TO A BETTER FUTURE AND BEYOND
Sustainability has been the flavor of the month for what feels like the last five years. It’s been a topic not far away from many people’s minds, especially now in light of the recent COP26 that has been making headlines around the world. It seems every man, woman, and their dog is talking about sustainability for the planet and sustainability in business.
This makes sense; to make any kind of serious change, or achieve a common goal, everyone needs to understand their part and play their role within the team.
We’ve listened to global leaders and business magnates alike discuss the importance of sustainability, as they try to determine the long term solutions to some of the problems we’re facing today. These solutions, however, will only be achieved if everyone plays their part.
This got me thinking back to my days playing high school and college football. Those of you who know me - or who have read my first blog post, will know this is one of my three areas of expertise (the others being Finance and Food). As a team, we shared the goal of winning a championship. Some of us needed to get stronger, others faster, but this served our main purpose - bringing home the championship. This is what makes success not only achievable but sustainable too.
I had a very strong arm growing up playing sports. As a freshman in high school, I could throw a baseball 80 MPH+, and a football 40 yards+ with a tight spiral. However, at 6’ 2”, and with my considerable frame I was put to better use for the team playing offensive line (you know, those guys that block and protect in the trenches that nobody knows what their names are, yet are the most important part of the offense...but, I digress). Playing this position meant I had to upskill and build my knowledge of a new role to contribute to fulfilling our team’s goal. If I was out of place or I wasn’t working alongside my teammates, the play we were trying to run would simply fall apart. We all had to be on the same page, running our individual responsibilities for each play, while ensuring we were keeping each other accountable to the mission as a whole.
The world at large, for the most part anyway, seems to be trying to do much the same thing. Trying to gain knowledge about the problem, their roles, and the part they have to play in sustainability.
So, my question is, why don’t we do this at home with our personal finances? After all, it's more difficult to solve global issues, if we can’t solve them locally first.
Short Term Focus, Long Term Problems
We talk about long term solutions for energy, for business, and for the planet - but why not our family? In my opinion, it's because many of us are too caught up in short term, day-to-day problems. We’re thinking about making our mortgage payment next week or planning on paying off that credit card next month. We’re worried about next months bills, expenses, and debts - not next decade’s. As a society we are stuck in a days > decades mindset, while we should be in a decades > days mindset!
This begs the question; How can we focus on the future when there is so much that requires our attention immediately?
This is why we seek the ever-elusive ‘get rich quick’ fix.
When people hear I work in finance, one of the first things they’ll ask me is “What’s the next great investment?” or “What can I put my money into that will get me rich now?”.
There are three problems with this mentality.
Firstly, if these things did in fact exist, I would’ve already taken full advantage of them to park myself and my family very comfortably on the sunniest island I could find. So, I wouldn’t even be around for you to ask me these questions. As I often quip with people, if someone tells you something that is too good to be true, it often is, and you should run the other way.
Second of all, these things frankly don’t exist in abundance. And, when they do exist in rare one-off situations, I have found that they are so speculative at the infancy stage, no one is willing to invest enough into them for it to make a material difference in their life if the investment pans out.
Thirdly, and most importantly, these aren’t actual solutions to your problems. A short term solution is like putting a small bandage on a large wound. You can cover the cut but you haven’t stopped the bleeding. Similar to if my football team put me at quarterback vs. offensive line. I would have felt great, but my team as a whole would have suffered.
So what is the solution here that we all actually need, but don’t even know to ask for? Financial Sustainability.
Tough Conversations
This is a term some of you may have heard, but don’t entirely understand. Financial Sustainability is getting your families plans, goals, investments, and behavior to work in harmony.
If these goals are aligned, the offensive line of your financial future can move forward and push your team closer to that touchdown of achievement. If the line isn’t moving as one, you may find yourself halted, or even taking steps back.
It’s more than simply having goals though. These goals need to be aligned too. Like the one player who wants to get stronger, and the other looking to get faster, who both still work for the team’s objective.
When was the last time you and your partner had an honest conversation about your finances? I don’t mean the chat where you investigate the latest credit card bill. I mean a chat about your financial goals for the family?
Culturally, we’re told it’s rude to talk about money[1]. You’ve probably heard something along the lines of “It’s not polite to ask someone how much they earn”. But what if we told you that financial problems were one of the leading causes of divorce? Some studies suggest that over a third of all marriages end because of these issues[2].
If you care about the future of your family, it’s time to open up and communicate. Family is everything. This is why, at the end of the day, these are the people we’re most accountable to for many things, including our personal finances.
But how do these conversations build a sustainable financial future?
