We are all millionaires, john crane

JOHN W. CRANE, Registered Representative and Financial Advisor of Park Avenue Securities LLC (PAS). 7101 Wisconsin Avenue, Suite 1200, Bethesda, MD 20814. Securities products/services and advisory services are offered through PAS, a registered broker-dealer and investment advisor. (301) 907-9030.

Financial Representative, The Guardian Life Insurance Company of America (Guardian), New York, NY. PAS is an indirect wholly-owned subsidiary of Guardian. First Financial Group is not an affiliate or subsidiary of PAS or Guardian.

PAS is a member of FINRA, SIPC.

WE ARE ALL MILLIONAIRES!Teaching Our Students A Lifetime View of Wealth

John W. Crane, ChFC®, MBAhttp://www.cranefinancial.com/




Agenda for Today

• Introducing Your Speaker• Current Trends Affecting Cash Flow & Wealth• Accumulation Theory versus Human Life Value• Human Life Value and Values Based Decision Making• Increasing Our Human Life Value• Summary & Something Extra• Q & A




• Academy of Finance, TC Williams High School Advisory Board Member and Guest Speaker (2003 – Present)

• NAF Conference Speaker (2006, 2007, 2010)• Financial Advisor, First Financial Group (2002 – Present)• License disclosures and clarity of purpose.• Live in Alexandria, VA with wife Linda, daughter Emma

and Lilly the Cat.

About Your Speaker




Current Trends Affecting Household Cash Flow Management and

Wealth Building Initiatives

Some Background and Context




Agenda for TodayPEOPLE ARE LIVING LONGER




Agenda for TodayPOOR HEALTH HABITS ON THE RISE




Agenda for TodayRATE OF DIVORCE IS ON THE RISE

Div

orce

s pe

r 1,

000

Mar

ried

Wom

en




Agenda for TodayINCREASINGLY VOLATILE MARKET

http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=djia&time=13&freq=2 (2010-07-09)

http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=djia&time=13&freq=2




Agenda for TodaySAVINGS TRENDS ARE DOWN

Personal Savings Rates (1952 - 2009)

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%1

95

2

19

55

19

58

19

61

19

64

19

67

19

70

19

73

19

76

19

79

19

82

19

85

19

88

19

91

19

94

19

97

20

00

20

03

20

06

20

09

Years

Sa

vin

gs

Ra

te (

%)

http://www.bea.gov/national/nipaweb/Nipa-Frb.asp





Accumulation Theory versus Human Life Value




Accumulation Theory

Wealth = $ x Time x % Growth

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29

Time

Mo

ney

Accumulation Theory

- Save $12,500/year

- 7% growth each and every year

- 30-years




Accumulation Theory• Wealth = Money x Time x Growth Rate• Many planning approaches and Internet-based

retirement calculators are based on this theory.• Employs the use of linear math to attempt to predict

the future. • Relies heavily on the concept of delayed gratification

in order for the plan to work. Is this realistic?




Agenda for TodaySAVINGS TRENDS ARE DOWN

Personal Savings Rates (1952 - 2009)

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%1

95

2

19

55

19

58

19

61

19

64

19

67

19

70

19

73

19

76

19

79

19

82

19

85

19

88

19

91

19

94

19

97

20

00

20

03

20

06

20

09

Years

Sa

vin

gs

Ra

te (

%)






Accumulation Theory Based Planning Many Times Makes Assumptions…

• Assumes regular increases in salary and no job loss.• Assumes always healthy, always alive and always

working.• Assumes never sued, never sick or injured, never

divorced, never making a bad investment, etc.




Accumulation Theory

Wealth = $ x Time x % Growth

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29

Time

Mo

ney

Accumulation Theory

- Save $12,500/year

- 7% growth each and every year

- 30-years




Human Life Value




Career earnings:

- $24,000/year - 30-years of work- 3% raise every year- $1,141,810 before taxes

* A true HLV calculation backs out taxes, inflation and personal consumption.




