Identifying assets and their true values to us is an important step in
reaching our goals, financial or otherwise.
Financial planning should be based on the solid foundation of clearly defined
goals. We determine our goals based on what we value the most in our life.
Financial decisions may require trade-off analysis of the non-financial aspects
of our lives. It is important to be aware of these trade offs even if they are
made over a long period of time in the future. These trade-offs are made
among our different forms of resources.
The following is a brief examination of the seven forms of resources we
have, examples of their trade-offs and how they may impact our
quality of life.
You can call this your spirituality, your true religion, your faith in a higher
power or the Great Spirit, your quest for Truth, your relationship with nature,
self-awareness or any other name you wish. Even if you are an atheist or an
agnostic you may still possess this asset. It is the bedrock of your emotional
stability. It is what is constant for you, independent of what happens in the
external world. It is the guiding light helping you make all your decisions. It
defines your self-worth. It inspires the conviction, enthusiasm and
perseverance you have to pursue your dreams and aspirations and meet the
challenges you face in life.
Of all forms of assets, this is by far the most valuable one. No one is ever able
to take it away from you. It is the form of resource you have the most control
over because it is the most personal one. This asset has the potential to play
a role in your well-being if you truly appreciate it as an asset. The best things
about getting older is that usually self-knowledge increases with age.
When you lack the inherent fulfillment that comes with self-knowledge, you
automatically try to achieve it through other means, most commonly through
excessive consumerism. As a result, your expenses increase. Then, the only
way to meet your financial obligations is to accept a high-paying position that
you dislike. As the result, your mental and or physical health suffers, your
relationships may be negatively impacted, and you may not even reach your
On the other hand, someone whose values includes "Thou shall not abandon
his obligations to his loved ones", if due to uncontrollable circumstances is
forced to accept such position, will be at peace with his predicament and find
meaning in it since that is the only way to act aligned with his values.
Our relationships with family, friends, community, business associates, even
our pets, are another form of asset. Some of us consider it our most valuable
asset (consciously or unconsciously). Happiness greatly depends on
relationships that are fulfilling, reliable and based on mutual trust. Our financial
decisions may impact one or more of our personal relationships.
Imagine that in the eyes of the world you’re nothing special, just another Joe
Blow. You don’t hold an influential position, you are not financially successful,
or particularly ambitious. However, throughout the years you have earned
many good friends who love to be around you because you have the
extraordinary gift of making people feel good about themselves. You are
generous with your time, effort and limited resources. If you were to suddenly
become disabled, you know that there are people who genuinely care about
you and would help you out in any way they can. They would not let you be
without a roof over your head or sleep on an empty stomach. They know that
you would do the same for them. How much is this worth to you?
This refers to both physical and mental health. Physical health, as an asset,
depreciates with time. However, both our mental health and lifestyle can
certainly affect the rate at which our physical health declines. Mental health is
intimately related to the self-knowledge and relationship assets, which in turn
strongly influence the lifestyle we lead. It is true that with this and all other
assets some of us are more generously blessed. However, it is also true that
all of us are equally capable of squandering this valuable asset just like any
other resource we are fortunate to possess.
Assume a credible financial advisor tells you that it is better for you to carry
your mortgage into your retirement. She even shows you the numbers to
prove it. When contemplating your retirement, you always envisioned yourself
physically healthy and free of debt. Based on your advisor’s announcement,
however, you are now confronted with a difficult choice.
If you carry your mortgage into your retirement, you will not be free of debt.
The ensuing anxiety that you may experience may jeopardize your mental
health, and possibly your physical health as well. Taking on a second job to
pay off your mortgage sooner may also compromise your health. You may
find it difficult to continue your daily regimen of home-cooked meals, exercise
and sufficient sleep. Although evaluation of other factors in your life will help
clarify your decision-making process, some sort of compromise is inevitable.
This is what most people have in mind when they refer to assets, personal
physical possessions and properties. Financial assets are the most quantifiable
of all our resources, and the ones with the most liquidity. Given the current
state of affairs in our society, most of us fear losing this asset more than
It is almost impossible to maintain your health and relationships if you are
chronically dependent on others for financial help. The constant stress and
anxiety caused by financial insecurity can greatly threaten other resources of
your life, most notably your health and your relationships.
Your education, knowledge, skills and experiences comprise your know-how.
Your income is directly related to how much the market values your know-
how. During critical economic periods, some of us may discover that the
market does not value our skills and work experiences as much as we
assumed. Automation, globalization and outsourcing are constant threats to
this asset even for professionals with college degree(s). This should be taken
into consideration in making any decision affecting finances.
It is important to realize that even the skills that you do not get paid for are
valuable, since they have the potential to eliminate expenses. This is specially
true during the retirement phase. Imagine that you have gained enough
knowledge and confidence about investment and personal finance that with the
help of a competent hourly financial advisor recommending index mutual funds
or low-cost active management funds, you eliminate thousands of dollars of
annual asset under management fees taken from your retirement portfolio.
Reducing an expense has the same affect on your financial assets as adding
You know how to cook, but you hate to wash dishes or eat alone. You would
much more prefer to go out and meet friends for dinner rather than spend
your evening fixing a nice meal. However, after your hours were cut to prevent
major lay-offs, you discovered that your budget could not sustain your
monthly eating out expenses anymore. Unhappy at the prospect of limiting
your social life, you decided to ask your friends to join your newly established
dinner club. Every member of your group agrees to once a week host a dinner
at his or her home. Every member that attends that dinner agrees to bring an
item to complement the host’s main dish and participates in the clean up
process. Your friends are delighted with your suggestion since most of them
face the same economic threats and value their social ties as much as you do.
This is the perceived amount of time we have left in our life to pursue our
dreams and aspirations. In the absence of any unfortunate event, a young
person would have more of this asset than an old person. A person who
squanders his physical health will most probably have less of this asset as well.
It is important to always be aware of this depleting asset when making any
decision financial or otherwise.
Sometimes quantifying the time left makes one more aware of the limitation of
this asset and puts things into the proper perspective (as depressing as it may
be to some of you). As an example, a 65-year old may say to himself I have
about 1024 (52 weeks times 20) high-quality Fridays left to enjoy.
This category includes education, transportation, parks and recreation areas,
as well as other publicly-funded resources or services. Our collective social
assets also include intangibles such as concepts like democracy and a can-do
attitude that may, in a time of crisis, pull the society together. Independent
media sources that provide unbiased news and commentaries are also a prized
shared resource. A sustainable and healthy environment greatly benefits the
community at large. Although our individual shares of social assets may be
hard to quantify, we do feel their value if deprived of them. At local, regional
and national levels, there are many instances where the returns on the
investment of time, energy and financial assets are maximized when they are
used to protect and grow the social assets of our community.
Catastrophic medical expenses are one of the leading causes of bankruptcy in
the United States. How much would you pay to live in a society where the grief
of poor health or a potential terminal disease is not exacerbated by the agony
of financial hardship?
Count on your strengths
Honest introspection is a crucial component of any planning process, financial
or otherwise. Trade-off decisions are extremely personal and should be
considered under the light of past experiences, heartfelt aspirations and
concrete facts. It is also wise to remember that trade-offs that directly affect
more than one individual in a household should be made collaboratively. This
maximizes the potential for a positive outcome and honors the value of each
individual concerned. The recognition of all the forms of resources have at our
disposal will greatly assist us in making the best choice possible.
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