Jason Parker interviews John Madison about his journey towards retirement.

Below is the full transcript:


Announcer: Welcome back America to Sound Retirement Radio, where we bring you concepts, ideas and strategies designed to help you achieve clarity, confidence and freedom as you prepare for and transition through retirement. Now, here is your host, Jason Parker.

Jason: America, welcome back to another round of Sound Retirement Radio. Thank you so much for making this program awesome. I really appreciate your reviews in iTunes. I appreciate those of you that have become friends of ours on Facebook. It really means a lot to me, and it’s really awesome that I get to connect with some of you on a one off basis.

I’m excited today to bring you our guest, because this program that I’m going to bring to you is actually one of those programs where I’ve had the opportunity to connect with one of our listeners, and we’re going to get to share his story here, his journey towards retirement. This is episode 064. If you’re driving down the road this morning in the Seattle area, and you want to listen to the entire program, I encourage you to visit us online at Sound Retirement Planning.com, where you can listen to the entire interview, and we’ll, also, have the transcript made available for you.

As you know, I like to get the morning started right, and I want to start out by renewing our mind. I have a verse here, and this is a verse I’ve been spending a lot of time with, this particular chapter, John, chapter twelve, for the last several weeks as I prepare for a speaking opportunity. This is from John, chapter twelve, verses four and five.

“But Judas Iscariot, the disciple who would soon betray him said, ‘That perfume was worth a year’s wages. It should have been sold and the money given to the poor.’ Not that he cared for the poor. He was a thief, and since he was in charge of the disciples’ money, he often stole some for himself.” I’d love to hear your feedback, your thoughts on that verse. Join us on Facebook, and chime in on the conversation there.

The next thing I want to do is share with you a joke, just put a little smile on your face this morning. This is a joke that my daughter shared with me. This is one that she’s shared with me several times over the years, but every once in a while, she’ll remember it, and then she’ll tell it to me, and it always makes us both chuckle a little bit, but she said, “Hey, Dad, why didn’t the skeleton cross the road? Because he didn’t have the guts.” It just cracks me up.

All right, folks, we’re going to get started. Episode 064, John Madison’s journey toward retirement. Again, John is a listener of Sound Retirement Radio. I’ve had the opportunity to connect with him. I want to say that he’s not a client of ours. He’s just somebody that I’ve had the opportunity to connect with. He lives on the other side of the country, in fact. He’s forty-nine years old. He’s married with three kids. His youngest is a senior in high school. He’s local to central Virginia. Graduated from Virginia Commonwealth University with a degree in accounting. He’s a CPA with twenty-eight years of experience. The last sixteen years, has been a business that he owns. He’s a freelancer working with entrepreneurs in the management of their businesses. He doesn’t do individual tax returns. He’s more of a corporate financial guy.

More recently though, he’s added personal financial coaching to the services he provides, and he’s led numerous personal financial classes. He’s taken classes on the subject, and he’s already coached numerous families. His coaching focuses on information and education only. He does not sell products or manage money for people, and as we get this interview started, I want to just remind our listeners, you can find out more about John, his website is River Pine Services.com, but John Madison, welcome to Sound Retirement Radio.

John: Thanks, Jason. Appreciate the opportunity.

Jason: I really appreciate the opportunity to have you as a guest. You sent me an email. I can’t remember what triggered the email in the first place, but as I read through it, it really inspired me, and I thought this is a guy I’d like to learn more from, and, also, somebody I’m sure our listeners would enjoy hearing.

John, you’re a young guy, forty-nine years old. As I understand it, could probably retire today, if you wanted to. Take a minute and just paint a picture for our listeners. Help them understand who you are, what your life looks like, and how you got to this point that you’re at financially now.

John: After that great intro, I have the professional background as far as the investing side of it goes. I started back in my probably mid-twenties, getting a little more serious about investing, although I really didn’t know what I was doing. I’m a saver by nature. That’s just my personality, and so saving was pretty easy, even though I didn’t really, again, know what I was doing.

I can remember back, and this is the pre-internet days, when you have to actually go write out a check, and I remember doing little fifty dollar deposits into mutual funds that I was in back at that point in time, and sending those in, having to wait for the statements to come back and all of that.

I just kept plugging away. Unfortunately, I think I did what a lost of investors do. You tend to chase what was hot. Of course, this was the late nineties, and so that was leading up to the tech bubble, and so I tended to be very aggressive with my portfolio. Again, I guess it’s a little bit of greed or whatever it is that leads you at that point in time. I did really well, of course, as a lot of people did in the late nineties, and then, of course, in 2000, I ended up probably losing way more than I should have. That was really the beginning I think of the education, learning about things like rebalancing and how important that is, and understanding your risk tolerance, those sorts of things, just really, really important.

