September 24, 2014

The Wealth Blueprint for Financial Success

Disney Blueprint

I was asked to speak at the Leadership Development Center at the University of Virginia’s EAN Annual Conference on Thursday, August 4th 2001. I’ve collected links to all the resources I mentioned in that talk here in one place.

First, don’t forget to subscribe to Marotta On Money in order to get comprehensive financial planning and wealth management advice throughout the year.

Find Your Garden

We were meant for meaningful and significant work. Finding the work you were called to do is critical for understanding the goal of ‘success.’ Nothing is more important.

The LORD God took the man and put him in the garden of Eden to work it and keep it. – Genesis 2:15

I believe that God made me for a purpose – for China. But He also made me fast. And when I run I feel His pleasure. To give it up would be to hold Him in contempt. You were right. It’s not just fun. To win is to honor Him. – Eric Liddell.

Andrew Wiles solving Fermat’s Last Theorem watch to the end as it climaxes five minutes into Part 4 of 5.

Do or do not. There is no ‘try.’ – Yoda

Finding the garden you were meant to work in can be a life-long process. It requires calendar time. Along the way we should give ourselves completely to the work we are doing as a way of learning what work we should be giving ourselves to. Here are articles we have written to help you get started with that process as well as a 9 part video series we highly recommend:

Life Planning Part 1: Plenty of Money Life planning takes a holistic look at what you truly value. And for most people, their life is more important than their money. Only after exploring your life goals can you structure your finances to help you realize your dreams.

Life Planning Part 2: Just a Few Years Left “Imagine that you visit your doctor, who tells you that you have only 5-10 years to live. You won’t ever feel sick, but you will have no notice of the moment of your death. What will you do in the time you have remaining? Will you change your life and how will you do it?”

Life Planning Part 3: Twenty-Four Hours to Go Imagine that your doctor shocks you with the news that you only have 24 hours to live. Notice what feelings arise as you confront your very real mortality. Ask yourself: What did you miss? Who did you not get to be? What did you not get to do?

Video: Comprehensive Wealth Management: Life Planning, Part 1 of 9 parts Life planning takes a holistic look at what you truly value. And for most people, their life is more important than their money. Only after exploring your life goals can you structure your finances to help you realize your dreams.

Don’t Retire: Keep Significant Goals Most Americans fail to plan adequately for retirement and consequently miss out on opportunities to enjoy the last third of life. The best and most rewarding financial planning is not just about the numbers but rather takes place in the context of personal goals.

And here is a recommended reading list for more information:

Wishcraft: How to Get What You Really Want” by Barbara Sher with Annie Gottlieb

I Could Do Anything If I Only Knew What It Was: How to Discover What You Really Want and How to Get It” by Barbara Sher with Barbara Smith

The New Retirementality: Planning Your Life and Living Your Dreams….at Any Age You Want” by Mitch Anthony

Encore: Finding Work that Matters in the Second Half of Life” by Marc Freedman

Life is short. Time is our most precious resource. Don’t delay finding your garden.

How to Live on 24 Hours a Day Don’t put off the things that truly matter to you until you have more time. You will never have any more time than what you are given each day.

Financial Independence

Since we should always have meaning work, the idea of retirement is better seen as financial independence. If you are financially independent you are free to pursue all of your life goals, even those which are not for pay. A retirement without meaningful activities is liable to be cut short by health and other problems as we were intended for significance.

Retirement is sometimes seen as a specific age, e.g. 65, but you can be financially independent at any age so long as your lifestyle expenses are within the safe withdrawal rate for your investable savings. Here are some articles to understand the maximum safe withdrawal rate at various ages, and also why spending all of your portfolio’s income will insure a diminishing lifestyle  because of inflation as you get older:

Maximum Safe Withdrawal Rates in Retirement Certain assumptions such as maximum safe withdrawal rate are critical in order not to compromise a long and successful retirement.

Regular Adjustments Maximize Retirement Success Retirement planning consists of a wild scatter plot of potential projections. Navigating successfully through possible outcomes requires regular corrections and adjustments.

Spending Retirement Income Can Be Risky The most common request we get is for a back-of-the-napkin calculation of future yield, interest or income. But rather than being a conservative withdrawal rate, this strategy may actually lead people to spend too much.

The Second Half of the Chessboard

Every seven years you delay saving and investing you cut in half the lifestyle you will have in retirement. You can live rich or you can be rich. Wealth is what you save, not what you spend. Save and invest at least 15% of your pay. Put an additional 10% away for surprise expenditures. Here are a number of articles to understand the millionaire mindset:

How to Double Your Retirement Every six years you delay saving and investing you cut in half the lifestyle you will have in retirement. You owe it to yourself and your family to make certain that your financial New Year’s Resolution are kept this year. Here are ways to save and to invest that are simple and specific enough to keep.

Wealth Management Is In Your Control For many people, tomorrow’s midterm elections feel like a political struggle over which they have very little control. It seems as though the outcome will determine the economics of the country for many years to come. Many feel similarly helpless to direct their own success. Nothing, however, could be further from the truth.

Decide to Be Rich It used to be that becoming a millionaire was regarded as a huge achievement. In today’s dollars, however, it is fairly trivial. The new rich is over $5 million.

What the Rich Know and the Poor Do Not This new year, resolve to get your financial house in order so that you can enjoy peace of mind. Financial planning is important, but it is never urgent. Most people fail to establish a financial plan because they fail to start planning. Some resolutions can be postponed, but for every six years that you delay saving and investing, you cut your retirement lifestyle in half. So, act on your resolution today.

