In my previous post, I noted that most people in today’s economy don’t believe they have anything meaningful in terms of “excess” wealth. This prevailing sentiment isn’t altogether surprising. It is, however, often simply not the truth. I’d like to use this post to explain why.

For this conversation, allow me to define “excess” wealth as those resources an individual or family has (or is projected to have) that are more than what they’re expected to need to provide for themselves and their loved ones, after wisely accounting for various risks they may face.

To start with, the single biggest reason most people have this common misconception is that they haven’t had anyone who has helped them understand, articulate and write down their personal definition of “financial independence;” that is, their needs, wants, and family legacy goals, as well as what this all can be expected to cost over the course of their lifetime. As a result, without a clear and confident sense of how much wealth is needed to pay for what they want, how can they effectively gauge excess, or a shortfall for that matter?

I’m not just talking about material goals and objectives here. Not that there’s anything wrong with those kinds of goals. But to truly plan for and create the life and the legacy of impact that most of us desire, we must find a way to reflect, think, and then ultimately act – with much bigger and better ends in mind. For most of us, this sort of thing doesn’t exactly come easily. As a result, we need help if we’re ever going to get to that place where we can do more of what really matters to us personally. If we’re really honest, we all too often take a “Fire. Ready. Aim.” approach, instead of a “Ready. Aim. Fire.” approach. If only more of us knew how to practically think and act differently in this area.

This is precisely where people can get stuck. It’s also usually where people lack a professional with the requisite expertise to help them get unstuck. In our experience, most people have never “simulated” all of their wealth (not just investable assets!) over time. They usually haven’t had the benefit of conservatively modeled-out scenarios of various potential financial decisions and outcomes through a comprehensive financial and estate planning process. Yet it’s precisely this type of planning process that can empower them to more clearly and confidently ascertain how their resources are likely to grow; the income that could reasonably be produced each year; the tax and other risks that could reduce those asset values and/or income flows; and ultimately, what is likely to be left over at the end of the proverbial rainbow.

Without a clear picture illustrating what’s possible in terms of spending, saving, investing, giving, etc., most people tend to default to what we lightly refer to as the “virtual mattress” plan. That’s somewhat blindly tucking resources away without any real and concrete objectives, wondering and sometimes worrying about how long it will last. This sort of “default” approach to managing and protecting one’s personal wealth offers no meaningful framework for confidently making important decisions that could serve to enhance one’s life and legacy. The result can sometimes be something quite the opposite – a life and a legacy that are only a shell of what could have been!

Why don’t more people demand and engage in this type of planning – particularly when doing so frequently has such a significant potential to increase their family’s sense of peace, freedom and impact?

If you’d like to know my thoughts on this, keep following these posts. Next time, I’ll share why I think most people fall short of their true “life and legacy” potential. 

Peace,
Ron Ware