What was equally important, I think, was I kept plugging on with the investing. I never stopped. I never sold out and sat on the sidelines. I just kept plugging away. It was a lot easier back then to keep plugging away, too, because I was a relatively new investor, and so there wasn’t a whole lot of dollars involved. While a percentage may have been painful, it wasn’t a whole lot of dollars of a lesson, but I kept plugging on through it. Gradually, you learn a little bit more about investing, and allocations, and diversification, and all of those sorts of things, so I just plugging on through, and even through the 2008, 2009 financial crisis. Again, it was a bad time in the market, but kept plugging on through there.

With the last four or five years I guess of the better returns. Of course, nobody knows what the future’s going to hold, so I don’t know that anybody really knows for sure that they have enough funds to retire, but certainly from the research and looking at history, if that’s any guide for us to be able to look forward, the numbers seem to indicate that’s the case, and I’ve met with a couple CSPs just to run the numbers through their systems, and they seem to tell me the same thing.

Hopefully, there’s enough there, but, again, you don’t know the future, so you do control what you can, and there’s a few things I think investors can control, but market returns are not one of them.

Jason: You’re a young guy though. You’re talking about starting investing in your early twenties, and you’re only forty-nine now, so you’ve done a really good job. In your email that you originally sent, one of the things that captured my attention, you used a word, a phrase, “life style inflation.” Would you take a minute and talk to our listeners about that?

John: Sure. What I’ve seen in a lot of cases, and what I think my wife and I have been I hope successful in avoiding is as your career grows, and your income grows, and we have certainly been blessed, since I started off on my own with my freelance accounting work. God has certainly blessed that endeavor, but my wife and I have always been very intentional about how much we would pull out of the business to live off of, and I see so many instances where folks, if there’s a ten percent increase in your income, they’ll be a ten percent or maybe a fifteen percent increase in the spending of their total expenses that goes along with that. We took the approach that just because the income went up, doesn’t necessarily mean that our lifestyle has to go up by the same amount.

We certainly spend more on our lifestyle now than we did years ago. Of course, we do. It was a intentional decision to do that and not based on income, and because of that, it’s, number one, kept our expenses lower, and so the amount that we need saved in order to duplicate that income going forward, or cover those expenses going forward, is smaller, but the other thing was, of course, it freed up more dollars to go towards investing. Just by chance or divine intervention, my really highest years of income were all through the late 2000s, even during the financial crisis and all of that, and so we just kept plugging money into it, and that really set the stage. If we had bailed out at that point in time, which would have been very emotionally easy to do, we would not be in the situation that we’re in right now, to have the flexibility and the option to stop working if I choose to.

Again, keeping our lifestyle down made those dollars available to put into the market, at what turned out to be an opportune time.

Jason: Yeah, that’s great. I want to ask you, and let me put this in a context of legacy, because when you do something like this radio show that’s, also, available as a podcast on the internet, it has the potential to live for a really long time, and impact a lot of people’s lives. John, you and I, we don’t know how much time we are going to have left, but this show could last for a really long time.

As you think about it in that context, maybe in the thought process of maybe your kids, or your grandkids, or your great-grandkids somehow get ahold of this some day, and they’re listening to this interview, what is the most important thing that you would hope to relay to other people listening to this show about your personal financial journey towards retirement?

John: I think it would be to have a plan. You don’t have to be a genius. I’m certainly not a genius. If you look at the funds that I invest in, it’s nothing complicated. It’s not a convoluted scheme of all these different sectors, and all that sort of thing. It’s really very, very simple, but it was done intentionally. I did the research to look at different methods of how to invest, and really settled on the one that I did, and we had been very intentional about planning those things out.

One of the best things that I ever did from an investing standpoint that has helped me tremendously, because on top of being a saver by nature, I’m, also, a worrier by nature, so imagine when things like 2008 hit, my natural, my human reaction is, “I’ve got to get out of this,” type of thing. One of the best things that I ever did was put down on paper, and I call it my investment policy statement. It’s not a term that I created. It’s certainly floating out there. Anyone can do some research on it to see what should be included there.

Basically what I do is when I was calm, and markets were calm, and I was level headed, I mapped out what investment programs gave me the best chance for success in the long run. Just ignore the short term stuff, like this last month or so in the market, just ignore that, but really document what it is that you believe in regards to investing, so that when those tough times come, and the emotions start to flare up, there have been many times I’ve gone back to my IPS, just to remind myself of don’t chase this, don’t sell out, maybe to rebalance, whatever the steps were in there, and it has really helped me.

