Wealth Clarity Blog

Guest blog post by Sarah Hopper of Sound Philanthropy.

You may have heard reference to the recently released study “More is More or More is Less” that shows that kids whose parents give them money to pay for college get worse grades. Personally, I just couldn’t wrap my head around this simple correlation, so I decided to do some thinking about what might really be going on.

The study was conducted by assistant professor Laura Hamilton of The University of California at Merced, and indicates that the students with financial support from their parents and the lowest grades are also the ones (generally) whose parents are “shocked” by the low marks, and failed to set any expectations around grades for their kids. She concludes that these findings support the idea that financial support of college can be a “moral hazard” – meaning that students are unable to take their studies seriously if they haven’t made their own financial investment in the education and experience. Hamilton acknowledges that the key issue is that many parents pay for college without setting expectations, or linking the money to certain goals around grades, graduation, jobs, etc. She encourages parents to consider the “investment” of their funds, and not “assume that all spending during college years has equal value.”

After reading the article Spoiled Children about this study (by Scott Jaschik, posted on InsideHigherEd.com) and the abstract (see link above), and perusing the comments of parents who are celebrating that they no longer need to pay for their kid’s education, I started to develop my own opinion about how we’ve missed the boat on what’s really going on here. Hamilton is on the right track, but I would take it a step further. Perhaps the motivation and drive to get good grades does not come from linking tuition payments to academic success, but rather in the preparation of the student to receive the gift of debt-free education? Consider this:

1. As parents (or grandparents!) how do we convey the “gift” of paying for college to our kids?

Paying for college – or any education – is a gift because the giver has the opportunity to offer the recipient a way to grow, develop as an individual, and enhance their lives – resulting in a more fulfilling existence, and a positive influence on the world. In order to allow it to take the form of a gift, the giver must tell the story of how it happened; how they are able to do this, and what it means to them, including their hopes and fears for the recipient.

Tangible idea to convey this message: Write a letter. Celebrate the milestone of getting into college with special dinner or experience that includes a conversation about the gift, as well as the responsibilities and opportunities that come with this new phase of life. Talk about what it means to be an “adult” member of the family, and express enthusiasm about the perspective and gifts that the young person will bring to the table in this role.

2. What is the “spirit” of this gift?

The spirit of the gift (a term from The Cycle of the Gift referenced below) comes from the giver’s intentions, and communication of those intentions to the beneficiary. These, coupled with the qualities of the gift to inspire and ignite the recipient, have the power to cause a cycle to happen – with the recipient perpetuating the gift to future generations.

Tangible ideas to convey the spirit of the gift: intentions can be communicated as part of the letter suggested above, or in the form of a special, personalized covenant or agreement between the giver and the recipient. The important part of keeping the “spirit” of the gift alive is on-going communications, and discussion about how these intentions are working (or not) for the recipient, and celebrations of significant milestones and achievements that happen along the way.

3. Is the recipient of this gift (the student) prepared to receive it?

The recipient is prepared to receive the gift if the giver, and other adults and mentors in his/her life, have helped him/her to build resilience, and an ability to adapt. This means that through respectful, honest, age-appropriate engagement, the recipient has participated in the growth of the idea of the gift, and discussions about what this means in terms of their own participation and responsibility. In this scenario, it is not necessary to “link” grades to tuition funding, because the motivation to succeed comes from the recipient him/herself, who has been included in the planning – as appropriate – from early on.

Tangible ideas to build resilience: Start money and values conversations early. Celebrate achievements, milestones and personal growth along the way – with real rituals and events that are meaningful for your family.

These questions and ideas were inspired in part by the recently published book, The Cycle of the Gift, by thought-leading authors Jay Hughes, Susan Massenzio, and Keith Whitaker. In it, they describe the necessary process and intentionality that must accompany a gift in order for it to have the desired effect of enhancing the life of the recipient. The buzz around this study was timely, as I was in the process of reading this book. I think it’s a perfect example of what Jay, Susan and Keith are talking about. I encourage you to both read the book, and also to think about the “gifts” in your life – both received and given – and how the spirit of these gifts has affected the outcome.

