Beyond Financial Resilience
I live in a coastal city in Florida with a burgeoning arts movement and vibrant downtown. The quality of life that is achievable in this not too high cost of living area is quite impressive. That said it is one of those cities you might think twice about moving to if you read Tanja Hester’s Building Climate Change Into Your Early Retirement Plans blog post at Our Next Life. A variety of models show a good part of this city, including the downtown area, potentially ending up under water in the next 50 to 100 years. My city government is well aware of this possibility and is currently seeking input on an Integrated Sustainability Action Plan (ISAP). One word that comes up frequently in ISAP discussions is resilience – how do we make our city more resilient in the face of climate change, a potential economic crisis, or some other (natural or economic) disaster? It’s a very important question for any city to ask. We as individuals can also benefit from contemplating how to make our own lives more resilient and the Resilient Investor Map (RIM) can help us do that.
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According to the Oxford dictionary, the word resilient means “able to withstand or recover quickly from difficult conditions.” When this word gets mentioned on financial independence blogs and podcasts from time to time it’s usually in reference to shoring up one’s monetary resilience to better weather an economic slump or to maintain a decent standard of living over many years of early retirement. In this context resilience mostly implies avoiding debt, keeping costs low, having enough money saved and invested, and establishing a number of active and passive income streams. Last year JD Roth wrote about this concept in his Developing Financial Resilience post over at Get Rich Slowly.
Certainly, financial resilience is important, but there are also other areas of our lives in which those of us pursuing FI/RE might want to contemplate how resilient we are. JD Roth began his blog post with a reference to an architect, who explained to him how in the world of construction resilience refers to a structure’s “capacity to return to its unique state after a disturbance.” Wouldn’t FI/RE enthusiasts also benefit from considering the resilience of their own homes, properties, and living situations? Within the realm of permaculture (which I have referenced in numerous other posts as a guiding framework for much of my whole systems thinking) the tendency is to look far beyond individual financial resilience to creating resilient communities. Finances certainly play a part in community resilience, but money is only one factor at play in this broader vision of resilience.
The Resilient Investor
In the book The Resilient Investor: A Plan for Your Life Not Just Your Money the leadership team at Natural Investments outlines a much more holistic strategy than typically presented in investing books. It’s one of the only personal finance books I’ve read in which the word permaculture appears (multiple times) and is something with which all of the authors are quite familiar. And it is the only investing book I’ve read that so clearly links our own individual resilience with that of our community’s. The authors not only make the case that we can greatly increase our own resiliency by strengthening our community involvement and ties. They also demonstrate that we can increase our individual resilience by improving our community’s resilience.
Some readers may already be familiar with Natural Investments because one of their clients is Vicki Robin co-author of Your Money or Your Life, a widely read book in FI/RE circles. She has mentioned her involvement with them in a number of online settings as well as in the updated 2018 version of the book. Other readers may know of them as the originators of The Heart Rating, which evaluates the environmental, social, and governance performance of mutual funds and was referenced by Ethan Roland in my interview with him on regenerative investing.
According to the Natural Investments team, resilience is not possible without observing the triple bottom line of people, planet, and profit. The authors build on that idea by introducing the concept of evolutionary investing, which they refer to as an “invitation … to create a new vision of the world we wish to see, and then to invest our time or money into creating the world.” Given that point of view, it is not surprising that they encourage a more expansive view of investing. For them
“investing is something that we all do by directing our time, attention, energy, or money in ways that move us toward our future dreams, using a diverse range of strategies.”
As part of this expanded view the authors identify three broad categories of assets:
1) personal – relationships, community, learning, health, and spiritual
2) tangible – home, efficient energy systems, local food supplies, and a healthy local ecosystem
3) financial – stocks, bonds, savings
These three asset categories closely resemble the eight forms of capital that I highlighted in an earlier post. In that previously mentioned interview with Ethan Roland, co-author of the original Eight Forms of Capital article, he references his book Regenerative Enterprise: Optimizing for Multi-Capital Abundance. Re-reading that blog post a month later that subtitle really struck me. OPTIMIZING FOR MULTI-CAPITAL ABUNDANCE particularly because of how positively optimization and life hacks are viewed in the FI/RE realm. Doesn’t it just make sense for us to optimize much more than our finances and to extend our optimizing efforts to all the forms of capital, wealth, and assets to which we have access? In The Resilient Investor financial advisors well-versed in permaculture offer us a road map for navigating this broader vision of a resilient and fully optimized life.
