Outside Economics

Recently I was in a meeting and the thought occurred to me; why do people even attempt to have a financial plan? What is the purpose of having a financial plan? Why take the time to create a financial plan and put forth the effort to implement it and follow through with it? The answer to these questions may sound obvious, but as I have studied financial planning and worked in the financial industry for the past 30 years, I have concluded that people have an innate desire to be self-reliant. However being self-reliant is a learned trait while we may have the innate desire, we have to act on it, and learn self-reliance.

What does it mean to be self-reliant? According to Dictionary.com, the adjective originated around 1826 and means, “relying on oneself or on one’s own powers, resources, etc.” Another definition, one that is a little broader is this: The ability, commitment, and effort to provide for the spiritual and temporal necessities of life for self and family. Both definitions explain the necessity to provide for one’s self.

The second definition is more comprehensive. My thinking is; how can you be self-reliant if you are not mentally or spiritually in the game? Can someone provide for self and others without that inner strength that comes from being mentally or spiritually prepared? I believe that self-reliance is more than just a good job and a fat bank/retirement account(s).

Self-reliant people not only have a good source of income, they have money in the bank, investments, as a friend of mine would add some food storage, debt free, and they are spiritually and mentally able to care for their own. This is a challenge in todays world where people are pulled in every direction, often wasting time and money. In some cases, children don’t have a complete understanding of what it took to earn the money they are now spending. 

With the challenges of providing for one’s self and family, may I submit that it would also include the necessity to continue to learn and improve one’s self. Consistently learning and integrating new concepts of truth, would help a person accomplish a goal of self-reliance. For example read good books, work with a mentor, be a mentor, help someone else reach their goals.

How does someone become self-reliant? Here are six ideas that will help you become more self-reliant:

1. Pay yourself first: Take some money out of each pay check and send it to savings (savings accounts, retirement accounts, investment accounts). The discipline of saving money and living on less than one’s income is a critical part of self-reliance.
2. Using a family budget: Using a budget is one of the basic principles of good money management. See more here
3. Risk management: Risk management is taking care of the risks we are exposed to on a daily basis. There are four things that can be done with the risks: 
1. Keep the risk yourself and personally pay for the things that may happen
2. Control the risk through behavior
3. Prevention - don’t engage in behavior/activity that would enhance the risk
4. Transfer the risk through some means of insurance.
4. Be prepared: Things happen in life that cause great pain or financial difficulty (loss of a job, divorce, death of a loved one, business reversal, etc.) These trials may cause us to stretch and grow in ways we never knew we could, so finding, and developing coping skills is critical (developing the mental/spiritual side of self-reliance).
5. Daily improvement: Find something to do on a daily basis that will help you improve various aspects of your life. For example each morning, I spend time, praying, reading, writing in a journal, exercising, and meditating. 
6. Become debt free: Debt is truly a bondage that never sleeps, never eats, is always your companion where ever you go; becoming debt free is a blessing of self-reliance. Get out of debt!

These steps towards complete self-reliance take time and work. Don’t be too hard on yourself if you are not self-reliant in the next year - keep working towards it. “Claim progress”, as my wife would say. Map these things out how you personally might implement them in your own families’ and measure your progress. And then realize that life happens and each of us can experience a reversal.

Reversals that can cause a person to be completely wiped out and they have to start over, some people go through life with no issues at all (at least not that we see), so be patient with people around you as we are all be on the road to self-reliance, we aren’t at the same level, or we may have just suffered a reversal.

Finally, remember that there is always hope; keep the embers of hope alive by working on the above six items in some manner, as part of your financial plan regularly measure and keep track of your efforts, and you will become self-reliant.

REMEMBER:

"Strive not to be a success, but to be of value." ~ Albert Einstein

Now that you are recovering from the pain of settling your tax bill with the federal government, Taxpayers often wonder, where does all their tax money go? The Office of Management & Budget breaks down where tax payments go each year, allowing Americans to see what they’re getting.

For fiscal 2015, the federal government took in over $3.2 trillion in tax payments (that’s $3,200,000,000,000) a record year compared to previous fiscal years. The federal budget for fiscal year 2015 ran from October 1, 2014, to September 30, 2015. The total figure amounts to approximately $21,833 for every person in the United States. 

Its important to note that the what is paid in taxes and what the federal government budgets are two different numbers - the difference is the deficit and is borrowed from the federal reserve bank and other countries around the world. The 2015 deficit was $439 billion. While the 2015 deficit has come down from previous years, the total public debt continues to rise. The debt continues to rise because every year we add the current year’s debt to the pile already on the books. Bringing our total debt to over $14 trillion dollars today, which is clearly unsustainable. Our nation’s debt is at the level of our GDP - meaning that if we the public spent an entire year working and producing everything this country produces and paid 100% it on the debt we might pay it off, depending on interest rates.