Some food for thought.

If you have questions or comments for Sarah, you can reach her at sarah@soundphilanthropy.com or www.soundphilanthropy.com  

Common logic suggests the more money you make the happier you will be. Research shows this is true, but only to a point.

Someone who makes a modest amount of money is measurably happier than someone who makes no money. And someone who makes a large amount of money is somewhat happier than someone who makes a small amount. But past a certain threshold – and it is not very high – having more money makes very little difference in raising levels of happiness and very quickly loses its effect.

So what’s the magic number?  In the United States, it’s about $75,000 a year.

Using data gathered from about a half million Americans, Princeton researchers found that higher incomes indeed made for better moods on a daily basis, but once household incomes approached the $75,000 mark, more money did not create more happiness. What does that suggest?

That after some basic needs, like shelter, food and health, are taken care of, your capacity for material happiness is more or less maxed out. It also suggests that focusing on making more and more money, and buying your way to a happier life is a plan likely to fail. Money, it seems, can buy you only temporary happiness, not long-term happiness.

It turns out that what does buy lasting happiness is spending money on others. Research by a psychology professor at the University of British Columbia, and a Harvard business professor determined that money more effectively leads to happiness if you are careful not to overindulge, if you spend on experiences rather than things, and most importantly if you spend on other people.

That all got me to thinking about two very different ways of handling one’s wealth:

1. As an owner
2. As a steward

An owner is internally focused. A steward is externally focused.

An owner thinks, ‘I earned this money, it’s mine, and I deserve this money.’  A steward thinks, ‘This money is a blessing, and possibly I happened to be in the right place at the right time.’

An owner is preoccupied with acquiring more money. A steward is concerned with identifying a purpose for the money, using it to make the world a better place.

An owner holds on to possessions tightly, afraid of losing what he has acquired, spending energy hoarding money. A steward holds to things loosely and does not fear losing them, preferring to invest money for a greater good.

Whether you earn a little or a lot, acting as a steward is a healthier approach. It requires having a higher level of faith, and admitting that you cannot control the outcomes of your decisions. That kind of thinking can lead to a life of real fulfillment, joy, and peace, and help build a meaningful legacy. Those who are on the journey of living fully understand that.

Are you more of an owner or a steward?

Sometimes it seems easier to give away large amounts of money to strangers than to family. Donating money to a well-known charity or foundation is one thing; gifting money to your child or family member can be more complicated.

Of course, one of the greatest blessings of amassing wealth is having the ability to share it, to use that money to spread hope and opportunity to others, especially your family. With that in mind, the end of the year is an appropriate time to put thought into gifts, both those we receive and those we give.

Practically speaking, the gift of money can be both a blessing and a curse for our child or family member.  It can help dreams come true; it can also act as a crutch, adversely affect relationships within a family, and even lead to destructive behavior.

Many clients who come to us for advice on gifting and bequeathing money are unsure of how to begin thinking about the decision. They often have mixed feelings, filled with both hope and fear. To help demystify that process, I have broken it down into three questions:

1. What do I hope the gift will do?
2. What do I expect the gift will do?
3. What do I fear the gift will do?

The first question really sets the stage for the decision. It represents the ideal outcome for making the gift. What do you hope the gift will accomplish? How does the gift help the family achieve its legacy? How will it feel to see your money put to use by your children in your lifetime?

Answering the second question might help you see the gap between your hopes and your fears. Do your expectations line up with your hopes? Or do they more closely resemble your fears? The answer will give you an idea of where you stand.

What you fear about giving the gift represents the uncertainty you feel. It is likely tied to your desire to instill a work ethic and sense of responsibility in your children. How much money is too much? How much will take away my child’s incentive? Will the inheritance give them an unhealthy sense of entitlement? Will giving money to my heirs create resentment or tension within the family?

Making a large gift will likely test the quality of the relationships within your family. If you are hoping the gift will improve a troubled relationship, you are probably going down the wrong path.

Ultimately, giving a gift to your heirs is about transferring hope from you to them. The money should give them hope to accomplish something they could not otherwise do, or something that might take a very long time without help. 

