Wealth Clarity Blog

This is the second post in the series on Kids & Money from our friends at Marigold Associates.  Enjoy!

Kids typically don’t pick up basic life skills through osmosis. They have to be taught how to clean a bathroom, check the oil in their car, and manage their money. Often what they have learned about money is “ask and ye shall receive.” As you can probably guess, this bit of wisdom doesn’t lead to financial independence.  A good financial education can provide a wonderful foundation for your child as he learns to manage wealth on his own.

The goal of financial education is to form financially responsible adults with positive values about money and useful financial skills. Financial training and education should begin as soon as children are old enough for pocket money, around kindergarten or first grade. There are several good programs on money management for children available in your local bookstore or on Amazon. These offer common-sense approaches and point out typical mistakes that can derail the enterprise. One such example we like to recommend is Making Allowances:  A Dollars and Sense Guide to Teaching Kids About Money, by Paul Lermitte with Jennifer Merritt.

Keep in mind that the biggest obstacle to the success of financial training is whether busy parents will commit the time and energy to stick with it!

The details of the plan that you decide to use can vary, but generally it should include the following elements:

• Allowance system. An allowance system is a basic contract between you and your child that guarantees you will give her a set sum of money to cover out-of-pocket needs on a regular schedule. In return, she agrees to responsibly contribute to the family by performing basic chores. Start simply and add funds and complexity as your child demonstrates readiness. The allowance amount should be appropriate for their expenses. By adolescence, kids should be able to manage their clothing budget. By the time they reach college they should be able to handle all of their own living expenses within the budget they are given. This will give them lots of experience having to make difficult choices. Do they save money to travel on spring break or buy new clothes every month?
• Let them control their own funds. Resist the temptation to “help.” Let them learn from their mistakes. No bailouts! On the other hand, do not use the allowance as reward or punishment for behavior.
• Talk with your children about money and your family financial decisions. Show them how you decide to make substantial purchases, shop for the best product/prices, ascertain what you can afford. Be sure to provide examples of decisions that include delaying or denying purchases.
• Use moderation in your spending. It is not good for your children to have the most expensive and latest of everything. No teenager ever needed a $300 pair of shoes!
• Give them something to work for and save toward, for example, an iPhone or a car. Help them learn the habit of putting away a portion of their income (gift and earned) for a larger project. As they master the early stages they may able be handle to loans and repayments for larger purchases, though saving is a better model.
• Help them establish the habit of giving to others. Remember, however, it is not theirs to share if you have handed it to them. In order for them to feel the benefit of giving, it needs to come from their own pocket.

Beware the financial education you provide your children will bring up all your own issues about money. You will discover what those are as you implement a money management system for your children. Over-protectiveness will come up as you find yourself tempted to give them a “bail-out” when they have overspent. Equating money and self-worth will lead you to want to give your kids expensive gifts to keep up with their schoolmates. Using money as a reward or punishment will demonstrate your own need for control.

We hope you will follow one of the excellent programs that offer detailed instruction in wealth management. While education is essential, it is not enough on its own. The deeper challenge lies in developing character, values, and a commitment to living a life of purpose. Formation of character and values within family practices play a prominent role in limiting the negative impact of wealth on your children. This is the topic of our next blog in this series.  Stay tuned!

As we are heading into the typical year end giving season, fraught will all kinds of traditional philanthropic complexity, I wanted to pass along a lesson I have learned in my own giving: 

Consciously checking my motives to make sure the giving is about the give-ee (recipient) and not about the give-or (me and you). 

There are plenty of examples of wealthy families and individuals that give large gifts to get recognition in some form, or their name on a building, or control the impact of the gift. I find it easy to dismiss those actions as:  I would never do that because I’m not that egotistical or narcissistic!

I wish all my giving was altruistic but realistically it’s just not the case; however, there are a bunch of subtle issues, that when I’m really honest with myself, influence how and why I give. 

For example, there are times the giving is about making me feel good; wanting to be in control, gaining approval from someone, and being seen as significant.  The dark side of giving takes roots in these quiet moments of reflection where only “I” can judge my true intentions and motivations. 

