Sunday, August 1, 2010

Part III: The Alternative to More - ENOUGH

Part III: The Alternative to More - ENOUGH

The Ladder to ENOUGH

It must be considered that there is nothing more difficult to carry out, nor doubtful of success, nor more dangerous to handle than to initiate a new order of things.

Machiavelli, The Prince

Enough is enough, and I’ve had enough!
Dr. Seuss, Horton the Elephant

While the more method is not necessarily wrong, there is an alternative - my ENOUGH approach, a derivative application of Managing by Objectives (MBO). My technique seeks to align life goals with personal resources to achieve life goals & values before the practitioner devises an investment strategy for the client. There are plenty of people and organizations eager to impose their investment ideologies on others. Some may define enough as part of their absolutist agenda. (The frugality crowd – ‘green with envy,’ & the faux egalitarian leftists politicos living in 30,000 square foot mansions – Lear Jet liberals who forgot Franklin’s statement, “be your message.”). Nothing could be farther from my ENOUGH approach, an internalized intensely personal process of discovering, defining, prioritizing and re‑evaluating our values and goals. The ENOUGH method seeks to return the person to person‑al financial planning – Personalized Financial Life Planning.

How do we get off the fast track and on to the sanity track? How do we start steering our own course instead of playing a distorted version of - follow the leader, buffeted by the gyrations of the Dow Jones Average, when the leader doesn’t know where we want to go? How do we gain control of our objectives – inside out rather than outside in -without being manipulated by the expert (who doesn’t even do his own personal financial plan let alone business plan?)

The answer is an entirely different model, heuristic or paradigm, the ladder to ENOUGH. In the ENOUGH model, we begin personal financial planning inside‑out, by personally determining our life goals. ENOUGH re‑connects our life goals & values to our personal resources. We no longer allow external values more is good, less is bad - to drive us up the more ladder. We understand that More is an extra material affair that promises ‘more, better, now, but becomes ‘less, worse, later.’ When we decide our goals, we prioritize them, make trade‑offs and create strategies. Then we align our goals with personal financial resources. Each step up the ladder to ENOUGH leads us to our life goals inside out.

Enough to live on; Enough to live for (1)
Warren Buffet

The motivation for advancing on the ladder to ENOUGH is achieving realizable life goals – healing financial anxiety, puttin’ money in it’s place to transcend to one’s significance – ‘enough to live on; enough to live for.’ The ladder to ENOUGH may be more difficult to climb, because it requires difficult decisions. We must ask the question, What Now? What Now demands that we determine goals and priorities. What Now means that we have a purpose beyond that of the make more, save more treadmill. On the ladder to ENOUGH, we begin with decisions about what enough is for us. Then we align our personal resources with life goals and signification. What does ENOUGH do? Consider these benefits:

Seven Benefits of ENOUGH

1. ENOUGH lessens and often heals financial anxiety. First of all, we are not driven by external pressures to seek more in order to be good. Instead, we have the freedom to choose our values and objectives. Freed of the cultural pressure to seek more, we can understand what is important to us and what is enough.

2. ENOUGH enables the individual to reach real‑I‑zable goals. Importantly, “I” decide my mission & goals. ENOUGH planning is merely a strategy to achieve my life goals.

3. ENOUGH is a connecting rope which aligns life goals and personal resources. ENOUGH personal planning saves time and money, because I have designed strategies to achieve specific goals instead of trying any strategy that will yield more.

4. ENOUGH gives each person control to steer, instead of giving someone else the tiller of our boat while we row. The individual chooses personalized financial life objectives and selects strategies best suited for achieving them, instead of being manipulated.

5. At the very least, ENOUGH allows you to assemble your documents and data so you can buy from a personal financial planner instead of being sold, saving money in the process.

#6. ENOUGH allows you to addition by subtraction. When we discussed more, we saw how more’s allure of ‘more, better, now’ more often than not becomes ‘less, worse, and later.’ More is Fatal Addition via An Extra Material Affair. In ENOUGH, we can experience Addition by Subtraction. Consider, for example, the person who selects a smaller salary over a greater one, but who works fewer hours, enjoys the work more. Remember, wealth is more than money. It is also lifestyle, it is time, it is our values. To trade money for values, for equanimity is truly addition by subtraction. What is better, a salary of $50,000 or $60,000 if the first requires 2,000 annual work hours and the second demands 3,000? The answer is that only you can decide. For some, adding 50 percent more work in return for 20 percent more money is Fatal Addition, and they would gladly add 1,000 hours to their lives by subtraction of salary.

