Wealth Clarity Blog

Guest Blog provided by Richard Beaton & Linda Wagener of Marigold Associates.

Over the past several weeks, we discussed the value of using deliberate training strategies such as allowances and budget management to teach children financial skills. In this segment we’re going to tackle the problem of how to form our children’s attitudes toward money and work. These are rarely shaped simply by education. They are rooted in the basic practices and habits of family life.

You may have heard the phrase “shirtsleeves to shirtsleeves in three generations.” It refers to the fact that often a person’s attitudes toward money and work can be traced to where they are in the family wealth cycle. Those in the first generation of affluence learned how to earn and manage money because they had to. There were no family funds to buy them everything that they needed, wanted, or thought they wanted. They had to work to pay for any extras and even in some cases, the necessities, like clothes. If they wanted a college education, they had to take out loans and work part time. By the third generation, the work ethic has often declined to the point where the accumulated wealth of the family is depleted by a generation who has learned to be consumers rather than creators of wealth.  But it doesn’t have to play out this way.

We interviewed a member of a fourth-generation family of wealth who illustrated this pattern clearly. His side of the family had continued to live productive lives. Their wealth had increased in every generation. Another branch of the family, the “country-club cousins,” had burned through their inheritance. Their kids would be back to shirt-sleeves. The difference? He pointed out the window to an 8-year old neighbor kid, mowing the lawn across the street. “See that kid? His family is worth millions. But they live modestly, and expect their kids to work as soon and as hard as they are able. See that other kid next door? He’s 16 and has never held a job. His family doesn’t have the wealth of the other, but probably never will.”

In our work with entrepreneurs and families, we have heard variations on this story over and over again. The families whose children grow up to be hard-working productive contributors are expected to work and be responsible, just like everyone else. They live comfortably but modestly. They also recognize that their wealth is a responsibility, not a privilege. It is to be used for good, not for pleasure.

Five Things You Can Do to Teach Your Children to Handle Wealth Wisely

1. Let them learn the joy of working hard and the reward that follows. It may be tempting to think that schoolwork is enough to accomplish this, but schoolwork has sadly become more about performance achievement. In contrast, work contributes to the well-being of others and is a piece of a larger enterprise.
2. Never use money as a reward for achievement such as grades. Such practices teach kids that money is the only reward that matters, and they distract them from the intrinsic pleasure of doing well.
3. Live modestly. This is often very difficult for those who want to enjoy their wealth. One entrepreneur we interviewed came from significant poverty and loved the lavish lifestyle he was now able to afford. The children of his first marriage had blown through every cent he had given them. He didn’t want the same thing to happen to the kids of his second marriage, yet he couldn’t give up the ostentatious lifestyle. Eventually he had nothing left to pass on.
4. Be wise with your inheritance strategy.Let your kids know from an early age that they will be expected to work and live responsibly. Make a commitment to yourself that you won’t give large sums of money to adults who have not demonstrated the capacity to use finances wisely. 
5. Don’t use your wealth to protect your kids from the harsh realities of life. Admittedly, this is difficult for any parent, but your children need to be exposed to those in need in order to build their sense of empathy and gratitude. You can build their hope by demonstrating how your wealth can make a difference in the world. Involve them early in giving back through hands-on service in their community. There are many excellent organizations that provide opportunities for young people to develop their skills. Social Venture Partners (Seattle) is one good example.

There is little in life as satisfying as seeing your children flourish in their lives; delighting in their life’s purpose. Whether they end up with modest or robust incomes, they will need to know how to work hard and manage their finances. As parents you can make a significant difference through financial education and creating a family environment that forms their character and values.

A big “thank you” to Richard Beaton and Linda Wagener of Marigold Associates for guest blogging.  Feel free to contact them directly if you have questions or need more information.  As a reminder, we are hosting a luncheon on February 15th to hear more about the subject of Kids & Money from these two experts.  If you have an interest in learning about the event, please contact jessica@highlandprivate.com.

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!

President Obama, I understand that you are in Bellevue right now–just down the street–and I was wondering if you wanted to drop by our office for coffee?  If you are too busy I understand; however, if we did have coffee today, this is what I would want to say to you. 

I am generally a positive person but lately I find I’m getting tired and annoyed by all of the political rhetoric, posturing, and maneuvering.  With over twelve months until the next election there seems to be an endless stream of news stories documenting the huge challenges we face, the various solutions suggested by you and other congressional leaders and GOP contenders; unfortunately, the volume is only expected to rise in the coming months. My stamina to listen much longer is shrinking faster than the short summer here in Seattle.    