Jason: Help our listeners understand a little bit more about this personal investment policy statement that you built for yourself, these guidelines or rules to give you … Like you said, you made it in the good times, so that when the bad times hit, you can refer back to it. What does that look like? Is it on a three by five card? Is it a fifty page dissertation, fifty page report that you wrote? What does it look like?

John: It’s a really simple word file. It’s probably two or three pages long, but it’s only long because I have it spaced out that way. You could condense it down to one piece of paper. Basically, it says this is what I’m going to invest in. For example, in my case, it’s low cost, broadly diversified index funds. I don’t necessary say it’s going to be fund A, B, C. I talk about the type of fund that I want to be in. I talk about the asset allocation that I want to have, because I understand my risk tolerance, and so I have devised a schedule in there that shows basically where I am now, all the way through until I’m sixty-five. I’ve got it mapped out by year, and it sounds really geeky, and I guess it kind of is, but that really helps me to see how I’m going to transition from the sixty forty rough allocation I’m in right now, to more of like a fifty fifty.

It talks about, again, when I’m going to rebalance, so that I don’t emotionally react to the market. It, also, tells me things I’m not going to invest in. I don’t invest in individual stocks. I don’t invest in precious metals and sectors like that. When you read some of the financial day to day news stuff, and they talk about the hot stocks and all this stuff, I’m human like anyone else. It’s tempting to want to research those, and maybe jump in, because somebody’s trying to convince you that it’s going to be a great opportunity, but then before I pull the trigger, I’ll think back to the IPS, and there’s no doubt it has saved me from making emotional decisions.

It just talks about what I am going to do, how I’m going to allocate that, and then, also, what I’m not going to do.

Jason: That’s great. Let me ask you a question about rebalancing for a moment. One of the things that people probably, if they’ve read my book, they know that we say rebalancing is a way to strategically sell high and buy low, and, if you think about it, that’s exactly what you’re doing. You’re selling some of your positions that have done well, and you’re buying more of your positions that have done poorly, and you do that with the belief that the market is sufficient. There’s going to be a reversion to the mean, and, over time, you’re going to earn a fair rate of return, and you know that no one asset class is the best performer year after year after year, but what does that look like for you, from a rebalancing standpoint? What are those triggers that say, “Okay, it’s time to rebalance the portfolio?”

John: I will go through quarterly. I prepare a little spreadsheet on excel, very simple, that I will update quarterly, just to see the results for the quarter. Basically, if something is off by more than 5% from its target allocation, my IPS dictates that I would rebalance that. If it’s less than 5%, I’ve given myself the leeway that I can rebalance. I rebalance quarterly. Again, if it’s more than 5% off, if it’s target, then I have to rebalance, and that forces me when a particular sector, you’re reading all the stuff about how terrible it is, and the numbers show that for a particular quarter, it forces me to go back into that sector, and basically I’m buying it on sale by locking in some profits on a sector that did better that quarter.

That’s how I look at it, and those are the triggers for me. It’s 5%, but if it’s less than that, again, I’m pretty detail oriented, so I tend to do a little bit of rebalancing even if it’s below the 5%. Again, that’s optional for me for the IPS.

Jason: Let me just make sure I understand what you’re saying. You rebalance every quarter. Is the rebalancing only based on a quarterly basis, if there’s a 5% change, or is that in addition to? Every quarter you’re going to rebalance no matter what, but if the portfolio is out of alignment 5% or more, then that’s, also, another trigger? Is that what you’re saying? I just want to make sure. Can you clarify that?

John: No. I only do it quarterly. I don’t even calculate it in between the ends of a calender … I use the calendar quarter, because that’s when I do it. At the end of the calendar quarters, I will recalculate my spreadsheet. When I log onto my accounts, I can’t tell just from looking at it mid-quarter, exactly how much do I have in each sector. It’s just Vanguard, which is where I am, just doesn’t really have a tool like that, that shows it to me.

To keep me from worrying about it too much, I don’t update the spreadsheet, but once a quarter. That’s when I would rebalance, if needed.

Jason: Great. I know we don’t want to get into too many specifics. You and I, we tend to be numbers nerdy, geeky guys, and so we’re into this kind of thing, but I think it’s important to remember, John, there’s a lot of people out there that aren’t wired that way. One of the things I wanted to ask you about during the time that we have for the radio show here in the Seattle area, is you’ve had the opportunity … You and I are both big fans of Dave Ramsey, and you’ve taught some of his Financial Peace University classes, and then you’ve, also, taught some of these legacy journeys. After you and I spoke, I actually went out and bought Dave Ramsey’s book, The Legacy Journey, and I’ve really been enjoying that.

