Pay Attention. Being Born Is Terminal

Some estates have problems

They have a range from incompetent executors, poorly worded wills, bequests of specific assets that deceased did not own at death, income and other taxes, takes too long to settle, and sale of assets at sharp discounts. There are far more if there is no will at all.

The problems come in two categories.

The will and its planning

The will didn’t work or the people tending to it did a poor job.  Sometimes on purpose. The will maker has complete control over those problems and should attend to them.

Executorship is a massive undertaking and the majority, even vast majority of people, have not clue number one. If they had only clue one, many would refuse the job. Pay careful attention to your selection. Try to match the executor’s skills to the complexity of your estate. If there is likely to be conflict among the heirs, you may want an institutional executor.

The will should be updated fairly frequently. Each time you do it notice that eventually your last effort will be the final will and testament of you. If you have the slightest hint that the one you have and are reviewing might be weak, amend it. Be sure, too, you have workable powers of attorney for health and property. It is possible that you could lose the ability to change because of lost capacity.

Be very conscious of specific bequests of property. I leave my white house at Rural Route 4 to my friend John is wonderful if you own that house at death. Worse still if you sold it and built a much larger white house, also at Rural Route 4. I have seen that one and it could have been disastrous.

Too little cash 

Too little cash is the cause of the other causes of estate break downs. 

No one has an estate tax problem. Taxes are just a fact. The problem is making the deposit that will allow the bank to clear the check the executor writes to the government. There is a great difference between a tax problem and a deposit problem. If you don’t take care to deal with the deposit other things happen. You control two of the ways to make the deposit.

You could hold liquid assets or you could own appropriate life insurance.

If you don’t make the cash available, the executor borrows for the estate costs and the estate winds up some day far in the future when the loan is repaid. Not many heirs like that one.

The alternative is to sell some assets. The rule while living is “Keep the best, sell the rest.” After death though, executors don’t sell what they want, they sell what they can. There are tax factors that make selling in the 12 months after death crucial. Thus the big discounts.

How many of you think “Estate Sale” means you should expect a bargain? Probably most of you.

When you analyze the four methods to get cash, own cash, own life insurance, sell, or borrow, life insurance wins.

Lynn Townsend’s Lesson 62 says, “If you have a problem you can solve by writing a check, you don’t have a problem, you have an expense.” Smart people pay necessary expenses in the cheapest possible way.

Planning the distribution of your estate is easy to put off.

I am alive today so I am pleased I didn’t waste yesterday working on that torturous subject. Common sense says it is like growing cabbage. Plan ahead.

A well organized and thoughtful estate is a blessing to all concerned. Act soon.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com  866-285-7772

Who Takes Time To Dream?

Many adults don’t.

They should. Dreaming establishes the guidelines for establishing the what you want part of strategy. Without the target there is little hope for success. People fall for fashion, and the crowd when they have no objective purpose of their own design. Dreaming is a necessity.

Dreaming does not get results.

Not dreaming will keep you from achieving success, though. Dreaming is just a step on the way. What follows dreaming is planning.

Adding the pieces to the dream that will permit its achievement. The other parts are what with, who with, when, where and eventually, when the dream is clearer, why. Why includes why not any of the other things you could have wanted. Why is motivating.

Clear choices make for easier achievement.

Designing structure

Structure involves many things.  Family, business, lifestyle choices, debt and its purpose, tax management, and cash flow management. In some cases, structure is quite complex with corporate structures, trusts, deferred income plans, and income splitting arrangements.

Most structures are simpler. Perhaps there is an easy one that applies to everyone. Spend less than you make on lifestyle and fear debt.

Take action

No dream comes to pass unless people act to make it happen. If you need help, get it. Waiting until you know everything is futile.

Action is the fundamental key to all success. Pablo Picasso

Action can be incorrect and still be good

If you record the results of your decisions, review them, and revise them as you go, the 3Rs, you cannot go far wrong. Part of structure must include the guideline that there shall be be no all or nothing choices. You don’t have to be right if you kill mistakes before they get big.

Mistakes are the education part. Education makes future decisions easier and better. Don’t fear mistakes and don’t let ego force you to live with them forever.

