Accounting for Off-Balance Sheet Assets

If you read the SEC filings for publicly traded companies, there is a portion called “Management Discussion & Analysis”.  In this section of the filing, management interprets the financial statements and sometimes they discuss off-balance sheet liabilities that are not otherwise documented or possibly assigned to a footnote in the filing.  This information isn’t exactly hidden, but it can easily be overlooked.  Generally Accepted Accounting Principles (GAAP) allows for off-balance sheet liabilities to be disclosed in this manner.

In November of 2009, I’ve implemented a new Generally Accepted Accounting Principle: I am scouring the footnotes of my life and the lives of my friends and family (aka “clients”) for off-balance sheet ASSETS.  

Off-Balance Sheet Assets are the things that matter the most but are measured the least, if they are measurable at all. 

This has not been a fun year for anyone that I know.  Some have lost jobs, others have lost companies or gone into bankruptcy, and all of us have seen our personal balance sheets suffer.  It’s easy to get depressed and discouraged by these personal tragedies and struggles, and I have slipped into that abyss several times over the course of the past year, but not anymore.  Now, all I feel is gratitude.

I’m grateful that our clients are O.K., that they weathered the financial equivalent of a category 5 hurricane (aka Hurricane Freddie and Fannie).  I’m grateful for my family and friends.  I’m grateful for our health and for this season. I’m grateful for the roof over my head.  I’m grateful for the opportunities I have to help others, even if it’s just smiling at them.

Sir Winston Churchill wrote, “A pessimist sees the difficulty in every opportunity. An optimist sees the opportunity in every difficulty.”  I’m not suggesting that we all take a Pollyanna world view and ignore the legitimate struggles that we face.  Rather, I am acknowledging that I am not in control of the stock market or the economy or government policy.  The only thing I can control is my attitude and I have chosen to be grateful because I really should be.  Life is a miracle and we’re surrounded by miracles every day.  We’ve conditioned ourselves to ignore them by being busy, and when we fail to recognize them, we lose perspective.

Apply this new Generally Accepted Accounting Principle to your own life.  Take out a yellow pad and write down the things you are grateful for, especially the little things.  After five or ten minutes, or two hours, it starts to really sink in.  It will not materially change the struggles that we are facing, but it does put them into perspective, and that’s what helps us to make it through them.  Some of the best things that ever happened to me were the worst things that ever happened to me at the time they were occurring.  If we gain the proper perspective while getting through these tough times, then they become fruitful, and they could become the best times to ever happen to us and our families.

Merry Christmas!

Do You Know What You Don’t Know?

“What gets us into trouble is not what we don’t know. It’s what we know for sure that just isn’t so.”  Mark Twain

I’m a people person. I love people and economics (in exactly that order).  I’m a good listener and my friends and family (also known as “clients”) often ask my advice on personal as well as financial issues.  I know what issues I can give advice on and which I can’t.  That’s a very important distinction to make.

A few times a year, I’ll have requests by clients to meet with their high school or college-aged children to discuss finances and investing.  I’ll meet the young man or woman for lunch and ask them open-ended questions about what they want to be when they grow up.  This is a lot of fun for me, and I often give financial advice to these children as they become adults.

Once a client’s child called and asked me a question that absolutely stumped me.  

“Mr. Black, I need your advice on a very important decision I have to make.” 

“Of course, anything I can do for you.  What are you trying to figure out?”

“Well”, he replied sheepishly, “I think I’ve found ‘the one’.”

“‘The ‘one’ what?”

“The girl I want to marry.”

“Well that’s great!  Congratulations.” I said.  “But what does that have to do with me?”

Then he asked me, “How does one go about buying an engagement ring?”

I laughed and told him, “You’re outside of my expertise.  You’ll have to ask Mrs. Black about that!”

I’m not qualified to give advice about a lot of things (particularly jewelry).  But I know someone to ask or to refer my friends and family to for just about every conceivable piece of advice they are seeking.  I’m always looking for the best qualified, nicest people to turn to when I get a question I don’t know the answer to.  I’m not a jack of all trades.  I’m a good wealth manager and I do my best to take care of the families that have entrusted their futures to my care, and they deserve to have the best advice possible for their unique situations.  I have a lot of very smart colleagues who specialize in investments, taxes, estate planning and insurance.  I read voraciously and it’s all I can do to keep up with my area of expertise.  Consider carefully the source of your advice and the values that your advisor holds because they do flavor the recommendations that he or she is giving you.