It seems almost everything about the world we live in today is transient. Things are changing all the time. Against this backdrop, building wealth that endures throughout your life may seem to be a tall order. Yet, it doesn’t have to be all that difficult if we understand (or surround ourselves with those that do) economic and market history.

Information vs. Knowledge

The implications of confusing information with knowledge can be lifestyle threatening. I saw a statistic recently that indicated a substantial percentage of individual investors still have not re-entered the stock market after the 2008 market swoon. The long-term lifestyle adjustments that will eventually have to occur for some of these investors are significant. Yet, most of them likely think they have made smart choices. Take a look at this short YouTube video (created by Loring Ward a West Coast advisory firm) on the history of the market and outside events if you still have doubts.

University of Chicago Professor Gary Becker coined the phrase “imagination capital” to describe how we should imagine future pleasure (from saving and investing) in order to make that pleasure seem less remote. I think this may be a key component in building wealth that endures. We have to be able to “see” the future benefits or we can’t manage to make the commitment to save today. Saving is the first step and then investing with a sense of purpose comes next.

You Can’t Build a House without a Foundation

I use the verb “building” purposefully in the title as this is a process that requires active and ongoing effort. It might be helpful to think of this “building” process in stages, like constructing a house.

  • The framing or foundation stage might be termed Financial Peace – this is where we become very clear about what we want money to do for us.
  • The next stage, built upon that foundation of clarity, is Financial Security – this is where we obtain confidence that our resources are invested properly and securely for the long term.
  • Finally, Financial Freedom – this is where we have “enough” money to endure.

Like a house, each phase depends upon the previous stage being completed. We obviously can’t hang sheet rock if the foundation and framing have not been done. We can’t put a roof on unless the walls are up. Oftentimes, clients want to jump to the end without investing in the beginning. We need to proceed in proper order.

Money has meaning and that meaning is different for all of us. Our financial futures depend largely on the choices and decisions we make in the present. Today is the most important day. Ready for a real conversation?

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