If you boil the concept of saving down to its essence, there are only two reasons to save, accumulate, and grow money.
You want to have the wherewithal to do for yourself or to do for others. For yourself and those close to you such as children or a spouse, you want to provide basic security while expanding choices and opportunities. You want to be selfsufficient, economically free, and generous to others.
Money cannot buy character or integrity. Money can make bad habits worse. Thankfully, for most who read this c o l u m n , money is seen in context as a force for good. Being rich in spirit goes beyond money. Some very
wealthy people are poor in spirit.
In the season between Thanksgiving and New Year’s Day, the emphasis is on shopping and spending, not saving—as in X number of shopping days before Christmas. As you look out beyond January 1, 2008, the focus
should be on “ g r o w t h ”—growth in personal progress and capability as you strive to make your future bigger than your past. Money and assets are tools to help you grow in purpose and to serve your goals.
We keep hearing about the “wealth gap,” and, yes, the rich have been getting richer. Charles Rangel,
powerful head of t h e Ho u s e Wa y s a n d Means Committee, is proposing to raise taxes on the rich so as to redistribute income and narrow the wealth gap. But who are the rich?
Mr. Rangel recently put forth a plan to slap a 4% surtax on single taxpayers who earn more than $150,000 a year and on married couples who make more than $100,000 each. You know who you are, and so does the IRS. And get this—the surtax will be figured on Adjusted Gross Income (AGI) before deductions for mortgage interest,
medical costs, state and local taxes, charitable contributions, etc. It would apply to long-term capital gains, raising the current 15 percent rate to 19 percent for those impacted.
Less money for you if you are “rich”—less for tuition, charities, savings, and necessities, including a little fun once-i n - awh i l e . Less money for closely-held businesses , roughly 24 million entrepreneurs who pay taxes through their personal tax return, such as with a Sub-S Corporation.
The idea that government needs to close the wealth gap is insidious and dangerous. The gap itself is based on a false premise, the idea that the economic pie is fixed. There is not a static amount of wealth. If Warren Buffett or Bill Gates have more money than I do, they in no way impede me in efforts to improve my lot. Their gain is
not at my expense. In fact, their gains may contribute to my growth.
Most certainly Bill Gates has created tools that improve productivity . Wealth expansion rests on improving productivity, and productivity is expandable . Wealth is growing in Atlanta, and in China, India, and elsewhere, because of leaps in productivity.
A recent study of data by the U.S. Treasury bears out the fact of “mobility.” Not all poor people stay poor. Not all rich people stay rich. Robert Frank, The Wealth Report, notes that income “mobility of individuals was considerable between 1996 and 2005, with roughly half of taxpayers who began in the bottom quintile moving to a higher income group within 10 years. Among those with the very highest incomes in 1996—the top one-hundredth of 1%—only 25% remained in the group in 2005. The median real income of these taxpayers (the super-rich) actually declined over the study period.”
In a 1997 speech by political observer P.J. O’Rourke in Shanghai, China, not long ago a collectivist nation, he reminded the audience that with the 10th Commandment God told Moses to tell the Tribes of Israel, and
everyone else, not to covet your neighbor’s stuff.
Cries by some to “close the wealth gap” means “I want the government to get more of my neighbor’s stuff and give it to me.”
Collectivists think about a gap as a group thing. How do we redistribute wealth from one group to another?
Entrepreneurs, energetic and forward-thinking workers, inventors, and others see “gaps” as opportunities. They think as individuals. How do I close a gap…create a solut ion…
improve a process? How do I create wealth?
Resolve to make 2008 the year that you close personal gaps and grow in wisdom and capability. The money will come. And keep your eye on Charlie Rangel. He ain’t Moses and he covets your stuff!
3930 East Jones Bridge Road Suite 150 Norcross, GA 30092 770-441-2603 (Fax) 770-441-7936
The Investment Coach 1994, Walker Capital Management Corp. Lewis Walker is President of Walker Capital Management Corp. and Walker Capital Advisory Services, Inc., a Registered Investment Advisor (R.I.A.) Securities and certain advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis Walker is a registered representative of SFA which is otherwise unaffiliated with the Walker Capital Companies.
Posted by hkelly as Financial Planning with Lewis Walker at 10:49 AM EST
No Comments »
T hanksgiving, November 22, 2007 — only 32 shopping days until Christmas! Expect short-run themes to combine with the agony of a looming election year to impede thoughtful contemplation of what Thanksgiving really means.
