We believe in helping to create Financially Empowered Families through education and coaching. A Financially Empowered Family is one who enjoys a high degree of financial certainty because they have reduced their risks to the lowest levels possible and they make sure to use every dollar to its highest and best use to create the maximum amount of benefit for their use and enjoyment.
It is becoming increasingly apparent that the economic and financial future we are living into will present us with some very unique challenges. It is now more important than ever before, that we implement financial strategies that will create the highest level of financial certainty.
In order to create financial certainty in uncertain economic times, it becomes necessary to re-evaluate and reconsider many of our traditional financial planning thought processes that have not serve us very well in the past. For example, over the past 30 years, traditional financial planning has suggested that “RISK” was a perfectly acceptable part of a long term financial plan. The most commonly acceptable risk was the Stock Market in the form of mutual fund shares. The idea behind mutual funds was to spread the “RISK” over a lot companies stocks that made up the mutual fund shares.
Consider that if you were in your 40’s or 50’s in 1999 you were extremely confident in your prospects for a great retirement. We were just finishing a decade of incredible stock market growth. But just three short years later your retirement accounts had suffered losses of 30%, 40% even 50%. A few years later you would suffer another significant loss in your retirement account that you still haven’t fully recovered from. The point is that most people had no idea the “ACCEPTABLE RISK” they were taking could destroy their retirement plans.
Traditional financial planning also uses a lot of assumptions that are turning out to be very unreliable. It is very common to assume that you are going to be in a lower tax bracket when you retire. Right from the beginning this assumption should be suspect. If you retire in a lower tax bracket it just might mean that you aren’t able to enjoy your retirement at the level you would like because you’re poor! The reality is that our Government needs money to pay its bills and the financial obligations and promises it has made to us in the form of entitlements such as Social Security, Medicare, etc. and when Governments need money they raise taxes! It is entirely possible that when you retire you will be in a higher tax bracket than you are today. But even if that is not the case, there are other assumptions that are made in the traditional financial planning process that we cannot rely on. For example, a rate of return. What if you planned on getting 10% return per year on your retirement account but only got 6%. What if you only earned a little over 5% which is what the Stock Market return was during the 10 year period from 2000-2009. More on rates of return in a minute.
Another assumption we make is that inflation will remain low. Very few people remember the early 1980’s when we experienced double digit inflation for a number of years and it appears that our Government and the Federal Reserve are willing to tempt fate again by printing money to bail out corporate America and stimulate the economy. The long term effect of these actions will be to cause inflation to rise in the years ahead.
By now you may be asking- what does all this have to do with creating financial certainty- it has everything to do with it!
Creating financial certainty requires developing and implementing strategies that will work under all financial and economic conditions. It suggests a course of action that reduces risk to the lowest level possible while at the same time designing financial back-up plans and exit strategies for when circumstances change. The process of creating certainty builds wealth without fear of loss, where financial growth is consistent and the outcome is predictable.
The financial certainty process involves identifying and then avoiding, reducing, or eliminating as many of the wealth transfers in your life as possible. It is a process that is more about how you invest and save than about where you put your money or what financial products you use. The process of creating financial certainty will ultimately provide you with the greatest amount of wealth with the least amount of risk while at the same time providing the highest degree of liquidity, use, control and enjoyment of that wealth.