Financial Harmony in Marriage Money problems can ruin the love affair with your spouse. The work of blending two lives in harmony requires certain basic commitments. Even a financial planner can’t help unless the couple is willing to make five simple commitments.

For Valentine’s Day, Work on a Budget Together An overwhelming number of people in failed marriages cite financial troubles as a major factor in their breakup. It’s not surprising because the way we use our time and money reflects our values. Without a strong set of shared values, marriages may founder. But dealing with finances together can bring a couple closer. Developing and remaining faithful to a budget is probably the best way to build both your wealth and your marriage.

Avoid Budget Busters Part 1 – Thrift, an Old-Time Virtue Making a Comeback No matter how rich or poor you are, thrift is an integral part of your budget. Being thrifty is a godly and biblical virtue.

Avoid Budget Busters Part 2 – Curb Your Worst Impulses Get control of the spending that breaks the bank. Certain purchases that are typically both unnecessary and unplanned are budget busters. Avoiding these financial slips requires hedging some of our worst impulses and constraining our desire for instant gratification.

Avoid Budget Busters Part 3: Plan on Budgeting Surprises Many budgets are doomed to failure because of the challenge of planning for unplanned spending. Here are some of the items you either did not put in your budget or they shouldn’t be in your spending.

Avoid Budget Busters Part 4: Budgeting Pitfalls Sometimes we make the mistake of deliberately budgeting the impossible. If you purposefully set the required spending in one category too high, you won’t be able to trim other categories to bring your overall spending into harmony.

Save 97 Percent of Any Windfall Surprisingly, studies show that onetime windfalls can actually impoverish you. They make you feel rich, which inevitably leads to overspending. But wealth is what you save, not what you spend.

Wealth is What You Save and Invest

Wealth is built by spending less than you earn and saving and investing the difference. Here is how to automate the process of saving and investing:

Pay Yourself First The greatest engine to generate real wealth is saving and investing. And the best way to ensure that your default is saving and investing is to automate the process. Pay yourself first, and your savings will grow exponentially.

Getting Started With Investing There isn’t a better time to invest than today. Getting started can be intimidating, but these simple steps will help you through your first few years of investing.

Gone Fishing Portfolios A gone fishing portfolio is a portfolio of just a few stocks which should weather the ups and downs of the market fairly well only rebalancing them twice a year.

 Monitoring Your Financial Progress

If saving and investing is automated you need only review your progress once or twice a year. Measure your progress and set goals for the New Year and rebalance your portfolio.

Seven Financial Resolutions for the New Year Financial resolutions usually don’t even last until the end of January. Making a permanent change in our behavior requires both time and a steely resolve. We can only develop financial character one action at a time. Here are seven practices to take you from pauper to prince or princess if you add one each year.

Compute Your Net Worth Once a Year – 2011 Computing your net worth annually is like taking a sextant reading to chart your course toward financial security. Net worth gives you a snapshot of how much money would be left if you converted everything you owned into cash and paid off all your debts.

Selecting a Financial Advisor and Safeguarding Your Interests

Read these articles to safeguard your investments and find advice which sits on your side of the table:

Ten Questions to Ask a Financial Advisor Someone asked me what disclosures I would require for financial advisors. I’ve written these principles in a yes-or-no format and reworded the questions. “Yes” is the best answer and “no” means you should seek more information or not consider that advisor at all. Although answering affirmatively to all 10 questions would be my first screen in selecting a financial advisor, it still does not guarantee the person has the competence necessary to offer comprehensive wealth management.

Safeguard #1: Do Not Allow Your Advisor to Have Custody of Your Investments I was recently asked if investors should trust their financial advisors. And my short answer, you may be surprised to hear, was no. Your financial advisor should not also have custody of your investments.

Safeguard #2: Walk Away from “Too Good to Be True” There are several investment safeguards you should insist on. One is to avoid any investment opportunity that sounds too good to be true.

Safeguard #3: Insist on Publicly Priced and Traded Investments One important safeguards is to insist on investing only in liquid assets. Investors undervalue liquidity 99.9% of the time. You need to be in the other 0.1%.

Safeguard #4: Buy Investments That Trend Upward Crazy volatile markets push people toward irrational investment schemes. Know how to avoid them in order to safeguard your money.

Safeguard #5: Understand Your Investment Strategy You have a critical part to play in financial planning. Certain responsibilities cannot be delegated to others.

Safeguard #6: Recognize And Avoid Financial Hooks To safeguard your money, you must be able to extricate yourself from any bad investment quickly. Of course, the companies that sell mistakes don’t want you to be able to do that, so they use financial hooks to hold your money captive.

Safeguard #7: Avoid Investment Advisors Who Sugarcoat Reality Excellent advisors communicate clearly exactly how bad the markets have been and can be.

Safeguard #8: Avoid an Advisor with a Lavish Lifestyle There will always be swindlers masquerading as investment advisors. You can learn to recognize such people by their over-the-top lifestyle.

You Deserve a Fiduciary Standard of Care Most investors are not aware of a critical division of professionals in the world of financial services. This distinction lies between fee-only fiduciaries who are free to act in your best interests and commission-based agents and brokers who are required to act in the best interest of the companies that employ them.

And once again, don’t forget to subscribe to Marotta On Money in order to get comprehensive financial planning and wealth management advice throughout the year.

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About David John Marotta

David John Marotta+ is the Founder and President of Marotta Wealth Management, Inc. He played for the State Department chess team at age 11, graduated from Stanford, taught Computer and Information Science, and still loves math and strategy games. Favorite number: e (2.7182818...)

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