Personal Economic Model®…What is it?


The large tank on the left is a representation of your ability to generate and sustain an income through work, inheritances or defined benefits such as social security.  Significant dollars may pass through this tank over your lifetime, but no money is ever stored there.  Your income turns into monthly cash flow, then it is dispersed to taxes, savings and investments and current lifestyle. 

There are two tanks in the center, green and yellow. The green tank is labeled SAFE and the yellow tank is labeled RISK. Cash flow directed at those tanks can provide income for your future lifestyle. Most families are at war, a constant fight to find balance between their current lifestyle and their future lifestyle. Directing too much income into those tanks today can seem like we have to cut back or not enjoy our current lifestyle. On the contrary, not directing enough cash flow to those tanks along the way could result in a future lifestyle that is dramatically less than what is desired. Our job is to help you find the money to make your future lifestyle more solid without cutting back from your current lifestyle.

Any dollars placed in the SAFE (Green) tank can never be lost while in that tank. Dollars placed in the green tank can only go forward, never backward. The RISK (Yellow) tank has potential for greater returns, but has no cap or lid which represents potential for losses. It is important to have balance between these two tanks. During those retirement years, you must have a plan in place to be able to draw from the SAFE tank in years of down markets. Many make the mistake of drawing funds from the RISK tank in down years for retirement income or to pay for college or some other large expense and the result can cause erosion of your assets exponentially. It takes balance and a plan to make money last as long as you do. Our job is to help you find and maintain balance between these two tanks.

We believe it is vital for you to have access to your money along the way for opportunities, emergencies and financing those major purchases, such as college, weddings, business equipment and cars. The need for financing never goes away. You will either always pay interest to others, forfeit the opportunity to earn interest, or begin to learn how to finance those large ticket items in a fashion that keeps you in control and your money moving forward uninterrupted. Our job is to help you maintain access to your money so that you can decide to utilize your own money, or someone else’s the next time you need to make a purchase.

If the Personal Economic Model® is new to you, it is time for us to get together and see how your money is flowing.  Give us a call today!