Hopefully these questions will serve as a framework for uncovering the issues that are hindering your decision-making process.  The better you understand you and your family’s values and aspirations, the more confidence you will have making the decision.

I was reminded recently that experiencing the life I want requires courage: to step into the life I want even though the outcome (the future) is unclear and worse yet, out of my control.

I say that because I was on my way to Lake Chelan for a summer vacation last week when I got a call that Steve, a friend and member of my Vistage CEO peer group, had passed away in a tragic bicycle accident.  I was speechless for a few moments; reflecting on how quickly death reminds me of the fragility of life.

Clearly, Steve passed too soon and too young, but he left a legacy of caring and loving influence mostly because he made courageous choices to live a life full of all sorts of adventures with friends and family.  Yes, it was at times very risky, but this is what Steve wanted.  As one person mentioned at his “celebration of life,” Steve experienced 120 years of living in his short 60 years on earth.  Steve knew what he wanted in life and went for it.

Don’t take me wrong, my comments aren’t intended to suggest that you need to live like Steve, but instead, my hope is that you (and I) will muster the courage to step fully into the life you want, and are uniquely designed to live—and to live it.

Sounds too simple?  I believe it’s simple, but based on my experience to date it’s definitely not easy.  Here’s a quick roadmap that I’m using to think about my own life:

1.     Choose.  Life is full of choices, moment to moment, that you and I get to make – choices about what we want to experience and become.  Opportunities are abundant, and this is the reason life is so rich.  The key, I am learning, is to make bold and authentic choices that are best suited to me and not unduly influenced by others or external factors.  I’ve also learned that taking the time for introspection has helped me make better choices about my life.

2.     Act.  Don’t let fear of the unknown keep you stuck.  Many of you have seen the Babe Ruth quotation in my office that says, “don’t let the fear of striking out get in your way.” Action takes courage because there are risks and the outcome is less than certain.  Leap into the life you want because no one else will do it for you.

3.     Let Go.  In reality, we control very few things in our day to day lives – what other people think of us, or how long we have to live on this earth, to name a few.  We only control our choices and actions at this moment.  Get proficient at the things you do have control over, and stop obsessing over and start letting go of the things you don’t.

In my experience, fear is the thing that keeps me stuck worrying about outcomes, and that ultimately leads me to a muted and watered-down life experience.  If I let go of outcomes, I won’t avoid grief or failure, but the totality of my life will be authentically mine.

It’s important to note that courage doesn’t mean recklessness. It also isn’t wishful thinking or passive hope. Courage is an action word that moves us towards an outcome but can’t guarantee the result. As Steve reminded me, each day of life is precious and so the importance of making courageous choices today is even more poignant.

Are you being courageous today to choose and act, or are you stuck?  In a future post, I’ll be discussing the kinds of things that keep many of us stuck.

As a business owner myself, there is no shortage of fears and worries that I either want to ignore or don’t know who I can talk about them with. It has morphed over the years, and I definitely feel more comfortable talking about deeper issues and concerns, but it has taken me a long time to get to this point.   

In retrospect, it was many times pride, fear of failure, and other times just the lack of someone (other than my wife) to talk to.  After a few years of dumping on my wife, and some counseling, we concluded it wasn’t good for our relationship.  Close friends may not be a good alternative either, because many times they just don’t have the experience or perspective to offer much value or guidance.  Key employees are also generally not good choices due to confidentiality and the potential for your raw thoughts to be shared with other third parties. 

But make no mistake, friend or no friends, these fears and worries are real and go home with the business owner every night, whether or not you consciously think about them.

The funny thing is, business owners are generally an optimistic bunch, and we really would much prefer to just focus 150% on running and growing our business and not waste energy on things out of our control.  However, this mentality only creates a false sense of security that can easily unwind into unintended consequences; namely, we aren’t really prepared for the uncertain future that awaits all of us. 

