The Tangible and the Intangible Measure of Money

This month marks the month that we first launched our Private Client Wealth Division to a pilot group of existing customers. Since that date over 80 clients have attended our private dinner function to showcase these new professional services.  So what is our Private Client Wealth Advisory Service? Well, it’s a complete cash flow and wealth creation service which is supported by sophisticated and detailed money planning and constant money measurement to ensure the wealth creation plan designed is effectively achieved.  The end result for the client/s is them achieving their target retirement wealth and date of retirement, whilst also knowing they will have money to enjoy today and tomorrow.

For the uninitiated it’s a pretty big concept to get one’s head around.  Furthermore, for those who have engaged our services to undertake their initial Money Analysis and Wealth Projection Report, the numbers or level of wealth presented seem difficult to comprehend.  The same argument/observation that plays out in so many conversations is ‘Surely the value of property won’t be that much in 30 years’ yet 30 years ago many people couldn’t comprehend the median value of houses to be over half a million dollars, when at the time they were around $50,000.

It’s the same observation that plays out in me and my wife’s situation now.  20 years ago, I wanted to have a million dollars or be a so called ‘millionaire’. Now, at 38, our personal wealth base of $3.5 million is a reality.  In 20 years this personal wealth base (outside of any business interests) is projected to be $18.6 million in future value terms (includes inflation and indexation of 3%) based on our Personal Wealth Management Plan that we designed and developed, based on our cash flows and future planned investments.  Now, given my 20 odd years of private investing and experience, this ‘inflated’ figures is, in my mind, more feasible given I understand the intangible value of money.

You see we have a funny way of treating and looking at money.

The vast majority of people see money as only tangible.  When it’s in our wallets or purses, it’s real yet when its on paper, like a share certificate or bricks and mortar is NOT real, even though it’s part of our asset base which forms a very big part of our compounding wealth growth.

This tangible aspect of money can make us irrational. If a stranger took $50 bucks out of our wallet, we potentially could get in a fight with them, yet if the value of houses in a street or suburb go down by $10,000 in a month we barely react at all. Just because no one knocked on our door and demanded $10,000 in cash, we just accept it.

Another example and this is the BIGGEST KILLER to serious wealth creation, is how we make decisions based on what we have in our wallets and bank accounts.  People making decisions based on short term available cash severely limit their abilities to get ahead in life.  Their tangible view of money paralyses their ability to look ahead.  “We can’t afford to invest or borrow money, because we don’t know what we are going to need our money for tomorrow”.

These types of people make excuses as to why they won’t take the next step, because although its potentially complex and difficult to forecast the money they are going to need for holidays, school fees, living expenses, emergency provisioning, bills, the car/s, mortgage repayments, etc, etc,  it still is possible to model this.  In fact, mine and Jane’s modelling and plan includes expense forecasting for child care (by the day), Jane’s time off work for our first child due next month, forecast cash flows for the expected arrival of a second child etc.  We have modelled expenditure, investment income, wages and basically anything that affects our wealth position by month for the next 40 years!  (The same service we offer in our Private Client Wealth division at Empower Wealth).

Intangible measures are what I document above.  They are things like equity that you might have in your home; they are understanding the future movements of your cash flow and money and seeing the types of outcomes that such events deliver.  They represent your money and wealth story that’s not in your purse or wallet, but what is anticipated on your journey, yet those who wait for them to crystallise before they make their money work harder earlier to build their wealth, do so at their and their families loss, because the time they wait is the time they will never get back in building that wealth base.

Sophisticated money management and control involves a mindset of understanding tangible and intangible measures of money.  The only reason they are intangible for most is they have never sought to try to measure their impact on one’s wealth position.  And yes I agree, it’s not easy to model by yourself, but don’t make that the excuse for not doing it and getting an idea of your wealth potential.  Like in business, you wouldn’t stop your business from growing because you couldn’t do it yourself, you’d outsource it because you see the bigger picture and benefit. Its time you started looking at your household and wealth in the same light.   Get help if you cannot do it alone.

If you want to learn more about our Private Client Wealth Services and Programs please feel free to call our Money & Wealth Planner Advisory Specialist – Michael Pope on 9326 8900.  He’ll give you an idea of these services, reports and programs we provide.  Furthermore my Free presentation tomorrow night will give you a good insight into the importance of superior money management and how it works in building wealth through a Residential Property Portfolio.

Remember – Knowledge is Empowering