Where do you want to live? Today, people move or get transferred all over the world. And many factors can put constraints on your living situation – health reasons, peace of mind, economic conditions.
We’ve already discussed the importance of establishing a career that’s aligned with your passion. This month we will discuss how your family can impact your financial plan.
Trying to create definite plans can be tricky here. Sometimes having children can be difficult and sometimes they just show up. However, I think you must have a discussion concerning your wants.
Ambition ignites planning and in my time as a wealth manager, I’ve learned there are four main components to consider when creating a wealth plan.
In this series, we’re going to discuss these four components and how they permeate your wealth plan at every life stage.
The four components to every wealth plan are:
Last month, we discussed the Big Decision phase of retirement. The main takeaway was to have a plan, but make it a flexible one. This is easier to do in the early days of retirement, but as we age, we face two new phases in our retirement. The first of these is the Navigating Longevity Phase, and just like every other phase in retirement, there is an emotional and an economic impact.
Last month we discussed the “honeymoon” phase of your retirement. This is when you start living out the retirement of your dreams. However, you will probably grow sick of golfing or sleeping-in every day, and reach a point when you face a big decision. Any big decision comes with big emotional and economic impact.
A research group from MIT called The AgeLab divides the average human life cycle into 4 different stages. The first three are the learning, growing, and maturing phases. Interestingly, they call the retirement stage the “exploring” stage. This stage lasts 8000 days. That means we have 8000 days of exploring ahead of us. To break things down even further, we can look at retirement in four other stages…
As I enter the “senior years” of life – at least that’s what I’m told – it’s great to have a partner for the last 40-some years to share the ride. It’s gotten so bad we finish each other’s sentences. It thrilled me to see a 2015 Pew study reporting that divorce rates for younger people are going down.
Unfortunately, the divorce rate for the age 50-and-older crowd is going up. In fact, the same Pew study claims the “gray” divorce rate has nearly doubled in the past 25 years.
Last month we established there are two types of economics – Financial and Behavioral. There are also 12 silos of wealth - one that deals with financial economics and 11 that deal with behavioral economics. Each of these silos of wealth is important in their own respect. We discussed the first four silos last month – Financial, Health, Family, and Moral Wealth. These next four silos deal with how we interact with society.
I recently read a book called "Legacy" by Dr. Richard J. Orlando. Orlando specializes in helping families manage their wealth and its transition. According to Orlando, there are many different types of wealth and each one is important when discussing financial wealth and family matters. This made me think about all the different people I have met, the unique abilities they possess, and how these unique abilities demonstrate our "wealth."
The unforeseen events in our lives can give us uneasiness. They come in two different packages – exciting ones and stressful ones.
The stressful ones can be:
Loss of a spouse or family member
Loss of a business partner or key employee
Loss of a job
Sickness or an injury
A large, negative market correction
The exciting ones can be:
A child who was not planned (this can also be stressful)
A business opportunity
A “dream job” opportunity
Many of the goals I hear are calm, mundane, and yes, somewhat boring. This is because people keep their “comfort zone” in the “safety zone.” I recommend the book “The Icarus Deception” by Seth Godin. Icarus was warned not to fly too close to the sun for fear that his wax wings would melt, but the part we don’t hear about is that. . . .
Well, we’ve almost made it through the first quarter of 2018. Hopefully, you have spent time developing a "decision-making process” that does not go to a default button established by someone else. Rather, you’ve designed a process that will help you make good decisions moving forward in your life. Hopefully, you have also developed a few "Dreams" that can be measured in nature and economics.
I saw some interesting data recently....
Now that you have established your OWN “default buttons,” it is time to use them to achieve your goals. Let’s start by establishing goals. Setting very specific goals is vital. They must be specific in nature and economics. When you create a specific goal, your mind will take over and provide the methodology to attain it. Adding economic goals will help bring it to reality – like when you save every month to attain it. A wise businessman told me, “if you can’t measure it, you can’t manage it. If you can’t manage it, you can’t monetize it. If you can’t monetize it, you can’t give it momentum.”
Always remember the 4 Ms...
Welcome to 2018. One of our senior clients said, “if I knew I was going to live this long, I would have taken better care of myself.” I believe he was speaking about his physical well-being, as his financial well-being is in great health. Thomas Edison said if we do everything we are capable of doing we would amaze ourselves. Another wise man said to know and not do is not knowing. If we truly can amaze ourselves, why do we regularly hit the “default button?”
Now that you have the correct "who" and the correct "what," you must make sure you can follow through on The Plan. The first issue all parties need to conclude is that "potholes and speed bumps" will occur. There will be business disruptions, only this time you are not steering the boat. But whether you like it or not, you still have an interest.
The business is still your baby and you want it to succeed.You need the payment from the buyout – to some degree. The Wealth Manager's work shows up here.
What does a Wealth Planner do?
Succession planning can be a difficult subject to broach with many business owners.
We have worked with many companies and their transition to a new "Boss.” Unfortunately, it doesn't usually have the time needed to be done correctly because the current boss does not want to talk about it. According to my wife, it is like trying to get me to go to the Emergency Room – I almost need to be seeing the white light in the tunnel. For many business owners, succession planning can feel a lot like this.
We have found there are four possible prospects for a succession plan...