Our digitally-saturated culture does not tend toward simple explanations or applications. It’s just too easy to produce a 10-minute video and attach 50 photos, instead of distilling our message into a concise, well-ordered document. But there’s a point where minutely detailed, all-inclusive explanations actually obstruct our comprehension. That’s when it’s time for Occam’s Razor.
There are times when you have to wonder if the jokes about economists really aren’t jokes. Right now, there’s the group of economists saying people need to spend more to get the economy going. Simultaneously, there’s another group of economists declaring people need to save more or they won’t be able to retire. Then, there’s the ironic twist, where actions intended to stimulate spending appear to increase saving.
One of the dilemmas of home ownership in retirement is whether to keep the home as a residence or sell it to provide additional retirement income. On one hand, a home owned free and clear in a desirable location may allow for a higher standard of living at an affordable price. On the other hand, selling the same property and down-sizing might mean greater net cash flow. The resolutions to this dilemma are not limited to staying in the home or selling it. In some circumstances, it may be possible to continue living in the same house while also drawing an income from the accumulated equity through an arrangement known as a reverse mortgage.
A unique challenge and/or opportunity for small business owners is what happens when one or more of their children are brought into the business. The combination of family dynamics and day-to-day business can be explosive, both positively and negatively, and long-lasting. One of the more sensitive aspects of involving children in a business is the terms of inheritance when the business owner passes, especially if the children’s participation in the business has been unequal. For example, if one child has become the company CEO, while the others have pursued careers in other fields, how should the business’ value be distributed?
There is perhaps the idea that consulting with a financial professional is something you do after you’ve established a positive cash flow and can start saving. But if you ask most insurance agents, registered representatives, investment advisors, even accountants, they will tell you one of their primary functions is helping their clients “find the money,” i.e., to come up with ways to rearrange or restructure a budget to make saving possible. Cash flow management is an essential service that underlies the other products and advice these professionals provide.
The random returns from non-guaranteed investments can be compared to playing cards drawn from a shuffled deck. You know that a regular deck of playing cards consists of 52 cards, but the order in which you receive them will be random. Likewise, historical returns from different investments may suggest a range of possible outcomes, but future returns will be impossible to predict.