Individually, Thanksgiving is about family and appreciation. We join with those we love, friends and family, to celebrate blessings. Nationally we pause to remember our Judeo-Christian heritage, a nation founded on a recogni-
tion of God-given individual rights, freedom, and the rule of law.
Loftier thoughts will not preoccupy the media. With the stock markets gyrating and The FUD Factor (fear, uncertainty, and doubt) distracting investors from longer term strategic planning, the focus will be on the consumer. With energy costs rising and housing prices under pressure, will the consumer slam shut wallets and purses and pull back
on holiday spending?
Then there is politics. Between now and Tuesday, November 4, 2008, unceasingly you will hear “how bad everything is.” The FUD Factor will be a dominant theme in the battle for the White House and veto-proof majorities in Congress.
Economist Paul Krugman’s new book, The Conscience of a Liberal, is a call for expanded government-led income redistribution schemes via increased taxes and a growth in social welfare programs. The book’s release is timed to the election cycle.
The countdown to Election Day 2008 may be a classic case of “deja vu all over again.” Newsweek maga-
zine on March 2, 1992, ran a cover story, “Behind the Voter’s Revolt: America’s Lost Dream.” That event was
cited by another economist, Robert J. Samuelson, in his 1995 book, The Good Life and It’s Discontents: The American Dream in the Age of Entitlement 1945-1995.
“History matters,” as Samuelson notes, and here is the good news for this Turkey Day. Our republic will continue to grow no matter who is in the White House and despite efforts of enemies to frustrate our progress and damage our national will. But progress will be messy and noisy. It always has been, a bedrock strength not often recognized.
Samuelson sought to explain “fashionable pessimism,” detailing “why the richest, most powerful, and most democratic nation in the world is overcome by self-doubt and confusion.” That was in 1995 — a period proclaimed by Clinton Redeux as a “golden age.” The more things change, the more they stay the same!
Over a decade ago, Samuelson quoted Joseph Schumpeter’s bromide about “creative destruction.” New technologies, business models, and channels of distribution obliterate the old. Growth produces winners and losers. Some industries, cities, and regions expand while others decline. The process “confers and revokes status…undermines tradition…empowers some nations and imperils others. It disrupts settled ways and compels people and institutions to alter comfortable habits. It generates insecurity.” (Emphasis mine).
?
Self-doubt is not a new phenomenon. So wherefore now, oh Republic? Even if others don’t trust the U.S. dollar, our money proclaims “In God We Trust.” God gave us two beautiful gifts — the ability to strive and thrive in what Michael Medved calls “this greatest nation on God’s green earth,” and free will, the ability to make choices and take personal responsibility for success or failure.
In advising clients, we reframe problems as challenges. A focus on problems without examining future forward solutions just saps energy. Let’s have a conversation about challenges as they relate to a realistic examination of the alternatives to meet challenges, the resources available to power alternatives, and delineation of the future experience (outcome) desired. Sadly, how you approach personal financial planning will not mirror national social, political, and financial planning. The focus will be on making the other guy, or woman, look bad, with a heavy dose of sound bites simplicities.
The dilemma cited by Samuelson in 1995 is the same one faced by “we the people” in 2007 –
2008: “America is an inventive, productive, and satisfied society because it is free; it is also a messy, violent,
and dissatisfied society, because it is free.”
“The good life” depends on your understanding of the difference between success and significance,
and the distinction between progress and perfection. “Discontents” can lead to stagnation and dependence, or renewed energy and “creative reconstruction.” Between this Thanksgiving and New Year’sDay, consider how your blessings and your resources, current and future, play into the next ten years. “Problems” reframed as challenges open new vistas.
Certainly the Pilgrims faced daunting challenges. They took time out for prayer and appreciation. Turkey.
Good wine. Children and grandchi ldren. Pets waiting f o r t a b l e scraps. We are blessed, as we salute the men
and women gathered in military mess halls around the world. Freedom is not free. It never will be.
3930 East Jones Bridge Road Suite 150 Norcross, GA 30092 770-441-2603 (Fax) 770-441-7936
The Investment Coach 1994, Walker Capital Management Corp. Lewis Walker is President of Walker Capital Management Corp. and Walker Capital Advisory Services, Inc., a Registered Investment Advisor (R.I.A.) Securities and certain advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis Walker is a registered representative of SFA which is otherwise unaffiliated with the Walker Capital Companies
Posted by hkelly as Financial Planning with Lewis Walker at 4:36 PM EST
No Comments »
Over twenty-years ago I wrote a column for a financial magazine entitled “The Battle of the Time Bandits.” It was written for my fellow financial planners who did not seem to know how to put a value on their time.
