believe that there is a hierarchy of values that would
help our planning for the accumulation, preservation,
and distribution of wealth.
most of us, our first objective is financial independence--to
accumulate through work or investments what we need to
maintain our desired lifestyle.
expressed as a unique combination of annual income and
a minimum resource base, financial independence answers
the question, "What do I want from my wealth for the rest
of my life?"
particular answer to this question might be different
from others; people have very different needs, values,
and assumptions about the world. But, your financial planning
will not reach its full potential without first answering
this question for yourself and setting your own targets
for wealth accumulation and preservation.
such targets and achieving them allows you to shift more
of your attention to the next level: wealth distribution.
This second level of planning determines, first and foremost,
your "family legacy"--what you will leave your heirs.
During this phase of the planning process, you deliberately
specify an inheritance amount for each beneficiary of
your estate. The specifics of these bequests might be
different from what others might choose, even if they
have the same net worth and number of
heirs as you do. The point is to think through
this important question in light of your own values and
to come to your own decision.
final level on this hierarchy is your "social capital."
Social capital represents that portion of your estate
not required to maintain financial independence and not
designated for family legacy. It represents the financial
potential you have to make a lasting impact on society,
the legacy you can offer to the common good.
is a rare advisor who fully appreciates this concept of
"social capital." For most advisors, social capital consists
only of dollars that are involuntarily extracted from
their clients and mandatorily redistributed to the government.
Social capital is thus viewed as something to reduce,
rather than as something to capture and direct consciously.
What is missing from this old paradigm is the realization
that there are two forms of social capital-- voluntary
and involuntary. Voluntary social capital is made up of
those dollars over which we make a conscious decision
to direct, either as philanthropic contributions or as
the taxes we choose not to avoid.
understanding this concept of voluntary social capital
allows you to see that the financial resources you will
not be allowed to keep, or do not need, can be captured
and redirected to those organizations and causes that
support your personal value system. This three-tiered
approach to financial planning offers an enormous opportunity
to move from a position of financial success to one of
noted psychologist Ernest Becker said, what we really
fear "is not so much extinction, but extinction with insignificance."
with permission from
The Seven Principles of Values-Based
published by Legacy Advisory Associates,
© 1990-2005, More Than Money, All rights reserved