How Successful People Gain and Retain Their Wealth

There is a TV show that I witnessed a couple of times that is titled, How Winning the Lottery Ruined my Life, or something to that effect.  While watching the “lucky” family discuss their travails and trials of winning such a large sum of money when they previously were considered poor or bankrupt was interesting to me. The reason for suffering from winning such large amounts of money is that the person was attempting to apply their current capabilities and philosophy of life to a much larger asset base.

Having served as an advisor to wealthy individuals for many years, it gave me perspective to understand the devastation of which the lottery winner spoke.  We all experience a stage in life that we are most comfortable.  This level of living has given us the lifestyle we feel is good, or good enough, to provide us some comforts of life.  The challenge is to understand that, as people, we must grow our philosophy toward money and wealth as we grow our lifestyle or trouble is on the horizon.

In simple terms, the person who has dominion over a few things must grow in mindset, knowledge and understanding about wealth to retain dominion over significantly more assets.  The Bible tells us that the person who has much wealth, much is expected.  That is a tremendous philosophical point about wealth.  Another statement I often use is that self-preservation leads to mediocrity while charity leads to wealth.  By giving away, in a reasonable and responsible manner, the assets you currently possess, you will receive greater assets from the marketplace.

To help you think like a wealthier individual, you should learn from those that possess great wealth.  Read biographies of Cornelius Vanderbilt, Andrew Carnegie and John D. Rockefeller.  What inspiration these men’s stories give me as I realize their generosity in developing the modern culture you and I benefit from.  Libraries, hospitals and universities all over our great country bear their names as a testament to the great blessing we possess of being American citizens.

One of the common themes I discerned from reading their biographies is that they thought differently than most people.  Their time was sacred and they didn’t waste it on trivial matters.  Most of them created, for themselves, an approach to capturing the best information to make critical decisions that contained considerable risk. To accurately describe their approach to managing their time, they eliminated, delegated or elevated activities which became their goals for success.

Many menial tasks that would arise during the day would be disregarded unless they had some relationship to the important goals set by the entrepreneur.  Business studies of behaviors inform us that most people major in minor things to the detriment of the business production they are seeking.  In simple terms, I call this “busy work”.  This type of activity has no sustained value or progress contribution toward your big goals for which you are seeking to attain.  According to Gallup, a considerable number of employees polled report they are simply disengaged from the act of contributing their skills to their employer at some point during each day.  That is startling when you realize these employers are paying significant amounts of money for training, retention and benefits for these “less than productive” employees.

Another strategy used by wealthy individuals is that they delegate tasks to others more capable or experienced in certain functions.  For example, many didn’t write or type their own letters but utilized a personal assistant.  Most of them didn’t drive themselves to destinations but used the skills of drivers and focused on their important tasks during the drive time.  Delegation is not restricted to business professionals. Many of us delegate our lawn work and flower beds to companies that specialize in such services.  Cleaning our homes and performing laundry are delegated activities for which others are most helpful.  You should be focusing on those activities that create and retain your most passionate areas of life.

Lastly, the wealthy are excellent at scaling their process for producing wealth.  They create a unique process and elevate it to capture market share or other investors.  By concentrating on your unique abilities to create value for others, you will quickly realize that a “better mousetrap” is in your possession.

Each day, plan your activities and review them to note what should be eliminated, delegated or elevated to give you the greatest opportunity to serve others and grow your wealth in life.

The world needs you to show up everyday to contribute your talents to helping others. It is only when we all find our purpose in this world and implement a means to using that purpose to help others that we truly are wealthy.  Mark Twain, one of my favorite authors, stated it well when he said, “The two most important days in your life are the day you are born and the day you find out why.”  

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The One Constant is Change

Remember as a younger person when you first heard the phrase, “the only constant in life is change”? At the time you, perhaps, thought the person to be either a great philosopher or speaking gibberish. As I am approaching the inspirational age of 60 years young, the aforementioned statement of change has been proven true more times than I can recall. To provide additional truth to this historic statement, the IRS does its part by changing the laws governing your annual filing of income tax returns.

