James P. Studinger is the owner of the JPStudinger Group, a wealth-management company and the author of Wealth Is a Choice, his first book. He was an instrumental advisor in helping to pass Michigan's new 529 College Savings Plan, earning praise from Governor Jennifer Granholm, as well as from the bill’s sponsor, State Representative Tim Melton of Pontiac/Auburn Hills (Chairman of the Committee on Education).
Growing up in Manistique, Michigan, James knew at an early age that he would be a businessman. Incurring a hefty credit-card debt while in college, he became convinced that a sound financial education was a vital life tool.
James spent his early career as a financial advisor with American
Express Financial Advisors, one of the largest financial planning firms
in the country. In 2002 he opened his own company, JPStudinger Group, a
firm that specializes in education and meeting clients' needs rather
than focusing on sales. His mantra is: an informed client is the best
Inspired to pass on a finiancial road map to his children, James set out to write down his his principles, which blossomed into Wealth Is a Choice, a book intended to educate readers and help them embrace, not fear, financial decisions.
When not writing and advising, James enjoys Michigan's outdoors: hiking, camping, hunting and fishing. He is also a fitness buff and likes to run, bike and play hockey. He and his wife reside in Bloomfield Hills with their two sons.
James will be writing about buil;ding wealth through and outside business in this tough economy.
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All photographs by Metro Detroit photographer Marvin Shaouni
Marvin is the Managing Photographer for Metromode & Model D.
James Studinger is the President of JPStudinger Group, an independent financial planning firm located at 2855 Coolidge Highway, Suite 103, Troy, Michigan 48084. He offers Securities and Investment-Advisory Services through NFP Securities, Inc., a Broker/Dealer, Member FINRA/SIPC, and Federally Registered Investment Advisor. NFP Securities, Inc. is not affiliated with Firm name. He may be reached at 248-643-6550 or through email at email@example.com. The firm’s website is www.jpstudinger.com. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by NFP Securities, Inc. This is for general information only and is not intended to provide specific investment advice or recommendation. NFP Securities, Inc. does not provide legal or tax advice. Clients should consult with their own legal and tax advisors.
For most of this week I’ve been talking about building wealth by investing our time and money into appreciating assets (Buy Appreciating Stuff Often or BASO). When economies are tough, it can seem like there is nothing to reinvest. So today I’m going to give you some practical ideas to free up your cash.
In Wealth Is a Choice I frequently discuss financial offense and defense. Offense is the money you bring in, and defense is what you do with it. When people feel behind, they often believe increasing income is the only solution. There are many in Michigan losing their jobs, or who have become overextended. I won’t deny that more income can be helpful, but I also believe that we are not sufficiently working with the income we already have.
And until we are, it is possible that no amount of income will be enough. The economic winds may be so fierce in Michigan that none of us are safe from the gails. Even for those who are employed and living within their means, strengthening your defense during good times is paramount to keeping afloat even if we’re not always so lucky.
Books like Deep Economy (Bill McKibben) and Common Wealth (Jeffrey Sachs) point out that America makes inefficient use of our resources, and that this trend can not be sustained. Do we need to buy less (live less) in order to waste less? Or is it possible that by wasting less we might just find ourselves spending less, and therefore saving more? David Bach Author of Go Green Live Rich believes you can, and so do I.
A couple of years ago, looking out my window at all the gas guzzling vehicles in the parking lot, I wrote an article that suggested if we paid more attention to how many barrels of oil we consume (rather than focus on the price of gas) then eventually gas prices would reduce. The amount of my income that goes to gasoline may be less than last year, but that alone won’t tell me if I used more or less gasoline. It is the collective habits of the masses that most influence the future cost of transportation.
So this year my wife and I did some experimenting. We tried using fewer resources. We began frequent car pooling. We took that a step further, and dusted off the bikes. It’s a 7.5 mile trip one-way, but amazingly we discovered it only added 15 minutes to the commute. It also gave us a great workout, and replaced some time needed at the gym. It has its realities, the first week I got a flat. And one tends to get a little sweaty. But we worked around those issues and functioned just fine. With office space so available in Michigan, next year when our office lease is up and we’ll move to a location much closer to home, making manual commute more reasonable and likely.
We began buying food in bulk, and composting (turning waste into nutrients) the veggie scraps. Next year we’ll have a real nice little garden, which won’t replace the grocery store, but it will make a difference. We joined a food co-op and got a weekly supply of locally grown veggies. We have a big freezer in the garage, and I get my annual meat supply from a couple farmer friends (giving more Michiganders a little more income rather than some corporation located outside our state. Plus, my average cost per pound is only around $3.50 and it’s all organic.