First, I want to talk about the Financial Peace. When you’ve had the opportunity to lead those classes, what have been some of your biggest takeaways as you’ve had a chance to teach about personal finance in that type of a setting?

John: Yeah. I hate to go back over and be redundant with what we’ve already talked about, but so many people that have come through the class just come in without a plan. Whether it’s budgeting … I’m not talking about just investing. Even just with budgeting and how they’re going to pay their debts off. They just lead their lives month to month I guess in a lot of areas, but including their finances, and so they don’t really have a plan.

One of the greatest things I think with Financial Peace University is it puts tools in people’s hands. Whether you agree with everything Dave Ramsey says or not is irrelevant to some of the benefit of those tools, and just seeing the people who really embrace it, and then getting feedback even months later, it’s very rewarding for me as the leader of the class to see how these people are putting these things into place, and taking control of their loss.

Jason: I want to just put a shout out there to all of our listeners. I’m a financial advisor. I work with hundreds of people. This is what I do for a living, and my wife and I attended Financial Peace University, and I have to tell you, it was really a great experience, because as somebody that’s in personal finance all the time, if I go and I say, “Here’s what we’re going to do,” sometimes that can create a little bit of friction in a relationship, but when you go to a class, and you have somebody else saying, “Here’s the plan you need to follow,” and both people can just sign up and agree, “Here’s somebody else saying here’s a good plan. Let’s jump on that.” It’s not me saying, “Let’s do it this way.” It’s not my wife saying, “Let’s do it this way.” It’s Dave Ramsey says, “Do it this way,” and it’s really a wonderful investment. I encourage you, if you haven’t a chance to go through that … It doesn’t matter if you’re a millionaire or if you’re flat broke, you’re going to find some tools, you’re going to find some enjoyment, you’re going to find a really great sense of community, so I want to encourage you to do that.

John, we’re almost out of time, if you can believe that or not, for the radio show, but I want to make sure our listeners know. You have a website out there. You do some personal financial coaching. What’s your website again?

John: It’s River Pine Services.com.

Jason: One of the things I love, you’re a CPA. You’ve got a lot of experience. There’s an old saying, find somebody who has what you want, do what they do, and you’ll get what they’ve got. People don’t need to reinvent the wheel here. They just need to find somebody that’s already further along the path. If you’re out there, you’re listening to the show, I want to encourage you, John, like he said, he’s not selling any products. He’s just doing some personal financial coaching. I imagine, John, there’s a limited number of people that you can bring through that type of a process.

One of the other things, I want to talk about the legacy journey next, because that’s a different take. A lot of times, people on the legacy journey have done a really good job financially. What are some of your big takeaways from teaching the legacy journey, or going through that process with people?

John: To me, the great thing about the class, and I think Dave refers to it as the followup class, the SPU. If you go through the SPU, and you work your way through … If your listeners are familiar with it, with the baby steps, everything is very technical, lots of forms, and all of that sort of thing, to get you towards financial freedom. Then once you get there, or you’re about to get there, you’re very close to it, there’s this great debate. It’s what I’ve been going through the last couple of years as well. It’s a great thing to be able to debate, but this idea of what’s next, and for what reason am I trying to achieve financial independence.

That’s really what legacy journey talks about. It talks about broadening your outlook beyond the technical numbers in front of you, and paying off your mortgage, and saving 15% for retirement, and saving money in your kids’ 529. It really takes a step back. There’s no forms. It’s not that kind of class, but it really gets you to thinking about some technical things. There’s a little bit of investing. There’s a little bit of estate planning and things like that, but, also, what can you do to effect, not only your own family’s generation or following generations, but society as a whole. What can you do?

That’s really what independence is for me. It’s not so much the dollars and cents anymore, and, honestly, I really am trying to, which is why I’ve gotten into coaching, I’m really trying to look beyond just the number side of it, and saying how can I take the knowledge that God’s blessed me with, to make a difference in people’s lives, and that’s why I just want to focus on education. I don’t tell people what to do. I just talk about where you are. Here’s some options. Maybe what I would do if I were in your situation.

Jason: John, I got to cut you off here. We’re going to come back and continue this conversation, because it’s very rich, and I want our listeners to get more of it. They can listen online at Sound Retirement Planning, but for the radio show, we’re out of time, so thank you for being a guest.

John: Thank you.

Speaker 1: Information and opinions expressed here are believed to be accurate and complete, for general information only, and should not be construed as specific tax, legal or financial advice for any individual, and does not constitute a solicitation for any securities or insurance products. Please consult with your financial professional before taking action on anything discussed in this program. Parker Financial, its representatives, or its affiliates have no liability for investment decisions or other actions taken or made by you based on the information provided in this program. All insurance related discussions are subject to the claims paying ability of the company.

