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Tuesday, May 1, 2018

The Three Wealth Building Assets

As advisors, we have the opportunity to meet people of all walks of life at different points in their journey to prosperity. One of the biggest misconceptions is that “Wealth” is a number on the balance sheet. But what if this net worth was really the output of other, less obvious resources?
Financial wealth does come from somewhere. It comes from the value we provide to the world (our Human Assets), to whom we provide that value (Social Assets), and by making good financial decisions along the way (Capital Assets).  Let’s shed some additional light on these different resources.

Human Assets

We will start with Human Assets.  Be forewarned, they are by far the most “touchy-feely.”  Human Assets include all of our knowledge, skills, and abilities – all the value that we have to offer as individual human beings. Human Assets cannot be taken away, nor given. They belong solely to the individual.
Athletes exemplify Human Assets. Although there are many other factors that impact the career of a track sprinter, at the end of the day the race is won or lost on the skill, ability and determination of the individual.
The development and deployment of Human Assets requires self-awareness and self-discipline. Knowing our past, understanding our strengths and weaknesses, and being able to communicate our values, are key elements in growth.
Why bother? Human Assets are often what determine the trajectory we take personally and professionally. Without self-awareness, building strong relationships (Social Assets) is more difficult. Knowing our strengths, weaknesses and passions help us bring our authentic selves to each of our relationships.
Growing our Human Assets helps us find friends and advocates that share our values. It helps us guide our efforts towards our professional sweet spots where our strengths overlap our motivations.

Social Assets

Social Assets are where we find both opportunities and significance. These are the quality and the quantity of the meaningful relationships we acquire and maintain over the course of our lives. Relationships, by definition, cannot belong to just one individual; they are shared. They ebb and flow.
The career success of politicians (for better or for worse) hinges on their Social Assets. No one can “achieve” elected office without the support of the electorate.
There are two environments where Social Assets are acquired and then deepened.
The Inner Circle. The key feature of the Inner Circle is providing wisdom and support. These are relationships where we can be vulnerable, share our doubts, misgivings, frustrations, and fears. These are the people we give permission to challenge us, hold us accountable, and to open our eyes to blind spots.
The Network. Our Network is the sum of all the various relationships we’ve made over the course of our lives. They are the people that know us, or know of us. Success comes from engaging both our strong ties for their support, and also exploring our weaker ties for new opportunities.
Social Assets are our access to wisdom, judgement, experience, and support outside ourselves. These relationships provide the deepest sources of significance and opportunity in our lives.

Capital Assets

Capital Assets are the traditional measure of “wealth”. These are the various things that we own or possess. They can be businesses, currency, contracts, commodities, and the list goes on. At a very basic level, these are external resources that we can control. For the purpose of our conversation, we will stick to financial assets that can be measured in dollars and cents.
At the risk of being redundant, venture capitalists are an example of exaggerated Capital Assets. These individuals use their wealth to purchase and own other companies. The professional success of a venture capitalist depends on the performance of the capital deployed.
There are too many topics in this category to give full attention to, so we will limit our discussion to the two primary concepts in broadening your Capital Assets: Creation and Utilization.
Creation is the value that you bring the world. It is the translation of your Human Assets (your labor) into Capital Assets. To responsibly develop Capital Assets with integrity, creation of value must be the motivation, opposed to consumption. We will spend time covering how we measure the overall creation of value by using a personal income statement.
Utilization describes how we employ the Capital Assets that we have generated over time. Where accumulation is backward-looking and involves trying to do well, by projecting the past into the future, Utilization is forward looking, anticipating opportunities to create additional value. We keep track of how our Capital Assets are being utilized by the personal balance sheet. 
Capital Assets are the easiest assets to quantify, but also the easiest to lose track of their meaning. Capital Assets are generated by the creation of value, and maintained through Utilization.

Two Cautions

Human, Social, and Capital Assets are resources, and only resources. They are means to cross the river between where we are, and where we want to be.
My first caution to you is never to mistake the means for ends. Human Assets are not ends, nor are Social Assets. And as much as the world would have you believe otherwise, neither are Capital Assets. When we lose sight of our values, our principles, or our faith, we start chasing the wrong things.
The second caution is that the outcomes of developing assets take on the character of the individual. The benefit or loss to society depends on who is using their resources and to what end.
My sincerest wish is to create a means of helping many people make the world a brighter place.

Geoffrey Sadek, CFP®

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Tuesday, March 20, 2018

Is It Luck?

    In light of the recent celebration of Saint Patrick’s Day, it seems all too fitting to acknowledge the ever-recognized term of “luck.” When it comes to prosperity or even hardship it seems this idea of good fortune, as a result of chance, is often credited for our circumstances.