Win or learn.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com  866-285-7772

Empathy For Our Future Self

The present is a function of past decisions.

If we have chosen poorly in the past, it will reflect on our present life and lifestyle.  Some of the decisions were forced upon us while others we chose willingly. Using credit cards to pay for vacations affects our current standard of living. Failing to save provides little cushion for adversity or unforeseen opportunities.

Student debt is a wonderful investment so long as it provides an education that allows a person to earn enough extra to pay the loan off in a reasonable time.

If things are going well it is usually because of good past decisions.

The future is a function of both the past and the present.

While the past is pretty much set in place, the present is more pliable. Some day, future self will be looking at the situation and saying, “Well done” or maybe, “Now what will I do?”

I have heard the complaint, “Saving cuts into my lifestyle too much.”That is a foolish statement. Saving cuts into lifestyle today or the absence of it today cuts into lifestyle in the future. What will future self have to say about how present self is behaving?

Retirement savings are not just money.  They are groceries and heat and hydro and cable TV. If there is no money then, what will future self do?

Have a little empathy.

It is not just savings. Be sure to insure your ability to earn. That future self with too little income could appear at any moment.

If future self was standing in front of you with a cup and a sign outlining their plight, would you help? Many people will help the beggar on the street and ignore their future self.

Poor choice.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com  866-285-7772

A Statistic Is Not A Fact. It is an Inference

Statistics are frequently necessary and often misleading

Facts are stubborn things, but statistics are more pliable.  Mark Twain

There are lies, damned lies, and statistics.  Benjamin Disraeli

Statistics are no substitute for judgement.  Henry Clay

Math is a language that you use to describe statistics, but really it’s about collecting information and putting it in an order that makes sense. Lauren Stamile

Statistical information is important and can help us make better decisions, but you should not assume you understand. Sometimes people try to trick you and they do so in compelling ways.

How can we learn to use statistical information to our better advantage?

It is like investing.

You won’t go far wrong investing if you don’t make any big mistakes. So too with statistics. If you can use them well, and recognize data or analysis that lacks rigor, you are well on the way.

How do we do that?

Best solutions often just mean understanding what you see. People know what you will find easy and use that against you.

Common statistical tricks:

End point bias. A very common one.  Suppose I told you that on 21 September 2000 gold closed at $US 270.20.  21 September 2017 it closed at $US 1,291.50.  About 10% rate of return.  But suppose I then told you that on 21 September 2012, gold was $US 1,771.23, for an average loss annually of 6.2% annually over the last five years.  If I wanted to sell gold I would pick the 10% annual gain. If I wanted to sell something else and you like gold, I would pick the 6.2% loss.

Survivor bias Many populations, the whole field of data, are limited to specific factors. Suppose I told you all fund managers with a 10-year record earned 7% on average.  What does that tell you about the manager group as a whole. Nothing whatever. Notice that managers with a 10-year history are kind of rare. Many fail before then,  many more started since then. Some have moved firms or changed their fundamental approach. Even if you get the 10-year crowd together, it will say nothing about how they will do next year.

Averages as a descriptor. We are intuitive users of normal distribution. (bell curve) Not all distributions look like that. Some are very peaked in the middle and have bumps on the end, like daily stock returns, while others are U-Shaped. People either love it or hate it. 

If the average is presented as meaningful, you can be mislead. There are other measures you might like to know about. Standard deviation is useful sometimes but harder to understand. Mean is average. Median is the amount where half are above and half below. Mode is the most common finding. When all three are the same, you probably have a good bell curve. If the outcome count for average is very low, you should worry. The average Canadian has 1.98 legs, yet there are few or none that demonstrate the characteristic.

Carefully selected populations.  If I ask welfare recipients if the monthly amount should be increased, I will get a different answer than if I ask everyone else. If I ask people who are between 20 and 25 if they like Bernie Sanders as president, I get something more positive than from when I ask 70-year-old conservatives. If you don’t know how the population was decided and how the questions were asked, you know nothing.

Presentation bias In Canada the question of Quebec’s succession comes up periodically. If the question is worded in a convoluted way or if it is presented in French alone, the answer will be different.

Know what you can about the population, the selection method, the analysis method and and any smoothing or other manipulation. Then you have a chance of applying common sense and moving forward.