Investing involves risk. Jason Parker is the President of Parker Financial, an independent fee based wealth management firm, located at 9057 Washington Avenue Northwest, Silverdale, Washington. For additional information, call 1-800-514-5046, or visit us online at Sound Retirement Planning.com.

Jason: John, we’re back.

Speaker 1: Great.

Jason: I’m sorry to have to cut you off like that, but we ran out of time. You were sharing this idea, what’s really on your heart and why you’re doing more of this coaching. When we spoke, you said something to me that really captured my imagination. You said you don’t want to retire just because you’re trying to retire from something. When you make that decision, you want to be retiring towards something, this next phase, this next journey in life. Tell our listeners a little bit more about that.

John: I do think that’s so important. No matter how frustrated you may be in your career, in your job, you may have been doing it a long time. I’ve been a CPA for a long time, and it has blessed me and it has blessed my family, and I don’t want to totally turn from that, but, by the same token, it’s been thirty years almost.

The great thing I guess about the financial independence, as I say, money can’t buy happiness, but it can bring you options. I really want to have that thing that I’m moving towards. I don’t want it to simply be I’m tired of doing accounting work or something like that, because I am still forty-nine, and I don’t know how long the Lord’s going to bless me to live here on earth, but I could easily live another forty or fifty years, and I’m not one that’s going to enjoy sitting on the sofa. I don’t play golf. I don’t do those types of things. Nothing wrong with that, I guess, if that’s you see in retirement, but, personally, I would want to use the remaining time that I have here on earth to look beyond myself, and try to help those that I can in the fields that I have hopefully some knowledge that can benefit them.

Jason: Yeah. That’s awesome.

John: I really to focus on that. No just running from the old, but running to something that God has placed me here to do.

Jason: Yeah. I am so fortunate that I’ve been able to find that in my career. I know that the work that we do really changes people’s lives. It has a significant meaningful impact, and it’s a really wonderful place when that’s where you’re working from.

We had a chance to talk a little bit about Dave Ramsey and the work he’s doing, and you and I are both fans, but what are some of the other resources that you plug into, books, podcasts. You even mentioned a calculator that you like to use. Share with our listeners some of those resources.

John: Sure. Back when I was more I guess trying to develop what turned out to be the IPS. I didn’t know what it was at the time, but it turned out to be that. There were some books that I read, things that were put out by Paul Merriman. I’m a big fan of what he talks about. The Four Pillars of Investing is to me a classic book that really helps you understand the broader market and investing in index funds and things like that.

I listen to a lot of podcasts. I certainly listen to yours. Again, Paul Merriman has a podcast. Stacking Benjamins is a favorite of mine, as well as Ric Edelman and Jill Schlesinger. I don’t necessarily always agree with everything that is talked about as far as investment ideas and all that, but, again, I’m a finance nerd, and so it’s enjoyable to me to just hear what people are talking about, even though, like I said, I really don’t change my IPS because of any of that.

Some websites, there’s a number of them out there that deal with early retirement. Of course, Vanguard has got a lot of resources there. The particular tool you were mentioned that you and I had talked about earlier is a tool called FIREcalc, and basically what it does in a nutshell is it’s not like a Monte Carlo simulation. It more looks at the actual history, and depending on how long a period of time you’re budgeting for retirement, it basically assumes … Just as an example, if you’re looking for a thirty year retirement period, what would have happened if you had retired let’s say in the year 1900, and it ran for thirty years, based on actual results, and then if you retired in 1901, and then 1902, and run it out for thirty years, however long you wanted to, and basically it shows you what would have happened in the past. Of course, that’s, again, no guarantee of what’s going to happen in the future.

It’s a great tool to see how you stack up should you happen to retire at a market peak especially, because that’s one of the concerns that I have as a earlier retiree is the sequence of returns risk, and not being able to afford, especially when the market has done so well, those first few years of retirement, when you look statistically at the numbers, a bad hit at the same time you’re starting to draw money out to live off of, can have a pretty big impact on the long term success or failure of your portfolio, and, of course, you don’t want to find out at eighty-five years old that you’ve run out of money.

Jason: Did you give the website for that calculator?

John: I know it’s FIREcalc. I don’t know off hand, but it’s very well known. If somebody Googles FIREcalc, it should come up very easily.

Jason: Great. Thanks for sharing that resource. Any other resources, before I ask you my next question here.

John: I think that’s basically it. I will read some of the forums and things like that on investing. Again, it’s more of an interest. It’s not something that I do because I’m trying to educate myself anymore. Not that there’s not more to learn, of course, but as far as the fundamentals of investing, and budgeting, and debt management, and all that sort of thing, I guess I’ve researched enough that I’ve signed off on that sort of thing.

