Every individual, family, or small business has a “personal economy” of its own. The bottom line performance is dictated by the economic dynamics of the entire personal economy, not by the savings-investment sector.

How we define “winning”:

Most people in our society have the outward appearance of winning, but are losing badly. Having enough income to hide the flaws within a personal economy is not winning. A “balance sheet” often gives a false illusion of winning by showing an increasing balance but not showing all of the economic costs that were incurred to achieve that balance. Winning is when a personal economy works in harmony, at peak performance. It is like turbo charging an engine, converting the wasted energy that was previously being lost in the exhaust into power.

Are you winning now?

The only valid test is a “profit and loss” statement that uncovers all of the financial costs that exist within one’s personal economy and measuring them against gains. The “My Wealth Transfers” worksheet will help you measure the performance in your personal economy. Because we cannot solve problems that we don’t see, it’s an indispensable tool and the necessary first step in creating a winning strategy.  For the worksheet, click here.

The “product”, or “box”, approach to finances (the approach promoted by financial institutions and financial planners):

Problem 1: Every financial product, from savings accounts to 401(k) and similar plans, from credit cards to equity loans, is sold to us by touting specific features to achieve specific results. Each one is like a separate “box” to be filled with money. But, the economic law of scarcity dictates that money runs out long before all the boxes we need for real financial security can be filled, or even started. This forces blind guesses, the greatest risk we face: “which box is the most important to fill?” Because we can’t know what future events we will face, we have only the hope that real life’s events will somehow work in harmony with the choices we made. Wrong guesses lead to untold financial disaster, a primary reason why only about 5% of us reach financial independence.

Problem 2: The rules, taxes, and penalties imposed on the “boxes” which financial institutions promote for saving and investing make using “our” money that we put into the boxes so expensive that it wipes out our gains. So, we are dependent on using their other boxes, the “lending” boxes, to finance our wants and needs. The cost of these boxes does exactly the same thing as problem 1: it wipes out the profits in the “savings” boxes. This cannot work profitably. On balance, we will always lose. Financial institutions will always win.

The term "rate of return" is dangerously misleading until all of the costs that are sustained in achieving a certain sum of money are identified and calculated. For a better understanding of the real bottom line, click here.

The “process” approach to finances (promoted by economists):

Liquidity replaces lock boxes, allowing money to flow strategically through a series of the products and services we regularly need. Each dollar becomes more valuable by doing multiple jobs simultaneously. Personal control, efficiency, and benefits are maximized. Costs and taxes are minimized. Previously incurred costs are recovered and put to work increasing personal financial security and wealth (“turbo charging”). It simply requires learning and applying a few economic principles that are timeless but just new to you. Because personal use of these principles eliminates the profits of financial institutions, they will not teach and promote their use.

From a coaching perspective, as opposed to “manage and control”, Personal Financial Economics positions clients to have more money throughout their lives, to have more enjoyment of their money, and to have an imposing moat of financial security around their financial castle.