Financial Matters

Money Offense and Money Defense

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Fall is here and that means it’s time for football! What does football have to do with your money? The same principles that govern the game can be applied to your financial planning. Ever hear “offense wins games but defense wins championships”? A team needs to be equally fortified with a strong offense to score and a strong defense to protect the team gains from being eroded to the point of a loss.

The Field

So which is more important, putting up points or protecting against points being put up? Both are equally important for if no points are scored the team will likely lose, just like if they allow too many points to be scored, they will likely lose. When it comes to your financial plan, the same holds true. Both are important-money offense and money defense!

Money Offense

At Financial Architects we refer to investing money as money offense. The goal is more money, typically earned through a rate of return. Examples are investing in stocks, bonds, mutual funds, and exchange traded funds. All are money tools that can offer a return, or growth, but can also carry a risk of loss. This risk of loss should not be underestimated, so advisors work to understand a client’s tolerance for risk and loss.

Are you risk tolerant?

Understanding the difference between risk and loss is important. A tolerance for risk is more in the hypothetical. With the recent hurricane disasters affecting many areas of the country, before the storms hit there was a risk of damage. People had to assess how risky was it to stay put and ride out the storm. Their perception of how much risk they could tolerate drove them to make a decision whether to stay or go. This was before the storm.

Are you loss tolerant?

On the other hand, the tolerance for loss is what happened after the storm. What type of damage was sustained and how do people move forward after the loss? Did they accurately predict the devastation that was suffered? Did they prepare with the resources to get back to normal as quickly as possible? Some will be resilient after a loss and some will succumb to despair due to lack of preparedness. Knowing how you will react to loss is important to understand before the loss actually occurs. Hence the difference between the hypothetical loss (risk) and the actual loss must be clear before mounting a financial offense.

Most planning focuses immediately on the money offense and this can be attractive because of the potential for growth. The timing of money offense is critical because if dollars are put into the markets before a strong financial defense is in place, problems can ensue. Financial architecture starts with building a strong money defense. If the financial plan is to have longevity, protections must be in place to be able to “win the championship”.

Money Defense

A strong financial defense will offer protection for various assets, just as a strong football defense will prevent an opponent from scoring from different areas of the field.  Every time an opponent scores due to a weak defense it increases the probability of loss for the defending team. Every time an asset is vulnerable to erosion, the risk of the financial plan failing increases. A financial plan is susceptible to failure if it leaves open the possibility that circumstances can interrupt the plan and cause financial devastation.

Do you have assets at risk?

What assets are worth protecting? All of them! An asset is commonly thought of as money that is reflected on a monthly statement from a bank or financial institution. Indeed, assets include everything from your home and your vehicles, to the ability to earn income and all future income streams. Sometimes an asset is tangible, a home, car, or boat. Sometimes as asset is an income stream or the ability to go to work and create an income stream. An asset might be the current and future value of a business, or the existing value of business revenue. Money defense means protecting all types of assets and it includes planning for the distribution of those assets at death.

Timing is everything

Asset protection is a proactive strategy which means it is done before something bad happens. Before an accident, a job loss, an illness, a death, a lawsuit, an increase in taxes, a rise in inflation, or a disability. If any of these situations occur, one is reliant on a strong financial defense to protect the existing asset or wealth; however, these protections are only effective when done proactively. It is not pleasant to think of things going wrong, but only through strategic planning which anticipates all types of losses, can one be fully prepared. Consider how likely it is that your auto insurance agent will increase the coverage limits after an accident?

End game

Financial architecture is making sure strategies are in place no matter what challenges present themselves. Not knowing how the financial game will go makes it imperative to have a strong offense and a strong defense. Accumulating money is only half of the goal. The other half is to hold on to the money and control how it is spent. Money offense is important but a strong money defense will offer protections that will help ensure victory in the long run.

Asalyn Coachman is a Registered Representative of and offers securities through The O.N. Equity Sales Company, Member FINRA/SIPC, 39395 W Twelve Mile Rd., Ste 102 Farmington Hills, MI 48331 (248) 482-3600.  Investment Advisory Services offered through O.N. Investment Management Company.  Financial Architects, Inc. is not a subsidiary or affiliate of The O.N. Equity Sales Company or O.N. Investment Management Company.

Asalyn Coachman is a Registered Representative of and offers Securities through The O.N. Equity Sales Company, Member FINRA/SIPC, 39395 W Twelve Mile Road, Ste. 102 Farmington Hills, MI 48331 (248) 482-3600. Investment Advisory Services offered through O.N. Investment Management Company. Financial Architects, Inc. is not affiliated with The O.N. Equity Sales Company or O.N. Investment Management Company. Asalyn earned a degree in Economics from Harvard University and a law degree from the State University of New York at Buffalo. She lives in Lake Orion with her husband and two children where she is active in organizations such as the Harvard Club of Eastern Michigan, Lake Orion Schools, and the Baldwin Center of Pontiac, Michigan, where she serves as board president.

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