How is it that personal finance became a taboo subject among families?

You might want to check out Jason Zweig’s December 27th column in the Wall Street Journal, “Financial Pressure Is a Family-Room Topic, Too”, for further background on this issue.

We’ve been doing this for years in our family, and it’s a tradition to gather at year-end, as we are now scattered across several time zones, and it’s the one time of year we know we will all be together.

Here is a template you might want to use. Our Agenda from the family meeting held the weekend before last. Think of it as an informal board meeting complete with a topical outline and handouts.

1. We started with a reminder of why the family meeting was a worthwhile event.

Fortunately, the Zweig article had arrived in that morning’s WSJ delivery and was copied for each family member.

Remember, authority and expertise increases proportionate to the distance of the adviser from the advisee.

2. The next two topics related directly to the market crash of 2008, which should go down as the third worst in market history, after 1907 and 1931.

Again, I needed to go to an external source for authenticity.

In this case, that was the market chart from 1830 -Present prepared by the Leuthold Group. It profiled every financial panic from the 1837 Wildcat Bank panic to the multiple body blows delivered in 2008. The lesson is clear enough. The sun will continue to rise from the east as it always has…and recovery will emerge from the present day implosion.

If you need a longer timeline, check out a similar chart from “Stocks for the Long Run, 4th Edition: The Definitive Guide to Financial Market Returns And Long Term Investment Strategies” by Jeremy Siegel, which begins at 1803.

Part two was a quick review of dollar cost averaging, as we are all participants in employer sponsored defined contribution plans, as well as personal IRAs. We all need to be reminded that steady, level accretions will buy more equity in declining markets and less equity in bull markets.

3. The main topic was the inevitable return of inflation after the trillions spent on stimulus schemes.

Over time, the most reliable inflation hedges are real estate and equities. Investing in equities we just covered, so the focus shifted to real estate.

My two adultlets are still renters, and I told them that the period from mid-2009 to mid-2010 would likely encompass the bottoming out of the residential real estate market…and that they should be building their down payment kitty and begin to investigate their local markets in depth so that they would be prepared.

We will likely see 30-year conventional financing reach 4.5%, and perhaps 4% for 15 year loans. What an extraordinary opportunity for gain, after enduring so much pain.

4. I encouraged my children to seek out educational enhancements that would improve their value in the workplace.

The most valuable asset they have in their mid to late twenties is the discounted present value of their future earnings stream…and it was within their power to enhance future earnings.

5. The final topic was charitable giving.

I encouraged them to seek out efficient charities that reflected their personal values…efficient in the sense that contributions resulted into transfers to the end recipients, rather than fattening the overhead of the charity itself.

For in the midst of all the doom and gloom, we must never lost sight of the fact that there are those in much more desperate and demanding circumstances.

It only took an hour or so, including much give and take. Less time than you spent teaching them how to drive.

And so you have your first new goal for the new year.

Teach your children well. Maybe even yourself in the process.

Posted: 01|8|09 at 6:49 am. Filed under: education, personal finance, real estate, recession.
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