Don’t take this commentary to reflect any hidden political agenda because I’m not attempting to position one.  What I am attempting to highlight, however, has to do with what isn’t being said, and needs to be said:  

I am rooting for you to be successful as President of the United States—in fact, if everyone takes a minute to think about it, we all need you to be successful, because the consequences of failure are too great.  In fact, I want you to be remembered as the best President of my generation.  Your success is good for me, my family, my business, my clients, and our country.  

There are fourteen months in your elected term remaining and these are precious months for the U.S. with no time for waste.  Taking a position that nothing will get done, or can get done, because of a political stalemate is unacceptable.  It would be like the Seattle Seahawks fans hoping the team will lose this year so we can get a shot at drafting Andrew Luck (expected first round quarterback pick from Stanford) next year.  NO! We are on the same team as Americans and we want to succeed now, not next year with a new President.        

You clearly have a job that most Americans can’t and don’t want to perform, but from my “corner” office to your “oval” office I need you to do the following:  

1. Lead like you have never led before; don’t cave into the negativity or hide.
2. Be a leader that inspires me to be great and do great things in my family, my work, and my community.
3. Show us how to move forward as a country without regard to race, religion, or political beliefs. 
4. Admit mistakes quickly and openly, in hopes of finding the right game plan that will lead to success now.
5. Do what needs to be done because it needs to be done, not because it will get you reelected. If you fail, re-election won’t matter.
6. Give America the confidence to transform and once again achieve greatness in both our own eyes and that of the world.   

I’m rooting for you!  

Sincerely,

John C. Christianson, CFA

Who doesn’t want to part of something excellent?  When you are focused on excellence, you attract people who are also focused on it, and value it.  The end product is a great team.

While team greatness is a wonderful outcome, there’s a dark side of excellence: perfectionism. 

It is really easy to confuse excellence with perfection.  One of the beliefs a perfectionist will hold onto is “the irrational belief that you and/or your environment must be perfect”. (www.livestrong.com )  Not only is this unachievable, I believe the irony is that in this pursuit, the perfectionist becomes mediocre.

How can this be?  In the pursuit, the perfectionist is always looking to analyze more, polish more, think more, nit pick more, etc…, and suffer from paralysis.  Too many great ideas fail to get implemented, utilized, or even considered out of the fear that the outcome will not be perfect.

I am reminded of the General Patton quote, “I’d rather have a good plan executed today, than a perfect plan executed next week”.  The exception to this is if we are talking about life or death situations, and if so, I always defer to a perfect plan.

Ron Ashkenas, with the Harvard Business Review, wrote a great blog on “The Problem with Perfection”.   His thought was that rather than waiting for the perfect solution, start testing while collecting more data.  Start small, with low risk and be relentless in honestly reviewing the data.

Will you have a few duds? Maybe, but the advantage of field testing, reviewing and adjusting is a cycle that will accelerate learning, growing, and creating value.

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.

I want to be more authentic.  I have mentioned it frequently in my posts and so I thought it would be helpful to provide some additional insight into what it means and why it’s so important to me.  No Webster dictionary definition here, just the things I believe contribute and lead to a more authentic life, such as:

• Less compartmentalization and more integration of the various roles I fill—business owner, husband, father, friend, and individual.
• A willingness to share how I’m feeling, whether good or bad.
• Clarity about what I want and need in my life.
• Less worry about what others think of me.

A few weeks ago, I was talking with Cameron Herald, The BackPocket COO.  I was introduced to Cameron by Les McKeown, author of the popular book (and blog) Predictable Success.  Cameron is a very successful guy in his own right, and we were getting acquainted on the phone when he said something that has really stuck with me.  He said (and I’m paraphrasing), “when you are working or living in your authentic self it’s so easy that it just naturally flows and you almost don’t need to even think about it.” It’s that state of living where “who you are” at the core is completely aligned with “what you’re doing and becoming.” 

He went on to talk about his ability to speak in front of people, and how easy that is for him to do; he doesn’t struggle or need to work at it.  How often I can row against the tide of my life instead of riding with the current; letting my gifts, my natural abilities, the things that come easily to me, and just letting them flow.

I realize that it would be unrealistic to think I can always be in that authentic zone, living fully, but my desire is to be more authentic, more often, which can lead me to a life of ease much quicker and with much less work.  It takes so much more energy and effort to be who I’m not or what others want me to be.  So, why work so hard if I don’t have to?

What can you do to live a life of ease?

“If you’re not failing every now and again, it’s a sign you’re not doing anything very innovative.” Woody Allen

I don’t know about you but I hate to fail.  Failure just sucks.  It is so much more fun to win and be successful.  Unfortunately, failure is a part of life.  I guess that makes me a poor loser.  In the past I would just stop with that last statement and then try even harder to win next time.  I called that perseverance and I even held that up as a virtue but I was missing something significant.

