Building Buckingham: It’s Good to Be Debt Free

Have you recently made the final payment on your home mortgage? Perhaps you just paid off your last student loan? Maybe your credit card balance is now zero, or your car loan is gone? If so, you know what a good feeling that can bring.

At Buckingham, managing your liabilities is a serious financial planning subject, and one that we regularly discuss with our clients. Clients generally like to know how they can eliminate most, if not all, of their debt by the time they plan to retire. A parallel, although not completely identical, line of thought led my wife, Susie, and me to make a similar commitment. We wanted to make sure we were free of any outside financial obligations by the time I was ready to step aside for the next generation of leadership to take over the reins at Buckingham.

Well, after more than 20 years with the firm, it’s with enormous satisfaction that I can say Susie and I are totally debt free. We own our home, free and clear. We can travel, anywhere. We can make gifts to the kids and grandchildren. In fact, we can pretty much do whatever we feel that we can responsibly afford, and not have to worry about the next loan payment.

So, how did we get to this happy place?

For starters, you need to know that when Bert Schweizer, Steve Funk, Paul Forman and I began our new Buckingham wealth management venture in 1994, we had very little of our own capital to get the company going. We believed we would need as much as $400,000 in initial financing to ensure the firm would survive its first and second years (1994 and 1995). We needed to pay rent, equip an office, pay some administrative salaries and cover a host of other expenses. And all with no guarantees regarding when and how our first revenue would develop.

We had some hard decisions to make. How should we fund our start up? Should we use some of our personal assets to invest in or loan to the company? Should we borrow from the bank? Or should we find some other source of funding?

As none of us was thrilled with the idea of taking on new debt and/or securing a loan with our personal assets, we decided to seek the assistance of outside investors. While Steve and Bert got the office staffed and ready for business, Paul and I began the search for four outside investors. We hoped each would put up $100,000 in return for a small equity interest in Buckingham. We made a list of ten possible backers, ranked them according to who we thought was the most likely to be interested in such a venture, and then set about calling them. We told them about our initial goal, which was to reach $100 million of assets under management within five years. I can only recall two who turned us down — although even they were interested in our enterprise. However, they needed more time than we could afford to give the idea some thought.

In all, it took Paul and me about a month to find our “Final Four.” In return for a small portion of our equity, we had obtained the necessary operating capital to make Buckingham a possibility. It seemed like a fair trade-off to us, and it obviously was to our four investors as well. They took a big risk on a start-up company. We had no assets, no clients (yet) and were still developing the evidence-based investment philosophy upon which we planned to build a substantial advisory firm. Two decades later, we’ve created a dynamic organization around our original idea. A team of more than 200 employees serves more than 18,000 clients throughout the country. We reach thousands more investors every day through books and the writing of our national thought leadership, which appears in many major media outlets.

I’m pleased to say that those initial four investors have never regretted their belief in us and in Buckingham. To this day, each of our four backers still owns a small interest in the company. I have every reason to believe they will continue to be rewarded for their involvement well into the future.

Over the years, as Buckingham has grown, we did make a decision to put in place certain short-term lines of credit. That allowed us to borrow from the bank for specific, limited cash flow needs. But we paid those loans right back when the next quarter’s billing receipts came in. Other than that, no loans, no payments and no outstanding balance! Like with my experience at Buckingham, being personally debt-free removes all worry about those particular financial obligations. And we take great pride in helping many of our clients achieve the same wonderful feeling Susie and I have worked toward.

The bottom line? Buckingham has always been debt free, which has allowed my family to be debt free too. And that feels great.


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The opinions expressed by featured authors are their own and may not accurately reflect those of the BAM ALLIANCE. This article is for general information only and is not intended to serve as specific financial, accounting or tax advice.

© 2015, The BAM ALLIANCE

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