Manage Your Finances Like A Great Chief Financial Officer
b"With Douglas McCormick, Author of Family Inc.: Using Business Principles to Maximize Your Family's Wealth,\\xa0Managing Partner and Co-Founder of HCI Equity Partners
Managing the family finances is so much more than balancing a checkbook.
After years of experience in the investment world and corporate boardrooms, Douglas McCormick developed a formula to manage your finances and ensure family financial security which he explains in his new book, Family Inc.: Using Business Principles to Maximize Your Family's Wealth.
Just as any business of any size must be actively managed to be successful, so should a family operate within an organized framework to ensure stability and wealth. \\u201cA company CFO not only manages the income statement and the balance sheets,\\u201d says Douglas, \\u201cThey do financial planning to forecast how that company is going to do, and they spend a lot of time ensuring that the company has adequate cash flow or access to capital to execute its business plan.\\xa0 In many ways, the specific actions are different, but all of those concepts are very applicable to how people navigate the financial game of life.\\u201d\\xa0
The designated CFO of a family can utilize these same tried and tested tools and principles as does the CFO of a major corporation. Douglas refers to this as active management and has developed a chart to highlight the concept he calls Family Inc.
The three assets every family has are labor, savings (which hopefully will grow over time), and social security benefits. Taking these assets into consideration, Douglas outlines a strategic plan to carry a family through all of life\\u2019s possible risks and unexpected circumstances. A few of the key factors are:
*Having short-term liquidity in case of a downturn in income or catastrophic expenses in the form of savings or disability and life insurance.
*Assessing the value of labor as capital combined with a pension, 401ks, and social security to calculate retirement needs.
*Determining the value of large financial decisions such as education based on potential returns and opportunities.
As for investing, Douglas encourages people \\u201cto think about themselves like a business owner with their investment portfolio, not an investor.\\u201d\\xa0 He says it\\u2019s easy to succumb to feeling as though you own a certain fund such as, for instance, Vanguard when, in effect, you don\\u2019t. What you own are the individual companies within that collection whose overall performance, \\u201cin terms of actual earnings growth or earnings stability, is really quite good.\\u201d
You may never be the head of Johnson and Johnson or even Ben & Jerry\\u2019s, but by applying the methods in Family Inc.: Using Business Principles to Maximize Your Family's Wealth you can certainly become the CFO of your own successful Family Inc.
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Steve Pomeranz: Douglas McCormick has gone from active duty army officer with a young family to the Harvard Business School to employee at a Wall Street investment bank to private equity investor and entrepreneur.\\xa0 Douglas answers the question: Is financial security achieved through savings, tricks, and stock picks,"