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Total Term is a vital metric that compares your current net worth to your estimated annual spending. This guide will explain what Total Term means, its significance, and how working with an Arena Investor Advisor can optimize your financial strategy.

What is Total Term?

Total Term is a financial ratio that measures the longevity of your current net worth if you had to live on it without any additional income. It is calculated by dividing your current net worth by your estimated annual spending. This ratio helps you understand how many years you could sustain your current lifestyle solely based on your accumulated assets, making it an essential figure for retirement planning and financial stability assessments.

Importance of Understanding Your Total Term

1. Retirement Planning: One of the most critical uses of the Total Term is in retirement planning. It provides a clear estimate of how many years your current assets can fund your retirement, helping you make informed decisions about when you might afford to retire or how much more you need to save.

2. Financial Health Assessment: Total Term gives a snapshot of your financial health and independence. A longer Total Term suggests a strong financial cushion and stability, while a shorter Total Term might indicate the need for increased savings, investments, income adjustments, or spending changes.

3. Spending and Investment Strategies: Understanding your Total Term can influence both your spending habits and investment strategies. It helps in balancing between saving enough to extend your Total Term and investing wisely to grow your net worth.

Calculating Your Total Term

To calculate your Total Term, you need to first determine your net worth, which is the sum of all your assets minus any liabilities. Then, estimate your annual spending, which includes all regular expenses for the year. Finally, divide your net worth by your estimated annual spending. For example, if your net worth is $500,000 and your annual spending is $50,000, your Total Term is 10 years.

How an Arena Investor Advisor Can Help

1. Comprehensive Financial Review: An Arena Investor Advisor starts by assessing your entire financial landscape—assets, liabilities, income, and expenses—to accurately calculate your Total Term. This initial review lays the groundwork for all further advice.

2. Tailored Financial Planning: Depending on your Total Term and financial goals, your advisor might suggest specific strategies to improve your financial longevity. This could involve increasing your savings rate, adjusting your spending habits, or optimizing your investment portfolio for better growth and sustainability.

3. Regular Monitoring and Adjustments: As your financial situation evolves—due to changes in income, expenses, or life circumstances—your Total Term will need re-evaluation. An Arena Investor Advisor ensures that your financial plan stays aligned with your current needs and future goals.

4. Risk Management: Understanding and managing risks associated with investments, market fluctuations, and personal life changes are crucial. Your advisor helps you navigate these risks, ensuring that they minimally impact your Total Term.

5. Educational Support: The concepts of net worth, annual spending, and their relation to financial independence can be complex. Arena Investor Advisors are dedicated to educating you about these principles, empowering you with the knowledge to make confident financial decisions.

All In All

Total Term is a powerful metric for assessing how well-prepared you are to maintain your current lifestyle without additional income. It is particularly useful for retirement planning but is equally important for understanding your overall financial health. With the guidance of an Arena Investor Advisor, you can optimize your Total Term, ensuring financial security and peace of mind for the future. This strategic approach not only safeguards your immediate financial needs but also sets a solid foundation for achieving long-term financial independence and success.

Built for The One in the Arena

Arena Investor is on a mission not only to help with financial planning, and investment management, but also with education. Keep reading, watching, following, and sharing great Arena Investor content. And as always if you want professional advice, we are glad to be your teammate – along a financial journey you can actually enjoy.

You’re the Hero.
    We’re the Guide.

‍We can use different mindsets for different conditions

There are a number of personality types. One type is the transactional individual. A highly transactional person seeks mostly transactional relationships and interactions. And they seek out “the process” because they like to understand a system or a network and leverage it. Like many things, this is a spectrum. Some people are somewhat transactional and some are purely transactional. A transactional personality leads to a transactional mindset. Typically, a transactional mindset means you are looking for something in return. This for that. 

There are pros and cons to transactional mentalities and relationships. Perhaps you are not very transactional, but you have a transactional relationship with someone. For instance, “When Mike and I get together, we drink a coffee and talk about sports.” It’s a true friendship, but it’s transactional. So just because an individual’s personality, or a particular relationship, is a this-for-that one doesn’t make it good or bad. It is what it is. 

