How to Explain the Personal Economic Model® to Prospects

How to Explain the Personal Economic Model® to Prospects

As part of the Circle of Wealth® system, the Personal Economic Model® allows you to show prospects their current financial situation and how to plan for retirement. It’s yet another way of showing them the value you provide through your insight and guidance.

How Can We Learn From the Medical Profession?

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You’ve heard the saying that a picture is worth a thousands words, and it’s certainly true. Our Personal Economic Model® is a picture that represents a family’s entire financial model.

Why would such a picture beneficial? Well, we need to look no further than the medical profession to see how highly trained doctors communicate with non-medically trained patients. They study for years to learn the human anatomy, medical procedures, and treatments. They speak in terms few outside their profession can understand and thus have a communication gap with their patients. So, to close the gap, when a patient enters an exam room, the doctor will use an anatomy model or poster to show the problem and solution.

In our profession, we also study for years, learn financial terms and use numbers to understand how money works. When it comes time to communicate what we know, most of our industry uses verbal communication with financial terms our prospects don’t understand. It’s no wonder why so many families leave meetings confused and often don’t follow sound advice.

It’s time we learn from the doctors, and adopt the use of a model representing a family’s financial anatomy to bridge our communication gap. In the Circle of Wealth® we have developed such a model that we call the Personal Economic Model®.

Let me walk you through this model as I would with prospects so you can get a feel for how this might help you in your practice.

How to Use the Personal Economic Model® with Prospects

In helping you with your family’s financial situation, I would like to start by sharing a picture of your financial anatomy. With this, I can better communicate details of each financial decision you will make, and share the relationships between all your financial choices.


As you look at the picture above, what do you see? This image is a visual representation of the flow and storage of your money. Let me explain.

Your money flows in on a regular basis as earned income. Over your lifetime, the Lifetime Capital Potential tank represents all the money that you will earn, which is substantial.

However, it’s doesn’t always feel substantial because it flows in a little at a time. As your monthly cash flows out, the first valve it hits is the Tax Filter. Unfortunately you don’t control this valve, the government does. They tax a certain amount of your monthly cash flow leaving you with your after tax income.

Once taxes are paid, your income flows through the Lifestyle Regulator. You control this valve and choose how much money flows out to your current lifestyle and how much is pumped up into your two savings tanks through the Future Lifestyle tube.

Position A financially would be to have enough money flowing into your future lifestyle savings tanks so that when you do choose to retire, you have enough dollars inside your tanks to be able to continue to live your lifestyle the way that you are living it today.

Let’s take a look at the two conceptual savings tanks and their characteristics.

First, the Risk Tank

  • Many advisors and families focus solely on this tank for their financial future.
  • Dollars here have a potential for higher returns but risk of loss is also in the equation.
  • The keys to this tank are higher rates of returns, longer investment horizons, and often little or no access before retirement.
  • Examples are Mutual Funds, Investment Real Estate, Precious Metals, and Variable Annuities.

Second, we have the Safe Tank

  • The idea of this tank is to represent dollars you save that are safe from losses.
  • Notice the cap, which represents the idea that dollars in this tank cannot evaporate.
  • Also, this tank represents dollars that you maintain easy access to for use during your working years.
  • The keys to this tank are safety and access, not necessarily high rates of returns.
  • Examples are Cash, CDs, Fixed Annuities, Money Market, Permanent Life Insurance, and Savings Accounts.

In addition to seeing how your money flows through the model, we can review your major lifestyle purchases to make sure you have enough available to meet life’s demands like college, weddings, and other major purchases.

And once your plan is on track, we can review your protection needs for accidents and unforeseen situations like income interruption from a disability or an early death, as well as protecting your property and third party liabilities.

So, in review: What is position A?

  • As money flows into your model enough is stored in the tanks to allow you to retire at the same or better standard of living you’re enjoying during your working years.
  • In addition, you have enough access to your money to meet the demands of large purchases needed by the family, and ensure your overall plan is protected from accidents and unforeseen situations.
  • In working together, we will use this picture to help you understand individual choices and how they impact the overall financial picture of your family’s future financial plans.

Once your prospects understand the Personal Economic Model®, they’ll have a clear picture of their finances, increasing their chances of following your advice.

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