    Looking at finances specifically (because that’s the industry we’re in), it’s not too often we can count on finding that one pot of gold. Financial success is work. It involves planning, lifestyle adjustments, goal-setting, self-control, and likely the help of a professional. Whether “luck” has anything to do with it, I suppose it depends who you ask. What I do know is, those who most of us would consider ‘prosperous’ or of ‘good fortune,’ are those who have successfully adhered to plans that lead them to a prosperous future. In the same way, those who don’t plan or prepare for their lives ahead, will often face unanticipated hardship.

    It’s also very important to note that you don’t have to be wealthy to be prosperous. For some, this might mean a tweak in your definition. If you look at the origin of the word “prosperous,” you’ll learn that it means doing well, and that is a very vague definition that can have a lot of different meaning for all of us. One of the best stories I’ve heard was about a friend who traveled to an impoverished country and was completely shaken and empowered by the JOY and happiness of the people she met.

    From my perspective, “luck” has nothing to do with it. You either achieve prosperity with hard work and dedication, or for you, it’s a condition of your heart and mind. I suppose in that regard, some might say we’re all lucky.

Crystal Schneider, Client Relations Manager

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Thursday, February 1, 2018

Financial Goals for Real People

“I want to retire” is not a goal

Just as “leadership” has become a buzzword in corporate management, so too has the concept of “financial goal-setting” in finance. Seeing the way some firms market themselves, there is a lot of misinformation on what makes a good financial goal.

Simply saying, “I want to retire,” doesn’t meet the criteria of a good financial goal. Chances are, you can retire today if you so desire, but the income you would be forced to live on may not meet your minimum standard of living. How can we improve this goal? By adding information, we can specify our minimum requirements. “I want to retire in 10 years with a monthly income of $8,000 in today’s dollars.” This gives us a far better idea on when we’ve crossed the finish line.

Components of a good retirement goal

·         Specific – Identify the dollar amount you need as income
·         Measurable – you can gauge whether you’ve hit your goal by using dollars to measure
·         Attainable –your goal should reflect your time horizon and your risk tolerance
·         Relevant – your goal should carry personal weight to you
·         Time bound – you should have a deadline to measure your progress

Retirement isn’t the only worthy goal

Once they have set a retirement goal, many couple’s think they are finished goal setting, but retirement isn’t the only goal worthy of our efforts. Many people don’t realize that there are several financial goals worth setting. Below are some often forgotten goals:

·         Providing assistance for children or grandchildren to go to college or private school.
·         Leaving an inheritance for children.
·         Paying off debts (student loans, car loans, mortgages).
·         Generating passive income from investments.
·         Planning a large purchase (home, cottage, business).

There are as many other worthy financial goals as there are people who set them. The challenge is how to make consistent meaningful progress towards them. Your financial advisor should be your chief accountability partner in pursuing these objectives. If you would like to explore setting financial goals for yourself, or staying on target, we can help.

Geoffrey Sadek, CFP®

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.


Wednesday, January 17, 2018

Writing It Down

"I want to lose some weight."  "I want to eat better."  "I want to take more time off."  "I want to get out of debt."  These are just a few of the many phrases I hear once the clock strikes midnight on January 1 each and every year.  And what’s wrong with these statements?  Well, absolutely nothing if a person wants to stay the same.  Because, despite the thought of desired improvement, these statements stay just that-thoughts-until they are put into action.

So how do we turn a thought into reality?  First, it starts by making specific goals. "I am going to go to the gym 4 days a week."  "I am going to eat 1800 calories or less a day."  "I am using all of my allotted vacation time this year."  "I am going to pay off my student loans in 2018."  These are specific goals that are more likely to be accomplished.  

Secondly, the goals need to be written down in a place that can be seen each and every day.  Writing down goals and stuffing them into a drawer to never be seen again will probably not help.  Write them on a note card and put them on your bathroom mirror, in your car, on your desk...what better way to hold yourself accountable than to have to read the exciting goals you wanted to achieve at the beginning of the year?

As you accomplish each goal put a little check mark by it.  You would be amazed by the happiness felt when you glance at your goal list and notice a few check marks.  I would hazard a guess that seeing a couple of check marks might just motivate you that much more to strive to complete another agenda item or two.  Notice a pattern here?

The same strategy can work when it comes to achieving financial goals.  "I want to retire at 60." "I want to have no debt other than my house." "I want to leave a legacy to my grand kids."  These goals don’t happen overnight.  It must start with paying off a specific debt or two this year, maxing out a Roth or 401k this year, and building on that momentum next year.  The best way to get on track financially is to meet with your financial advisor to comprise a financial plan. Then, meet with your advisor, at least annually, to make sure you’re on track and to hold yourself accountable.  Before you know it, you’ll be on your way toward achieving your goals!

