Financial Resources

LEVEL I: BALANCE SHEET, INCOME STATEMENT, & CASH FLOW STATEMENT
The balance sheet, incomes statement, and cash flow statement are the beginnings of wealth creation. Although there are some who are able to create large amounts of wealth exclusive of these ideals, most of us will eventually generate desired amounts of wealth through consistent capital investment (i.e. saving) via mastering these concepts and applying them to our financial & emotional lives.

LEVEL II: TIME VALUE OF MONEY, COMPOUNDING, DISCOUNTING & PURCHASING POWER
The second level of comprehensive financial literacy is understanding the effects of the time value of money, and how to leverage this knowledge to your benefit. The two cornerstones of this level are future value and present value. Future value is more intuitively understood by the mind and is incredibly useful for making projections and goal attainment, whereas present value is less intuitive (for most), yet invaluable in determining a project or potential investment’s worth. When dealing with future projections, the most important component to integrate into those projections is the element of purchasing power (i.e. the erosive effects of inflation). This principle of purchasing power should unquestionably be present in any and all future value calculations, projections, and models.

LEVEL III: PRINCIPLES OF MANAGING, VALUING, & GROWING PERSONAL WEALTH
The 3rd Level of comprehensive financial literacy is principles of managing, valuing & growing personal wealth. It is our perspective that the era of simply shoveling the responsibility onto a stock broker or investment advisor is slowly coming to an end as the disparity in knowledge and application between institutional and public portfolio management continues to widen. There exists two definitive, agreed upon, and tangible gaps in the world of wealth management advisory services. One is between the services and principles of mathematics applied to the ultra-wealthy (over $100MM) and the commoner (those below that mark). The other gap is the mathematics and application that is being academically applied to investment advisory services versus the mathematics actually applied in the majority of the public investment advisory world. The responsibility (unfortunately) falls on the shoulders of the investor (not the financial institution) to gain an understanding of what the principles are, how they could potentially affect long term portfolio performance and risk, and assuring the principles implementation by the advisor of their choice.

For those who choose an investment advisor, your depth of knowledge need only go so far as to understand what the variables are, their affect on overall portfolio statistics, and how they can be incorporated to better serve your wealth preservation. For a list as to what those concepts are, please download our Advisory Efficacy Request Form.

For those who choose to do their own investing, you are strongly encouraged to not only understand the concepts, but also be able to derive them and apply them to your own portfolios (through portfolio tracking software or creation and maintenance of spreadsheets). Anything less significantly increases exposure to non-compensatory risk and furthermore mitigates the potential for persistent excess returns over multiple market cycles.