Friday, June 03, 2011

Family Lawyer in Houston Discusses When The Rich Act Like They Are Poor (Part 1)

By: Kim Hegwood, Family Lawyer in Houston

In my line of work as a family lawyer in Houston, I get to have deep and meaningful conversations with families about the things which they most care about. I LOVE those conversations, and I believe that understanding these deeper passions is "the only way to fly", when it comes to estate planning.

Now, as I do so, I also run into people's attitudes about their wealth.

I have made a close study, over the years, of how money "works", and just what it is that propels certain individuals and families into great quantities of resources ... and what also brings them down.

You see, sometimes the very wealthy begin to act like they are poor.

It is the beginning of a bad problem. And, it is also something to watch out for in your children -- because it will give you a clear picture about what might happen should you bequest your resources to them without a clear plan. I have compiled a group of behaviors characterizing the financially-strapped.

You may have resources NOW... but are you:

* Spending money on things you really don't need:  I am sure we have all got one of those friends who just loves to spend money, and buy things just to say they have them.  The newest iPhone just came out? They buy it even though they already have an older version.   A new TV came out with a higher refresh rate than their current one? They buy one so they can say they have the newest and latest technology.

That may be fine for a certain amount of time, but there is something deeper happening in the heart, there, which if left unchecked, can signal a decline in wealth. Because it starts with the iPhones ... but where does it end?

* Ignorant about where your money is going: Far too often people who are broke find themselves short because they have never tracked their monthly cash flow and their small expenses are adding up to consume everything they bring in.  They really need to track their expenses for a month or two so that they can set up a plan.

But the wealthy sometimes begin to believe that they are immune to such proletarian concerns, and allow the same bad habit to encroach into their portfolio. Do not let up -- but, of course, do not fall into obsession (e.g., are you checking your accounts every day? That is also a problem!).

* Blaming your problems on outside forces:  People do not like to see themselves as the source of their problems. While people certainly have problems that are not caused by something they have done, far too often they will also try to shift blame when they should be looking at themselves.  They blame their friends, family and the government.  They believe that "the little guy just can't get ahead".

Are you doing the same thing? "It's the market's fault!", "My financial advisor screwed me!", etc., etc. ... again, signals of a deeper problem.

* More interested in having others think you are wealthy, than actually being wealthy: People who are always broke like to be seen as wealthy and successful, even if looking that way to others means that they are actually forfeiting the possibility of being wealthy in reality.

Are you pumping your resources into an image? Are you "investing" in items which, really, are more about how people will see you than how they will help your net worth?

* Not planning ahead: For the poor, money is short because they have not set up a family budget, and a saving and spending plan.  When they set up a monthly cash flow forecast, and know exactly what they are going to spend in what categories--they will do much better.  If you fail to plan, you can plan to fail, right?

Again, many resources can lead to laziness in this area. Do not let up with it.

I will have more to say on this topic next week.

Until then, I do hope you receive this in the affection with which I wrote it.