The standard deduction is the allowance of a certain amount to accommodate your lifestyle needs such as food, shelter, and clothing without the need to itemize these deductions on your individual income tax return. Each year the IRS considers the inflation rate in the United States to determine if adjustments should be made to the standard deduction amount for the various filing statuses. In recent years, the IRS simplified this process by combining the original standard deduction with the exemptions a filer could claim to reduce his taxable income. 

Due to the altitudinous inflation experienced in the United States in the past two years, most recent rate provided by the U.S. Bureau of Labor Statistics to be 8.2%, the IRS recently issued the increased standard deduction amounts for the 2023 tax year (i.e., your return you will file in 2024). For those filing jointly, the standard deduction has increased $1,800 over the 2022 amount to a deduction of $27,700. If you qualify as a single filer or choose to file as married but filing separate from your spouse, the standard deduction is $13,850 which is $900 higher than the previous allowed deduction. For those individuals who are single and maintain a household for a minor or special dependent, the head of household status allows a greater deduction than a single filer. Their amount for 2023 standard deduction will be $20,800 which is $1,400 higher than in 2022.

For taxpayers that owe little or nothing for a residence, contribute smaller amounts to charities and have medical coverage for major illnesses or infirmities, the standard deduction provides a benefit. Time is a considerable savings for filers who do not meet the standard deduction limit with their itemized deductions. To simplify the process of filing your individual return each year, consider the standard deduction amount allowed and perform a quick mathematical equation to confirm your potential deductions are more than your standard deduction.

The United States Tax Code provides seven tax rates, or brackets, for purposes of calculating your annual income tax liability. From a rate as low as 10% on taxable income of $11,000 or less to a maximum rate of 37% for filers with taxable income above $578,125 for single individuals and above $693,750 for married filing joint taxpayers. To add a little complexity to the process, the Congress assesses a surtax on certain filers to assist in the funding of the Medicare and Social Security programs. 

One of the easiest methods of completing your annual tax filing obligation is to start early. Employers are required to mail Forms W-2 to employees on or before January 31, 2023. Start now by gathering your potential itemized deduction receipts and as income documents are sent you, begin the process of completing your returns. It is recommended that you file electronically to facilitate the processing of your returns and, hopefully, the electronic deposit of a refund check to your bank account.

A quote attributed to one of the greatest planners of the last one hundred years, President Dwight D. Eisenhower, as the commanding general in WWII, “In preparing for battle I have always found that plans are useless, but planning is indispensable.” applies to tax “battles.”  The planning for targeted outcomes is critical to the realization of your goals.

Tax planning is necessary for you to prepare yourself for the best results possible in filing and paying your annual income taxes. If you need assistance achieving your retirement planning goals, one of which should be the lessened impact of taxation on your wealth, seek the assistance of a CERTIFIED FINANCIAL PLANNERprofessional to guide you through this important planning process. Go play in the Autumn breeze this weekend!

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Medicare Benefits Planning

One of the most critical benefits affecting American citizens is the Medicare Program.  For those individuals who qualify at age 65, this program provides health coverage for inpatient care (Part A), outpatient care (Part B), prescriptions (Part D) and other areas.  This article will focus on these three most common areas of care.

To qualify for Medicare benefits, you must have worked in a job that withheld Medicare contributions from your paycheck while working at least forty quarters (i.e., 10 years).  This is a very low bar to meet eligibility for such a comprehensive medical plan.  Of course, as with many federal laws, exceptions apply to the general guidelines.

The important concept of medical coverage through Medicare is that it functions similar to the private insurance you may have received while employed in your career.  For example, Medicare covers 80% of your covered qualified medical charges for inpatient care.  This means your hospital stay may be covered but you will be expected to pay the remaining 20% unless you purchase a Medicare Supplement Plan.

Supplement plans are relatively inexpensive and can be the difference between destroying your lifetime savings and the security your family needs.  There are many carriers of such plans and each state may differ as to the carriers available.  It is critical that you determine the appropriate Medicare Supplement Plan you desire that is contracted with your various medical providers.  Supplement plan consultants are often helpful to narrow the field of possible plans and to assist in the selection of a plan that meets your budget.

