Who is Steve Blank and Why is He Talking to VT’s Foundation?

1. Who is Steve Blankand Why is He Talkingto VT’sFoundation?

2. History • Establish an endowed chair and center to lead the contributions of the Department of Agricultural and Applied Economics to agribusiness and other rural businesses in Virginia. • Recognize and honor the many contributions of Dr. David Kohl to students and industry. • Fund raising target for endowed chair is $1.5 million. • ~$75k in annual earnings. • Earnings used as salary supplement to attract the best candidates, and to supplement student experiential learning and outreach to industry.

3. Steve Blank’s Background • Education in business administration and agricultural economics • Professional career includes teaching, research, extension, and administrative positions Cal Poly, South Dakota State, Univ of Arizona, Univ of California-Davis (1988-2012) • International & domestic research and consulting projects Now Department Head and Professor, Agricultural and Applied Economics Dept., Virginia Tech

4. What is Agricultural & Applied Economicsand Why Should I Care?

5. AAEC Department: • Is home to COINS – funded by the VT Foundation • Is in VT’s College of Agriculture and Life Sciences • Grants BS, MS, and Ph.D degrees • Conducts teaching, research, and Cooperative Extension programs in these fields: Agribusiness Resource & Environmental Economics International Development & Trade Community, Rural, and Regional Economic Development Food and Health Economics Financial Planning

6. Show Me the Money!

7. Show Me the Money! Or How Long Can you Afford to Live?

8. Financial Planning for a Long & Happy Life … … From a Risk Management Perspective

9. What are your financial goals? GoalsRisks

10. What are your financial goals? GoalsRisks • Comfortable lifestyle

11. What are your financial goals? GoalsRisks • Comfortable lifestyle Debtor’s prison

12. What are your financial goals? GoalsRisks • Comfortable lifestyle Debtor’s prison • House

13. What are your financial goals? GoalsRisks • Comfortable lifestyle Debtor’s prison • House Money pit

14. What are your financial goals? GoalsRisks • Comfortable lifestyle Debtor’s prison • House Money pit • Car (transport)

15. What are your financial goals? GoalsRisks • Comfortable lifestyle Debtor’s prison • House Money pit • Car (transport) It dies before you do

16. What are your financial goals? GoalsRisks • Comfortable lifestyle Debtor’s prison • House Money pit • Car (transport) It dies before you do • Empty nest

17. What are your financial goals? GoalsRisks • Comfortable lifestyle Debtor’s prison • House Money pit • Car (transport) It dies before you do • Empty nest They never leave!

18. What are your financial goals? GoalsRisks • Comfortable lifestyle Debtor’s prison • House Money pit • Car (transport) It dies before you do • Empty nest They never leave! • Comfortable retirement

19. What are your financial goals? GoalsRisks • Comfortable lifestyle Debtor’s prison • House Money pit • Car (transport) It dies before you do • Empty nest They never leave! • Comfortable retirement Running out of money before running out of life

20. Would you like to retire someday? How are you going to fund your retirement?

21. In retirement … • Employment income goes to zero • Household consumption continues

22. Therefore, to retire, a household needs to accumulate wealth during spouses’ working lifetime.

23. Sources of Wealth during one’s life: • Employment income • Personal capital gains • Business income • Business capital gains • Inheritance (in your dreams!)

24. What has been the source of most household wealth?

25. What has been the source of most household wealth? Historically: capital gains on home Recently: not so much!

26. Capital gains are not liquid • Asset must be sold to capture gains • Borrowing against capital gains is possible, but adds debt

27. So, during your lifetime you may be gaining wealth through capital gains, but you need cash flow to pay the bills.

28. If you do not want to work in “retirement” you need to make your lifestyle sustainable.(Cash in-flows ≥ cash out-flows)

29. Sustainable households have a system that provides data needed for financial decisions. • Decisions focus on issues affecting cash flows. • A written Budget is usually required.

30. (Almost) Painless Financial Records and Budgets Use Quicken or some other software

31. Simple Strategies to Improve Post-retirement Cash Flows In-flow strategies: • Budget a savings amount each month • Invest in an annuity (early in career) • Invest in appreciating assets (land, stock) • Buy life insurance policy with cash value • Consider a Reverse Mortgage on home after retirement: pros & cons

32. Simple Strategies to Improve Post-retirement Cash Flows Out-flow strategies: • Reduce ownership & maintenance costs by decreasing size of house (and capture some capital gains) • Reduce/eliminate use of credit card debt • Resist urge to give away your nest egg

33. Simple Risk Management Tools to Protect Cash Flows Protect In-flows: • Health & disability insurance • Life insurance • Diversify savings investments Protect (Reduce) Out-flows: • Auto insurance • Home insurance

34. Estate Planningis part ofRetirement Planning:Protecting your spouse

35. In conclusion … • A modern household must be managed like any other business • Successful management requires information in the proper form at the time needed • Automating the household’s management information system (MIS) is easy and cost-effective with accounting software