By Kevin Engbers, CFP® Wealth Advisor
The early 80’s was an exciting time for an aspiring entrepreneur and newlywed. Just young enough to possess all the answers. Ignorant enough to prove it. Interest rates were incredibly low, and a budding economy provided the right incentive and opportunity for me to monopolize and monetize.
Haberdashery was my launchpad, and so began the contractual purchase of a historically strong men’s clothing store. Business was growing along with my credit and confidence. There was no need for a financial, savings or investment plan. Leverage, expand, repeat. The process was quite simple. This is a good time for me to explain that utilizing the right kind of leverage in an organized financial plan coupled with prudent saving and investing strategy is a better plan. However, there is also a lifetime of lessons learned when a business built on credit (or as I was about to learn debt), can affect company stability when a rural dependent business encounters “a farm crisis.”
Here is a partial list of lessons learned;
- Cash flow and balance sheets look much different when interest rates on loans increase from 5% to 16%.
- The ability of others to purchase goods and services declines when the consumer is also highly leveraged
- Lending institutions are protected with excess equity collateral.
- They are less likely to continue to borrow when loan-to-equity value is “excessively strained.”
- Having a 2 to 6 months emergency liquidity fund would have been a great idea.
- Owning excess cash reserves when no one else does can provide capital for incredible opportunities.
- Your options are reduced when others begin making decisions for you.
- Credit = Debt. Debt without cash flow = financial hardship.
I was forced to face a series of difficult decisions that were life changing; but not life ending. The permanent mark that was left on me from this situation helped me to reflect as I wrestled with, “why someone hadn’t sat me down to discuss, goals, strategies, the need for savings/emergency funds, and the management of various risks? To help understand that these discussions could drastically change or eliminate the level of financial hardship or risk exposure.
Over the subsequent years a series of career opportunities led me to the steps of a financial services firm. My previous experience inspired me to focus on helping others improve or increase their financial confidence by having a proactive financial game plan. It brought to light the burning question that I believe everyone needs to face. If what you thought to be true turns out the opposite, when would you want to know. Would you want to know the day you retire, 5, or 10 years into retirement? Or would it make sense to have a proactive game plan today to evaluate if changes might be necessary to improve your financial futures probability of success? Sometimes difficult life lessons like mine influences someone to never take a risk again. That too has a bad outcome. My father was correct when he reminded me that “knowledge is the retention of important facts, but when you add the lessons learned from the experiences of life, a person has the opportunity to gain wisdom.” It is our quest to never settle, to continue to help others embrace the pinnacle of wealth we call True Wealth and to inspire others to improve their financial confidence, so they can confidently enjoy life.
Come experience the Pinnacle difference of Wealth Designed, Life Defined and Confidently Enjoy life.