Another area of spending that is interesting is federal civilian employees, their wages and benefits. I am never one to complain about what someone earns, after all that is the free market we live in, which I completely support. However, it takes a lot of tax payers to support just one federal worker. The average take home wages for federal employees are $83,034 per year. Benefits cost the tax payers another $35,532 per employee; bringing the total compensation for 2015, to $118,566 per employee. (These figures do not include the military.) This is quite a bit higher than the average american employee of the average american company.

The wage gap between federal employees and the private sector continues to grow according to the CATO Institute. Using 2014 numbers: federal employees earned an average of $84,153 and the average private sector employee earned only $56,350. When considering wages and benefits, the gap is larger: $119,934 for federal employees and $67,246 for private sector employees. I could not find the private sector earnings for 2015, but I don’t think they caught up to the federal employees compensation in one year. 

I remember as a teenager my father explaining to me why it was wrong for the federal government to allow federal employees to unionize. He explained that in the future wages would be out of control and that the employees of the federal government would stop being true public servants.    

The mandate to reign in federal spending and to balance the budget must be accomplished. We simply can’t go on for ever running up such deficits and incurring so much debt. Congress and the president must stand up and do what is right. Period. All of these little pet projects of a million here or a million there have been adding up and now they have caught up to create an uncontrollable flood of debt that soon will wash away everything in its path. We all need to stop hanging onto these pet projects and shutter a few federal agencies. 

And the public needs to learn more self-reliance so they can stop thinking they “need the federal government to solve all their problems.”

Source: Office of Management & Budget, CATO Institute

REMEMBER:

The penalty good men pay for indifference to public affairs is to be ruled by evil men. Attributed to Plato

Last week I wrote about Leadership and Self Reliance with the idea that this week I am following up with how this works with a particular professional business. First let me explain a little about self-reliance. The idea is for people to become self-reliant or to rely on themselves, their own powers, resources, etc. This does not mean that a person does not use the services of other people, but it means that they have prepared their lives in such a way that those services add value to what they are doing on their own. The concept is the opposite of the entitlement mentality wherein people believe that they deserve something without any effort on their part.

It should be part of everyone’s vision to become self-reliant in this world. I love my children, and I am thrilled at their successes, and I love helping them succeed, I am most proud when they accomplish their goals on their own. Each one is a great person in their own right, some are more self-reliant that others (they are all at different and stages in life where we would expect this). The vision is to help them become self-reliant in their own family unit. That does not mean they won’t need help now and then, it means they are figuring things out for themselves and then seeking help with their own plan.

As a Personal CFO, using the composite leadership principles, over the years I have worked with clients who are chiropractic physicians, (while this works with all businesses in this article I am going to reference chiropractors). I like working with them because, as part of their medical training, they are taught that the body has incredible healing powers on its own, it needs a little adjusting now and then to keep it going. They also realize that other complications arise and a person may need medical care beyond their specialty. The chiropractors I have had the pleasure of working with have a sincere desire to make people’s lives better. They are, for the most part, self-reliant.

In my work as a strategist, helping chiropractors fulfill their vision, often starts with defining what their long-term vision is, (the direction they want to go), complete with all their ideas, which generally goes beyond ten years or more. This may include building a self-sustaining practice that helps patients improve their health. A practice with all the right policies and procedures in place, so if a team member is missing for a few days or out on maternity leave, others know how to fill in. Implementation and monitoring can provide a more profitable stress free practice. After all only when a business is profitable can it continue to provide the services necessary to the public. The vision also includes the most important benefit of all, a quality family life with time for the spouse and children. Remember that ALL businesses are family businesses.

What makes the vision, come about is setting and accomplishing specific measurable goals. These goals are more mid-term in nature answering the question: what specific things can we do to accomplish the vision? The change agent is active in this role, defining these goals and designing measurable ways to accomplish them. Implementing certain strategies to bring about greater success in the practice. In the case with a chiropractor, it may involve additional marketing, to see more people at certain times of the day. Writing the policies that employees need to follow to make that patients receive the level of service and care they are seeking. Establishing an office budget to better manage the office’s financial resources. Designing strategies to minimize taxes. Risk management and how to protect against exposed risks. Many of these goals can be implemented in as little as a few months to a year.

As items are implemented in a manner of priority to the chiropractor, the practice begins to change in the practice and home life. Stresses are reduced as items on the “to-do list” are accomplished. The Manager (in this case the Chiropractor) sees the things that are necessary to accomplish day in and day out to accomplish the goals set. This direction provides a charted course that ultimately makes the practice easier to manage. Employees know what to do in their areas of responsibility as well as understand the responsibilities of others, thereby creating a cohesive team effort.

A challenge that has always occurred is the monitoring of what is happening. Through constant outside monitoring, small lapses are able to be caught and corrected. As financial issues arise they are dealt with right then. Providing counsel at that time is easier than trying to fix a problem months later. We can’t predict the future but we can be prepared for what may come. Monitoring the practice allows the chiropractor to focus more on patient care, which helps the practice become more profitable.