April Is Financial Literacy Month: Are You Making The Most of Your Family’s Opportunities?

Posted April 24 2018
by Douglas P. McCormick
April Is Financial Literacy Month: Are You Making The Most of Your Family’s Opportunities?

PenFed Credit Union is proud to feature author and finance expert Douglas P. McCormick’s ground breaking book Family Inc: Using Business Principles To Maximize Your Family’s Wealth during financial literacy month.

About the Author:

Douglas P. McCormick has a lifetime of experiences that provide the foundation for the framework, principles and tools in Family Inc. As a professional investor, he has spent two decades managing money for clients such as insurance companies, pension fun

Douglas P. McCormick, author of Family Inc: Using Business Principles To Maximize Your Family’s Wealth

ds, entrepreneurs and high net worth families. During his professional career, he has gone from a cadet at the United States Military Academy, to active duty Army officer, to student at Harvard Business School, to employee at a Wall Street investment bank, to private equity investor and finally entrepreneur through co-founding his own investment firm.

Doug’s book and writings on financial literacy and veteran economic empowerment have been covered by leading national media outlets including The Wall Street Journal, The NY Times, USA Today, PBS, Time, Stars & Stripes, Military.com and The Motley Fool. In addition to promoting financial literacy, Doug serves the veteran community as a board member for Team Red White and Blue and Chairman of the Board for Bunker Labs.

We sat down with Doug to share his story with fellow veterans during financial literacy month. Why did you write Family Inc?

I wrote this book because I saw a real need and an opportunity to have a positive impact on a lot of people seeking a better way to navigate the financial game of life. 
Financial illiteracy is one of the biggest challenges America faces today with negative implications for our national and economic security as well as quality of life among Americans. In spite of its importance, our education system does not effectively teach this important life skill and I found the “do it yourself” resources lacking—too simplistic, too narrow or too technical. 
They say money can’t buy happiness and I certainly agree. However, the lack of it sure can make life challenging. My goal for this book is to empower readers with a framework for identifying and navigating life’s most important financial decisions.

You believe that every family needs a Family Chief Financial Officer. Why is this and what does a Family CFO do?

Successful corporations adopt one person to look after all of the financial affairs of the organization and I believe the same holds true for families. Like any business, your family’s business – Family Inc. – must be actively managed. The Family CFO’s responsibilities include managing the family cash, balance sheet, income and expenses, managing family labor decisions and development, risk management, asset allocation, investments in entrepreneurship, advisor management, tax and estate planning, family financial education and succession planning. These responsibilities are so significant and broad that they can’t be outsourced to an outside professional or team of experts. My book, Family Inc., provides tools and a framework to educate readers on how to become their Family CFO.

What is unique about veterans that makes their financial decisions different from the rest of America?

Active duty service members and veterans need to appreciate that they have different circumstances than most Americans that can impact their financial planning. For example, almost 85% of service members will make a mid-career transition from service. When they transition they are likely to do so with dependents and without a well established network outside of the service given frequent deployments and relocations. On this positive side, most veterans leave service with good skills and life experiences, a great brand and benefits to support their transition such as the GI Bill.   In order to maximize financial security, veterans must develop a financial plan that acknowledges these unique challenges and assets.

I see how active duty members and veterans in transition face different challenges than most Americans. But give me some examples of how that relates to real world decision making?

Given the unique challenges and assets that service members and veterans possess, I recommend four key principles when pursuing financial security:

  1. Treat Financial Flexibility as a Key Asset: Financial flexibility in the form of savings, minimal debt and obligations allows families to overcome unexpected challenges such as a health problem or an unexpected car repair. It is also critically important during transition because it affords the veteran flexibility to move to areas of greater opportunity and the time to seek the RIGHT job rather than A job.
  2. Put All Your Assets to Work: When pursuing financial security, don’t forget to put all of your assets to work. For most veteran families, their future labor, GI Bill benefits, reputation and their personal brand that they bring from service are their largest assets. Financial security begins and ends with good skills that lead to good career options.
  3. Invest in yourself: Given that your labor is likely your largest asset, don’t forget to invest in yourself. Investments in formal education, additional career skills or even entrepreneurship often yield higher returns than investments in the financial markets.
  4. Focus on the Big Picture: When pursuing financial security, many people get caught up in the details of the present such as how much I am making this year or how did my investments do this year? But financial security is accomplished over many years and must be managed with a long term perspective. Work to build a career and skills, not a paycheck and focus on long-term investment results over the day to day “noise” of the market.

Much of your advice above is related to managing your career (or your labor asset)! Can you discuss your investment philosophy?

In short, I recommend passive investing (indexing to the market) over active investing (trying to beat the market). As I explained above, I believe active investments in education, entrepreneurship and career development are compelling ways to increase a family’s wealth. However, when it comes to growing your retirement assets through investments in the market, I recommend significant equity exposure to a diversified portfolio of low cost index funds (i.e. ETFs) given the expected long term holding period.

Where can people learn more about the book, your work, advice and how you are supporting the veteran community?

To learn more about the book, my philosophy and recommendations for navigating the “financial game of life” visit PenFed.org/Family-IncFamily Inc.is also sold through all major book retailers such as Amazon and Barnes & Noble.

To date, I have donated thousands of books to veteran service organizations that promote economic empowerment in one of four areas: education, career management, financial literacy and entrepreneurship. Now through June 30, 2018, I am donating 100% of book royalties to veteran causes such as The PenFed Foundation. Learn more about how your book purchase supports the military community.    


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