Investing for your family's future - how does a professional plan and work his/her plan to completion.
I was recently called to address a group of small and medium size entrepreneurs at a business seminar. As I talked about savings, investment and family wealth I was surprised at how attentive they became. At the end of the session most of their questions focused on how they could safeguard their family future through their business. They wanted their businesses to guarantee the success of their children and clearly wanted to know how that can be done. I was not prepared for this and more than a little surprised that they struggled with the question of planning for their families future. Their greatest concern was that their children should not suffer. I realized that investment is not a question of social class, wealth or professional status. I believe that the fundamental question is one of family values.
What I find interesting is that though professionals are ideally placed to understand the importance of investment, many display an alarming level of apathy toward their family's future. Many professionals face the future with the level of preparedness that these small entrepreneurs sought to be liberated from.
The the level of preparedness becomes evident when professionals leave employment. Without employment they are incapable of sustaining any sort of family development leave alone investment plan. I do not think it would be true to say that professionals do not value their families, but evidence may have it that despite their obvious economic privileges and status in society professionals fare no better investing in the family future than the lower echelons of society. Indeed they may be a little worse. How indeed should a professional plan for the family's future?
Investing in your family future is in many ways a selfless act of love. It requires one to appreciate the totality of life. No one lives forever on earth. It means that you determine to set aside part of your earnings to be enjoyed by the next generation. The Bible calls this a wise, in reality it means that you give up some of what you could enjoy. I will not moralize over the issue, it is a matter you must put through the test of your own conscience before you implement the following financial principles.
As a professional you will be in possession of an education that enables you to access and process large amounts of information that was not available to the previous generation. The quality of the investment decisions you make should therefore be much higher. Available information will reveal that the highest return is tied to the long term savings and investments. Meanwhile, your competence and professional discipline are used by your employer to make a profit. Your work uses your skills to earn you an income for an investor. Yet all these professional competencies are powerful investment vehicles for your family's future. We suggest that you place these vehicles at the disposal of your family.
In order to make sensible family investments we must understand the investment framework that supports family success. The family is similar to a going concern - a business. It consumes resources and generates income. It is in fact more than a going concern. It is a growing concern. A business can do well just keeping up with inflation and returning a modest profit year in year out. On the other hand the family unit consumes more and more as the years go by and far outstrips the simple demands of inflation inflation. Family cost multiply with every added mouth to feed and explode from two to 30 or 40 people in one generation. Without family investment managing this explosive growth is mind boggling. Some of the next generation will be poor. Family investments must cater for this growth in the years to come.
As a parent, decide how you are going to invest your resources for the future welfare of your family. Decide now whether you want to save money for them? Build them a house or a business. Your job will feed you and your family while you are alive. When you are dead it is not much of an investment option.
The next line of investment must be education. However investment does not mean "expensive schooling". It does mean being able to profit from the knowledge and expertise obtained in school. Children of poor parents may be much more adept at this than the rich kids. Without profitable education family wealth is unsustainable.
Many organizations in which professionals work provide excellent exposure to systems, strategies and structures that guarantee that a business succeeds year-in year-out feeding many thousands of employees long after founders pass on. We must employ these successful investment strategies in our families as well. Many businesses invest in strategic initiatives born out of strategic planning. How many professionals do you know who have a strategic plan for their families? I could guarantee that no professional worth his or her pay would be willing to work in a company without a vision or a strategic plan. Why is it that we leave our families to attempt survival without a budget leave alone a strategic plan?
The fourth investment vehicle is income. Many professionals consider income to be a just reward in return for their labour. This, they believe, gives them the right to spend it as they wish. The bigger the salary the better. Total salaries are consumed religiously every month in terms of rent, food and amenities. This is skewed and limited thinking. Income is actually family investment capital. More emphasis should be placed on translating wages into family wealth. Many rich people are thought to be mean or frugal. But they makes a point of NOT consuming a significant portion of what they earn! THERE IS A MAJOR LESSON HERE. Investment is probably the one single discipline that has made Warren Buffet Rich. Many professionals just do not understand the base principles. Don't eat everything you earn.
Finally, not enough professionals are willing to start up enterprises. Admittedly it takes a lot of effort and may take a long time and has its attendant risks. But business has the potential to go on for generations-not so a job. What I find interesting is that professionals are generally willing to invest their money in other peoples successful business. A friend of mine says " my best entrepreneurs are employed" (- read entrepreneurs as professionals).
Because I am running out of space, and need a proper conclusion, here are the principles; First make a conscious choice to invest in your family's future. That means determine the significant proportion of your income and resources you will invest in your family. Two; educate your family and equip them to build on the wealth you accumulate and prepare them to succeed in the future they face. That is easier said than done, but many Asian families achieve this by involving their children in family enterprise from an early age. Three; develop a family strategy to save and make prudent investment and prepare for future needs. If you don't anticipate these growing concerns of your family they will collapse your earnings. There are a number of financial investment tools that can help you prepare for the future starting from simple savings to investment bonds and property. Four; Structure your wealth to generate long term wealth. For example instead of buying an expensive car, buy a house that will earn your family income for the next 30 years. By the way, this is a great retirement plan. Finally think about investing in an enterprise yourself. Invest in a vehicle that will create further investment by itself. A profession or a job alone cannot do this for you.
21-8-09
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