Personal Sustainability

kevingirard — Tue, 03 Nov 2009 14:14:23 -0800

Personal savings rates have declined rapidly over the last few decades and have led to an impending crisis for many families. Baby boomers and their children haven’t adequately prepared for their retirements, causing a major generational issue involving sacrificing on lifestyle, continuing to work into their 70s and relying on their families for support. This crisis has implications beyond retirement planning however.

One thing that I typically ask a prospect is to think back to their first memory of money. My grandparents’ generation would probably have remembered the brutal scarcity of the depression and the lessons that they learned and passed on to their children involved holding on to any job that you can, and not wasting a penny on anything that they don’t need. My parents’ generation remembered those lessons, but experienced an unprecedented level of opportunity, and what they passed on to my generation was a desire to give their children all of the things that their parents denied them. Today the balance between saving and spending is out of balance with the average savings rate in the country sitting at less than 5%, half of what it was just 20 years ago and one tenth of what it is in China today.

One reason that the national savings rate is important is that savings are the basis of economic growth. Our financial system is basically designed to redistribute savings to individuals and corporations who want to grow and having savings gives an individual a say in the direction that we’re growing. Structures like a savings account or GIC allow the average person to lend their savings to a bank, putting the power to choose the direction of economic growth in the hands of the institution.

Today we have new kinds of investment vehicles which give individuals the opportunity to decide where they want to contribute to growth in our society.

Microfinance gives underserved people primarily in developing countries access to integrated financial systems, including products such as loans, savings and insurance.
Socially Responsible Investments (SRI) are focused on investing in organizations that take the social and environmental cost of their activities into account. They can be structured as mutual funds or accounts with money management organizations that research and manage investments in a variety of sectors, including but not limited to agriculture, energy and consumer products.
Direct Investment through an organization such as Kiva (http://www.kiva.org/) allow individuals to target specific ventures around the world for a business loan, and become involved in a one-on-one relationship with an entrepreneur.

Making use of these vehicles for social change require that individuals save, invest and grow their wealth. Directing your savings to an investment that you believe in gives you the opportunity to change our direction as a society. If you believe that what our current system values is incorrect, then savings are one way to exercise your right to disagree.

The basic questions of financial planning

kevingirard — Sun, 01 Nov 2009 13:24:22 -0800

A large part of what I do these days is to try to convince people to give me an hour of their time to create a financial plan for them or give them some insight into where they're heading. As a newer consultant, I don't think that's abnormal, but I hate feeling as if I'm a salesman, so the challenge is to show people that my interest is in making a positive impact on their lives. Some of the ideas that I use to challenge people that I meet at trade shows, networking events or through direct marketing:

If something were to happen to you, do you have the insurance coverage that you need in order to ensure that your family will be okay?
Do you know how much you have to save each year in order to retire when you want, with the lifestyle that you want?
Do you know what the financial impact of your passing will be, and how it will affect your surviving family members?
Are there programs and investment options available to reduce your taxes in your later years that you simply aren't aware of?
Do you know the effect of compound interest, and how you can build up substantial savings over time by putting aside even a few dollars each week?
What is your investment strategy, and how does it specifically address your goals?

The area of financial planning is so vast that it's simply impossible to spend the time asking every reasonable question, but I think that these cover the most vital areas. If any of these questions trouble you, or make you think about your own situation, please send me a message.

kevingirard's Blog

Personal Sustainability

The basic questions of financial planning