I see families get more creative with toys for their kids. During a taping of Ken Stern's new Detroit Public Television show, he said he’d be giving friends gift certificates for Christmas, but not for stores, but instead, for his time (babysitting kids, helping shovel their snow, cooking a meal for them). Remember, cardboard boxes make great forts and drawings are fantastic birthday cards.
We do much of our communication via email, and try to reduce the number of things printed. Instead of mailing client holiday cards we send them an email that we’ve donated the expense to charity. When we take notes, it’s usually on the backs of useless scrap paper. So we recycle paper once before it’s shredded and recycled again. Through this, something very interesting happened with our trash. I used to pile up bags each Tuesday for pick-up, now I usually just have one small bag of trash, and one box of recycle. We use less - spend less, but still buy the things we want. But we are not spending as much money for packaging or convenience.
Take a month off spending
If you want to see what’s possible but can’t commit to a massive yearlong change, then just take one month. For one month, brown bag it for lunch, don’t go shopping for new clothes, don’t sign up for new memberships, and see how much less you can spend that month. Re-think the way you buy groceries. Go through the cupboards and see what’s there. Look around your community for free family events. Get involved to improve your neighborhood. And more than just not spending money - see if you can improve your net worth. Rather than feeling trapped inside and watching TV, brainstorm and see if there are fun things you can do that also might increase income. Rediscover your strengths. Spend some good ole’ wholesome American family time with friends and have them over for a pot-luck.
I’ve posted a free "Cash Flow Worksheet (Budget)" on my website. It’s in an excel format, so please feel free to download it and alter the fields to personalize your budget.
The good thing about a bad economy is that it’s easier to make the shift to living frugally. We’re all in this together and even the Jones’s are cutting back. And we might discover that this whole "Go Green" thing is reconnecting to those around us and building stronger communities.
I’ve enjoyed this week, and hope it gave you some good practical ideas. Please continue to share your thoughts and ideas.
Most of Michigan’s primary income is W-2, from an employer. Some are sole practitioners and work independently on a 10-99, and others own organizations that employee others. Sometimes the sole-practitioner, and usually the business owner, is also building an asset that can be sold for a profit. All three methods of earning an income are unique and not suited for everyone as their primary source.
Padding our wealth with different wealth
I’m a big believer in the powerful word ALSO. I encourage business owners to also build wealth outside of their business, and for employees to also build options outside of their job. The advantages of having self employment income are vast, and can be viewed as part of one’s overall "investment" strategy. Not only does it keep open the possibility of prosperity, but there are also many practical benefits.
Here are a couple of examples, starting with the employee. I recently met with Steve who is working for a big three supplier experiencing heavy layoffs. So far he is safe. Steve is quite good at building websites, and has been for a number of years, for free. Besides the fact that he isn’t making any money, unfortunately his skill isn’t structured as a business for tax reasons. Most of the equipment, overhead and meetings with his pro-bono clients would be considered a business expense if he operated as such. Some of the equipment helps him on his day job, and is written off as an un-reimbursed business expense on his tax return. But that is subject to a 2% restriction of AGI (meaning that if he made $100,000, then he could only begin writing off expenses that exceed $2,000). However, if he had a legitimate business (pursuing paying customers) then he might be able to benefit with greater realized deductions. Not to mention making extra income.
As it turns out, he actually does have potential clients who want to pay him to build websites. If he gets laid off, will the income be enough to support his family? Probably not entirely - but it helps. And who knows, the experience may open other doors. The great news is that it gives him options - another source of income, some nice tax advantages and another diversified way of building wealth.
For the current business owner, building wealth outside of your business isn’t just an option, it’s critical. Norm McKee, a CPA in Rochester has been performing a record number of business bankruptcies. Unfortunately too much wealth was wrapped up inside the business. When times are good it’s easy to think that it will always be good, and we spend our money freely. Then when times are bad we are just scraping by, and have no money to save. Many business owners have their wealth tied up in their business, and they believe that someday they will sell, and get all that wealth out. Sometimes it happens just that way. But other times it doesn’t. Many sell within, to existing employees or family members. People don’t often have the funds to pay for the business with one check, so they put down a modest payment, and then finance the rest. Sometimes they are not able to secure financing with a bank, so they finance with the original owner. For some it works, but for others things get tough, and the new owners are not as successful. The business fails leaving the original owner still wanting for the rest of their payment.
