Ludvig van Beethoven, one of the most prolific and acclaimed composers in history, completed his final symphony in 1824. Symphony No. 9, which has endured for almost three hundred years and is as recognizable as any piece in the entire canon of classical music, was composed when Beethoven was completely deaf. Here’s a sample. So how did he do it? By knowing the sound, pitch, and tone of every instrument in the orchestra? Yes. But is that all? Beethoven’s vivid imagination was also able to conjure up the unique characteristics of each instrument and he instinctively knew how each instrument and each section of instruments would compliment each other to produce such soaring and moving music. Symphony No. 9 is an astonishing feat of composition by any standard, but to think that Beethoven wrote such a masterpiece without actually being able to hear it himself...is extraordinary. His genius lies in what can be described as possessing, within his head, the perfect “model” for each instrument and their intended interplay. In order to achieve true, long term financial success we must employ what I call “The Beethoven Principle.” The Beethoven Principle means that each “financial instrument” has its place, its value, its notes to play in our personal “financial symphony.” By carefully and expertly arranging financial products in such a way that they interact harmoniously, our money performs better, opportunities arise, retirement income increases. Even the challenges and dangers posed by increasing taxes, stock market uncertainty, rising interest rates, paying for children's education, the fear of outliving one’s money, and a myriad of other concerns may be more easily overcome or lessened. Recently, I was reading an article on a financial website that illustrates how most “experts” fail to truly grasp the power of The Beethoven Principle. The post includes a seemingly harmless opinion when trying to convince its readers of the virtues of discussing life insurance versus investments: “Whole life isn’t the best way to invest, traditional investments are.” I see this sophomoric, naïve approach to dispensing financial advice all the time. Neophyte financial “experts” try to sell their audience or clients on the idea that investments are better than life insurance, or vice versa, that stocks always outperform bonds, that there’s nothing better than maximizing your 401k, etc. Whenever you hear or read advice presented as definitive and limited as this, allow The Beethoven Principle to come to mind. It’s not too surprising that this individual is actually an ER doctor in real life. But he freely dispenses financial advice on his blog as authoritatively as if he were removing an appendix. The author’s dogmatic “either/or” posture is indicative of a lack of financial and economic acumen. His fundamental error, and the one which is far too pervasive within the mainstream and fringe financial advice-giving population, is pretending that personal finance is a zero sum game. It’s not. Each financial product has a role to play, unique characteristics unto itself, and when looked at through the eyes of a competent financial composer, seemingly dissimilar products can come together in a financial symphony that produces results far beyond their individual capabilities. Life Insurance should not be considered or sold as an “investment.” For the author to compare it to one, or to presume that true professionals would do the same, is misleading and illustrates his lack of a fundamental understanding of how life insurance works as well as The Beethoven Principle itself. Index funds are investments. Real estate is an investment. Mutual funds are investments. Bonds are investments. Mortgages are debt instruments. Life insurance is insurance. To say “traditional investments are [the best way to invest]” is like suggesting that taking a drink is the best way to curb your thirst and waiting for the applause. It’s not that you should choose between life insurance or investments, for example, it’s that the Beethoven Principle illustrates how life insurance and investments can create greater value together when arranged properly. We must resist comparing violins to trumpets, bassoons to base drums. This leads to financial decision-making in a vacuum, losing the forest for the trees as the saying goes. Like Beethoven, you need to figure out how insurance and investments and debt and all your other financial decisions can work together so that the whole is greater than the sum of its parts. By focusing on the individual instruments, “opinionists” such as the ER doctor turned blogger would have you believe that this is a timeless a version of Symphony No. 9. With so many financial instruments at play, how can I put them together in a successful way using The Beethoven Principle? Just like few composers’ work stands the test of time, few financial tools are at our disposal to help us in this regard. One such tool is the Leap Model™. Instead of relying upon opinion masquerading as financial advice, tools like the Leap Model are built upon a holistic and economic approach to analyzing financial decisions. Opinion, hyperbole, and fabrication melt away and are replaced by the careful coordination of all of one’s financial assets and decisions into an easy to understand, comprehensive, visual financial model.
All of your Protection, Savings, Investment, Debt, and Cash Flow decisions appear on one page, on one screen, together performing your financial symphony. Measure how all of your financial products and decisions work together, or against each other, and assess how changes or new alternatives can impact future results. And if a few notes are a little “off key,” you can make adjustments until the outcome resembles your best composition. Beethoven was able to overcome his deafness to still compose an enduring symphony through a combination of talent, will, imagination and a mastery of how to maximize the performance of instruments, whether solo, or in combination. The same is true with our money. Using a tool like the Leap Model can help put The Beethoven Principle at work in your financial life.