Jason: Yeah. In today’s program, we don’t want to give investors your specific mutual funds that you’re investing in or anything like that, but I am curious to know, because one of the things you’ve said is you want to keep things simple. You want to keep your fees low. You like to use index funds to create the diversification. Would you share approximately how many different funds, mutual funds do you use in order to create that diversification strategy?

John: Sure. There’s basically three core areas where the vast majority of the funds are invested, and they’re more of a total stock market total, international total bond market type of funds. If you look at the way the funds are constructed, it tends to weigh too heavily towards the larger companies, and history has shown that the smaller cap funds and value funds, or companies, over long periods of time tend to do better. More volatile in the short run, but tend to do better in the long run.

I could have stopped right there with basically three funds, but what I’ve done … Again, I’m kind of nerdy about it, but I’ve taken little small slices, and I’ve thrown in an emerging markets fund. I’ve thrown in a small cap fund, a small cap value. Again, very small percentages.

Honestly, I don’t even know thirty years from now if it’s even going to make a difference in the returns that I’ll experience, but I’m trying to capture a little bit of that return, and because they tend not to be correlated to the broader market, actually it’s counter intuitive, but you add a little bit of risk in these more specialty sectors, you end up bringing down the risk of a total portfolio, which, again, is counter intuitive. You would think it would make it more risky, but actually you look at the results historically, and it doesn’t.

It’s a little bit of slice and dice with some of these smaller sectors, but, also, [Inaudible 00:33:03] in there. I think [Inaudible 00:33:05] are a great opportunity, again, for a long term investor.

Jason: Let’s talk for a minute about your biggest financial mistake. We all have these. They’re good things. At the time, I know they never feel like good things. As you think back over your financial life, what’s been your biggest mistake?

John: I think it was probably, if I had to pick one thing, I would probably say it was not understanding how to invest before I started investing, and with that I mean things like risk, and asset allocation, my own risk tolerance, the importance of rebalancing, certainly understanding the impact of cost long term, and understanding how it’s the fees and trading costs of moving things around. If I had to pick anything, I would think that would be the one thing.

When I was younger, I think my biggest mistake was probably trying to live my parents’ lifestyle when I got out of college. You try to go too far too fast, but then as far as just the investing side of it goes, again, just having a plan. It’s not like you’ve got to hit a home run and outsmart the market. Just take the market returns, and over a thirty year investing experience, you’ll do fine.

Jason: I think it’s really wonderful that we can have you on the program. You’re forty-nine years old, and paint this picture of hope. As you look out into the world today, you look out into the economy today, there’s a lot of bad news out there. Are you optimistic about the future?

John: Absolutely. Again, when it comes to investing, you’ve got to look long term. I don’t know what’s going to happen in the next certainly weeks, or months, or even the next few years. I don’t know. You certainly look at the headlines right now, and you’d be scared to death. Any of us would be, but I’m not investing for the next six months or even five years. The money that I would need if I decided to close my accounting work today, the money that I would use for the first number of years, isn’t in the market. You shouldn’t have it in the market if that’s the case.

The money that is in the market, is longer term money. As long as I’m keeping that perspective, I’m very optimistic. We’ve had terrible times before. If you look back through the history of our country and the economy, that I’m sure if you were living through that, was incredibly scary, and you wonder whether it will ever come back or not, but it always has. Nobody can guarantee that it will, but if history is any guide, it will, and so just keep that focus on the long term.

Jason: You just nailed it there. This is something that we teach over and over and over. I sound like a broken record, but time is the cure to the volatility of the stock market. The more time you have, the more risk you can afford to take, and so, John, you’re not quite there yet. You’re not quite retired, but we’ve worked with, coached a lot of people through this process, and when you’re creating a retirement cash flow plan, when you think about diversification, this is a principle I always teach. Diversify your time horizon first, and then take the appropriate amount of risk with the money, based on when you’re going to need it, because, like you said, if you’re going to be retired, you don’t want to be taking a lot of risk with money that you need in the short term for cash flow, so really, really important. Some of these things are so simple, but I think it’s really important, like you say, having a good plan.

I want to ask you about risk tolerance, because you’ve talked about that a couple of times. How did you come up with a risk tolerance for you? What does that look like? How did you come up with it, and what you are actually comfortable experiencing at this point in your life?

