Smart Financial Strategies for Building Family Wealth
1. Rebalancing Investment Portfolios
Rebalancing is a crucial strategy for long-term investment success. Ric Edelman emphasized that regularly selling assets that have appreciated and buying those that have dipped keeps your portfolio aligned with your risk tolerance and financial goals. This counters pattern recognition bias, where investors chase past winners assuming future performance. Instead, disciplined rebalancing allows you to systematically “buy low and sell high,” optimizing returns over time. Whether you manage your portfolio yourself or work with a financial advisor, schedule regular rebalancing reviews to stay on track.
2. Teaching Kids About Money Early
Children can begin learning financial principles as early as age three. Ric recommends introducing money through fun, hands-on experiences like counting coins, reading picture books about money, or using supermarket trips to explain choices and budgeting. Giving children allowances segmented into categories like spending, saving, giving, and taxes helps instill real-world financial habits. For instance, withholding a portion of their allowance as “taxes” and saving it toward a long-term goal (like a car) teaches deferred gratification and responsible money management.
3. Embracing Global Investment Opportunities
Investing internationally is a smart way to diversify your portfolio beyond U.S. markets. Ric pointed to BRIC nations (Brazil, Russia, India, China), as well as Western Europe and Japan, as opportunities. You can invest abroad via individual stocks traded as ADRs (American Depository Receipts) or through ETFs and index funds that represent foreign economies. However, be mindful of sovereignty and currency risks. Depending on your financial profile, international investments might make up 5%-20% of your total assets.
4. Avoiding Variable Annuities in Retirement Accounts
Variable annuities often promise guaranteed income streams but come with high fees and tax redundancy when placed inside retirement accounts like IRAs or 401(k)s. Ric cautioned against this strategy, especially for younger investors like 30-year-old Mike. Tax-deferred accounts already provide growth without taxes until withdrawal, making annuities unnecessary and costly. Long-term market investments typically offer better growth potential with fewer fees.
5. Why Life Settlements Aren’t Worth the Risk
Life settlements involve buying life insurance policies from individuals, betting on their life expectancy to collect death benefits. Ric strongly advised against these investments, calling them controversial and morally questionable. They’re not only risky but can distort actuarial data and raise premiums for all policyholders. Many states have already banned the practice due to ethical and financial concerns.
6. Financial Wisdom from Nolan Ryan
Baseball legend Nolan Ryan shared insights on his shift from athlete to executive with the Texas Rangers. Managing a Major League team introduced new challenges—especially balancing rising player salaries with team sustainability. He encouraged athletes to think beyond their playing years, seek financial advice early, and reduce off-field stressors that could affect performance. His message: take advantage of unique income opportunities now, but plan responsibly for the future.
7. Making Professional Sports Affordable for Families
Nolan also addressed fan affordability, noting the Rangers’ commitment to keeping baseball accessible. Programs like kids’ free admission, dollar hot dog nights, and family discounts help ensure that fans of all backgrounds can enjoy games. It’s not just about tickets—it’s about delivering a full, satisfying experience.
8. Lease Smart: Negotiating Car Features
Ric reminded listeners that leasing a car means renting, not owning. Unfortunately, many buyers overpay by not negotiating the cost of extras like GPS or Bluetooth, even though they won’t own them at lease-end. Always negotiate the total cost of the vehicle with options before agreeing to a monthly lease price. This ensures you’re not paying full price for features you’re essentially borrowing.
Takeaways
From teaching kids about money to investing internationally and rebalancing portfolios, smart money management requires awareness, discipline, and continuous learning. Avoid high-fee traps like variable annuities in retirement accounts and steer clear of morally ambiguous investments like life settlements. Instead, focus on proven strategies for wealth creation, financial education, and smart spending.
All information provided is for educational purposes only and does not constitute investment, legal or tax advice; an offer to buy or sell any security or insurance product; or an endorsement of any third party or such third party’s views. The information contained herein has been obtained from sources we believe to be reliable but is not guaranteed as to its accuracy or completeness. Whenever there are hyperlinks to third-party content, this information is intended to provide additional perspective and should not be construed as an endorsement of any services, products, guidance, individuals or points of view outside Edelman Financial Engines. All examples are hypothetical and for illustrative purposes only. Please contact us for more complete information based on your personal circumstances and to obtain personal individual investment advice.
Neither Edelman Financial Engines nor its affiliates offer tax or legal advice. Interested parties are strongly encouraged to seek advice from qualified tax and/or legal experts regarding the best options for your particular circumstances.
