4 Financial Planning Lessons from Extreme Ownership

I recently reread one of my favorite books of all time: Extreme Ownership by Jocko Willink and Leif Babin. Jocko and Babin are both former Navy SEALS who use their training to teach business leaders the lessons they learned on leadership. The concepts are incredibly simple and can apply to almost every aspect of your life. As I was reading, I couldn’t help but think about how it related back to tackling financial planning goals for millennials.

Simple

It’s easy to try and put together a complex financial plan that tackles all of the issues and covers a wide range of variables. The problem is that trying to address all of the issues at once increases the risks involved and potential for the plan to be derailed. At Assist FP, we provide clients with a one page financial plan. Keep it simple. 

A good practice is to break down a complex goal into multiple simple steps that are easily implemented. For example, in order to increase your savings rate to 20% of your income, break it down into multiple steps such as:

• Contribute the minimum amount to your employer retirement plan in order to get the employer match

• Max out a Roth IRA

• Open a taxable account

It would be overwhelming to try and accomplish all of the above at the same time unless you have significant free cash flow. The better option is to keep it simple and start with one option and automate it.

As you accomplish one of the simple steps, you can then move on to the next and will gain momentum towards achieving the ultimate goal. This ties directly into the next lesson.

Prioritize and Execute

As a millennial, there are a lot of goals that you’re working towards in the future. Some are short term goals such as creating an emergency fund, paying off debt, buying a house, etc. and some are more long term such as starting a business, saving for college, and retirement.

It can be daunting and the inability to prioritize will likely cause you to not give any of the goals the proper attention they need. Determine your goals and then categorize them into short term and long term goals. 

The short term goals might be easier to accomplish in one simple step but the long term goals should be prioritized and then broken down into multiple parts.

For example, you won’t reach the goal of having X amount of dollars to retire for possibly 20+ years, but you could break that down into multiple simple steps such as saving X% of income annually. 

Don’t try to tackle all of the issues at once. Tackle one, and move to the next and the progress will compound.

Cover and Move

In the SEALS, Jocko and Babin describe the effective military tactic of “cover and move”. This is essentially where one team is on watch ready to respond to an attack (“cover”) as the other teams move a short distance, and then they switch positions slowly moving back and forth until they reach their destination safely.

You must be thinking how on earth does this apply to financial planning? We don’t have to worry about getting shot at in Iraq.

You’re right. But there are obstacles everywhere waiting to blow up your plan. A job loss, car breaks down, unexpected medical expenses, etc. 

Your emergency fund is your “cover and move”. This gives you the ability to be flexible and avoid financial catastrophes. Build a sufficient emergency fund of 3-6 months worth of living expenses in a boring savings account. 

An emergency fund is like insurance, no one really thinks they need it until they do.

Extreme Ownership

At the end of the day, things will happen. No plan or human is perfect. You will make mistakes and you will have bad luck that seems out of your control. Blaming others won’t get you anywhere though. 

Own it. All of it. 

Once you adopt the extreme ownership mindset that you are responsible for everything that happens then it will be much easier to hold yourself accountable, learn from the situation, and move forward!

Are you interested in learning more about Extreme Ownership? Check out this Ted X video of Jocko Willink discussing the mentality.

Disclaimer: This blog shouldn’t be considered advice, or recommendations. If you have questions pertaining to your individual situation you should consult your financial advisor.