Most blogs have a theme. Our theme is building and protecting family wealth; that which is durable and transferable. Over the past thirty years, we have observed that such wealth isn’t simply about net worth. It consists of three, vital components. True family wealth integrates love, wisdom, and money. And, it doesn’t happen by accident. It is built intentionally, upon a family’s values, vision and goals.
We have also observed a series of habits; common behaviors shared by those families who continue to grow. These are behaviors a family can learn. Behaviors a family can pass along for generations. Families come in many shapes and sizes. And, wealth means different things to different people. However, these six habits are the common threads among the most successful:
Habit #1. Spend Less than You Make – Who hasn’t heard this rule? Yet it is among the toughest to execute. Today’s low interest rates make it easy to dig a big hole. Smart families handle debt with care; there are no short cuts to a disciplined strategy.
Habit #2. Follow a Working Investment Policy – From the basic; Jay Leno only buys toys (cars and motorcycles) with the “extra money” that he picks up in Vegas or other gigs. To the sophisticated; managed risk lies in adhering to an asset allocation model based on modern portfolio theory.
Habit #3. Visualize, Prioritize, and Realize Goals – There is no substitute for focus and commitment to achieve specific short (lifestyle) and long-term (legacy) goals. Doing so empowers us to overcome distractions, find acceptable strtaegies, and then finish the job.
Habit #4. Pay the Minimum Tax – The IRS does not tell us when we miss an opportunity to pay the least amount of tax legally possible. Strategic tax planning only works when done BEFORE a transaction. Paying too little tax, tax evasion, can have even worse consequences.
Habit #5. Manage the Experts – Bernie Madoff flourished on those who had “blind faith” in an advisor. Accountability is vital. So is teamwork. Choosing, coordinating, and managing an advisory team is among the most elusive habits to sustainable growth.
Habit #6. Grow on Purpose – All human growth begins with nurture at the family level. Purposeful families embrace the task of helping each member discover and realize their highest potential. This is the foundation of durable family wealth.
As obvious as these habits may appear, it is not surprising that each is easier said than done. Identifying them is a first step. Establishing them as regular behavior is a matter of time and repetition.
In Blog posts to come, we intend to feature current events as good and bad examples of each habit. Look at it as habit reinforcement training. Please provide me with feedback, questions, comments and critiques. I look forward to hearing from you soon.