FREE CHAPTER PREVIE
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CHAPTER 6
Financial Capital
W
hen we speak publicly about the Three E trends, most people who come up to us afterwards ask:
What should I do?
What we’ve learned is that most of them are really asking:
What should I do with my money???
We get it. Most of us spend the majority of our waking hours at work, earning money that we hope will provide a secure future for ourselves and those we care about. The idea of losing our hard-won financial savings suddenly during another economic crisis, through job loss or a market crash, is a near-universal fear.Given this sensitivity and the related urgency many have around it, we’ll begin our journey in resilience-building by focusing on developing Financial Capital.So how can we protect our money and its purchasing power? And how may we be able to use our insights of future trends to make more of it?
Money ≠ Resilience
But first, let’s get some perspective. It’s very important to note that even though we’re starting with Financial Capital, that does not mean it’s more important to developing resilience than any of the seven other forms. It’s not. And let’s be really clear about this. If all you have is Financial Capital, even if you have millions to your name, you are NOT resilient. We’ll explain why more fully as we dial through the other forms of capital in future chapters, but for now, suffice it to say that some of the least resilient people we encounter in our consulting work have 8-figure bank accounts or higher. This is due in part to how completely these folks have let their identity become defined by the size of their savings account. They live in fear of their money disappearing; afraid they’ll have no purpose or worth in the world without it.
Prosper
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Don’t get us wrong, though. Financial Capital is important:
it is often the easiest means by which you can acquire other forms of capital
.Think about it. You don’t use your dollars (or Euros, or Pounds, or Yen, etc) for a physical purpose. You don’t build a house out of them. Eating them doesn’t nourish you. Instead, you exchange them for goods and services that can. And this exchange not only leaves you with a desired asset. It can also leave you with a tremendous surplus of
Time
(one of the other forms of capital), as you didn’t have to invest the labor to produce the acquired asset. Anyone who’s ever built a house, grown a crop, or gone through medical school themselves has a real appreciation for the true time savings that exchanging money for goods and services offers. Which is why we encourage you to start thinking more broadly about what “wealth” is. Yes, money is a very real part of wealth, but only a part. In addition to the cash to your name, are you healthy? Happy? Safe? Wise? Valued by others? Self-sufficient? Those are the real “assets” you truly want to end up with in life. Money is simply one of the means of acquiring things in life that we need or value.If there’s one light bulb we’re trying to turn on in your head in this chapter, it’s this: Think about your financial holdings as divided into two buckets.The first bucket is your
Resilience-Building Fund
. This is the allotment you plan to exchange for other forms of capital in the near term.The second is your
Financial Future Portfolio
. This is the money you will save and invest today, with the intent to exchange it for other forms of capital at a later time (i.e. years) in the future.How much of your holdings should go into the seed fund? And what should you do with the money left in your financial portfolio? We’ll go into answering these questions in detail in this chapter. But first, it helps to start this journey with a clear picture of your current financial situation. After all, you can’t make good decisions without good data.
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