But if you were in a sales position, you would be wise to add transactional skills.

Beware though: If you are not a transactional person naturally, then there is a certain amount of friction that occurs when you act transactionally. Decide if that’s okay for you. 

You’re almost certainly adding skills and participating in the workplace in ways that create some friction for you already. When there’s too much friction though, you want to quit your job or change your field. But having a transactional skill set can be valuable when under the right conditions. Most times people think of personalities as set, and that may be correct. But you can certainly add skills that transactional people naturally have.

So what’s “The Investor Mindset” then?

The Investor Mindset, briefly, is what investor-types use. You may already know the people in your life that think and act like investors naturally. Some of their characteristics are: analytical, delayed gratification and thinking long, re-investing, builders or curators, value-measurers, value-adders. 

These are pretty positive characteristics. Again, like many things, it is a spectrum. If you are so analytical that you cannot make a decision, that is bad. You don’t want “paralysis by analysis,” as they say. 

Another thing to watch out for is delaying gratification too much. Someone who overdoes this may become unhappy. Perhaps it is useful when managing money, but it isn’t great if you overuse it in your life. What if you never eat a cookie? It sounds funny when talking about cookies, but be careful about persistently delaying gratification. Discipline is great, but find appropriate treats for yourself too along your journey. 

So whether the previously described investor characteristics come naturally to you or not, you want to treat it like a skill, and use it when appropriate.

At Arena Investor we use “The Investor Mindset” to help us perform our jobs well serving financial planning and investment management clients, as well as providing financial education.

Simply put, The Investor Mindset treats almost everything like a portfolio and only things that make that portfolio better should go in it. At Arena Investor this can mean: stocks, crypto, ETFs, mutual funds, bonds, real estate and so on.

But The Investor Mindset can be used at large too – well beyond finances. For instance, it can also apply to nutrition, fitness, friendship, your subscription TV “watch later” list, and on and on. Investor-types don’t naturally take-on things that don’t make their portfolio better. At a minimum, they try to decide if it is on-par with what they already like, or better. If it is sub-par then good luck talking them into doing it.

A Lot of People Can Relate to This Already

Believe it or not, a lot of people can relate to this as sports fans. Good luck convincing a Cleveland Browns fan that the Arizona Cardinals vs the Seattle Seahawks fits their “entertainment portfolio.” They may watch because they like football at large, but they aren’t truly invested in that game. It isn’t as good or better than their AFC North matchups against the Pittsburgh Steelers, Cincinnati Bengals, or Baltimore Ravens. They believe those matchups do make their entertainment portfolio better though.

The suggestion is this:Add “The Investor Mindset” to your life. You don’t have to re-create yourself and try to be someone you’re not though. Simply start to see the world with Investor-tinted glass a bit more each day. 

It can help you get started as an investor too

Perhaps you’ve wanted to invest for a long time now. But you are afraid to get started. With The Investor Mindset realize that an empty portfolio would be made better with one quality company in it.

Now you’ve started. 

And you’ve used The Investor Mindset – you upgraded your portfolio!

Do that a second time, and continue until you are diversified.

Remember: You only want to put stocks into your portfolio that make it better. So say you want to build a portfolio of 10 stocks. Well at the beginning you are really just laying a foundation. Don’t lay a crappy foundation. 

If you wouldn’t leave the portfolio alone for 5 years and be happy with your picks with minimal intervention (say, less than once per quarter), then do not add that stock. 

But remember, while we say stock we really mean company. You should be happy with the company you pick for 5+ years. You should believe in it, the work it does, the role it plays, and be able to sleep at night. That way, you will get through the ups and downs that The Business Cycle (here) intrinsically experiences. 

Be sure to think long when you build the foundation. You wouldn’t swap out parts of your foundation every day, week, or month would you? Perhaps over time you make an upgrade though because it makes sense.

“The Investor Mindset” is large and encompassing. So is a transactional mindset. But you can use the skills that naturally come with those mindsets to your advantage. And you don’t have to become a different person to do it. Pick something in your life to try out The Investor Mindset on. At the start of the new year health and wealth are at the top of many people’s minds already. Maybe choose one of those. Nutrition is a great way to add it to your life: Does this thing I’m about to eat or drink make my body-portfolio better or worse? 