So, here are three fears you may want pay much closer attention to: 

1. Feeling isolated at the top—no one to talk to or be real with.  Advisory boards can be great, but are not always the best venue for processing your inner concerns, hopes, and dreams.  Unsure about whom to trust and with what information?  Concerned that if you trust someone with confidential information about the business it could get leaked? The need for a true confidant to listen to your joys and disappointments without an agenda and to hold you accountable is invaluable.
2. What if something bad happens?—get sick, die, divorce.  Who is asking you the hard questions without sugar coating it?  Is there a contingency plan to address these unfortunate potential events so your wife, family, and key employees aren’t left with a big mess to clean up?  Does someone know you and your situation well enough to help guide your choices that will impact your life and business?
3. Burnout caused by an out-of-balance life.  Who are you without the business?  Is there an overarching plan or legacy for all this hard work and time?  Consider a broader view of your wealth that includes intellectual, financial, social, family, and spiritual capital. Many times the business and financial capital is well developed and other areas of life are immature.   

I have lots of experience with these fears and many others and have carried them around for years.  It was about 3 years ago that I finally realized the importance of facing them head on.  The benefits have come in the form of lower stress, greater life satisfaction, and a clearer purpose and meaning for my life. 

If you have questions about my journey in this area, please drop me a note and let’s grab coffee.  I’d be happy to share my story.

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.

I am excited to have Richard Beaton and Linda Wagener, founders of Marigold Associates, provide a series of guest posts related to the topic of kids and money.  As a heads up, we are hosting a lunch seminar on Wednesday, February 15th, that will give you an opportunity to hear even more of their deep wisdom and experience in this area.  If you are interested in attending, please contact jessica@highlandprivate.com.

Will your children be positively or negatively affected by the financial wealth you share with them?

In thirty years of working with families and children, we have never heard one family member express concern about the impact of wealth on their kids. Wealth is always assumed to be a good thing.  But the reality is that there are plenty of reasons to be concerned.

The value of wealth lies in its power to expand opportunities and resources that can strengthen families and provide a good life for children. There are extraordinary young people coming from families of means who are thriving and contributing positively to society. There are also extraordinary young people coming from families of means who are floundering amidst the wealth, overwhelmed by abundance and opportunity.

Affluence increases certain risks. There are far too many examples of young people whose lives have been distorted by wealth. The negative impact of wealth can result in a broad range of life problems, which include:

• Lifelong financial dependency.
• Loss of hard won family wealth due to mismanagement or unhealthy lifestyles.
• Destructive values about money such as equating money with self worth or believing that happiness depends upon having all the latest trends.
• Over use of credit, ending in unmanageable debt.
• Family conflict and resentments about money and inheritances.
• Loss of incentive to live a life of substance and meaning.

Gift that it is, wealth apparently has the power to build or destroy. What makes the difference?

We have been studying multigenerational families of wealth for many years, and here’s what we’ve found.  Some of the families we have observed have practices that consistently result in generations of children who become creatively engaged in life. They contribute to their families and communities through productive lives. Other families have struggled. Their children are voracious consumers of wealth who have failed to build their lives around a meaningful purpose. In the worst cases, there have been drug and alcohol problems, eating disorders, family alienation and estrangement.

We observed that the successful families have deliberately prepared their children for wealth. Beginning at a young age, they have provided financial education and training, formed their children to have strong values including a work ethic and integrated certain practices into their family life.

This is the first of a series on how to prepare children for living with wealth. We will tackle each of these topics – education, formation and practice – in the blogs that follow. In the meantime, here is something you and your family can do in preparation:

1. Discuss with your spouse what you’ve done to prepare your children for wealth.  What concrete steps have you taken?  Where are you succeeding? Where could you improve?
2. Talk with your children about their views about wealth.  What do they think money is for?

As I was thinking of last month’s post about leaving a legacy I thought but what if all I had was today?

If you knew you only had today to live, how would you spend your time?  What things would you choose to do?

My guess is that you would make sure to spend time with people you love and you might even go do something super fun, or see something that really mattered to you.  As I contemplated it myself, I think the day would be marked as much by the things that I wouldn’t do as by the things I would choose to do. 