Human Life Value Method

• Value of Company Stock = NPV of all future cash flows.• Human Life Value (HLV) is the net present value of all of all

future earnings for a person. • HLV is a FINITE dollar amount and should be treated as such.• All spending activities reduce the amount of money you will

get to use and enjoy over your lifetime….so choose wisely.• HLV creates the context for which one can determine the

lifetime affordability of two big ticket items: cars and houses.




Human Life Value and Values Based Decision Making




Setting the Bar at $24,000/year(subtitle: Why you should go to college)

• Income and expenses indexed at 3% for inflation.• Living in a $500/month apartment• Spending $500/month on grocery/dining out.• Spending on average $200/month on ‘cars’.• Saving approximately 9% a year• Taking care of bare essentials; no vacations, no fun.




Agenda for Today

Ending Balance

0

200

-200

-400

-600

-800

-1,000

-1,200

-1,400

-1,600

-1,800

-2,000

-2,200

-2,400

-2,600

-2,800

-3,000

-3,200

Dol

lars

(In

$1,

000s

)

2015 2021 2027 2033 2039 2045 2051 2057 2063 2069 2075

Year

Future Value

Insufficient funds to provide necessary cash flow

S a m p l e

Net Worth reaches $152,000 by year 30, but when retirement hitsand income stops….the income earner quickly runs out of money.

Pre-Retirement lifestyle exceeded what was sustainable.




Setting the Bar at $60,000/year(subtitle: the ‘PERFECT’ financial plan)

• Income and expenses indexed at 3% for inflation.• Owning a home with a $1,200/month payment.• Spending $500/month on grocery/dining out.• Spending on average $300/month on ‘cars’.• Saving approximately 30% a year• Taking a modest vacation each year.




Agenda for Today

Net Worth reaches $1,580,000 by year 30, continues to increaseuntil inflation gains steam and then net worth declines until death at age 100.

ABSOLUTE PERFECTION!

Ending Balance

0

100

200

300

400

500

600

700

800

900

1,000

1,100

1,200

1,300

1,400

1,500

1,600

1,700

Dol

lars

(In

$1,

000s

)

2015 2021 2027 2033 2039 2045 2051 2057 2063 2069 2075

Year

Future Value

S a m p l e




‘Perfect’ Plan isn’t Perfect……unless life is perfect!

• Assumes regular increases in salary and no job loss.• Assumes always healthy, always alive and always working.• Assumes never sued, never sick or injured, never divorced,

never making a bad investment, etc.• Life isn’t perfect, so give away the risks you can give away

(insurance) and be prudent with the ones you must keep.• Seek balance across your Health, your Money and your

Relationships.




Values Based Decision Making

Get the Highest Rate of Return with Your TWO Currencies





HEALTH

RELATIONSHIPS

MONEY

DESIREDVISION




HEALTH

• Sleep• Diet• Exercise

HEALTH




HEALTH

• Education• Career Management• Cash Flow / Money

Management

MONEY




HEALTH

• Family• Community• Spiritual

RELATIONSHIPS





HEALTH

RELATIONSHIPS

MONEY

DESIREDVISION




Increasing Our Human Life Value(increasing our Stock Price)




Increasing Human Life Value

• Education• Focus on Desired Future Vision• Active Career Management• Employ leverage by integrating across H.R.M.




Summary &Something Extra




Main Points for Today• WE ARE ALL MILLIONAIRES in terms of our future income as

revealed by our Human Life Value.• DAILY CASH FLOW DECISIONS MATTER!! Consider your HLV

(lifetime of earnings) and set a sustainable lifestyle.• BLOCK OUT DISTRACTIONS by focusing on your Desired Future

Vision and maintain positive balance across Health, Money and Relationships.

• FOCUS ON WHAT YOU CAN CONTROL. Work on making positive incremental improvements. MAXIMIZE your MONEY and YOUR TIME!




Something Extra




The Secret to Life




Q & A





1)

2)

3)

1)

2)

3)

1)

2)

3)

The ______________ to ________

1)

2)

3)


Human Life Value is the Net Present Valueof all future earnings less taxes, inflation and personal consumption.

We are all millionaires, john crane

Business

Transcript of We are all millionaires, john crane