Note: There’s a key difference with nutrition though in that a splurge for an hour on a Friday night isn’t as long-lasting as a financial splurge or investing splurge – that money is spent indefinitely.

Built for The One in the Arena

Arena Investor is on a mission not only to help with financial planning, and investment management, but also with education. Keep reading, watching, following, and sharing great Arena Investor content. And as always if you want professional advice, we are glad to be your teammate – along a financial journey you can actually enjoy.

You’re the Hero.
    We’re the Guide.

The concept of "Insurance Rate" is vital in personal finance, serving as a gauge for the adequacy of your insurance coverage relative to your unique financial situation. This includes factors like your spending habits, income, and net worth.  Here Arena Investor breaks down how each of these factors influences your insurance needs and offers a strategic approach to managing your Insurance Rate effectively.

What is Insurance Rate?

Insurance Rate is a measure that compares the amount of insurance coverage you have to the amount you actually need, based on key financial factors such as your spending, income, and net worth. Understanding and optimizing your Insurance Rate ensures that you are neither underinsured nor overpaying for unnecessary coverage.

Spending: Aligning Coverage with Lifestyle Costs

1. Understanding Your Spending: Your monthly and annual spending patterns play a crucial role in determining how much insurance you need. High expenditures might necessitate greater coverage to maintain your lifestyle in case of disruptions like illness or disability.

2. Coverage Considerations:

   - Health Insurance: Ensure your health insurance adequately covers your typical medical expenses. If you frequently visit medical professionals or require specialized medications, consider plans with broader coverage or lower deductibles.

   - Disability Insurance: Particularly important for those with high monthly spending, this insurance replaces a portion of your income if you're unable to work due to injury or illness.

How Arena Investor Can Help Analyze Your Spending versus Insurance

Your advisor can review your spending habits and current insurance policies that protect against potential financial strains, ensuring your coverage matches your lifestyle costs.

Income: Securing Your Earnings

1. Analyzing Your Income Sources: Your total income, including salary, bonuses, and any passive income, directly impacts your Insurance Rate. Higher earnings may require more extensive coverage to fully protect your standard of living.

2. Coverage Considerations:

   - Life Insurance: Essential for individuals with dependents or significant debts, life insurance should be sized to replace your income in the event of your death, providing financial security for your beneficiaries.

   - Loss of Income Insurance: This can supplement disability insurance by covering additional aspects of income loss due to illness or injury.

How Arena Investor Can Help Analyze Your Income versus Insurance

Your advisor can assess your income and income protection insurances based on your earnings and future income potential, ensuring your family’s financial stability.

Net Worth: Protecting Your Assets

1. Evaluating Your Net Worth: Your total net worth — which includes assets like homes, cars, investments, and savings — necessitates adequate insurance coverage to protect against loss, liability, or significant devaluation.

2. Coverage Considerations:

   - Property and Casualty Insurance: Adequate coverage for real estate and personal property is crucial, especially if your net worth is largely tied to these assets.

   - Umbrella Insurance: Offers additional liability protection that extends beyond the limits of regular policies, which is critical for high-net-worth individuals.

How Arena Investor Can Help Analyze Your Net Worth versus Insurance

Your advisor can assess your current net worth, projected net worth growth, and asset portfolio and discuss insurance, so you can get comprehensive protection of your net worth against unforeseen events.

All In All

Your Insurance Rate is a dynamic indicator of how well your insurance coverage aligns with your financial profile — your spending, income, and net worth. With the guidance of an Arena Investor Advisor, you can achieve an optimal Insurance Rate, balancing cost-efficiency with proper protection. This strategic approach not only secures your financial assets but also provides peace of mind, knowing that you and your family are well-protected no matter what life brings.

Built for The One in the Arena

Arena Investor is on a mission not only to help with financial planning, and investment management, but also with education. Keep reading, watching, following, and sharing great Arena Investor content. And as always if you want professional advice, we are glad to be your teammate – along a financial journey you can actually enjoy.

You’re the Hero.
    We’re the Guide.