For example, I wouldn’t get frustrated or angry with someone but instead would laugh often; I wouldn’t worry about rushing from place to place but instead would focus on staying present in each moment; I wouldn’t focus on mundane tasks and busyness in favor of meaningful conversations and relationship; I wouldn’t worry so much and waste time on fear-based thinking but instead explore life.

The reality is that we really don’t have any control over how much time we have on this planet.  The funny thing is that planning for the future is critical to what we do at Highland, and it’s very important, but it can give a false sense of control.  Living fully present in each moment and focused on today is all we really have for sure.

Try this simple exercise: Before you do the next thing in your day, ask yourself, what if today was my last?  How would you choose to live it?  My suspicion is that you might need to make some adjustments or different choices about how you’re going to spend your time.

This doesn’t mean that you don’t go to work (nice try), but instead use it as a way to evaluate if you are doing the things that bring meaning and value to your life, even at work.

We all have things we have to do but maybe don’t want to, but the key is to minimize these types of items and instead of stubbornly doing all of them regardless, use this screening mechanism to evaluate what needs to change today.

What would you do if today is all there is?

About a month ago, the Wizard of Westwood, John Wooden died after a storied life of triumph.  He was arguably one of the greatest coaches and leaders of all time, indelibly influencing the game of basketball forever with his focus on basic skills, team greatness, and individual commitment.

After his death, I watched hours of ESPN programming about his life, his philosophy, his relationships, and his legacy.  I was amazed by how many people he influenced during his life, even long after he stopped coaching, and I presume for many years to come.

Over the past decade I have read several books about John and his life.  I have even used some of the elements of his Pyramid of Success approach in my own business team development and vision.  I shared some of that in a previous post on our internal strategic planning.

As a part of my own personal visioning process, I asked myself the question:  At my funeral, what do I want people to say about me?  Obviously, this really unabashedly pokes at the issue of legacy and the true meaning of my life. 

I had never done this before and decided to take a stab at it. So, one afternoon I got out my notebook and pen and started a list. 

It was interesting that it took me a while to get past the small items and performance based things like work success, awards, etc. and get to the essence of who I am and what I want to be remembered for (good father, husband, deep friendships, loyalty, compassion are a few of mine).  I plan to spend more time refining the list and processing what I wrote down over the next few months as I continue on this journey.

Some of the items are quite personal and in a recent conversation with a friend who was asking me about my list, I found myself getting very uncomfortable.  This tells me I also have some work to do on being more authentic with who I am—and who I want to become. 

What do you want your life to be about?  If you don’t know, it might be time to think about it and start moving towards it.  This exercise might come in handy, “My Life Story.”  It’s a five step exercise that helps represent expression of the “choices” you are making about your life.

If you want to know more about my experience going through this process, please feel free to reach out and I would be happy to share more of my story.

The word “wealth” gets used often and can get confused with the word “rich”.  They are not interchangeable but can be used like they are synonymous.

The point or outcome of proper “wealth” management is so you can lead a “rich” life.  Wealth connotes money, investments, assets, property, and rights of ownership.  (See my previous post on what wealth management means.)

Riches represent things like: significance, family, passions, friendships, happiness, impact, joy, compassion, and legacy.  We all want a “rich” life, don’t we?  You might say these are the softer issues associated with wealth, but in my opinion they are what matter most in my life and they aren’t impacted by how much money you have.

Here are a few things you might consider that can increase the riches in your life:

• Take the time to visualize the “rich” life you desire.  Write it down because your definition and picture is unique and different than mine. 
• Integrate your wealth management strategies into your life so that it can yield riches. That is the reason why your core values and personal vision are critical elements of a wealth strategy.  I will be talking more about how to do this in future posts.
• Inventory the results of your wealth management in light of the life you desire.  If changes need to be made in your strategy now is the time to make them.
• Evaluate the amount of time you are spending on things that don’t create riches in your life.  Commit to making one key change in this area this month. Really.  This month.

We only have only one life to live and so living it to the fullest, each day, is the only way I know how to live richly.  As I said in a recent video blog, I am evaluating my use of email and how it can control and rob me of precious time.  Join our discussion on Facebook on what areas of your life need adjustment.