Statistics don’t prove anything about the future.

They are for insight.  Statistical inference is the idea to notice. Inference is not a certainty and if the statistician wants to fool you, they can.  Statistical data is one of those areas where you can likely get any answer you want if you torture the data long enough. Be a little cautious.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com  866-285-7772

Decisions! Decisions!

Financial outcomes depend on decisions

People usually get that. The ones that don’t fall into the magical thinking group. They have uneven outcomes.

Clearly then, making good decisions is a good life skill.

How do we do that?

Notice that decisions attached to no purpose usually turn out badly. There are clear reasons for that.

1. Most decisions involve process, resources and tools to get the hoped for result. If the outcome is not clear, it is unlikely the proper resource group, the proper tools and the proper process will be found by accident.
2. Tools are the distillation  of humanity’s experience with a particular problem. It is not smart to reinvent the wheel. Saving and investment have been proven as a process to create future income. Tools make it efficient. Efficient tools get the outcome with fewer resources.
3. Processes are dynamic. For long ones, there will likely be adjustments. Few plans turn out exactly as expected. If the outcome is unclear  people cannot see the need soon enough to make a difference.

Build a template

What do you want? When? Who helps? What resources are available? What is the measurement system?

Templates have two parts

The problem definition and the solution design.

Defining the problem matters most. A good start nearly preselects the how of doing it. Good problem definition provides motivation. It is easier to do things you understand.

Solution design ties tightly to the defined purpose. The tools and processes are more specific. Best of all you don’t become confused by what you did not choose. You know why you picked what you did.

Setting reasonable parameters.

Know how the resources work. In a Financial plan there is no reasonable expectation that you can earn 20% on your investments over a long time. Realistically, 3% after inflation and taxes is superb.

Understand time. Especially notice if you have a guarantee of getting a lot of it. Didn’t think so. After that observation look at patience. All good outcomes include patience.

Great wealth has an enormous time frame. They look at family money, not yield. They think in centuries, not months. One bought over a hundred acres in a major city. They built some rental properties with a view to paying expenses while they waited 100 years to develop it.

Leverage is an impatience gig.

Most wealthy people use leverage sparingly. They see the future as inherently unknowable while the debt is rigid. Big variations in quoted value are immaterial if there is no debt to equity ratio agreement.

Few plans fail when there is a clear purpose, careful methods, discipline, patience, reasonable expectations and ongoing monitoring.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com  866-285-7772

Tax Strategy

The government and the people differ

There was a time, quite some time ago now, when the government existed to serve the people. Governments did things that were beneficial and needed economic and legal force to get them done. The St. Lawrence seaway and the large airports would not be present absent this ability. Think of highway systems.  What developer could do those?  None.

Times are different now.

Governments still do some things that only they can do, but attitudes have changed. Strategic vision is now less for the people and more for the enduring glory of the institution of government.

Case in point – proposed amendments to the taxation of small businesses.

There is a fundamentally different viewing point problem with the proposal. The government wants, possibly needs, more money to fulfill their plans. They use the diversion of fairness to mask their grab. Ask yourself one question. Can a tax system be fair if the proceeds of the tax are not spent on things the people want and need?  How about if a meaningful share of the money is wasted?

Answer: Fairness is a trick.

Economies are not built on political narratives.

Opposing attitudes.

Government attitude seems to be they are entitled to the money from anywhere in the economy and all they have to do is make a good political narrative.

On the other side, businesses think all the money they earn is theirs and are reluctant to give any to the government.  Not a very smart approach either. Mature business people know they must pay tax.  The infrastructure they depend on is important and costs to maintain. No one begrudges some level of basic tax.

When governments feel entitled the people have a problem.

Recall bank robber Willie Sutton.  When asked why he robbed banks, he replied, “Because that’s where the money is.” So with the government. They cannot impose adverse taxes on people who have no money and no income.

The problem is a simple one to see.

Who builds wealth.  

Not the government. They absorb money. Business people create new wealth with new businesses and efficiently operate old businesses. They employ people.  Your friends and neighbors. They support their community.

Business ownership has risks, but once they are established, fewer than people would have you believe.  The young ones are the risky ones. Most go away within five years. They didn’t have any income to speak of so no tax policy will hurt them.