So business ownership can be used on a small scale to supplement income, or large scale to create value, I don’t believe it is a stand alone method of building wealth. I also recommend using various retirement plans (401k, 403b, 457, Simple, SEP), Roth IRA’s, real estate (not just your house), bonds, cd’s and other accounts. When calculating your retirement number, decide how much of that number might be driven by the sale of the business, and how much wealth needs to be raised elsewhere. It’s also wise to calculate what things might look like if the business isn’t sold at all. Are you protecting your outside assets and would they be sufficient to provide you a decent lifestyle?
For most of this week I’ve been talking about building wealth. I know that when times are tough it’s sometimes difficult to imagine excess. So for my final blog tomorrow, I’ll be giving you ideas of how to save money.
Buy Appreciating Assets Often (BASO). If it were that easy then why isn’t everyone doing it? Well, I think now many people are doing it (401k’s and other retirement plans), some more sufficiently than others. It is apparent that many of us are adopting the shift in thinking, and many are treading waters they didn’t think they would.
Reinventing Job Security In Michigan
Here’s a great example. I was recently having breakfast at the Parade Company in celebration of the upcoming Thanksgiving Day Parade. I met a man who works for one of the Big Three. He told me that after 30 years, he’s changing the way he views earning a living. And he doesn’t think his sons will feed their families the same way he provided for them. In fact, he’s put much of his own financial security on the line to help them start a business. I asked him if they appreciated it. He said that he thought they did, especially the oldest one, "He gets it." He told them they’re going to have to work hard and maybe put in eleven or twelve hour days. But if they can make it through this tough economy and even just survive, then when things eventually recover they should be doing ok.
He’s also looking at his own retirement differently with the state of GM, Chrysler and Ford. He won’t be sitting idle if he does take a buyout. Even now he’s looking into self-employment brokering machinery on-line. He is familiar with the equipment, and knows how to find the product at a fair price, and has found others willing to buy it, for a profit.
He and his family are embracing the shift in what it means to have financial security. They realize that it may take having more than one income source, being actively engaged in outside business, or by having assets that produce income or growth. He admits that there’s a challenging learning curve. He’s made plenty of mistakes over his life, but now he feels he’s experienced enough to do well. “It’s the least I can do to help my boys, and share my experiences in hopes they make better decisions than I did.”
Recently, two close associates of mine, Curt and Vicki, re-invented themselves and transitioned out of the mortgage business. All it took was a moment of inspiration and the couple had invented the concept for an innovative product to service the growing pet industry. A year later, the two have developed product prototypes with established, reputable manufacturing partners and have raised capital to support their efforts. They are on the verge of bringing this new product to market.
The other day Curt said, "I never expected to transition out of a successful career and into an entirely different industry. Now, I am manufacturing a consumer product and loving every minute of it." Curt’s always dreamed of new inventions, but actually bringing something to market is a whole new exciting challenge.
For some, we’ll be building businesses as a side job, something to supplement our income. Maybe it will be the money that puts our kids through college, or invested in retirement accounts that eventually complete our retirement needs. For others, new businesses may totally redefine wealth, and take them to new levels they never thought possible. No matter the immediate results of any pursuit, the experiences are invaluable and "what works" can be duplicated, even in this Michigan economy.
This is a prime example of what BASO means. This gentleman is becoming part of the solution. He is showing us how we can create wealth not just with our money, but also with our time, our ideas and our energy. To learn how to have security by having options, and not just relying on our employer or government in hopes that the $1,500 a month projected retirement income stays true.
Stay tuned for tomorrow as I’ll talk about how to create wealth inside and outside of your business.
Yesterday we discussed being part of the solution and standing out in Michigan’s tough economy; putting pen to paper to test our ideas, relearn our jobs, welcoming peer feedback and establishing goals. And we talked about having strong anchor points to more effectively measure the quality of our decisions.
Buy Appreciating Stuff Often (BASO)
Yes it’s that simple; buy things that go up in value. OK genius, I thought I was doing that in my 401k and at the moment, I certainly don’t feel rich! I hear you, so let me explain.
Michigan retirees have a pension and social security as the engine and chassis, with modest savings in the bank as traction control. For many auto related workers, their retirement strategy was to work with one employer for most of their career, have very low fixed expenses, own things free and clear, while living well within their means. There wasn’t discussion of investing 20% to 30% of earned income. We learned about money in that environment, and have become accustomed to the notion that our income is necessary to keep up with our spending. We would work therefore, to pay bills.
In this new society of individual wealth, scrap the idea that you work just to survive. You work in order to become wealthier, and much more independent. I don’t want my income to keep me afloat; I want my income to make me richer! Beyond money, one thing that hasn’t changed is that our jobs also provide us a purpose and life fulfillment.