One check and balance to apply to your giving is to consider making more of your gifts in the purest form = anonymous.  Gifts in this form can take away the control and impact I want to bundle together with my gift.

Another possibility is to embrace the planting and harvesting giving concept.  Using this clearly farming metaphor, there are times when the gift is about planting and we may not be able to see the fruits of our giving for many reasons.  In other instances, someone else may have contributed greatly to the early stages of planting and we get the blessing of seeing our gift bear all kinds of fruit.  I have found the more I try to control whether I’m a planter or a harvester, or both, the more the giving becomes about me.

Finally, before you write any checks–or gift appreciated securities–this year end, take the following quick emotional inventory:

1. Am I okay if I don’t get recognition for the gift?
2. Am I more concerned about the person or organization in need or the giver? 
3. Should this gift be made anonymously?
4. Am I okay not controlling the outcome or the harvest, instead being one of many to move the ball further down the field?

What other giving issues or emotional effects of giving have you experienced that could be helpful to share?

One of our jobs at Highland is to develop investment portfolios that maximize return and minimize risk.  While investment portfolios are critically important, it is only one facet of life; there are other areas of life that if properly considered, can guide you to a well managed life portfolio–something we at Highland refer to as living fully.

In that regard, when was the last time you took a hard look at your “life portfolio”?  By that I mean, checking to see if you have proper diversification, are balancing trade-offs, and measuring performance in key areas such as:  family, health, community, or even fun experiences?    

Personally, I value my health and want to have an active life well into my senior years.  Considering my current condition, I would rate my health possibly a 6 out of 10 (not very good).  To move that needle a little bit higher would be rather simple:  get more active.

In isolation, taking proactive steps towards better health sounds easy, right?  Well not really because I have a ton of excuses and embrace them all!  But considering my life goals, it’s worth it to me to invest the time, energy, and money on a trainer so I’ll have some accountability.  Check with me in 6 months; I expect to feel and look much better. (More importantly, check with me when I’m 70; how many times did I go skiing with my grandkids?)

For those who are interested in living fully, this can be a life changing exercise.  Budgeting effort, time and resources into the life you have always dreamed of can pay dividends in ways you could only hope for.  The daily or weekly investments you make now reap dividends and compound over time.

In my next post I’ll be sharing a few ideas on how to make simple and easy investments into your life portfolio that can help move you closer to living fully.

What is the “real” cost of your lifestyle?  Not the amount you spend each year but instead the other emotional and real implications of living the way you’ve chosen.  My recent trip to Africa helped put this in perspective in a way that was life changing.

There is something in the Seattle area called the “eastside lifestyle”.  It refers to the suburban area east of Seattle that tends to attract people with higher incomes and wealth.  It has less to do with location (as there are neighborhoods like this in Seattle proper) and more to do with the way in which upwardly mobile people tend to live.  It implies access to bigger homes and amenities, better schools and more Range Rover-type families, and generally newer everything.  Most communities on the West Coast, and elsewhere, have their “eastside” pockets or bubbles.  For many people, including our clients, the financial cost to live this lifestyle ranges roughly from $200,000 to $400,000 per year.

I’m not making a value judgment about this lifestyle (I live on the eastside), but my experience shows that the impact of living this type of lifestyle extracts a cost that is real and tangible.  I’m not referring to the actual dollars spent but instead the emotional and time implications, and the trade-offs we all have to make to live this way.

Real costs, or even symptoms of the eastside lifestyle, include:  anxiety and worry; thinking about work when on vacation or weekends; no margin in our lives; stress and pressure to get into the best private schools and sports programs; difficulty staying on top of the financial complexity, keeping up with the Joneses, etc.  These costs can be amplified further if there aren’t reasonable financial controls and boundaries around spending or the ability to say no.

