Going Vertical

Jeff’s got a great analogy about Space Shuttle take-offs v Navy Jet Fighters – when was the last time that you actually got to fly one of those things, Jeff? – that tells you a lot about how he thinks!

What advice can you give Jeff from your perspective, be it stratospheric, strictly earthbound, or anywhere in between?

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I’m sure Adrian advocates an aggressive vertical takeoff profile, given the picture he chose to use of the space shuttle taking flight.

My typical launch profile is a bit different than that of the Space Shuttle.  I’m used to starting from a standstill, checking the instruments, stroking the afterburners, taking level flight to build speed, and then pulling up to start a climb.  I’ve been launching this way for about 17 years now.  Not just professionally as a Naval Aviator, but also financially.

However, I think I’ve may have stayed in ground effect for a bit too long financially and its now time to pull back on the stick, load up the “Gs” and take things vertical.

But there’s more to going vertical than just honking on a big ‘ol pull on the control stick.  Pull too little or too late and you might not clear the trees at the end of the runway.  Pull too much, too quickly or too soon and you could decelerate rapidly causing you to peak out lower than you intended.  There’s a science to looking cool.

The struggle I am having in our experiment is one of changing old habits.  I’m finding that old investing habits can be hard to break, especially those that you believe have been good ones.

I have been a typical retirement account poster child.  I use ‘em and I max ‘em out.  And I haven’t done too bad along the way.  I’m on track to be comfortable later in life, not having to work until I die, nor rely upon the charity of my children.

But being comfortable in 27 years is not why I’m here.  I want to find a time machine to shave 17 years off that clock.

Let’s take a closer look at where things sit right now and determine if I have enough airspeed on this baby to take her vertical.

INCOME STATEMENT

Adrian made a nice graphic at the top of the page capturing my monthly income statement.  Before I add a little more detail, I have a small confession to make first.

Those numbers reflect what life will look like in May 2009.  My pay is still fluctuating from my recent move and won’t settle out completely until I officially “check in” to my new command on May first.

Monthly after tax income: $12,501 (made up of my paycheck and rental income)

Monthly expenses: $9,512 (made up of living expenses and two mortgages)

Monthly savings: $2,989

My surplus is normally divvied up between a 401K, two Roth IRA’s, two 529 college accounts, and cash savings.  However, right now everything is being funneled into money market savings to replenish my cash reserves and cushion the unforeseen expenses that come with a move.

NET WORTH

Reviewing my net worth profile yields the following:

Total assets: $1,355,253 (two houses, two cars, one boat, cash savings, and several retirement accounts)

Total liabilities: $753,755 (two mortgages, one short term bridge loan tied to my home)

Net worth: $601,498 (this is a new all time high for me)

WHAT’S NEXT

Reviewing all these numbers helps me understand some of my hesitation and reluctance to step away from my past investing practices.  Things don’t feel broke.

Adding to this hesitation are concerns for those who rely upon me.  I have a wife and two kids that are depending upon the course I chart.

What if I make a misstep in this experiment?

What if I lose it all trying something new?

Failure is not an option.

If I’m going to pull back on the stick the right amount, I have some more work to do in order to determine how much “pull” is enough.

But I’m committed to this and have been laying the ground work necessary to begin shifting my investment portfolio from mutual funds to a concentrated selection of individual stocks so that I can take this baby vertical.

Keep your eyes on the sky.

I’ll be the one with my hair on fire.

Tail End Charlie

Besides learning a lot about military aviation – a subject that unashamedly excites me – Jeff is always fun to read; clear, concise and informative … that’s not a recomendation, just an acknowledgement

The ‘obvious’ seems to be: start a flying school … but, Jeff – and, you – may have other ideas. Also, work backwards: how big must a flying school be in order to generate Jeff’s required annual compound growth rate? My suspicion is that Jeff – or we – would need to come up with another angle entirely … a lot of capital … or, a unique twist: anything to make Jeff’s ‘small’ business grow BIG …

… quick!

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I have to start with an explanation, give a couple of excuses, then get down to business.  You’re probably wondering “What the heck does Tail End Charlie mean?”  It’s a term relevant to military aviation and applicable to my situation of bringing up the rear on the growth engine exercise.

As best I can determine, the term has it’s origins during World War II and was used to refer to the poor sap who was the rear gunner in a bomber or the man guarding the rear of a patrol.  It has parallels in Naval Aviation where I’ve used it in reference to the last aircraft in formation or the last aircraft to land on the aircraft carrier.

The term meshes nicely with the seaboard landing scenario on an aircraft carrier.  For Naval Aviators, the term “Charlie” means that Mom (the boat) is ready to recover airplanes.  In Naval Aviation slang “Charlie” stems from the fact that Mom usually has to make a big sweeping turn into the wind so she can recover aircraft.  From the sky, the boat’s wake looks like a big letter “C,” or “Charlie” in the military phonetic alphabet.  If you’re “Tail End Charlie,” you’re the last to land.

So how did I end up as Tail End Charlie on the growth engine exercise, guarding the rear of the formation, paying homage to my fellow MITs and learning from their experiences?  A bunch of excuses is how.  I’ll save you the explanation only to say that everything else I’ve devoted my attention to this past month promises to increase my Net Worth.  So my heart was in the right place.  But I’m Tail End Charlie nonetheless.

Here’s my Diane’s Table…

When I step back and look at my table, several things jump out at me.  Flying, Teaching, Family and Leading/Team Building seem to be very prominent items.  Also heavily weighted are Reading/Writing, Financial Matters, Home Improvements and Making Money Online.

I’ll save you the time counting columns on my Diane’s Table.

The following items are consistent across four columns:

• Flying and Airplanes
• Teaching / Instructing / Learning / Mentoring
• Family

The following items are consistent across three columns:

• Leading / Team Building / Working with People
• Reading / Writing
• Financial Planning / Money Management / Investing
• Home Improvements
• Making Money Online

The Following items are consistent across two columns:

• Cars
• Boating
• Computers

I have some ideas as to what all this tells me but I’ll save that for later in the dialogue that will hopefully follow below.  I don’t want to influence the discussion before the brainstorming and feedback that I hope will come from the rest of the MIT team.  Just remember my RCGR is 38% and I plan to stretch a bit and use Real Estate, Stocks, and a Small Business to overshoot my Number.

Until then, Tail End Charlie is “rollin in the groove” with the hook down, flaps full, three down and locked, ready to come aboard.