To enroll, or to change plans, you should be aware of the upcoming Open Enrollment Period.  For 2022, the period is October 15 through December 7.  It is critical that you review your current plan for potential savings as new plan changes and plan providers are introduced into the marketplace.  Often people will purchase a supplement plan and, like the infomercial, “set it and forget it”.  This is a big mistake that could cost you thousands of dollars.

Let’s review the outcomes of such a person who failed to obtain a supplement plan and suffered a significant health issue.  While in the Intensive Care Unit of a major hospital, the medical care she received was excellent.  She left the hospital after 10 days of care and felt so much better… until she started receiving the bills!  The total cost of the hospital stay was more than $120,000 for all the medical care provided her.  Without a supplemental plan, she was responsible for more than $24,000 of the total cost.

Medicare Part D is a complicated area of law.  It is vital that you seriously consider enrolling in this program when you are first eligible or you will be penalized for each month you delay enrollment.  This sounds rather harsh but the method of funding the program is through premiums assessed individuals who utilize the benefit.  Considering that most people may live a relatively healthy life until age 75, the ten-year period of qualification to election date may cause you to incur a significant penalty at a time when you may need your savings for other priorities.  

The cost of medical care continues to rise at an unprecedented pace in the United States.  We highly recommend those individuals enrolling for their Medicare Benefits to seriously consider purchasing a supplement plan.  Monthly premiums vary depending upon the level of care and the carrier issuing the policy.

If you are approaching your 65th birthday, it is critical that you file for your Medicare Benefits approximately 60 – 90 days prior to your birthday.  It will be a lot easier to blow the candles off your cake if you aren’t worrying about medical bills.  Seek the assistance of a CERTIFIED FINANCIAL PLANNER™ professional to guide you through this critical and difficult process. Make it a wonderful week!

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What Is Your Net Worth?

As a result of the economic disruption of the past two years, many people are becoming confused and concerned as to the sufficiency of their financial wealth in maintaining their lifestyle. Fear has a means of causing one to doubt previously acceptable strategies and financial reserves as supportive of your future. By focusing on the factors, you can control, you will regain your confidence and build competence to achieve your future no matter the market conditions.

First, it is critical that you understand your current financial state. To do this it is necessary that you look earnestly at your overall finances in a manner that provides you the most information. One document that will help you capture this information in a succinct manner is a personal financial statement. This report is a snapshot of your assets (the items you own), your liabilities (the amounts you owe to others) and your net worth (an arithmetic function of assets minus liabilities). Let’s assume you own assets valued at $3,000,000 and have liabilities of $1,000,000. Your current net worth, in the most simplistic of terms, would be $2,000,000.

By understanding what you own and how much you owe others, you may now start the planning process for the future. You know the old saying, “It is hard to get to where you wish to go if you don’t where you are.” This document can be a very useful tool for an individual planning for her future. Exam the personal financial statement and notice those assets that may create income and those that simply grow in value. Perhaps on your financial statement there are assets that are idle and incur expenses without generating income to offset their maintenance.

Examining the liabilities, you may calculate several important ratios or factors that will help you achieve greater net worth. For example, if your indebtedness is secured by collateral, what is the value of the asset? Is it sufficient to allow the indebtedness to be liquidated by selling the asset? What is my weighted average cost of borrowing? These are important questions to consider when creating a financial plan.

Taxes are often overlooked on a personal financial statement. This is one liability that must be considered in the statement since it is prevalent in our country and will require assets to achieve the payment. Taxes are owed in many forms – estate, sales, income, property, etc. I am reminded of the poem authored and published by the Adam Smith Institute that reads in part, “Tax his cigars, tax his beers, if he cries then tax his tears. Tax all he has, then let him know, that you won’t be done til he has no dough. When he screams and hollers, then tax him some more, tax him til he’s good and sore.” A little levity is always good when talking about a portion of one’s lifetime income being sent to a taxing authority.