#7 ENOUGH offers FUability©. Now that I have your attention & before you and the politically correct police get your panties and untidy whites in an uproar – think about it. ENOUGH yields:
· Increase choice
· Greater control of one’s life
· Minimizes being ‘beholden,’ dependent, or downright taking ‘crap’ (the shove it factor)
· Lowers the potential of compromising one’s principles and therefore character
· Independence – not being dependent (groveling however euphemized – see choice)
· A sustainable standard of living – enough to live on; enough to live on

You may decide to choose an investment with a lower rate of return over a “bargain” with a higher rate of return. Why? Because the risk in the first investment is lower, and you do not want to jeopardize your plan to achieve enough. The first investment may in fact have been a bargain, realizing the higher return. But by subtracting, you added the security to your enough box, reduced your anxiety, and achieved your goal. Furthermore, that “bargain” might surprise you.

In ENOUGH personal financial life planning we always begin with the goal. ENOUGH often leads us to turn down get‑rich schemes, not because we are anti‑profit or even anti‑risk, but for the more fundamental premise – you manage goals NOT assets. The pitch of more ‘which stock, which bond, which one what kind’ rather than managing the goal. A fundamental principle of ENOUGH personal financial life planning: avoid sacrificing what you need for what you don’t need, schmedrick. (Schmedrick – look it up.)

In this world there are only tragedies: One is not getting what one wants, and the other is getting it.
Oscar Wilde

The Enough Box

It is not the man who has too little who is poor, but the one who hankers after more. What difference does it make how much there is laid away in a man’s safe or in his barn, how much head of stock he grazes or how much cash he puts out in interest, if he is always after what is another’s and only counts what he has yet to get, never what he has already. You ask, “What is the proper limit to a person=s wealth?” First, having what is essential. Then, having what is enough.
Lucilius, Letters, tr. Robert Campbell

How many times have we heard stories about entrepreneurs who have made and then lost their fortunes? In fact, they may make and lose several fortunes in their financial careers. They remind us of bulimics of business, gorging and purging and gorging again. They suffer from ego‑ruptcy, risking what they need for what they don’t need (MOREonic behavior)

ENOUGH builds the foundation of personal financial life planning on personal goals, rather than on accumulating more for more’s own sake. Therefore, the futile win‑lose‑win addiction can be replaced with what I call the enough box. Once a goal has been achieved, presuming that the goal is an important value, ENOUGH planning protects, insulates & fortifies that goal (personal financial Ovaltine). Many external events may jeopardize the assets in the enough box, including elder care, divorce, disability, personal guarantees or additional investments which require feeding- the assets which keep on taking. Various strategies allow us to cushion enough to minimize the probability and seriousness of risk factors. One strategy is to never risk enough for what you don’t need - fatal addition which causes subtraction by addition.

The concept of ENOUGH planning tends to push clients toward that the very difficult questions: “What Next?”and What Now? The answer to “What Next/ What Now?” is an objective that we have struggled to identify, prioritize and pursue. The most common way to evade the question is to create a “cushion” after knowing what enough is and where you have to be on the enough track to be on target. Once preservation and diversification of assets for enough have been achieved, clients add padding with a few more investments, “just in case.” The problem is that this stretching of enough to include more can rupture the entire strategy. However, if maintaining the cushion is successful, clients move on to their second line of defense buffers against confronting “What Next, What Now?” Buffered by their false feeling of security, they indulge in vacations or traveling or deferred leisure activities (otherwise known as ‘someday things’) for a while. But when their defenses of fear, pleasure and ignorance are exhausted, they revert to more for the sake of more by re‑defining enough. As Sam Levenson put it, “I finally got the means to the end and they moved the ends farther apart!”

In ENOUGH personal financial life planning, we are involved with developing and completing, not with extruding or distending. We are concerned about our your personal financial wellness. This approach is an alignment process. We help you to focus on one essential question: “Am I meeting my funding requirements for my personal financial life goals which will support my life aims and values?” Your life aims are the “What Now's/What Next’s” that, by habit, most have been trying so hard to evade and too often haven’t a clue about since they have been working too hard to consider it. They are like the man who worked all day to cut down a tree with a dull saw, because he didn’t want to stop working to sharpen the blade (or the man who climbed the ladder to elope with Mary Jane only to discover that the ladder was leaning against Peggy Sue’s house)! When the Dow Jones Industrial Average plummeted 18%+ (508 points) on October 20, 1987, losing more than one fifth of its value, more investors everywhere asked anxiously, “How much have I lost?” My clients, when I was in practice, asked, “Do we still have enough?