John: As far as coming up with it, there’s a number of great online tools to help you to begin to narrow that down. I know Vanguard has one. If people go there, you can search on their website for their risk assessment. Again, there’s nothing magical about it, but answering a series of questions, it started giving me at least a range, and then, again, all I can go by is history. That’s all I can put my hands on. Looking at the history of different mixes of portfolios, whether it’s 90% stock or 90% bonds. Looking at the returns that that they … Let’s say 10% bands, so 90% stock, 80% stock, so on and so forth, returns historically, compared to where I am. I know what I have now. I know what the market has done historically. We project as well as we can what we’ll need in the future, and then how much risk do I have to take in order to, historically speaking, hit my goal.

When I take a risk assessment test just for my personality, I’m about a seventy thirty, but my portfolio is sixty forty, because the other point that goes with this, I think it’s not just your risk tolerance, it’s how much risk do you have to take in order to achieve your objective. Earlier this year, as a matter of fact, I moved from seventy thirty to sixty forty. Again, that was a part of my IPS because it was a material change in my situation. That’s the only reason I change the IPS. It’s not because the market is scary right now. It’s because something has happened in my overall situation that would make me want to change that. I actually accelerated that process of moving from, at the time, seventy thirty to eventually I’ll be at fifty fifty. I accelerated that a little bit because I could take some risk off the table. Yes, historically speaking, I’m going to give up a little bit of the return for that, but don’t take risk that you don’t have to take.

Again, looking at the history of the different numbers and where I am now, and where I want to be, you begin to hone in on at least … There’s no science to it where this is the exactly perfect allocation, but you begin to get closer to it.

Jason: Yeah. I’ve got just a couple more questions I want to ask you before we end our time together here today, but I want to just thank you again for being a guest. You’re taking a lot of time out of your schedule here to share with our listeners, with the world, your story, and I think it’s really powerful.

Back to this idea of lifestyle inflation, because this is something we see so much. People’s income goes up. They spend more money. Somehow, you and your wife, your family, didn’t get caught up in that keeping up with the Jones. Give our listeners some tips on being content. What does that look like? How do you remain content at a time when you see all your friends driving brand new cars, and buying bigger and bigger houses, and you guys are keeping things simple. How did you do that?

John: I guess, first, to take a step back from the financial side of it, as a Christian, and I struggle with content often. I think we all do. It’s just the human nature. I think as a Christian, I’m trying to keep a bigger perspective, or a longer term and eternal perspective, if you will, versus how can I improve through some material good my life today.

From a financial standpoint, which is helpful, at least me, I won’t speak for my wife, but what has helped me is to keep my eye on what was important, and what did I want to try to achieve from an investing, from a professional, from a financial standpoint, what is it I wanted to achieve, and upgrading the satellite package was not one of the things that I wanted to achieve. It was not. I like watching TV as much as the next person, but that just wasn’t where the priority was. Trying to keep that longer term perspective, and not get so caught up in the emotion of trying to satisfy maybe a long term need with a short term what you feel like is a perk.

Jason: What is that? As you create that vision for yourself, you’re looking out in the future, you’re staying focused on it, what ultimately is it that’s driving you to that goal? What is it that you’re trying to get?

John: I guess earlier it was to plan for my eventual retirement. I didn’t know what that was going to look like. That was what I was looking for out there. Now that I’m getting closer to it, I’m certainly older than when I started, and it’s now possible for me. I’m trying to see, again, where I can do good. This world is not about me. It’s not about just accumulating stuff. God has blessed us, and I am so appreciative of it. I try to be a good steward of it, but I understand that I was put here for some other reason than just accumulating assets. [Inaudible 00:42:14] accumulating assets, but if that’s the point of your life, to me, that’s hollow. I was going to say shallow. That’s the wrong word. It’s hollow, because you’re just not going to derive any sort of satisfaction from material good I think, in the long run.

Really just trying to keep that eternal perspective, and figure out … I don’t have all the answers yet, but keep trying to figure out what it is that God would have me to do. I believe he’s blessed us for a reason, and I’m trying to figure that out right now. That’s why I got into coaching, because it was something that I enjoy doing. Trying to put some hope in other people’s lives is incredibly rewarding, not in a financial way for me. I’d make more money continuing to be a CPA, but to have the ability to be able to sit down with folks, and talk about their situation, and just show them that, yes, there’s a way out of this. It’s not hopeless. That’s incredibly rewarding, and that’s much more warming to my heart, not to be too corny about it, but that’s much more warming to me than doing another balance sheet.

Jason: I think that’s hard for people to understand, who are just trying to survive day to day, this idea of what you’re talking about, this idea of finding purpose in the work that you’re doing is beyond money, because there’s so many people that really are struggling. They’re really struggling just to put gas in their car, and put food on their table, and make sure their kids have clean clothes to wear. My guess is most of the people listening to this show are probably a lot more similar to your situation, but, gosh, I really appreciate this opportunity to learn from you though, and just hear your life experiences as you’ve gone through this.

