)s, IRAs, SEPs, Roth IRAs, Health Savings Accounts, 529 college savings plans, and about 10 more with various combinations of numbers and acronyms in the name. All of them are underutilized by any standard of measurement.

Part of the problem is complexity. We’ve made it easier to go out and get a loan for a new SUV or a 5,000 square foot house than to start saving or put that money away for retirement.  We’ve been incentivizing people to take out student loan debt instead of starting college savings accounts.

To solve the complexity problem we need to make it easier to save and invest. We need to create a simpler path to wealth through regular and efficient investing. I like to call this Lean Investing. Read more…