The final step is to analyze the change in your net worth. Are you growing in net worth or are you losing ground? It is critical to understand the net worth you possess so that you can work with this amount for purposes of funding your future lifestyle. Review your net worth over the past ten years and note the growth trend you experienced. Are you consistently increasing in net worth prior to retirement? If not, adjustments must be made in your assets that you purchase and the indebtedness you incur.

To fully understand the development and uses of a personal financial statement, seek the assistance of a CERTIFIED FINANCIAL PLANNER™ professional. To create a pathway to success, you must first establish your current point in time and net worth. You owe it to your family and yourself to be as capable as you can possibly be to direct your efforts to the future of your design. See you on the gridiron!

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Lifetime Decisions on Social Security Benefits

Perhaps one of the “Top 10” retirement questions we receive is when to elect social security benefits. The question is one that is complicated to answer due to the fact that many unknown variables exist within this question. Just a few considerations are: 1) How long will I live? 2) How can I maximize my benefits? 3) What is the best strategy to gain the most household benefits? 

Let’s tackle the first question since it is preeminent to the prediction of mortality. The answer to the question of “How long will I live?” requires greater analysis than a simple number presented as the target date. What age were your parents and grandparents at their deaths? Do you have any comorbidities or systemic health issues? What are your current cash flow needs? Are you married? Widowed? Do you have a dependent child that has been diagnosed special needs? All of these factors, and many more, give rise to a greater amount of analysis to properly estimate your date of filing for benefits.

According to the U.S. Centers for Disease Control, in a study published in 2019, men enjoy a life expectancy, at birth, of 75.1 years and women 80.5 years. Of course, these are averages and many of us will live to 100 years of age and beyond. Curiously, the projected ages for men and women declined in the past year by approximately 0.9 to 1.2 years. Was this due to the effects of the pandemic or is this a normal fluctuation of the population cycle? 

The most important election many of us will make that has a lifetime impact is the election to receive social security benefits. Much confusion exists around the timing of this election. We highly recommend that each client examine their needs, lifestyle and circumstances when determining the filing date for benefits. For example, if your lifetime savings is not projected to meet your cash flow needs due to the lower returns from the current market cycle, you may wish to analyze the lifetime loss of SSA benefits by electing earlier than your Full Retirement Age (FRA). It is not ideal to make lifetime decisions based on short-term needs. For an individual who is age 62 and would reach FRA at age 67, if benefits are elected at any time from age 62 to 66 years and 364 days (provided it is not leap year), his or her benefits will be reduced permanently by 30%. Depending on your lifetime earnings report, this may be a significant loss of benefit.

Lastly, the best strategy for your household is to determine the ages of each spouse and then review the earnings reports for each by obtaining them on www.ssa.gov . If the higher earned benefit spouse were to delay benefits until reaching age 70, instead of claiming at age 67, a 24% increase in monthly benefits would be availed to the surviving spouse upon the death of the higher earner. The bonus earned by the higher-earning spouse is material in the fact that many spouses may live to be 90 years of age or more which allows significant time for the collection of the bonus payments. Upon the death of the higher benefit spouse, the survivor would “step in the shoes” of the deceased and receive their benefit (while forgoing the survivor’s original earned benefit).

It is critical that you make the best decision for your family. A proper analysis of the hundreds of options of benefit elections is necessary to give you confidence in this lifetime decision. If you wish to plan appropriately for your SSA benefits, contact a CERTIFIED FINANCIAL PLANNERTM professional to assist you in this important lifetime decision.

Today is another 24-hour period for you to find gratitude and happiness. Spread your smiles to those around you and you will reap what you sow. I have a saying that may be appropriate – “If smiles were contagious, would you start a pandemic?” See you on the walking trail!

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Thriving in Volatile Markets

Do you dread challenging markets?  Do you break out into a cold sweat when your investment statement arrives in the mail?  Many of us don’t understand the positives, yes, I said “positives”, of the opportunities that present themselves in volatile markets.  Retail investors exhibit several common traits.  First, they typically like to “buy high” and “sell low” based on fear and not sound research.  Second, their idea of diversification is to own several different accounts with a myriad of investment positions in each one.  This is not only a complicated method of living but fraught with issues such as investment overlap and possible sector concentration.