The Long Game
With Thanksgiving upon us, I’m sure that like me, you’re madly getting everything prepared for the day’s festivities. You ordered ingredients in advance to ensure you don’t miss out on the good stuff, researching the latest turkey cooking craze (while frying a turkey seems to be en vogue, have you ever tried smoking a turkey!?!?), getting enough drinks and chairs, and ensuring your home is clean, tidy, and nicely decorated.
This is followed by the time-honored tradition of going around the table and sharing what it is we’re most thankful for. What if we took a similar approach in discussing our finances? So instead of enjoying one great meal, we could have an amazing Thanksgiving for generations to come?
Instead of hustling, scrimping, and saving for one great day together, what if you could set up your family's financial future for the long term?
How is this possible? Well, with the right wealth advice, of course.
SECURING YOUR FAMILY'S FINANCIAL SUSTAINABILITY
In my opinion, the key to financial sustainability is made up of three components:
Financial Planning
Investments Tied to Long-Term Goals
Behavioral Coaching
When these elements work together, they create the ecosystem required for you to set up, and maintain the success of your family's sustainable financial future for the long term.
Financial Planning
Think of your family like a business. You have a CEO (I’ll leave it up to you and your partner to decide who is), who has the vision and calls the shots. The other is probably the COO, ensuring the operations run soundly. Every strong business, however, needs a CFO too. So, who is yours? Who is the steward of the ship, who optimizes your balance sheet, who oversees cash flow, and who makes proper long-term capital allocation decisions?
No matter who plays these roles, in my opinion, the two of you need to work together or with someone to structure your balances, debts, assets, and cash flow - instead of simply watching your income and paying bills.
Without proper financial planning, it's very difficult to manage the total picture of your household properly, which is a recipe for shaky finances.
So the first step is creating a strong financial plan that is aligned with your family's goals. Personally speaking, my wife and I have discussed our financial goals for a long time, so we’re able to support each other in achieving them. How can you expect your spouse to support you if they don’t know what they’re cheering for?
Investments Tied to Long-Term Goals
As I mentioned earlier, everyone’s looking for the next ‘best’ investment. What they aren’t looking for, however, is the best investment for their goals. One investment strategy can create gains for one person and strains for another. It’s not about the best investment, but the best investments for you. It’s your money after all - it should be working to your own goals, not someone else’s right?
Behavioral Coaching
Even the best-laid plans and investments can be undercut by terrible behavior. This is a crucial step that many people overlook when it comes to their financial sustainability.
This coaching aims to help you take the emotions out of financial decisions. To see past the now and consider the bigger picture. Whenever something is ours, emotions become attached to it. As humans, our ancestral brain makes us all victims of our own emotions. Even with the best intentions, our feelings can cloud our better judgement. I’ve seen countless clients, colleagues, and friends try to justify hanging onto a bad investment or make poor (pun intended) decisions because of how they feel about something - despite clear evidence to the contrary. Why? Because they remain emotionally tied to the situation.
This is why you need an objective third party, who isn’t privy to the same emotions as you. Someone who has your best interests at heart that can tell when it’s time to make the tough call. Someone who has walked the path before you and can steer you in the right direction.
The Season of Giving
Clients have often referred to me as their psychologist/marital counsellor (of course, I am not qualified to do this, except pure listening and objective advice) because, like me, the decisions they’re making aren’t about money, they’re about family. Sometimes, we’re just a little too close to see the bigger picture.
The issue of sustainability is the same - whether it’s in business or your finances at home. Financial Sustainability is the action taken for the advancement and security of your family for generations to come. An action they will give thanks for every year as they sit around the dining room table, reigniting and reminiscing with each other.
So, will you give your family, both present and future, the chance of a sustainable financial future?
Take the first step towards financial sustainability with Julius Wealth Advisors today.
References
Why so many Americans don’t talk about money - Joe Pinsker, The Atlantic, 2020.
These are the 11 most common reasons people get divorced, ranked - Gabbie Shaw, Insider, 2019.
Fight or Flight? Why Our Caveman Brains Keep Getting Confused - Sara Novak, Discover Magazine, 2021
Disclosures:
This piece contains general information that is not suitable for everyone and was prepared for informational purposes only. Nothing contained herein should be construed as a solicitation to buy or sell any security or as an offer to provide investment advice. The information contained herein has been obtained from sources believed to be reliable, but the accuracy of the information cannot be guaranteed. Past performance does not guarantee any future results. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. For additional information about Julius Wealth Advisors, including its services and fees, contact us or visit adviserinfo.sec.gov.