Non Financial Aspects of Estate Planning

2016-03-09 15.23.39A friend asked me to¬†give this talk to his firm, but I prefer to write short articles. ūüėČ

When families talk about estate planning the discussion can center around cash flow, assets and tax minimization. While those topics need to be sorted, dollar-centric living can lead to regret.

If¬†you apply last week’s tips about family leadership, you might¬†discover certain realities about financial wealth.

2016-03-16 13.56.23Namely…

The highest use of¬†an asset lies in its capacity to enable better choices…

  • flexibility to allocate time towards shared experiences
  • the ability to control one’s schedule
  • the opportunity to tag along when other people are doing what they enjoy
  • health in the context¬†of body, mind and spirit

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2016-03-13 21.51.50Cash flow without education, connection and meaning can be a negative. Examples are the challenges faced by lottery winners, professional athletes and young, highly paid professionals.

With cash flow, I would go further and point out that excess family cash flow will ultimately be consumed by the least responsible adults in a family system.

You might tell yourself that you are “doing it for the kids” but the money ends up being blown¬†by someone’s aunt or uncle.

2016-03-11 20.04.44-1What to do?

  • In your lifetime, use¬†money to acquire time.
  • Share time with people you wish to influence with your values. Be the brand.
  • Remember that it’s better to¬†earn, and spend, our own way in life. It’s what you did.
  • Have a bias towards “assets used for shared experiences,” rather than cash flow.

Ask the question, How do I wish to be remembered?

Be that person, today.

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2016-03-10 08.52.21Shared experiences, both positive and negative, bridge generations across time.

As a child, I had¬†four grandparents and three great-grandparents. Of my childhood elders,¬†only one made the transition into my children’s consciousness. The elder that bridged across did so because¬†my daughter and I were involved in her end of life care.

Love, not money, is what travels across time.

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Two Gifts

2016-01-09 19.05.25For a number of years, I’ve chosen one thing and constantly reminded myself that I have far more than I need of this item.

If you’ve heard me talk about my experiences with finance, or sport, one¬†theme that I emphasize is a feeling that I was¬†far more successful¬†than I expected to be.

Another example might be talking about living with preschoolers… it’s the most hugs I’ve ever had in my life. I’m very well loved.

Or what it’s like to be married to my wife… sharing my life with her¬†is far from a hardship posting.

This habit need not be built with the “big” things in our lives.

2016-01-09 16.56.53Each time I leave a tip at a restaurant, I might pause and say, internally, “isn’t it wonderful to be in a position where I have a little extra to give.”

Each time I reach into the fruit drawer of my fridge, “pretty amazing that we can have crispy apples, year round.”

If I shovel my neighbor’s sidewalk, “it’s so cool to have the time to help this person out.”

The point being to create, and reinforce, a trigger than reminds me that I am surrounded by examples of having more than I need.

So the first gift I wish for you is a feeling of having enough, in at least one area of your life.

2016-01-03 12.59.47++

A new habit I’m seeking to build is paying attention to how I feel when I’m walking.

I picked this one up from The Art of Power, by Hanh. It’s a wonderful book, filled with stories about how¬†I fool myself!

I have found walking a little slower feels better.

I’ve noticed that breathing a little deeper feels better.

Strengthening those two habits will lead to better outcomes.

Because…

Most my errors come from quick action when anxious.

So the second gift I wish for you is short, pleasurable breaks whenever you find yourself walking.

2016-01-01 11.49.55

Give A Minute

minuteA simple way to reduce the noise in your head.

  • When you can feel yourself closing off,
  • or anger rising,
  • or have been asked to do something that you’re rather not…

…give a minute

2015-08-30 18.20.58

  • When my kids aren’t listening to me…
  • or I think they aren’t complying…
  • or they are arguing with each other…

…give a minute

2015-08-20 17.02.24By giving bits of time, I immediately removed half the conflict out my life and was able to leave the past, in the past.

It’s wonderful.

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You are¬†going to tell yourself that you don’t have the time to give a minute.

I can feel rushed as well.

Perhaps you can start small.

I started by giving seconds away when driving.

Yield.

If you start then pay attention.

Pay attention to what happens after.

By giving time I feel less pain.

Yes, I am a little slower when we are together but this is more than compensated by peace of mind when we are apart.

