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beginning balances
Money Two Ways: Balances and Flows
There are two ways to think about money. It helps to understand both if you want to be comfortable financially.
Balances. Balances are what we have: the number on our investment statement or bank account, our 401(k) value, or what our Roth IRA is worth. Some think a certain total is required in order to retire, to be financially independent, or to meet some other goal.
Flows. Flows are the income and the outgo, month by month or year after year. These include recurring items like paychecks or Social Security coming in, travel expenses or utilities going out.
While these terms certainly work, one of our favorite analogies is the orchard and the fruit crop. The orchard is like the balance; it’s what we own. The fruit crop is the flow. We like to say that if the fruit crop is big enough to live on, we don’t need to worry what the neighbor would pay us for the orchard.
What does this mean? That once we’re ready for retirement, for instance, we pay more attention to flows than balances.
So if Social Security and a pension more than meet your cash flow needs in retirement—if the flows run a surplus—you might feel comfortable financially even without a fortune in balances. On the other hand, if you spend more than what’s is coming in, you may feel financially stressed no matter what your balances are.
One of the key elements of our work for you is turning balances into flows. We think about the size of our retirement accounts all throughout our working careers. But in planning for retirement, we like to figure out how much cash flow can come out of those retirement balances. In other words, how big of a fruit crop could your orchard deliver?
Clients, if you would like to talk about your balances, flows, orchard, or fruit crop, please email us or call.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision.
Investing involves risk including loss of principal.
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Play the audio version of this post below:
Money Two Ways: Balances and Flows – 228Main.com Presents: The Best of Leibman Financial Services
This text is available at https://www.228Main.com/.
Got To Do It? Get To Do It!
Sometimes the business of life feels just like that: business. The business of staying healthy requires an occasional trip to the dentist or a plateful of greens when you’d rather eat something else.
But we’ve noticed a curious thing lately among some financial planner types. One related that a client said their meetings were like going to the dentist. Another compared the task of financial planning to eating your vegetables. Both talked about the planning process as something that is unpleasant, necessary, but good for your long-term welfare.
Our business with you does not feel like that.
Clients, we wouldn’t pretend to speak for you, but we often find both relief and joy in finding order in life’s chaos. It’s a pleasure to come to understand the meaning of your wealth. It seems we all get a little giddy when we check in and confirm you are on track for your long-term goals or can get your investments better aligned with your values.
What a treat!
As time goes by, the product of investment gains is sometimes wealth beyond expectations. (No guarantees, of course.) Reviewing a long history of beginning balances growing over time feels more puppy dogs and rainbows than dental appointments and bitter veggies.
Psychologists say attitudes are contagious. Some people have told me that I myself have a positive outlook. But that probably would not fully explain the difference in the tone and tenor of our meetings, compared to those dental appointment types. Maybe it comes down to these things:
- We look for a good philosophical fit before we even begin a working relationship.
- We believe that those not born with good investing instincts can learn.
- We trust people to be the experts of their objectives and what they want to accomplish.
- We strive to meet people where they are, to talk about our areas of expertise in only those ways that everyone participating has a grasp of what is going on—and what we are doing about it.
- We keep our focus on the long term, to increase the chances that people get to their most cherished goals.
People working together, in mutual respect—that’s what we strive to be about. And what a joy it can be.
When you’re ready to collaborate on your plans and planning, email us or call.
Want content like this in your inbox each week? Leave your email here.
Play the audio version of this post below:
Got To Do It? Get To Do It! – 228Main.com Presents: The Best of Leibman Financial Services
This text is available at https://www.228Main.com/.
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