I want to ask you this next question, this is a hard one. This is one that was brought to me by one of my clients, and I have to tell you, one of the things that … I don’t know if you’ve had the opportunity to do this yet, but just to really sit down and create a purpose statement. What is it? Why do you get out of bed in the morning? When you’re not going to work to just make money anymore, this idea of purpose. What is it that drives you? What is it that says, “I’m willing to give up the best hours of my day, the best years of my life, to go and spend time with people,” that really motivates? Here were the two questions that brought me to this point that I just labored over. I just really struggled with.

I’ll paint the picture for you, and then I’ll ask you to answer these two questions for me, and you may have heard me ask this question in the past. Imagine that we pull into a church. We get out of our car. We walk into the church. We walk up to the front of the church, and there is a casket, and you look inside that casket, and you realize that we’re at your funeral. Then we’re going to go, and we’re going to sit down, and for the next hour, we’re going to listen to your family, and your friends, and your co-workers, and they’re going to get up, and they’re going to talk about your life.

The two questions that I … They still haunt me as I think about them, but question number one, and this one’s a little bit easier I think for most of us, but question number one is how will you be remembered, and then the second question, and this is the one that I really, really think about a lot, but not just how you will be remembered, but the second part of the question is what have you contributed?

As you think about those two questions in that context, how will you be remembered, what have you contributed, and, by the way, for our listeners, this client of mine that gave me this, she actually handed me the book, The Seven Habits of Highly Effective People, and this is in the second chapter of that book, so that’s where this came from, and she told me to read this. John, how would you answer those questions? How will you be remembered? What have you contributed?

John: As far as question number one, I guess how I would want to be remembered, really has nothing to do … I know this is a financial podcast or radio show, but really has nothing to do with the financial things of my life. I would, first and foremost, want to be remembered as someone who lived out their faith as well as they could. Of course, no one’s perfect, but that people could see Christ in me. I certainly would want to be remembered as a good father, a good husband, a good businessman, a good, honest businessman, who really looked out for his clients, and tried to run a very reputable business.

I guess financially speaking on that question, would be that I was a good steward. Every share of mutual funds that I own, someone else is going to own those shares eventually, so this period of time where I’m owning some, I would hope that people would look back and say, “He was a good steward of those resources.”

As far as what I’ve contributed, that’s the journey I’m on right now, and that’s where I’m looking at this coaching and that sort of thing. I don’t put the emphasis on what I’ve “contributed” based on the taxes that I’ve paid, or the mutual funds that I’ve accumulated, or even the things that I’ve purchased for my own use, or paying for my kids’ school, or something like that. It’s how have you made a difference in people’s lives. People aren’t going to remember fifty years from now, they’re not going to remember which mutual fund I owned.

They may not remember me at all, but if they do, I think they would be more likely to remember me based on something, as the question asks, what did you contribute to something greater than yourself. That’s the journey I’m on right now as I’m winding down the accounting side, my accounting career, I’m exploring these other things, and coaching is one of those things that is really important to me. Whether that’s what God has called me to do, and that’s going to be an even larger focus five years from now, I don’t know. That’s the journey I’m on. I do want to discover why did God put me here? Why did he allow us to accumulate what he has? How can we use that blessing to in turn bless others, and, again, not necessarily financially like giving it away, but the use of my time, which is such a valuable resource.

Jason: Yeah. That’s awesome. These aren’t easy questions for people to think about and to answer, but then to be willing to share it publicly with hundreds, thousands of people around the world, thank you so much for just being willing to do that.

I don’t even know if I want to ask you any more questions, because I think that’s probably a good place to end, but is there anything that you want to make sure that our listeners know before we end our time together here?

John: I guess it would just be, to sum up, if I was talking to someone on the investing side, do your research when you’re calm. Develop the plan that makes sense to you. I manage my stuff on my own, but I have no problem with folks that want to use an advisor, and have them manage it, but I do think we have a responsibility to understand the principles of what we’re going to do, and then stay the course. Don’t get sidetracked with all of the hot stories and the hot stock picks in Money Magazine this month. You picked a course for a reason, stay with it, unless there’s some material change in your life. Don’t go changing it simply because something has changed in the market, and just be very intentional with your finances.

Jason: Awesome. Folks, if you’re listening to this program, this is episode 064, John Madison’s journey toward retirement. His website is River Pine Services.com. He’s a CPA, and he does coaching for individuals that are looking for some help with their personal finances. John Madison, thank you so much for being a guest on Sound Retirement Radio.

John: Thank you for having me. I greatly appreciate it.

Jason: All right. Take care.

John: You, too. Bye bye.

You can also follow John’s blog at  60minutefinance.com