My mom and the drive for betterment

I’ve said before that one of the ways I test whether I’m doing the right thing is to consider whether I’d want what I say and do to be said and done for the benefit of my mom.  Would my mom be best served by following the advice that I give?

The reason I mention this is to draw-out something unique in that test.  Most people are genuine and honest and would say that they also only give advice that they’d want their mom to follow. But what I see so often is that the quality of the advice given, even with good intentions, is just so poor.

If the advice is well-intended but poor in quality, then it’s not good advice.  And when people who give advice aren’t committed to the mastery of their craft, then you wind up getting well-intended poor advice that does the same amount of damage as ill-intended advice.

The point: don’t always listen to people just because they’re nice and honest.  Those should be minimum standards.  And don’t buy stuff from people just because you like them.  Look for gravitas.  Look for wisdom.  Test for mastery and the boundaries of where that mastery stops.  Look for an advisor who invests in continuous learning and who plans on being better tomorrow than they are today.

Photo: Rachael McGraw, Santa Monica

How to plan for the cost of loss

In the tenets of risk management there are just four strategic initiatives: prevent loss, mitigate loss, transfer loss, and finance loss.

Some losses can’t be avoided and there’s usually no one else willing to take it from you, so once that loss has happened all you’ve got left is figuring out how to pay for it.  And for that there are really just three financing options: using personal assets, taking out a loan, or using insurance.

So when you and your financial planner are working on your financial plan, incorporate a discussion on how you plan to pay for the consequence if you suffer an unexpected loss from the major categories of risks.  It can be made easier by following this template:

“If we face (insert loss scenario here) we’ll deal with the financial impact by turning to our (insert your personal asset, your access to a loan, or your insurance here).”

Now you’ve got something to work with because you can audit, measure, and test ahead of time whether your asset/loan/insurance will be sufficient, broad enough in scope, and efficient in its cost.  And if in doing so you find any part of your plan to be insufficient, you’ll have to decide whether you’re motivated enough to do something about it.

Photo: Rachael McGraw, Seattle