Should the government feel able to take money from the successful? Seems so.

Will the government’s taking have any effect?

Not much on the older businesses. They can afford to manage their taxes effectively. The easiest solution is to go elsewhere. Maybe not all at once. But, you can bet, given the opportunity to expand, it won’t happen here. Ask Ontario how a dumb approach to business is helping them.

It will affect young businesses.  Fewer will form. Of a hundred that form, probably only thirty would make it to the successful level even in good times. The problem is no one knows who the thirty are. If instead of a hundred forming only seventy do so because they entrepreneurs can’t see the long value to them, now only 20 or so will be successful.

There are 10 missing successful businesses. Each with zero Canadian employees. Each with zero Canadian suppliers, bankers, lawyers, accountants and advertising agencies. Each paying no tax at all.

To believe otherwise is delusional. Things you punish, you get less of.

Is there a need for reform?

Probably, but this looks like a foolish way to do it. The government will get more money in the short term and materially less in the long term.  Governments should have a time scale where the long run is somewhere beyond 90 days in the future.

As my friend Gord Stovell recently commented,

“Canadians want the best social services, yet they discourage the things that will give them the resources to provide them.”

Things break down when governments behave like kings. The government thinks all the money is theirs and you can keep some while the people think exactly the opposite. Seriously conflicted viewing points.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com  866-285-7772

In The Zone

Every athlete, every professional and every scientist knows the feeling

Those days when things just come together.  It is a space slightly above subconscious and slightly below conscious. Psychologists call it a flow state.

It is the condition where knowledge, experience, emotion and skill converge.

Why is it a sometimes thing?

Daniel Kahneman has pointed out that when facts and beliefs are both in play, beliefs win. Sometimes situations are new enough that we cannot interpret the situation well enough and old beliefs dominate the process. It is new for a reason. We don’t have useful experience to guide our beliefs.

In most cases we don’t know how we came to hold those beliefs so they are as often as not inappropriate. Once that happens, emotions become troubling.  Particularly fear.

Fear is a poor counselor.

Fear makes us more narrow.  Less willing to try new things. Less willing to struggle on after a mistake. The flow state is wider. We see and can evaluate new things. The “Aha!” moment. 

No one has ever said “Aha!” or “Eureka!” while they are afraid.

Fear is not trusting yourself and that cannot be good.

Fear has a place

Fear intends to keep us from risky places. It is part of our life guidance system. The problem we have is it appears when there is no physical danger. Just psychic danger.

What if my new girlfriend saw that? What would people think? What if I lose money?

None are life threatening, but fear of them is life-limiting.

Flow is possible.

Visualization helps. Sit in a chair, relax, control your breathing and think about shooting foul shots or putting 6-foot downhill putts. Go through the whole sequence. Over and over.

Surprising thing! You miss some.

You can change your approach so that happens less and when you get back at the physical thing, you will be better at it. The relaxed state will be easier to achieve and relaxed is pressure defeating.

Take it to life

You can visualize sales interviews, employee evaluation meetings, dates, conflict with children, and lecture yourself about procrastination. It is threat free.  It is only a little emotional and you can influence that.

It is a way for you to find defects without any real world consequences.

Flow is not always possible.

You need to be enthusiastic about what you are doing. You need to focus and adjust as you go along. Minor variations and obstacles are interesting not threatening. The opposite condition is easy to achieve. Maybe from training and experience.

The place for obsession

When working, I expect Steve Jobs was in a flow state. We have seen golfers score crazy low when everything they hit looks for the hole, We have seen Michael Jordan and Russell Westbrook take over a basketball game. They were not thinking about picking up the dry cleaning or if people liked them.

I found an article a while ago that talks about how how children are obsessive learners until they get to school. Obsession Is the Ultimate Skill

The auther talks about recovering his passion. About his deschooling.

The lesson applies to children, employees, you and every adult you encounter.

Think how easy your family life, your job or business, your social relationships would be if people were openly passionate about life. Think how interesting it would be to talk to people who are enthusiastic.

Learn to avoid limiting yourself or those around you.

Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. 

In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.

Please be in touch if I can help you. don@moneyfyi.com  866-285-7772