One tool we use when discussing the best course of action to secure your financial future is the Personal Economic Model®. Just as a medical doctor would use an anatomical model to convey medical concepts, we use the following model to convey financial concepts.
This model offers a visual representation of the way money flows through your hands.
On the left, you will notice the Lifetime Capital Potential tank, which illustrates that the amount of money you will control during your lifetime is both large, as well as finite. Most people are shocked to see how much money can flow through their hands in their lifetime.
Once earned, your money flows directly to the Tax Filter where the state and federal governments take tax dollars owed from your paycheck. The after tax dollars are then directed to either your Current Lifestyle or your Future Lifestyle.
Your management of the Lifestyle Regulator determines where these dollars go. Regulating the cash flow between your current lifestyle desires and your future lifestyle requirements may be the most important financial decision you will ever make.
Each and every dollar that is allowed to flow through to your Current Lifestyle is consumed and gone forever.
The goal is to accumulate enough money in the Savings and Investment tanks so that when you retire, the dollars in those tanks can be used to pay for your future lifestyle requirements. Retirement planning seems hard for most people to do but it is not rocket science.
The best position, position A, would be to have enough in the tanks so that you can live in the future like you live today adjusted for inflation and have your money last at least to your life expectancy.
That’s a win, but the icing on the cake would be to accomplish that with little to no impact on your present standard of living, and that is exactly what we strive to help our clients to do.
Working with us can help you with the following:
- Optimize the balance between your Current and Future Lifestyles
- Identify inefficiencies in your current personal economic model (where are you losing money)
- Design, implement, and execute a plan to secure your financial future
- Limit the impact on your Current Lifestyle dollars (maintain your current standard of living)
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