I’m a life long guitarist. When musicians learn a piece of music, they organize sounds into small portions or “chunks” at a time which facilitates memory. It appears that there are studies which supports this practice:
We can only memorize things in small chunks which then have to be joined together like links in a chain to form a sequence. The size of each chunk depends on the prior knowledge of the individual, so that although some skilled performers might be able to memorize large sections of a piece, others should focus on a phrase or even a bar at a time.1
To help people make sound financial decisions, I have created MoneyCapsules®, a system which organizes one’s financial life into seven units, or “chunks”: Values-Cash-Return-Tax-Risk-Time and Giving. I have discovered multiple benefits of this approach, both for individuals as well as financial advisors. One key benefit is that MoneyCapsules® provide a way for individuals to engage in an impactful conversation with their personal decision partners (spouse, family, friend), or their professional decision partners (a financial advisor, accountant, attorney).
For the individual, the process can be beneficial because MoneyCapsules® :
- Offers a simplified way to focus on and discuss specific parts of one’s financial life, instead of lumping everything together. For example, if there is a concern about tax efficient transfer of wealth, the conversation can be focused on only the “Giving” capsule.
- Gives the individual a framework to more effectively communicate with their professional decision partners.
- Help clients be able to ask relevant questions at the right time. This is important because even a great answer to the wrong question is of little value.
- Provides a way of organizing and understanding one’s financial life into small units that make it easier to make sound financial decisions.
- Allows the individual to personalize their financial plan based on their own priorities and values. For example, an individual might prioritize Return-Time-Giving, whereas someone else might value Giving as most important.
- Provides a visual approach to talking about money which facilitates conversations and may help with memory retention.
- Gives financial planning a different approach. Instead of first jumping to charts, numbers, and products, the advisor is able to first help their client organize and understand their financial life based on their personal values, necessary to make sound financial decisions.
- Encourages the advisor to do less talking and more listening, allowing the client to take ownership in the financial plan. When the conversation begins with the technical components of wealth, the plan is directed by the advisor; whereas when a conversation begins with the client’s personal values, the client takes ownership of their own plan.
- Helps the financial advisor feel confident that the advice he or she is giving is based on the needs of the client, not on his own needs.
- Provides a simple language to explain complex financial concepts.
- Offers a systematic process necessary for high quality client experience.
Values– Values defines what’s most important to you. Values-based decisions make for a more meaningful life.
Cash– Is the life blood of your financial health. A healthy financial life requires that cash flow and cash reserve are properly balanced. It’s here you will communicate what matters most to you about Cash.
Return– It’s important to consider the total return on all your investments. Return is where your advisor discovers what matters most to you over the short or long-term and how market volatility affects your behavior.
Tax– Is a hot topic, which is important because the preservation of family wealth requires an integrated approach to managing taxes. So it’s here your advisor will explore how your feel about taxes.
Risk– Knowing when to manage or transfer unexpected life challenges is essential for good financial health. Here you will communicate to your advisor the specific risks that you perceive.
Time– Time is the one resource which can never be replaced. Managing time-based goals & anticipated events effectively is important. It’s here you will clarify what matters most to you over short and long periods of time.
Giving– Giving and receiving are powerful forces in our lives. Transferring wealth and values as part of a legacy is at the heart of Giving. It’s here you communicate what matters most to you about Giving.
Ask us how we can help you better communicate your financial self with MoneyCapsules®.