This is where Africa comes in:  as the picture of this African family clearly shows, many people of Uganda have virtually nothing; average earnings are about one dollar per day. For this reason, Ugandans value everything they have and feel so blessed to have it.  Sure, they are enticed by the American dream, but they also realize that it doesn’t bring happiness or joy.  The have more love and community than we do by a long shot, and it was interesting to realize that it wasn’t because of lifestyle or status.

I came home realizing how blessed I am but also how many of these lifestyle costs I feel personally.  They can exhaust me, and drain valuable energy from me so that I’m not present and available to those I care about; they also limit my ability to use my blessings to impact the world around me.

I just don’t plain need all the things I have and quite frankly I was appalled at how often I carelessly handle and manage the many financial gifts in my life.  Here are a few of the practical implications of this lesson and a few of the changes I’m making in how I live my life:

• Buy less
• Making sure I understand whether it’s a want or a need
• Making do; let things wear out before buying something else
• Say no more often—it’s okay to deny myself things from time to time
• Reduce the number of “things” in my life that create complexity
• Improve my communication about money at home

These types of adjustments to lifestyle are hard to make.  We all get hard-wired into living modes that create difficult patterns to break. Even though I want to make changes I find I still fall prey to old ways of living, however, the first step in change is awareness.

Going against the grain, choosing to lead the un-eastside lifestyle, takes energy and commitment.  I’m curious to hear from those who’ve done it and whether you’d be willing to share your journey and what you’ve learned?

I returned home from Africa last week to learn the sad news concerning the passing of my friend and professional colleague, Mabry De Buys.

If you didn’t have the privilege of knowing her, she set the bar for excellence and commitment in her work that made her both revered and feared (depending on what side you were on) as a family law attorney.

With all that professional sizzle and notoriety, she would always take the time to respond to emails and phone calls, even late into the night.  Never short on words or a story (or two), she handed out wisdom in a way that made you feel like you’d known her for years.

I will miss her southern charm, wicked intelligence, and sly smile of confidence.  Her impact on my life will be lasting.

If you want to explore the concept of “significance” in your life take a trip to Africa. Why? Your comfort zone will be challenged at a minimum, and as in my case, your life might be changed.

It was about a year ago when my friend, Heather Tuininga, Executive Director of the Luke 12:48 Foundation asked if I wanted to travel to Uganda. She was planning to see both what the Foundation was supporting and also explore new areas of need in this beautiful and very poor country approximately the size of Oregon. After lots of planning, four of us including Eric, her husband, and my wife, Kelle, embarked on a 10 day adventure from which I’m returning today.

Over the coming weeks, I plan to share some of the things I learned and experienced. During my whirlwind tour, I saw the best and worst of Uganda: extreme poverty that would break your heart; the effects of a 20 year war in Gulu and the northern region near Sudan; laboring with local villagers to repair a well in the bush; meeting a broad cross section of people and organizations working diligently to provide a helping hand to the severely disadvantaged; and, witnessing the majestic wildlife and natural beauty that eastern Africa has to offer.

For the long-term readers of the blog you might remember that one of the core values at Highland is caring about people, and more specifically, caring about the world.   I told our team last year that I needed to explore what that meant personally before I could lead Highland credibly in this area.

The trip to Uganda was a wonderful start and the impact on my life will be lasting for sure. I’m excited to share what I’ve learned. Stay tuned!

Have you noticed the growing number of billionaires who are publicly announcing their intention to give away most, if not all, of their wealth during their lifetime?  Bill Gates, Warren Buffett, and the most recent addition Mark Zuckerberg, founder of Facebook and the notorious and vaguely fictional character in the movie Social Network, along with 50 other donors who have signed what is being called the Giving Pledge.

Loosely stated, the Giving Pledge is the idea is to put their names on a document pledging to give the majority of their money to charity instead of to heirs, where it’s many times wasted, according to an article in The Daily Nation.

What I found most interesting in this new trend is that it makes just as much sense for the super wealthy as it does for wealth creators and high net worth individuals even though your asset base doesn’t include quite as many zeros.  At first I thought:  well this is easy for the super rich to do because they have gobs of money.  Not so fast.  In reality it’s likely harder emotionally the more money you have.  Continue Reading »

Catching a cab ride back to the New Orleans airport recently, I was reminded of several important life lessons, and the teacher was my 82 year old cab driver, Eddie. 