Just to be clear, I do believe that persevering is a critical element in creating the opportunity and environment for success to happen, but only through failure have I really learned and gained wisdom; and wisdom has been beneficial in my life and those I come into contact with.

The reason I (and most people) are not interested in failure is because it usually means pain of some sort and we all want, and were taught, to avoid pain.  I am not suggesting that we need to seek out some kind of failure induced suffering, but instead that we change our focus from the failure and move it to the adjustments we can make.

It’s all about the adjustments.

I learned this recently when the second quarter team goal that I was responsible for didn’t get accomplished.  I had an opportunity to model failure in front of my team.  I could have made excuses (and have in the past), I could have denied or ignored it (ditto), but instead I took a different tack.  I told my team that I failed, but most importantly, I laid out the adjustments to the plan that I felt would allow me to be successful during the third quarter.  This was liberating for me because I was honest about the disappointment with myself but also what I planned to do about it.  My team even got to speak into my adjustment plan and feel vested in what I was doing.

This kind of humility and transparency are vital in an organization and especially one that you want to build trust.  I am not perfect and I need to accept that and model what happens when I fail or I can’t expect anyone else on my team to do the same.  There is no getting around the fact that it’s hard to do, but the benefits far outweigh the personal apprehension you may be feeling.

Don’t get me wrong, this doesn’t mean I am accepting a lower level of performance expectation or commitment from me or the team, in fact, what you will find is that the faster you can learn how to adjust, the sooner you can reach your team goals.  Fail-adjust. Fail-adjust. Fail-adjust.  Getting stuck on failure is where I have gone astray previously and now try to move to adjustment much quicker.

If you want to know more about the impact on my team, feel free to drop me a note or give me a call and I’d be happy to share more about what I’ve learned in this area.

P.S. Go for it.  The sooner your team knows you are human and fail too, the more of your energy will be focused on adjustment, and the sooner you will see significant impacts on your team success, energy, and performance.

Join us for the special briefing “Preserving, Protecting, and Enhancing Wealth in The New Normal” hosted by the Highland Capital Management Investment Team of John Christianson, Dan McGilvray, and Jonathan Friedman.

July 29^th, 2010 from 12:00 to 1:00 PM (PST)

They will share with you ideas about facing “The New Normal” including:

• What is the “New Normal” and what does it mean to you?
• What is Highland doing to enhance our clients’ investments and their future?
• What might the future hold?

Please RSVP by emailing tina@HighlandCM.com by Tuesday, July 27^th.  We will then send you a link to the presentation.  If you have any specific investment questions related to this topic that you would like addressed during the webcast please feel free to send us your question(s) in advance.

We look forward to having you join us!

The book The 4-Hour Workweek has taught me to pay attention productively. 

Productivity is not just about getting things done.  We need to pay attention and set boundaries for ourselves.  Check out our newest video where I discuss how not to let situational circumstances control those boundary lines.

What are you going to do to pay attention?

I don’t have one, but sure wish I did.  Many times in my life, I’ve wanted a mentor – someone I could talk to about my career, life, key decisions, and all the stuff in life that can use the soothing wisdom that only rich life experience can provide.

Many people have played mentor-like roles in my life: my wife, friends and colleagues, and a few consultants.  Their perspectives have always been helpful, but the dynamics in many of those relationships have been more like sounding boards. I’ve never had a mentor in the true sense. 

Maybe some of the reasons I never had an actual mentor are that I didn’t know where to look or how to find one, also I lacked the wisdom to really appreciate and understand the benefits.  It is clear to me now that I missed out, so I’ve decided to try a different tack.

Three untraditional strategies to finding a perfect mentor:

 First, I am building my network of business people who have deep experience in various industries.  I ask them to evaluate my strategies and ideas and to offer their input on opportunities and roadblocks and what they see in the future.  It’s a funny thing – most are thrilled just to share their experiences and watch as I progress.  As one of the guys said to me today, “It is fun for me to grab you by the scruff of the neck, show you what to do, but you have to go do it.” 

Second, I am embracing the openness and transparency that these types of relationships require.  It takes some practice but the quicker I have gotten “real” with my issues the better the conversations have become.

Third, I am processing the idea of building out an advisory board with a few of these key individuals.  There are other approaches like YPO (Young Presidents’ Organization) and Vistage that can provide important support in similar ways, but the idea of a personal advisory board seems to make sense to me right now.

In time, I believe a few of these relationships could turn into mentorships, and that would be just fine with me.

Have you found a mentor that already existed in your own network?