03 Sep THE NEED FOR PERSONAL FINANCIAL RESPONSIBILITY: A BASIC TALE
There’s a motto that conveys the core concept of our financial responsibility. This motto was prominently displayed on a plaque on President Harry Truman’s desk while he occupied the White House. It read “the buck stops here.” The motto or saying derives from the slang expression “pass the buck” which means passing the responsibility on to someone else. The expression is said to have originated with the game of poker, in which a marker or a counter, frequently in frontier days a knife with a buckhorn handle, was used to indicate the person whose turn it was to deal. If the player did not wish to deal he could pass the responsibility by passing the “buck,” as the counter came to be called, to the next player. This concept of individual responsibility was so strong that President Truman referred to it even in his farewell address to the American people. He asserted “The President-whoever he is-has to decide. He can’t pass the buck to anyone. No one else can do the deciding for him. That’s his job.”
THE CONCEPT OF PERSONAL FINANCIAL RESPONSIBILITY
This tale has one primary purpose and it’s to emphasize the concept that individuals are responsible for their own financial lives. If someone were to compile my tales into a book this should be the first tale because the concept of personal responsibility is in my opinion the first requirement for financial success. Until you take personal responsibility for producing more than you consume and taking the excess production and investing it wisely you haven’t embraced financial success. You must decide and the sooner you do the better chance you have. The buck stops with you and your primary responsibility is the allocation of your capital, excess production or savings. Your job is to allocate this capital intelligently and these tales will help you accomplish your goal.
“The buck stops here” means that though you can delegate your responsibility, you cannot abdicate your responsibility. You must make decisions for yourself since you ultimately reap the rewards or suffer the consequences. Even if you hire someone to make all your investment decisions and consult with them on every minor financial decision that you may encounter, you are still making the decisions. You can seek input from others, you may delegate responsibility but you are ultimately responsible. This may seem a cruel concept but the sooner you accept this harsh truth the sooner you can go about taking care of your financial well-being.
This tale would also be the first of any compilation for a different reason. As a first generation Cuban-American, individual responsibility is embedded in my psyche and the essence of the Cuban-American success story in the United States. We were taught to make no excuses. We were taught to value education, to work hard, and to save and invest money. The Cuban-American experience shares the heritage that possessions can be taken away at any time but that knowledge can’t. You can take away our capital but you can’t take away know how. Much of what these tales cover I learned as a little boy and they were reinforced as my education grew. The concepts are simple the lessons are lasting.
FINANCIAL SUCCESS REQUIRES MORE THAN PERSONAL FINANCIAL RESPONSIBILITY
Other than accepting personal responsibility there is a second important criteria for financial success. It is the concept of advocacy or advisory. An advocate is one who speaks or acts on behalf of another. An advisor is of course someone, presumably an expert that gives advice. In the financial services world these two often come in the same package. It’s important to know how to work with advisors, what motivates advisors, how to select advisors and how to distinguish wise advice from foolish advice. Every successful person that I have ever met employs some combination of advisors. They recognize that they are ultimately responsible however. If you are to be successful you must understand and master this skill set. The very fact that you are reading these tales puts me temporarily in the position of advisor. You must have a way to determine if the things I or what others say ring true. Hopefully after you have read all my tales you will be able to make proper distinctions and hopefully better decisions. But don’t forget the basics. You are responsible and you must learn how to use advisors wisely.
THE ADVISORY RELATIONSHIP
Implicit in the concept of the advisory relationship is the notion that the client lacks the knowledge, skill, ability, time or interest to make their investment or capital allocation decisions. Implicit in this relationship is also the concept of trust. So it’s reasonable to assume that you perceive your advisor as an expert in their field. However, history has demonstrated that very few people that call themselves advisors in the financial services field are in fact experts. Most are either posers or inept or so conflicted they are incapable of rendering professional, expert advice. These tales may help you recognize if your advisor falls into the non-expert category. For a better understanding of the various types of advisors read A Tale of Projection and to better understand my definition of expert read An Expert Tale. These two tales have yet to be released but will in the coming months.
These tales will also try to address an age-old dilemma. when hiring advisors. The dilemma or problem is the single most complicated financial decision that people face. How do I hire and evaluate experts when I have limited expertise? This problem isn’t just found in the field of finance. It’s true in almost all areas where a person works with advisors or experts. I wrote A Fairy Tale, which I will also release in the coming months, to give you some ideas of how you may resolve this issue. Resolving this issue has been a challenge since the beginning of wealth building and wealth protection. How do you successfully turn your money over to someone that holds themselves out as experts when you have no way of knowing if they are what they say they are?
These tales are designed to help you either work with an advisor or be self-advisory. However, just because you work with an advisor doesn’t mean that you are not responsible. You are just as responsible as if you were to make all your financial decisions. There are those that disagree with this concept. They are wrong. To them I say like Donald Trump, “you’re fired.” When you can fire or dismiss an advisor at any time and for any reason, you are ultimately in control. If you can fire someone, you are in charge. As further proof, you can’t fire yourself so get comfortable with the idea that you must be wise with how you conduct your financial affairs and that your primary financial function, other than saving money is to allocate your capital intelligently.