My life is definitely one with Mustachian problems. When we were in the million net worth category, I didn't worry so much about DW feeling overwhelmed by the financial decisions or the kids getting too much too soon, but now that the estate is over $4M and growing, I worry more about her feeling stressed out or the wrong person taking advantage of her trust. I'm perfectly relaxed with moving hundreds of thousands around, gaming out tax strategies, and all of the various optimizations that save us tens of thousands and match our risk tolerance to our goals. We are a great team, but neither of us are as good at life individually...
Why not leave an instruction manual behind? Folks leave a will, which is good, but some folks need detailed instructions. If a company can have a emergency action plan, why can’t an individual? There are templates out there.
I've written a 6 page guide for our son and my wife.
Headings include:
Contacts. (Accountant, key relatives, Attorney, etc.)
Things To Do. (Contact friends and put in a change of address for us to our son's home, both right away and at the end of the next two years so important mail comes to their home.)
In Our House. (Stuff in our house they will need like papers, etc.)
Land (List of properties owned, Property management company or business partners and gist of any outstanding deals.)
Banks (What banks we have accounts in and the names they are under.)
Investment Accounts (Where we have our stocks and bonds, etc.)
Insurance (What companies we have policies with and what kind they are.)
Accounts Receivable (Who owes us money, example, someone pays us mortgage payments for a property we sold them.)
Liabilities (Who we owe money to, used to include our mortgage (paid off!!), any outstanding business deals we owe money on. I don't worry about routine things that will get invoiced every month, that sorts itself out easily enough.)
Bequests (Mandatory bequests are in our will, this includes what to do with stuff such as our books, tools, craft supplies, etc. if they don't want them and don't need to sell them.)
Burial Plans (What our preferences are so they know.)
And, lastly,
Money and Investment Advice.
I'll include most of the text on this one as it's pretty generic:
"Don’t give financial advisors the ability to embezzle your money.
Most financial advisors are not advisors, they are salespeople paid on commission. They are paid more if they steer you into investments that make their employer rich. You want an advisor that has a “fiduciary responsibility” to you. That phrase is really important so double check and get it in writing that it’s part of their business relationship to you. Pay them a fee for their time not a percentage of what you own.
Keep your account passwords and control of your accounts in your own hands.
Financial advisors are useful but there’s nothing they will do for you that you can’t easily learn to do yourself. Take the time to learn about money and investments. Think of it as your job. If you don’t do that someone else can legally skim a lot of the earnings off your investments. If you can already add, subtract, multiply and divide and get the right answer most of the time, there’s nothing about this you can’t easily learn to do.
Fees matter a lot more than intuitively obvious. Learn about compound growth and the astounding effect of a 1% difference in fees on how much your investment will be worth in 20 years. Hint: it’s not just 1%, it’s a whole hell of a lot more!
Don’t be fearful and don’t be greedy. Inflation is guaranteed to steal your wealth over time. So a lot of the investments people think are “safe” actually aren’t safe over long time periods but they are usually safe for a short period of time. The purchasing power of money in a savings deposit earning 1% is being lost every day because inflation averages 3%. When SwordGuy was a kid gas was $0.26 a gallon!l Don’t confuse risk with volatility. Buying a mutual fund composed of hundreds of top notch companies is a volatile investment (the value can fluctuate quite a bit from day to day) but it’s not risky. It’s actually safer than the savings account if your time horizon for needing the money is 10 years out.
That 5 year, 10 year, 20 year and 30 year time horizon is an important skill to learn. Regular folks stuck with just wages for income don’t typically think that way and their lack of wealth (often despite high incomes) demonstrates that.
Read JL Collin’s book A Simple Path to Wealth to learn about investing. It’s short, simple, and teaches you what you need to learn with a minimum of fuss and bother.
Don’t panic when the news spreads fear, uncertainty and doubt about the stock market. They do that all the time, it’s good for ratings. Just hold onto the stocks and wait until prices recover.
The average person doesn’t know a damn thing about investing and common wisdom about investing that they hold is often dead wrong. Don’t take financial advice from broke people (except possibly if it’s “Damn, I did this stupid thing, don’t do that!”). Broke people with middle class (or better) incomes are broke because they don’t know how to build or keep wealth despite jobs that provide the income to do so.
Diversify so that all your eggs aren’t in one basket.
Learn to think in terms of income streams. When a poor person gets a windfall, they often (rightly) focus on paying off what they owe and then (wrongly) focus on spending what’s left over. When a middle class person gets a windfall they often spend it on something they think is an asset but is actually a liability. An example would be a fancy new car. A new car loses a lot of its value the moment it’s driven off the dealer’s lot and expensive ones come with higher taxes and insurance and monthly payment costs. It’s not an asset, it’s a financial millstone. (And if it’s a gas guzzler, it comes with higher gas bills too!) When wealthy people get a windfall, they often turn that money into an “income stream”. An income stream provides steady income for the future. Example. Middle class person gets $60,000 and buys a $60,000 car for cash. Taxes and insurance are now much higher so those items are a drag on future wealth building activities. A wealthy person might buy a rental house and rent it out for a profit. That rent is an income stream. They then use that profit to buy their vehicle. In ten years when both vehicles need to be replaced, the wealthy person still has an income stream to pay for their replacement vehicles for the rest of their life. (Of course, a smarter wealthy person would buy a much more economical vehicle! 😊 ) If you want a luxury that will require an ongoing expense, set up an income stream that will provide those funds in the future."
Topic: Race from $2M to $4M...and Beyond! (Read 1404634 times)