Resilient Investor Map (RIM)
A very useful tool presented in the book to help us determine our real net worth by taking inventory of this wide array of personal, tangible, and financial assets is the Resilient Investing Map (RIM). The book goes into a good bit of helpful detail outlining the differences between the information to be included in each of the nine zones on the map. In order to keep this blog post to a more manageable length I’m only including the RIM template, which provides a brief synopsis of the types of information to list in each zone. A blank RIM for your own personal use as well as completed samples and other supplementary materials can be accessed on the book’s companion website.
For those who are so inclined the authors suggest updating one’s RIM annually. I think this could be an excellent exercise for those that are already regularly allocating time to conduct a thorough analysis of their assets. For me I know that would not be the case as I’m just not in the habit of doing that to the extent I could be. However, I did fill out a RIM as I worked my way through this book and am including my highlights below. I can see this being an especially beneficial activity for people new to thinking in terms of this expanded view of assets and wealth.
Seeing the various assets and capital I am accumulating mapped out across the various zones confirms for me that I am in the process of building a resilient life and contributing to resilience in my community. This will be extremely valuable because as the authors point out nobody knows for sure how the future will play out. The best part of all is that connecting with my community while simultaneously increasing resilience makes my life so much more joyful and rich. As the authors note, these connections and other personal assets “are likely to be the most stable and valuable form of investment” I’ve made in such uncertain and complex times.
Regular readers of this blog know that I am a big proponent of local investing as a means of supporting the thriving communities many of us wish to live in as we pursue and especially after we reach financial independence. So I was particularly pleased to find the authors making the case for local investing. They wisely noted that not so long ago one’s hometown was the only place that people spent, loaned, and invested money. These close-to-home financial interactions steer us away from the more distant and ambiguous global financial system and re-direct us towards more intimate face-to-face relationships in our lives.
Investing in things that are close to us makes it easier to be aware of any of the negative social or environmental impacts of our investments as those negative impacts unfold right in our back yard. When we invest in the global economy those negative impacts play out in somebody else’s back yard. We may not even be aware that negative effects are taking place as a result of our investments or we may simply feel helpless to do anything about it. Then we just shrug our shoulders and accept it as “just the way it is.”
Evolutionary Investing for Non-Accredited Investors
I do wish the book had gone further in providing specific suggestions for non-accredited investors (those of us with a net worth under $1 million or a salary under $250,000), who aren’t working with financial advisors to learn about what “evolutionary” investing options are available to us as well as how we can access these options and get our money invested in them. This is the information I really feel is lacking for those of us trying to pursue a triple bottom line with our investments and the whole reason I started this blog.
I understand that this is a relatively new way of investing and that the evolutionary investing opportunities that do exist are mostly only available to accredited investors at this point. There are some evolutionary investing opportunities currently available to non-accredited investors. The challenge is spreading the word about these opportunities. I have learned about a number of them over the past year and will be doing much more in the coming months to share that information on this blog. Even once I’ve assembled all of that information on this blog a large information gap will still remain to be filled. Hopefully, more people in personal finance will begin specializing in this area as well and help teach those of us that are interested how to find and access these opportunities so we can start investing in the world we’d like to live in without having to be a millionaire to join the club.
I understand that people might be dubious or fearful about achieving financial independence by optimizing for multi-capital abundance. Most of what is modeled for us in the FI/RE community and mainstream personal finance that feels safer is the accumulation of wealth from investments in extractive industries and practices. For anyone who is hesitating because this line of thinking and investing veers from the current norm, I’d like to leave you with a Buckminster Fuller quote shared in The Resilient Investor “You never change things by fighting the existing reality; [instead] build a new model that makes the existing model obsolete.”
The Resilient Investor: A Plan for Your Life Not Just Your Money Life
By Hal Brill, Michael Kramer, and Christopher Peck with Jim Cummings
(PS – My library did not previously own this book, but they purchased it after I submitted a request form for it. That might work for you as well if you don’t find it in your library’s catalogue.)