April 2017 Opening Thoughts

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The rich are different from you and me, though maybe not quite like we think they are.

When we ponder the wealthy, we imagine athletes, entertainers, and more recently, entrepreneurs. But the enduring lesson of the classic personal finance book, “The Millionaire Next Door” is this: Most of the rich grow wealth because of modesty, thrift, and prudence. They live happily in starter homes. They don’t subsidize irresponsible adult children. They have an allergy to luxury automobiles.

Even twenty years after the book was published, it still stands as a sort of promise that normal people have a shot at accumulating true wealth through habits and not just outsized risk; that people in blue-collar businesses doing real work can, by saving well and not spending lavishly, achieve real comfort.

The book became something of an underground hit on the parenting circuit. “Mothers would buy it,” Danko has said. “They said that our message was the one that they wanted to give to their children.”

Moms and dads who pick it up are given some tough love if they are funneling money to their adult children. In the chapter, “Economic Outpatient Care,” meant to lampoon parental good intentions gone awry, the authors noted that the more parents give their adult children, the less wealth those children accumulate. Adult children who get little or nothing from their parents once they are grown, end up accumulating more than those children who are beneficiaries of their parents’ benevolence. Giving one-time gifts to get young adults started in life has become habit-forming for everyone.

The authors were academically driven to research people and their spending habits. They found that there were many people who lived in expensive houses with enormous mortgages in high-income neighborhoods who didn’t have much in the way of net worth. Lots of others, however, were quiet millionaires, leading unpresumptuous lives.

Meanwhile, The Center for Retirement Research at Boston College estimates that more than half of all American households will not have enough retirement income to maintain the living standards they are accustomed to before retirement, even if the members of the household work until age 65, two years longer than the average retirement age today. There are plenty of research papers written all pointing to this: The odds are that you will run out of money in retirement.

“Everybody’s big focus is that we have to save more,” said John Bogle, founder of Vanguard. “A greater part of the problem is the failure of investors to earn their fair share of market returns.”

I will “second” that remark. It has been my observation, over the past 30 years, that often people are too aggressive, too conservative, too passive, or too emotional to smartly maneuver the stock market. I think people do not understand the seriousness of wealth-building and retirement preparedness. Perhaps they might be thinking that their grandfathers seemed to do okay in retirement, so, somehow, it will work out for them too. But, most of our grandfathers had pension plans and many of us don’t have those today. Also, our grandfathers were scared into saving, having lived through the Great Depression. We haven’t been so frugal.

For our generation of baby boomers I wrote Before It’s Too Late: Retirement & Estate Solutions. It is written to those who are a little behind in solidifying their financial foundation. Most of them have decent home equity and large 401k balances, but no financial certainty when it comes to their future. My book includes a financial “Bucket List” of critical things to do for guaranteed lifetime income. No baby boomer should retire without checking this list.

For a different view of how to piece together the puzzle of financial security I wrote Happy & Secure in Sonoma County. In this book seven of my clients tell their story of financial ups and downs leading up to their coming to see me. After reading their stories, you will read what I did, as their Advisor, to help strengthen their financial position, feeling of security, and general happiness.

These two books have received great reviews and publicity. They are for sale in 18 different retail locations around Sonoma County, on Amazon, and available in our office. If you want financial peace of mind, you should have these two books. And, more than that, you should come into our office for a financial consultation. We can build your financial security, while removing doubts and uncertainty, by putting a financial plan in place for you. Lots of our clients have come in for this kind of consultation; don’t be left out.

It’s been another busy tax season. We’re grateful for your ongoing patronage! I hope we have met your expectations or perhaps, even exceeded them. I would encourage you to contact us with your tax and investment questions. We are here for you and want to assist you in the lowering your taxes, building your wealth, and securing your financial future.

Warm Regards,