“You talking to me?” Taxi Driver, 1976

Yes. Even if you haven’t a penny in the bank, I’m talking to you.

Pat was divorced early in life. He never fully recovered from the trauma and never remarried. Over the next 24 years, however, he became quite a successful salesman for an industrial supply company. He took what he considered to be good advice and maxed out his 401(k), contributed to an IRA when possible and bought into the companies stock purchase plan; he amassed quite a corral of assets. Pat chose not to create a “bank” of money aside from that.

Then reality struck.

Pat had remained close to his children over the years. In 1999 his oldest daughter suffered a stroke. His former wife and his other children had moved out of state. The care of his daughter fell on his shoulders. Since Pat was earning a significant income the financial pressure was bearable.

Then reality struck again.

Shortly after that in late 2000 the company he worked for was acquired by a major competitor and Pat was terminated. His company stock was automatically cashed in as a part of the buyout so Pat incurred a large tax liability and reduction in value as a result. He rolled his 401(k) into his IRA account on the advice of his broker. Also on the advice of his broker, he invested his “retirement” accounts in what was considered safe but still fairly aggressive mutual funds. (Hindsight tells you where this is headed, but it sounded like a good idea at the time.)

And, again!

By the summer of 2001, at the young age of 55, Pat had given up on finding work. His daughter’s care and his own monthly expenses had drained the money he received from the stock sale. Pat decided to start his own business. He no longer had a no-compete limitation and he still had his old customer relationships so he cashed in some of his IRA investments, paid penalties and taxes, bought some inventory and went to work.

And again on 9/11…

Pat’s infant business took an immediate hit as devastating to him as the hit to the Twin Towers was to the rest of us. Not only that, but the value of his investments fell over 62%. Pat was suddenly struggling to make ends meet, care for his daughter and salvage a business he had started on a shoestring.

Your Personal Economy

Pat’s story is not yet ended but it has served its purpose for this post. Pat’s American DNA motivated him to “save.” His advisors – and most of the pundits, publicists and prognosticators who rely on the Behemoths for their information and advice – led him down a path that led him and millions of other Americans into a dungeon of debt.

In Pat’s case the debt was mostly to his company and to the government. His stock had strings attached so he really didn’t entirely own it and the price he received was not based on value but on the whim and greed of his employer. His “savings” in tax qualified plans were really nothing more than loans from the government at an unspecified interest rate to be repaid later disguised as a current deduction and a future liability.

Every successful personal economy has four clearly defined characteristics and achievable goals:

1. Freedom from debt to others – including debt to the government disguised as a future tax liability
2. Income you don’t have to work for but you won’t outlive that is protected from inflationary pressures
3. Ready cash to deal with the surprisingly unsurprising surprises that we all experience
4. A legacy of wisdom and wealth to pay forward to those we care about

Does your personal economy measure up? It can –> www.TheMoneyForLifeBook.com

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