It was clear that Eddie was nearing the twilight of his career as a cabby and his plan was to turn in his meter at age 85.  (In retrospect, I had to laugh at this statement considering how much time I spend helping people race to retire before sixty.)  Regardless, when someone is close to retiring, I always like to ask them what they plan on doing with their new found time, and what life has taught them. 

Eddie told me he felt blessed by the life he’d lived in Louisiana (69 years of hot and muggy); he planned on continuing to give back to the community by cutting the hair of men at the local nursing home (I guess he was a barber in his spare time too); he made a conscious effort to simplify his life several years earlier by selling his rental properties and cab company because they created too much worry and stress;  and he didn’t fret about what others had that he didn’t because as his grandmother told him many years ago, “all that glitters ain’t always gold.” 

Have you ever had a conversation with someone like Eddie where the experience is sort of surreal?  I was caught off guard by his authenticiy and simplicity of his life.  As I flew home to Seattle, these were a few of the takeaways: 

1.)    How often I have made my life more complex than it needs to be; all for the sake of getting more and achieving more.  In many cases, it has given me stress and worry in spades. 

2.)    How often I’ve taken for granted the blessings in my life, especially living and working in the Pacific Northwest.  I have made an intention to appreciate the beauty of this area more regularly and not complain so much about the weather.

3.)    How many times I let my desire to give back philanthropically be controlled by my perceived level of financial success instead of as a reflection of my heart and its capacity for love and compassion. 

I don’t think I’ll see Eddie again before he retires, but there is no doubt I left his cab more positive and self aware than when I got in. 

Here’s to making 2012 a year to remember.  Purpose, simplicity, authenticity…..Living fully!

Happy New Year!

Guest post by Kendra VanderMeulen, president, Seattle Christian Foundation

Most of us fund our charitable giving with cash.  But, did you know that the most tax-efficient way is to use appreciated stocks?  While the last two years have been bumpy in the stock market, this year has been better and many people have significant appreciation in their portfolios.  Appreciated stock makes a great charitable gift, even if the stock is one you want to continue to hold.

For example, if you want to contribute $20,000 to charity before the end of the year and you have $20,000 worth of stocks with a cost basis of $15,000, you might consider giving the stocks instead of cash.  This would result in a $20,000 tax deduction.   You could then take the $20,000 cash you had planned to give and repurchase the same stocks.  You wind up with the same portfolio position but now you have a $20,000 cost basis in the stocks instead of a $15,000 cost basis.  So you get the double tax benefit of a charitable deduction along with stepped up basis, and your favorite charities get the financial support they need. Continue Reading »

Wealth creators, especially first generation, can tend to feel invincible when it comes to things like: taking on debt, ability to control business and financial success, and providing the lifestyle our families and children desire, or has grown accustomed to.  You can start to believe you are superman, able to handle almost anything you put your mind and energy to.

Financial capacity does play a part in these things (obviously), but wealth creators often forget they also have limits to what they can do and pay for, almost regardless of net worth.

It’s pretty simple really; wealth creators have trouble saying no.

Whether you agree with this statement or not, there are few interesting observations that I’ve witnessed in my own life experience as it relates to saying no:

• First, many wealth creators were faced with “no” many times in their own lives and upbringing and this doesn’t get talked about much;
• Second, the underlying motivation is good and plays out as wanting to create a better life for their family than they had;
• Finally, professional advisors are called upon to fill the role of “bad guy” because they don’t have the personal discipline themselves in many cases.  Note:  As a financial advisor, it’s much easier to do this for a client than say no in my own life.

This came full circle during a meeting I was having with a client recently and the subject of college expenses came up.  It was interesting because both of us had multiple kids in college and we were kibitzing about how different the college selection process, not to mention the spiraling costs, had become since “back in the day.”

Continue Reading »