Ryan P. Smith, ChFC®, CASL™, CFP®, AEP®

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Wednesday, November 29, 2017

The Most Wonderful Time of the Year

Parties, shopping, cookies, visits with relatives, travel, decorating, more cookies, giving gifts, receiving gifts, and more cookies makes the holidays a truly wonderful time.  Then there’s paying the bills, too much “togetherness”, too little “togetherness”, poor sleep, year-end deadlines, shopping, and travel.  All that can make the holidays not so wonderful, stressful even.
Holiday stress is definitely a thing.  From a financial perspective, not only does our holiday spending cause stress but, according to a recent survey by credit karma, stress causes many of us to spend more.  This is a dangerous cycle.
A quick Google search will find pages and pages of articles with tips on minimizing your holiday financial stress.  Most of them hit on the obvious:  Make a budget, start saving early in the year, don’t use credit cards, start shopping earlier, etc.  While helpful, these articles often neglect the big picture.
Here are my suggestions:
·         Determine why you celebrate the holidays.  Is it about the gifts and spending? Or are there other important priorities?  Discuss this with your family to get everyone on the same page.  De-emphasize the all-day gift opening sessions.
·         Make it about experiences rather than things.  Volunteer as a group or family to serve at food banks or for projects that help others.  Create lifelong meaning and memories.
·         “Adopt” a family in need.  Instead of buying things for each other that you don’t need, share your blessings with others.
A little reflection and communication can go a long way to making the holidays more enjoyable, and you may even find that others in the family have the same ideas. 

Merry Christmas, Happy Holidays, and Happy New Year!

A. Christopher Engle, LUTCF®, CFP®, ChFC®
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

Friday, October 27, 2017

Sometimes You Just Need to Refresh

We’ve all needed to do it at one point or another. Whether it’s been physical exhaustion in need of a nice spa treatment, a wardrobe that no longer fits our lifestyle, or a pesky webpage that’s trying our patience, it’s easy to understand the significance of taking a moment to refresh. One area though, that we may neglect to consider needing a revival, is our financial plan; but just like our wardrobe, our financial plan can become stale, outdated, and irrelevant. For this reason, it’s important to periodically evaluate our financial plan to determine if it still makes sense with our evolving goals and circumstances or if it’s time to hit the refresh button.

Because it’s no secret that money dictates most everything we do, it’s important to consider what it is we want or need in order to create an applicable plan. Fortunately, there are professionals that can help navigate this process who are knowledgeable in not only the scenarios we ought to consider, but also the behavior of financial investments.

A couple of steps that can be taken to assess the efficacy of your financial plan are 1) establish a rapport with a financial advisor who measures their success by yours and 2) engage in a rhythmic personal assessment of your goals and circumstances.

You know yourself best, so when it comes to something as personal as lifelong goals, you are the greatest judge in the matter. Pair your assessment with the help of a professional, and even the goals that are really more like dreams, become realistic. So even if your hairdo matches your parents’ yearbook picture, don’t let your goals go unaccomplished because you failed to plan for their accomplishment.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.


Wednesday, September 27, 2017

Financial Resilience: Part 3 of 3

Resilience (noun): the capacity to recover quickly from difficulties; toughness.

In the previous two parts of this Series, I outlined various facets of Individual and Family financial resilience. This third and final installment will close the loop by illustrating how these households organize and interact to build Community Resilience.

At this point, the effects of globalization and financialization are apparent in many of the smaller and more rural communities. Over the course of the past century, capital has become evermore consolidated in cities through large financial institutions, major national corporations, and the effects of compounding interest.

As a result, local economies have become increasingly reflective of national economy. As evidenced during the financial crisis of 2008, a major market event can have a dramatic impact on even the smallest businesses.

What then can we do as individuals and families to help protect the communities in which we live?
In his book Local Dollars, Local Sense, Michael Shuman outlines three important rules to support the prosperity of a local economy:
  1. Maximize the percentage of jobs in your local community that exist in businesses that are locally owned. 
  2. Maximize the diversity of the businesses in your community, so that your economy is as self-reliant and as resilient as possible.
  3. Prioritize spreading and replicating local business models with outstanding labor and environmental practices.
The bottom line is that if we want a thriving community, we must help build one with our finances. Buying local products and produce, supporting local existing businesses, and encouraging community entrepreneurs can be marginally more expensive, but the benefits to the community cannot be ignored.

Being able to provide local sources of food, education, transportation, and manufacturing helps protect communities from national financial challenges.

Here are some resources on building a local, sustainable economy in Grand Rapids:
  1. Local Dollars, Local Sense by Michael Shuman
  2. Locavesting by Amy Cortes
  3. Slow Money by Woody Tashe
  4. Small is Beautiful by E.F. Schumacher
Geoffrey Sadek, CFP®

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.