You’ll be surprised at how little time it takes to transform yourself.

Stay open.

Fatherhood: Giving Myself A Break

disneyDuring the school year, my son and I have a routine. When I come back from my afternoon workout, he takes a bath while I have a shower. It’s a win-win-win as the two of us end up clean and my wife likes a fresh family.

Last week, as I was heading out the door for date night, my son asked me to help him get clean.

One of my reactions was fear.

  • Fear that if I gave into this request then I’d never get out of the house.
  • Fear that if I gave into the request then the requests would never stop.

Fortunately, I was able to pause before I acted on my fear.

While pausing, the thought arrived that I MUST break this pattern of behavior in my boy.

What pattern was that?

Loving me, or wanting to spend time with me? ūüėČ

Pausing a little more, I thought about everyone in the situation.

  • The Sitter – being left with a dirty, unhappy four-year old
  • My Wife – sitting outside, content with her apps
  • My Boy – wanting his dad to spend time with him
  • Myself – feeling a wall rising¬†inside me as I’m tempted to close out my son

I sent my wife a text that I’d be a bit late, enjoyed giving my son a bath and everything worked out fine.

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I share this story because it highlights a dangerous habit that is easy to create.

Closing my inner life because I’m scared of future demands.

If you look for this pattern then you will see it everywhere.

  • Gifting – refusing to help now, to avoid being asked later
  • Parents – giving into the desire to break the child now, to “help” them later

Inside me, the habit feels like a form of revenge.

I’ll turn away from you now, because that’s “easier” than having to say no later.

Looking deeply, I’m the one that is hurt by this habit (and I’m robbing myself of the feel-good benefit of being a nice guy).

Harsh people think their hardness is a long-term favor to the people in their lives. They probably learned this habit in a difficult childhood.

My heart tells me that I’ll be OK with the risks of staying open to the people in my life.

Be brave.

Effective Wealth – Legal and Strategic Considerations

alvinIn my first¬†piece on effective wealth, I laid out…

  • Individual wealth => 5 to 10 years cost of living
  • Generational wealth => 10 to 25 years cost of living
  • Multi-generational wealth => 25 to 40 years cost of living
  • Surplus¬†(excess?) wealth => beyond 40 years cost of living

We hold our individual wealth in Living Trusts – these have the benefit of being fully revocable (assets in and out easily) and transparent to the IRS (easy for taxes and administration).

TIP Рfive years cost of living in a debt-free balance sheet will change your life and make you far less susceptible to corruption and influence. Once you hit ten years cost of living (in a debt free balance sheet) then you should consider cutting expenses and working part time. At a minimum, 5-10 years worth of wealth should trigger a sabbatical to consider personal wellness and how you allocate time.

Generational wealth is held in an irrevocable Grantor Trust that benefits my spouse and kids. I can’t get the assets back nor can any creditor or petitioner. In my lifetime, I retain the obligation to pay taxes on the trust as well as the ability to swap assets in/out for fair consideration. Admin is about the same as¬†managing a partnership/LLC with similar assets/earnings.

TIP Рonce you are nearing 20 years cost of living in a debt-free balance sheet you are close to the breakout point where you can stop working, forever. Now is the time to shift towards personal wellness!

Multi-generational wealth Рthis is small part of my family balance sheet, because I followed my advice at each of the above segments. We use a Private Trust Company (in a state without income tax) that oversees a trust that benefits my descendants. We also use 529 (college) accounts.

TIP Рthe first time you realize that you might be making money for your adult children STOP and undertake a life review that focuses on how you allocate time and personal wellness.

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What does all this cost? Charging market rates for my work, I oversee the structure for less than $5,000 per annum. Living Trusts/Will were $5,000 to set up. Grantor Trust was $5,000. Private Trust Company and Family Trust was $10,000. These are Boulder, not New York, rates.

How does this give you peace of mind? My personal assets are the smallest of any adult in my family tree. By value, I own less than 1% of the above structure. I am free to give my family the gift of service.

I’ve said what needs to be said.

I’ve done what needs to be done.

I’m free to focus on loving those that love me.


 

The legal and tax consequences of an error in your family structure can be severe. Take expert, local advice. Nothing on this site should ever be considered professional advice.