Personal financial life planning as a strategy to achieve life goals is the cornerstone of the ENOUGH approach. The knowledge and acceptance of what is enough for you, I believe, contributes to overall wellness – contributes to personal financial life wellness by reducing the free‑floating, culturally‑embedded more anxiety. With more acting as your motivation, there can never be any closure or sense of accomplishment - just a stressful compulsion and you get jettisoned. With ENOUGH your goals are well‑defined and achievable. Furthermore, you are in control of defining your goals and taking action to achieve them (instead of allowing someone to manipulate your portfolio and hoping that you will get more). You can relax and enjoy your life or choose to be anxious. But now it’s your choice.

Case Study:
Becoming Financially Independent of Your
Independent Business

Most Americans, for whatever reason, would like to be financially independent. Many entrepreneurs and owners of closely‑held businesses, at first blush, appear to have achieved financial independence. However, more often than not, they are financially dependent on their independent business - more slave than master, more concentrated than diversified, more illiquid than liquid.

More and more of the owner’s time is spent on things tangential, but necessary to the business. How many times have owners said, ‘I used to know everybody in the place, but no more. I miss long Friday afternoon lunches of pizza and beer and not going back to the office when I was poorer. Now it seems I spend all my time with bankers who have collateralized everything I own. I spend more and more time with lawyers and accountants and less time running the business.’

Yet in the next breath, the entrepreneur/manager will say, “Investments? I haven’t made any money in them - this is the business I know. Besides, I gotta get the accounts receivable down. I needta meet with the accountants and I gotta talk to our lawyers. I gotta meet with the insurers on the increased premiums and decreased coverages and convince my board members to remain even though our liability coverage has holes large enough to drive a Mack truck through. Margery keeps complaining she is a ‘F priority’ (even below Kathy Griffin) and thinks we ought to see the marriage counselor again. If I’m so rich, so independent, why don’t I feel it? Why don’=t I have any cash?"

Skim milk often masquerades as cream. That which we think saves us often strangles us. The brass ring of success and independence often is slavery. As Jack Lemmon said in Save the Tiger, AAll I need is one more good season.@

One more. . . . One more. . . .

How many “independent” business owners have you known going through these throes? How many entrepreneurs do you know who have been on the less than merry‑go‑round of make it, lose it, make it for the third or fourth time, rivaling their divorce count?

One more. . . .

Knowing what is enough may help to get the entrepreneur off the less than merry‑go‑round of more. What is enough? That is a question you will be answering as you progress through my writings and rantings. For the entrepreneur trapped on the more ladder, ENOUGH can relieve the tyranny of more and restore the joy of doing business. How?

ENOUGH is knowing one’s economic “gottas.” The gottas are the absolute requirements - not the oughtas (what you’d like to have) or the nicetas (luxuries). Knowing your real economic gottas makes for the line in the sand where the bank cannot collateralize. Knowing your economic gotta level and having it funded independent of the business can lower anxieties. But ENOUGH requires a change of thinking about how you allocate your personal resources, of which your “baby” -C the business - is just one. Just feeding the baby, “your only good investment,” only starves the rest of the family while reinforcing the more addiction.

ENOUGH may mean deferring the purchase of the latest equipment. (For those approaching retirement it may mean reframing to preservation and distribution rather than growth). It may mean downsizing rather than exposing your entire investment to risk. ENOUGH means insulating your objectives, like your home, and refusing to extend your debt using your home’s equity as collateral, like the entrepreneur who wanted to become financially independent or at least less dependent on his independent business. You need insulation as well for staying power, to ride out economic dips and setbacks. This means rewirement – not necessarily retirement. It does mean having sufficient passive income to provide some percentage (the gotta level) of your standard of living irrespective of the business’s fortunes and the market’s gyrations . It means being active in the business, but not a slave to it. It means that you have time to remember the names of people down the hall and Margery thinking that she is an ‘A’ priority again (okay, B, your dog and the business come first – but she’s at least best in breed). It means long pizza lunches on Friday again, if you choose. It means telling the bank that you have perfect credit and have enjoyed the relationship, but. . . .

Becoming financially independent of your business means - enough already!

(1) Buffet said this in regards to inheritance. This writer is of the opinion, that other than a hand up to help oneself, inheritance by bloodline – hereditary privilege only disables the beneficiary creating of nobility of no-ability, harms society by valuing bloodline over merit, and dissipates resources – talents on loan from God.

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