Thursday, January 9, 2014

Financial Well-Being: Assets

From an early age people start collecting and accumulating baubles and trinkets. Some have more sentimental value than financial, but nonetheless hold meaning beyond what the eye can see. We attribute ownership to these things, even if there's not an actual contract or document that can verify such. If these things went missing or were destroyed in a disaster, it may create a financial hardship and a deep sense of loss.

An asset is defined as "a useful or valuable thing, person or quality; an advantage or resource". The financial value of assets can be quite subjective and hence the need for appraisals. The actual value tends to be what other people are willing to pay at a particular point in time. Just take a look at eBay recent sales of a specific item and you'll find quite a range of prices paid for similar items.

As you begin to purchase and accumulate assets, there are some very important considerations to make. First, is it necessary? Do you really need this particular thing at this point in time. Can you borrow or rent the item, instead? Does it fit with the rest of your financial plan? What purpose does it serve?
Second, if it is necessary, is it the right time to purchase the item? There may be other priorities that need to be taken care of, beforehand. Could market conditions change and make it worth putting off the purchase for a time?
Finally, is it the right price? With so many tools at our fingertips, we can compare and research before making a final purchase. Take time to learn all you can, before making a purchase. Will it hold it's value over time or depreciate rather quickly?

Another important aspect to consider is the care and keeping of assets. For everything you choose to own, there is a level of management needed to document and protect it. At the most basic level is keeping records of purchase agreements, receipts and warranties, including serial numbers. These records should be kept in a safe or digital file for as long as you own the item. If you suffer a disaster or theft, insurance adjusters will need to have some sort of proof for the things you claim to have lost. Depending on the value and use of the item, you may need to have a specific insurance policy for it. The more valuable the item, the more complex things can become. Keep an accurate inventory of your assets with current estimates of their value.

Storage may be worth contemplating. If you travel a lot or rent your residence, it might be prudent to use a safe deposit box at the local bank. Fire proof safes can be handy, but not quite as secure. Again, it depends on how valuable or irreplaceable the item may be. Consider the expense of storage as you are thinking about making the purchase. Will the cost to protect and maintain the item outweigh the benefit of owning it?

Finally, consider final disposition of the item. If you sell or bequeath the item, there may be tax considerations, depending what kind of asset you have and how long you've owned it. Although you could write a list of what you have and how you wish for things to be settled upon your death, it's safer to have an attorney involved. There are short term and long term gains, tax shelters and charitable donations that could affect the final settlement. If you wish for the asset to be handed down to the next generation, there are many financial implications to consider and you would be well advised to seek out an accountant, along with an attorney to develop a plan that will meet your specific goals in the long run.

The more you have, the more there is to manage and protect. Carefully consider the life you wish to have and how assets might fit into that life. Don't let things dictate the way you live. Learn to live with what you need and manage your assets well. Know the purpose they serve and communicate your wishes clearly. Share the stories that go with them, so they can live on.

Monday, January 6, 2014

Financial Well-Being - You are Your Greatest Asset

What is my passion? It's empowering others with tools and resources to help them accomplish what they deem most important in life. I am also incredibly curious; always looking for the how, why and what else for everything under the sun. So over the past 17+ years, I've been accumulating skills and knowledge about Financial Well-Being and that's what I'd like to share with anyone interested in reading my posts.

How do I define Financial Well-Being? A holistic approach to actively managing one's assets, income and expenses - tracking and controlling one's personal finances to accomplish what you want. Holistic means that this approach includes daily money management, borrowing, insurance, investments and building a legacy. Historically, each of these topics have been taught and managed in silos, but with today's technology and laws, it's more efficient for them to be integrated and managed in sync. The benefits include peace of mind, increased flexibility to seize opportunities and safety guards to preserve what you have.

First things first:

You are your most important asset, end of discussion. You were born and raised in a unique set of circumstances that contribute to your knowledge, skill-set, thought process and interests. Just as you would evaluate any other asset, it's important to know yourself, first and foremost. What are your strengths? What would you like to improve upon? What are you unwilling to compromise? What is most important to your way of life? There are no wrong answers here, the more specific you can be will help you tremendously in the long run. Take time to find your answers, which will then guide everything else you do.

There are some great resources available online and in print, to identify your strengths, personality and emotional intelligence. All of these are very helpful, as well as writing out your own story. I broke my story down as follows: Early Years, Significant Events, Training, Work and Volunteering. For each topic, you can even add how that impacted your values and direction of your life. Once you have finished, identify four or five key elements that define you. These key elements should help guide your financial decisions, so you are living true to yourself. It's best to review and revise these at least once a year, to make sure you're still living authentically. By writing out your story this way, it will help you in interviews and introductions to clearly state who you are and what you're about.

You are the author and director of your life. Although you can't control and influence everything that happens, you do have a say in how to react and prepare for emergencies and life's uncertainties. Life is full of setbacks and disappointments, so plan how you want to manage the risks you can't control. First consider how you will care and invest in yourself. Your body is an amazing organism that improves or deteriorates based on what you do to it. At a minimum get a good's night rest, eat for fuel & nutrients, exercise regularly and keep your brain active. This will help you think clearly and critically when things come up, without getting overwhelmed. Just like they always say before plane takeoff's, if cabin pressure drops, put the oxygen mask on yourself first, then help others. Invest in your well-being, so you can be useful to others.

Set aside time each week to spend on improving yourself. Maybe you need to learn a skill or trade to pursue your passion. Maybe you want to start your own business. Maybe you want to get more involved in your community. Wherever you are falling short of accomplishing what you want, there are opportunities to grow, learn and improve. Choose one area to focus on at a time. Set some specific targets and define what steps you'll take to reach those targets. Give yourself a deadline. Write it down and track your progress. Seek out resources online and in your community for support, assistance and networks to connect with. Be willing to share your knowledge and skills, as well as glean from others. Don't let the doubters and naysayers get you sidetracked or discouraged, because they sure will try.

Be sure to celebrate along the way. Sometimes the journey can seem incredibly challenging, so take time to acknowledge small achievements, new friendships, goals reached and life itself. Give yourself room to fail and room to express your frustration. Make sure your home is always a safe place where you can exhale and get refreshed for the next round. Have the courage to say no when you've had enough. It's okay to stay in by yourself when you need a little silence, without owing an explanation. Find a trusted friend to talk to when things get too heavy. And they certainly will. Caring for your own well-being and development, will give you greater satisfaction and allow you to make a greater contribution to others' well-being.

As you develop a better sense of who you are, what you want to accomplish and how you can contribute, your direction will become clearer. Over time you will have a stronger grasp on where to focus your time, energy and finances. It's a lifelong process, facing new obstacles and opportunities, but very rewarding. It makes it easier to let go of things that aren't important and change habits to accomplish those things that are.

Next time, I'll write about financial assets.

Thank you for your feedback.