The Village in my Sienna

mobileMonday’s article touched on a trait that makes me an effective investor: the capacity to see the options inside the deal.

My ability to see second and third order effects isn’t limited to finance.

Last week, Mr. Money Mustache published an article about the cost of buying more assets than we need.

I confess that I am an expert at living above my needs.

The fact that I have earned the “means” does not change the reality of my choices.

A story!

Our local hospice has a partnership with an organization in Tanzania. One of their joint projects is building houses for widows and orphans.

It costs $600 to sponsor a house.

These days, I drive a 2011 Toyota Sienna AWD van. The Sportsmobile (pictured above) was sold when my kids arrived.

$600 is the semi-annual cost to insure and register my Sienna. Two houses a year.

Last week, I spent a house on new tires!

The good people at Mint.Com tell me that my Sienna is worth $21,499.

Swapping my Sienna for a cargo bike, would net 30 houses and save my family 6 houses annually, forever.

Over a decade, this choice could help 500 people with the loss of their spouse or parent.

I have been to Tanzania and these are good people to help.

The cost of this change is inconvenience when the weather isn’t great and a reduced ability to go on driving vacations.

The benefit would be knowing that hundreds of kids ride with me each day.

I told my wife that I’m going to wait a year on selling the Sienna.

However, the cargo bike arrives this month. I financed it by selling items that I put to one side last spring.

Change slowly.

Too Kind Too Generous

ax_and_bellaHow do you deal with someone telling you that you’re too kind or too generous?

What if the person telling you is your inner voice?!

I wasn’t sure how to handle, so I went for a bike ride to consider my alternatives.

Riding along, I laughed when I realized that people never tell me that I’m too kind to them, only too kind to others.

A little later, I laughed again when I realized that I seem to have everyone fooled. My too-kind-too-generous strategy is solely in my self interest.

So, rather than get grumpy. A better reaction is to share that…

You are a good person.

Remember that my capacity to help another person isn’t limited to them. It’s how I treat you.

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I looked a little deeper and considered the times where I felt that life was giving someone else too much of a good thing.

These feelings are related to the difficulty that I can have with other people’s success and happiness.

I realized my criticism was flowing from a fear that there wasn’t enough for me.

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I’ll end with a song that my son learned when he was two-years old.

The song is called Magic Penny and this is my favorite part…

Love is something if you give it away,
Give it away, give it away.
Love is something if you give it away,
You end up having more.

It’s just like a magic penny,
Hold it tight and you won’t have any. 
Lend it, spend it, and you’ll have so many
They’ll roll all over the floor.

My children are excellent teachers.

The Season of Giving

3_kidsI’ve been reviewing next year’s family budget.¬†There are four categories where I have a lot of discretion: donations, date nights, couple retreats and vacations.

Donations/Gifting: Halfway through year, it was looking like I would have to borrow to maintain my preferred gifting rate. I hate borrowing so I cut the budget in half.

Late in the year, we sold our house and I was able to hit our original goal.

It wasn’t until I played The Dollar Game¬†that I started to understand the physiological and psychological benefits of being open to other people.

I like having¬†a formal budget. I never have to consider if I can “afford” to be open to another person. I know that I can always help someone, at least a little bit. As well, when I feel that I’ve been ripped off, I tell myself that the money came out of my gifting allocation and I move on.

Vacations: For a long time, I’ve wanted to ride my bike to the top of Haleakala in Maui. At an elevation of 10,023 feet, the volcano is a biggie.

So I added a Maui vacation to my 2015 budget.

When I ran the numbers for airfare, childcare, condo rental… climbing the volcano was going to cost me close to $1 per vertical foot.

My Colorado price per vertical foot is a penny!

If my goal is satisfaction and¬†a life with meaning… is the Maui¬†trip the best use of the money?

Does short-term luxury lead to satisfaction across a year? Maybe if I take a lot of pictures!

