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Money Conversations: Part 2

Updated: Mar 29

As I shared in Part 1, I love doing impromptu Q&A sessions during my workshops on retirement or financial planning. Just like attendees may tire of hearing the same concepts over and over again, presenters also tire of going over the same material. As a financial advisor, my main purpose as a speaker is to help the audience. So, I ask them what they want to talk about.

Pretty simple, right?

Recently, however, I deviated from this formula for a couple of talks because there are some topics that I believe people need to be addressing in their financial lives. We live in a world where information is abundant, and the temptation to do-it-yourself permeates everything from home projects to personal finance. There is definitely merit to being informed. Yet, I fear that some folks are leaning too much on their own understanding these days. 

If you haven’t read Part 1 of this series, I encourage you to check it out before reading ahead. For the rest of us, let’s continue our discussion on money conversations you should be having with yourself and your loved ones.

Am I Prepared for the Economy of Tomorrow?

I remember having to tackle defensive linemen in high school football drills. I was a tall and thin wide receiver, but there I was having to clash heads with the biggest guys on the team. To me, it didn’t make any sense; it seemed so far-fetched from the reality of an actual game. But–it still happened. 

I had a choice to make–play full out and trust the process OR get run over. Either way, I was participating.

Something big is brewing for the future. While many of the projects in development began years ago, the COVID pandemic pushed many into warp speed. In the years ahead, many of us will be faced with a similar choice–play full out or get left behind.

By now, I believe it’s safe to say that most people have at least heard of Bitcoin. In 2017, I wrote this gem of an article when Bitcoin went mainstream. I think it’s safe to say that my initial beliefs–and likely your initial beliefs—were wrong. 

Cryptoassets and blockchain technology is not only here to stay, but I believe they are here to take over. The scope of what’s happening is too broad and detailed for this post, but I can almost guarantee you that our world is going to be radically transformed by these technologies. 

The question you need to ask yourself is, “Will I get onboard with this change?” 

Here are a few brief examples of things that have happened recently:

  1. El Salvador has adopted bitcoin as a currency. Have you considered what might happen if many of the smaller countries with unstable currencies decided to use bitcoin as a legal way to conduct business? How might this change the global marketplace? For starters, they won’t need the IMF to raise funds. They can simply go directly to the blockchain.

  2. DAOs are here to stay. DAO stands for Decentralized Autonomous Organization. Many of these are already in existence, each with its own mission or mandate. Recently, a DAO was formed in an attempt to buy an original copy of the US Constitution. Constitution DAO raised over $47 million dollars for the effort. 

Ultimately, the DAO was outbid, but the implications of this development are tremendous. Think about the nonprofits or special causes that often rely on 3rd parties to raise their funds. Could you imagine a DAO that is created to raise money for the next major disaster or special interest initiative? 

  1. Miami intends to pay its residents a bitcoin dividend. That’s correct– Miami is planning to use its bitcoin holdings to generate yield, which will be distributed out to its residents via a MiamiCoin. The mechanics behind this are complex, but will we see more large cities follow? 

  2. Stable coins are everywhere…or they could be soon. For those who don’t speak crypto, stable coins are tokens that are pegged to a currency (typically the US Dollar). This creates the “stable” effect of holding each coin at the value of 1 US Dollar, yet it allows the coin to transact and operate on exchanges or blockchains. Many of these stable coins are already in existence, but they may be coming to a bank near you. The Treasury Department recently issued a report on stablecoins, and it appears that regulations are imminent for banks. What this likely means is that stablecoin adoption is most likely coming to the major banks, providing banks with a foothold in the cryptoasset space.

Think about the adjustments we could see in interest rates being offered by banks. What relationship could this create between savers and banks? How will this impact banks’ ability to make loans in fiat currency by holding deposits denominated in stablecoin? It’s a mad, mad, mad, mad world. 

These are just a small set of examples. There are many more that we could explore–NFTs, Web3, and the Metaverse. Did you know that a piece of “virtual real estate” just sold for over 2 million dollars?

It’s possible that we are getting ahead of ourselves. I personally don’t see much utility in jpeg images of punks or apes; however, the technology and community interconnectivity is powerful. We shouldn’t underestimate the long-term impacts on how these new developments impact wealth creation or investing in the future. 

I share these ideas because I’m learning as fast as I can—but it’s not fast enough. The speed of change is mind-boggling. I can’t imagine what it will feel like to those who aren’t paying attention. 

If you’re reading this, I urge you to consider how these new technologies might intersect with your life. Could they impact how you handle your personal finances? Might they shape your investing philosophy? How might your life be disrupted if the “old” ways of doing things go away?

Who Is Going to Take Care of Mom/Dad?

Extended care isn’t an exciting subject, but I cannot think of any topic that is more relevant for our country today. We have an aging population, and modern medicine is allowing us to live longer. Take a look at the following chart:

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I sat through a discussion a few weeks ago where a doctor shared his views that we will see humans living to 120-150 years old in the years ahead. For me, I say “No, Thank You.” The vast majority of us have not considered the 80 year old version of ourselves. The pull of our present wants, needs, and worries can make a long distance forecast like that feel impractical. Yet, it’s our 80 year-old self that will likely reap the outcomes of the financial plans we make (or don’t make) today. 

In case you weren’t aware, the majority of long-term care in this country is provided by family members at home. This article from 2019 states “about 41 million family caregivers in the U.S. provided an estimated 34 billion hours of care to an adult with limitations in daily activities” in 2017. The truth is that it is extremely difficult to even quantify the number of people who are actually receiving care, who is actually giving it, and the financial impact. (Here’s more statistics on LTC)

Here’s a small summary of what I have seen as a financial advisor in Fort Mill, SC — people leaving their jobs, parents moving in with empty nesters, people making weekly trips to visit mom or dad, and folks paying for a nurse to be there when they can’t be. Emotional and physical impacts aside, the financial impact can be tremendous. 

Years of lost employment income, prematurely pulling funds from the stock market, spending down assets that could have been inherited as part of a generational wealth transfer, will destroy long term financial goals. I wish there was an easy button we could press to fix this dilemma.

Why does this matter?

It matters because many of us will be faced with difficult decisions in the years ahead. As our parents and family members age, they will likely require some form of extended care. It’s important for you and anyone involved or affected by this situation to discuss it. 

Just like we create our wills and power of attorney documents for estate planning, we need to come up with an action plan for long-term care. A good financial planner can help with the details, but the first step is acknowledging the possibility that you might be making these decisions in the years ahead. Don’t you want to have an idea of what kindcare your loved ones desire and what is possible? 

What Am I Missing?

When you’ve thought of everything… Have you really thought of everything? In the beginning of 2020, I was speaking at an event. I remember saying that the Coronavirus coming from China was not likely to be a big cause of concern. At the time, it seemed to be more of the usual media sensationalism. How wrong was I? How wrong was everyone?

If you had a global pandemic shuts down the world economy and reshapes life as we know it on your forecast for 2020—you need to be in finance. 

The point is that there is always some kind of black swan event—something unknown and unknowable that can happen. This isn’t to introduce more fear and anxiety. It’s more about staying vigilant and being prepared for the what ifs that could alter our financial landscape: loss of a spouse, loss of a job, etc. 

I hope that you can take many of the questions throughout these posts and use them to catalyze your thinking about your finances. Financial planning done right addresses the whole person–not just portfolio returns. Take some time to check-in with your loved ones. Let’s prepare and do the work in advance. As always, our team is here to help–let’s talk!

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