“Why would you reject easy money?”
There were a few times my friends implore me to not turn down certain deals. The first time was during my junior college days, where a part-time job paid $15 an hour for what seemed like a relatively easy task (turns out it was not so easy after all!)
You may have encountered a similar experience to me at some point in your life.
Many of us won’t reject easy money, but often the easy money comes attached with some unknowns.
Some easy money requires us to exchange our integrity to make the money. Others require us to do something that potentially would embarrass us.
There is always some reason for us choosing not to make the money, which is something others do not understand. Very often, our friends did not put themselves in our shoes and think why we would reject money that is there to be taken.
Legal Counsell John Goodell shared with us his family’s interesting money story.
His grandfather’s great depression stories left a lasting impression and shaped the frugal family lifestyle. They were able to live on one income and once his wife’s doctor salary came online, it is not difficult for a family with a frugal lifestyle and an above-average salary to reach financial independence very fast.
They paid off their outstanding loans by 32 years old and they could, by 35 years old saved up enough to cover their existing expenses, if we defined how much is enough to be financially independent by the 4% withdrawal rate.
But they took a pause and asked themselves:
“What good is money if there’s no one to share its many uses with?”
So they decided to try their hands on living a richer life.
Just like his grandfather, John wanted to archive some valuable money stories that could shaped his children’s life next time. But these weren’t stories about making fundamental sound money decisions but… decisions about letting money slip away.
Among the stories, the one story that I think about the most was the third one.
Giving up a $60,000 Inflation-Indexed CPF LIFE Annuity Six Years Away
John decided to cut short his military career two years after welcoming their third kid by resigning from an active-duty Army career at 39 years old.
If you are a fulltime soldier for 20 years, you will be able to secure a military pension. The pension will amount to 50% of your highest 36 months of base pay. For each additional year of service past 20 years, the pension increases by 2.5% a year.
Given John’s active-duty career path, he estimate that 50% pension would equal to $60,500 a year in today’s money and he could have started drawing out at age 45.
Now that he resigned, he served as a reservist and he would still get a military pension with 20 years of reservist service and a much reduced pension. John estimate that he will receive $46,000 a year once he turned 60 years old.
We can all see what John is forgoing.
It is very difficult to secure an income stream that is inflation-indexed, perpetual and backed by the government and John could have secured it with six years to go.
The main reason John forgo that was because military life can be very disruptive for his family. In the prior two years, his family have to live in four places. As children grew older, every move means the children have to say goodbye to their friends and his wife would have to constantly interrupt her career.
As I grew older, and interact with more friends with children, I understood more that if you could spend six years more being fulltime with the kids, the quality of the relationship might be very different.
I guess the decision would be easier if John was single or even married without kids.
Given my character, I would strive for predictability most of the time and that means I would have not made the same decision as John. Giving up the pension feels a little like you “wasted” the time you spend in a single professional career with nothing to show for it.
However, I do wonder if I was in the same life situation as him whether I would have taken the same route. I probably would have because if you see what your family are going through on a day-to-day basis, the practical aspect of the decision will weigh much heavier.
What about you? Have you ever made some life decision that if you calculate them well today, you would have ended differently financially?
What made you come up with that decision and did you regret them today?
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Friday 18th of March 2022
"I understood more that if you could spend six years more being fulltime with the kids, the quality of the relationship might be very different."
Interesting. How different?