I made a list of alternatives…

  • Get 2,000 $5 notes and play a massive¬†$5¬†version of The Dollar Game¬†– gets rid of my worry that a dollar isn’t enough to help – that’s a big stack of cash
  • Sponsor 100 people for The Dollar Game – I ruled that one out because¬†the effect¬†doesn’t seem to work with someone else’s money
  • Build 15 homes in the developing world
  • Overtip all year – feel like a big shot – own the fact¬†that my desire to climb the volcano is the ego-picture¬†from the summit
  • Sponsor a teaching assistant for my daughter’s kindergarten class so the little people learn more quickly – guaranteed kudos
  • Buy 30 iPads for the school – additional¬†kudos, perhaps more¬†if done anonymously, to appear humble
  • Increase my giving budget – open my heart more often, to more people

Once you start frequent, small gifts – it turns out that the person that you’re helping the most is yourself.

I don’t regret my inefficiencies. I’m sure that I’d love the trip to Maui.

Luxury spending doesn’t have the staying power of an open heart.

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My original article on The Dollar Game and a follow up one year later on giving.

More on Couples Retreats and my marriage – Article 1 and Article 2

Budgets For Beginners

flyingA reader asked for simple tips for starting out with financial management.

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#1 Рtrack everything you spend in a month

You may be surprised at the comfort that “knowing” gives you. The anxiety of “not knowing” is usually¬†huge.

#2 Рmake a list of everything you owe, the minimum payments, and the rate of interest on each account

#3 Рafter you pay your monthly essentials, surplus cash goes to eliminate your credit card accounts (highest rate to lowest rate). Pay them off and close the accounts. Make a minimum extra repayment of $100 per week on the account with the highest rate.

#4 – saving (or debt repayment) is best done weekly, and automatically¬†– for Americans, an IRA is a good option to consider. If you’re unsure what to do then have each adult in your house¬†stick $100 per week into a target date retirement fund with a low-cost provider, like Vanguard.

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The habit of weekly savings is powerful.

I helped a friend repay $10,000 in two years by using 100 weekly checks – her net worth when we started was negative $10,000. All she had was her clothes, her computer and a debt she owed. If she’d continued the savings habit then she’d have¬†a portfolio of $75,000 now.

$100 per week from 18 to 62 years old will grow to $720,304 (5% compounding).

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Financially secure parents/grandparents Рconsider matching earned retirement savings, this will help you to avoid supplementing consumption.

$100 per week from 12 to 30 years old will grow to $150,000 (5% compounding).

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How much should you save?

If you want more info on saving for retirement then Bernstein’s ebook is a good one – it’s $0.99 on Amazon right now¬†and a quick read.

My Financial Domain and Legacy

You can find my Part One here and Paul’s thoughts on Part One here.

#3 – What are the other things in life that are critically important to me, and for which I will be financially responsible?

This is a great question.

Be sure to run your answer by your therapist.

Why?

Because people that are high-achievers and good savers tend to take on responsibilities outside of their domain. I’ve watched families make themselves miserable by taking ownership of the financial wellbeing of adult relatives.

What’s my financial domain? Myself, my spouse and my minor children.

Watching people that I love struggle is no fun at all. However, I respect the people that had the courage to let me suffer as a result of my own choices.

#4 – What are the risks in the universe which may prevent me from fulfilling my responsibilities to myself and to others, and how might I defend against them or at least mitigate their impact?

Another great question!

Humans are lousy at assessing risk and statistics. An excellent investment you can make is reading Taleb’s Antifragile¬†– please don’t use the book as motivation to set up a personal derivatives strategy!

Pro Tip: use insurance products to insure an identifiable risk, not make investments.

#5 –¬†If I have accumulated wealth that exceeds all of the above requirements, how might I best utilize that wealth to derive the most personal satisfaction available from life?

It’s a shame that it takes so much money for people to realize they¬†had won before they even started.

Value your time, more than your money.

Diversify your time towards helping people that have less of what you think you need. Specifically, teach what you’ve learned.

Improve your family’s human capital, starting with your¬†health, your manners and your gratitude to the society that enabled your success.¬†Start with small, simple changes:

  • Physical movement AM and PM
  • Get strong
  • Eat real food
  • Be a little more kind
  • Be a little more fun
  • Optimize your health markers via diet and exercise (blood pressure, cholesterol, blood glucose, body composition)

If you are a self-made person then love the people closest to you by ensuring that they have the opportunity to prove their self-worth via their own initiative and through their own passions. Tell your kids when they impress you.

Be willing to constrain yourself to create harmony within your family and community.

Laugh out loud.