My early effort came to mind as I read a column in Financial Advisor magazine, “The Value of Your Time” by Nick
Murray (July, 2007).
Consider a typical year containing 365 days. Let’s suppose that you do not want to work on Saturday or Sunday
– subtract 104 days. Assume ten secular or religious holidays per year as time off plus three weeks vacation (be good to
yourself) – subtract 25 work days. Assume reasonable health, but subtract 10 days a year for illness, personal days, jury
duty, or professional development seminars. The total is 139 days away from work, leaving 226 actual workdays.?
Assume you are at work for eight hours, but you lose two hours a day drinking coffee, eating lunch, shooting the breeze with co-workers, playing around on your computer, personal phone calls, whatever. That leaves (226 x 6 =) 1356
real work hours per year. Do your own math but the estimate is surprisingly accurate, if not a bit generous.
Even if you are truly working 8 to 9 hours a day, how much work time is dedicated to mundane minutia? How much real time is spent on unique ability activities, your value-added tasks and intellectual capital that generates the revenue that pays your salary or generates cash flow?
To make the math easy, assume total compensation of $100,000 per year (you can use a percentage or a multiplier
relative to 100k to determine your “hourly value”). Divide $100,000 by 1356 and you are worth almost $75 per hour.
Nick Murray lectures and sells books. He marvels at how much time some people will spend to recover a few dollars based on an honest mistake. Is the hassle really worth your time and expense?
Recently I flew from Amman, Jordan, to Paris, and through Newark to Atlanta. In Newark (I suppose because I had been in the Middle East), TSA took my luggage apart. They removed my TSA-approved lock and failed to put it back. A new lock cost $10.
To claim anything from the U.S. Government, you have to fill out a lengthy claim form and document your loss. If you are worth $75 per hour, your productive time is valued at $1.25 per minute! Trust me, it would take more than 8 minutes of time and frustration to recover ten dollars. As a taxpayer, I wonder how much it would cost the government to refund ten bucks. We’d be horrified at the answer.
You only have 24 hours in your daily time bank. You have to sleep, eat, bathe, and perform other routine functions. You want to enjoy your family, friends, pet or pets, and have some downtime for yourself. You want to
exercise, have time for worship or stewardship service as a volunteer and/or for hobbies and recreation.
In his 1986 classic hit, “Against about, Deadlines and commitments, what to leave in, what to leave out.” (Like a Rock, 1986 album).
“What to leave in, what to leave out.” The quintessential time-related question! You may be an “unpaid worker,” a stay-at-home spouse, caregiver, or volunteer. Your time, too, is valuable and has a price.
The point is, what is your unique ability? What really brings in the money, or supports others who bring in the
money? What to leave out? Whatever does not maximize your unique ability. Outsource everything else. Leave out,
as much as possible, whatever causes stress, drains your energy, and does not light your fire. If you are a “control freak”
that is not easy to do but that is even more reason to do so.
As an advisor, I talk to entrepreneurs (I am one) and those who want to start or build a business. Key questions: Do you know who you are? Do you know what your unique ability is and, if so, how to maximize it? What should your financial ROE (return on effort) be?
If you want to take home $100,000 year after taxes, and deductions, what does that require? On average, your net pay will be 67% of your gross. Gross earnings are (100k/.67 =) $149,254. (Deductions are for federal and Georgia income taxes, Social Security and Medicare, and do not include 401(k) contributions or other employee-supported
benefits like group insurance).
Let’s assume as an entrepreneurial enterprise you run a tight ship. Overhead is 45 percent of gross (also a reasonable number if you have rent, employees, etc.) To garner your $149,254 in gross compensation, you have to
generate $271,371 in total revenue. If you are the sole producer, your time is worth $200 per hour!
Play with your own percentages. TIME IS “What to leave in, what to leave out.” Intellectual capital, passion, focus, and re-charging “free time” is CURRENCY. “What to leave in, what to leave out”becomes even more clear!
3930 East Jones Bridge Road Suite 150 Norcross, GA 30092 770-441-2603 (Fax) 770-441-7936
The Investment Coach 1994, Walker Capital Management Corp. Lewis Walker is President of Walker Capital Management Corp. and Walker Capital Advisory Services, Inc., a Registered Investment Advisor (R.I.A.) Securities and certain advisory services offered through The Strategic Financial Alliance, Inc. (SFA). Lewis Walker is a registered representative of SFA which is otherwiseunaffiliated with the Walker Capital Companies.
Posted by hkelly as Financial Planning with Lewis Walker at 4:10 PM EST
No Comments »