It’s ironic, many acknowledge that the tides have shifted, and that we all need to be much wealthier than we are today, and yet we give most of our money to what destroys the sanctity of our future. We spend the majority of our income on bills, depreciating assets and activities which further increase expenses. And we give too little of our resources to assets that have the ability to make us more income. Is it any wonder that we don’t feel more secure?
You’re not going to get it right all the time and sometimes your values will decline. You’ll invest into some bad ideas. You’ll invest at the inopportune time. But through each experience, if you pay attention to what you are doing, and establish your strong anchor point, you’ll get good at this. You’ll realize that it’s not always easy to identify the best investment, but that it is very easy to identify the worst ones, like depreciating assets.
Keep in mind that investments are sometimes volatile, and as we are witnessing today, their value can change rapidly. You should also keep in mind that pension funds also move in value. And although you can’t usually see it, each day the pension fund is a little more or a little less solvent than it was yesterday. In the world of individual wealth we have great transparency and can see the value of our assets gyrate. That transparency can help you make sharp decisions, but it can also bring you anxiety. Keep going back to your goals and your anchor point to stay grounded, and smiling.
Tomorrow I’ll talk specifically about building wealth in business and how to build wealth outside your business.
I recently wrote Wealth Is a Choice, a book designed to help give people the "secrets" of what I believe it takes to become wealthy. Yesterday I received an email from a local Michigander that asked, "Is your subtitle But Poverty Is Thrust Upon You?"
It certainly feels that way around here these days.
There is no question that in today, in our state’s and even our global economy there is much to fear. Yet tomorrow will come and there will be those who lead, prosper and help take us into that new world. To paraphrase one of my favorite Robert Deniro movies, Ronin, "You are either part of the solution, part of the problem, or just the landscape."
A number of years ago I realized that the financial services industry needs to be improved, and there is much that people need to understand.
We are an industrious society, but we don’t make enough great decisions with our money. Case in point, back in 2003 Michigan residents were given a gift - a fifty year historically low fixed mortgage interest rates. We should be basking in the comfort of having secured our humble abodes. Instead, fast forward just 5 years later and we are in a world wide mortgage and financial crisis. There are many places to point the finger: the consumer, the broker, the lender, the investor and the government. Each has their role.
Writing was my solution
So I began writing about the principles of money, as if I were leaving advice behind to my own children. I shared the experiences I’ve had in the industry and realized that my beliefs are direct answers to many of the questions I’ve heard from clients and others every day for years. After many late night writing sessions, an exhaustive learning curve of the book industry (which I found Michigan is a hotbed for world class printers), and much editing, finally Wealth Is a Choice was published and stands as my modest solution to today’s financial problems, improving my industry and my business at the same time.
We’re all looking for ways to improve our business and stand out (positively) in Michigan and this troubling economy.
Here’s one, write.
Writing about your business/job has multiple positive affects, and here’s why - if you really want to understand something, then teach it. For all of us, whether we’re business owners or employees, there are a couple of things that help drive success. Be very good at your trade, and let others know about it. No matter how good or natural you believe you are in what you do, when you sit down and spend days crafting the specifics, you get better. It’s not required that you end up with a 300 page book; it might be that you dust off and rewrite your business plan or work goals.
Know that values determine decisions.
I liken this to shooting a bow and arrow. There are three important points that when in unison yield a successful shot - the target, my angle of the bow, and my anchor point (values). I need the target in order to know what angle to hold the bow. I need to hold the proper angle in order for my arrow to reach the target. And I need a strong anchor point to ensure that I’ll have consistency in my shots.
I’ll keep with personal finances for a real life example. For as diligent as we are with careers, it’s puzzling that we’re ineffectual when establishing more personal goals such as how much money to have saved for retirement, college or other aspirations. That’s the target. If we do not identify where it is we are headed, then how is it possible to evaluate the quality of the strategies we’re using to get there? How do we evaluate the real cost of buying a house? How much money to budget toward savings? Which car to buy? What investments to use? Should we have life insurance? Should we have a trust, or is a will sufficient? Should we take the buyout? If we take the buyout, what do we do with it? We need to lift our heads above the dust swirling from the battle of trying to move in any direction, and make sure we are actually headed in the correct direction.
For the days that follow
Throughout the rest of this week I’ll write about some of the other principles I've established in my book, for my clients and in my own life. These principles are solid in any environment, but when we are facing such dire circumstances here in Michigan, it’s more important than ever to be on top of your game.
Many employees in Southeast Michigan are facing layoffs and talking about self employment. I'll talk about building wealth through business, and to also how to build wealth outside of business. And, in recognizing the pain of the local economy, I’ll share with you steps you can take to help improve cash flow.
I hope you enjoy, and please send me your thoughts, personal stories and ideas! I’m looking forward to our dialogue.