Seek Balance

Personal finance is more of an art than a science, in spite of all the books, classes, and lectures on the topic – not to mention the money charged by “experts” for “financial planning.” Nothing in this industry, be it planning or investing is ever black-and-white.

[Note: That’s not to say there aren’t good or bad investments for given economic conditions.]

Instead, there are options. No one, no planner, lecturer, author, or self-help guru can tell a client what is right for them. We each have to make personal decisions about our finances based on what is right for us. The best an advisor can do is to help clients understand their options, and make recommendations based on their own beliefs (e.g. “If it were my money…”).

Oftentimes we as individuals don’t go all the way in one direction or another, but try to straddle some invisible line; to find some gray area.

There is no better example of this than the varying philosophies on saving. Generally among investors there are two schools of thought, each with their own merits.

The first way of thinking is to save and create a nest egg to pass along to kids. The goal here is to make priority number one of saving and investing to improve the stations in life for descendants – an attempt to make a family truly “wealthy.”

As a brief side note, it’s important to understand financial milestones. For example, a person is considered “financially independent” if they have accumulated in liquid assets enough money to pay their expenses for the next two or three years. They are termed “financial independent” because they can maintain their standards of living, even if they lose their jobs.

The definition of “wealthy” is even less clear, but to date the best definition we have found is this: “A person is truly wealthy when their money earns more than they do,” meaning that interest and dividends from investments are greater than a person’s salary. Very few people ever reach this level of wealth.

In any case, people who stress saving generally at least want to be able to maintain their lifestyles in retirement; at a minimum to support themselves in later-life without burdening their families.

One thing we commonly tell clients is that no one owes it to their kids to leave them a large inheritance. However, people DO at least owe it to their children to be able to support themselves financially late in life without being a burden.

Conversely, the other philosophy on personal finance is extremely simple. It’s characterized by a simple phrase we’ve all heard before: “You can’t take it with you.” In other words, people should enjoy their money and worry less about the future, much less future generations. Let them worry about themselves.

Obviously this second philosophy isn’t simply unsound financially, it’s unhealthy!

It is of utmost importance for each of us to find some sort of balance between responsibility and enjoyment, because obviously there is validity to both ways of thinking. And while I’d like to be able to provide some sort of answer – some kind of golden ratio between fun and safe – each of us must answer this question for him or her-self.

Hopefully most readers have already found some kind of balance in their lives, and are enjoying their earnings while also preparing for the future – maybe even stockpiling something to leave behind. For those that haven’t, the first step is to recognize the need; the second is to understand the options.

While this article, as originally published, has a stronger focus on personal finance and saving, nowhere has this reality been reflected than in the varying theories on investment management. Diversification is a prime example. Long thought to be a must, a growing number of holes are being punched in modern portfolio theory, originally developed by Harry Markowitz and others. The most recent realization, as profiled in an Investment News story reveals that low-risk stocks can outperform their higher-risk cousins – a concept denied in Markowitz’s theory.

Ben Treece is a partner with Treece Investment Advisory Corp ( and licensed with FINRA ( through Treece Financial Services Corp. The above information is the opinion of Ben Treece and should not be construed as investment advice or used without outside verification.
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