A better method of achieving your long-term investment goals is to develop a plan of investing that does not change with market cycles.  This type of approach will serve you well in the long-term since you are dollar-cost averaging by investing each month (or some predictable cycle).  In a market expansion, your constant investment amount will buy fewer shares or units of a particular investment.  However, in a declining market, such as the one being experienced in the United States at this time, your consistent investment amount will buy more shares of a particular investment due to the lowered buy price.

Dollar-cost averaging doesn’t guarantee success of your portfolio but it does utilize the natural market cycles to help you achieve a potential lower average cost in the shares/units you purchase over time.  For example, if you are investing $1,000 each month in your portfolio and the shares are $50.00 each, you may buy 20 shares during the month.  However, if the market is declining and shares are now $40.00 each, you may buy 25 shares during the period.  Over time you may experience a lower average cost of investment in each share.

In our previous example, assume the investment is a company that has a history of paying excellent dividends and has weathered many difficult business cycles.  The company’s management gives you confidence that it will, once again, keep the company moving in a positive trajectory despite the economic hardships.  By focusing on facts and not emotions, the probability that you will achieve your investment goals is much greater.  Remember the quote from the “Oracle of Omaha” Warren Buffett, “If you don’t feel comfortable owning a stock for 10 years, you shouldn’t own it for 10 minutes.”

I understand it is difficult and takes great courage to weather some of the more difficult economic cycles the United States has suffered.  However, remember that you will be using the totality of your investments for supporting your lifestyle in retirement and it took you many years to accumulate the funds.  One or two negative market cycles will give way to more positive cycles at some point.  The future isn’t hard to predict if you create it yourself. 

Establish your investment plan based on sound logic and economics.  Don’t attempt to time or “outsmart” the markets.  Many bankrupt individuals have attempted these approaches.  If you have questions on establishing an appropriate strategy for your lifetime accumulation of retirement funds, contact a CERTIFIED FINANCIAL PLANNERTM professional.  The best counter to emotional disruption during a negative market cycle is to think long-term and stay with the plan you developed. Now, go out and enjoy your day.  You got this!

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Why Your Loan Interest Rate Is Going Up

If you have attempted to purchase a new car, new home or pay on your credit cards, you may notice the interest rates being charged you are higher than you experienced earlier this summer. Inflation has been a tremendous force on the budge of families in the United States in the past year. Currently, the year-over-year inflation rate is 8.5%. This number impacts most financial matters where lenders are involved.

The Federal Reserve Board is the responsible agency for establishing a monetary policy and to promote stability in the banking system of the United States. Based on the money supply in the country, as we are currently experiencing, demand for consumer goods and real estate are higher but the supply of these same goods is limited. This is the definition of inflation. Although you can’t see “inflation”, you experience it everyday when buying groceries, filling up the tank of your automobile, borrowing money on a home or requesting a credit card.

The rate controlled by the Federal Reserve is known as the discount rate. This is the rate of interest charged to banks to borrow from the Federal Reserve. If the rate of borrowing rises for your community banks, the rate of interest charged on loans to you by the bank might be higher than you previously experienced. Loan rates to consumers (you and I) are based on manner factors:  your credit score, your debt-to-income ratio, collateral offered for securing the loan and general payment history with the lender.

In the past several years, the Federal Reserve allowed the discount rate to remain near zero percent. This fueled an aggressive amount of lending and money supply to become more liberal for borrowers while rates charged the borrowers were exceptionally low. For example, to some of the most credit-worthy borrowers, automobile financing companies such as General Motors Acceptance Corporation would loan funds to buy automobiles with terms such as no interest for sixty months. Why would the lender extend such a loan to anyone? The reason is that the inventory of automobiles was increasing, and manufacturers (and the related dealers) needed to sell more inventory.

Credit card companies were maintaining extremely low interest rates during the past several years as well.  I am not a fan of credit cards as a means of borrowing unless the full payment of the card will be paid each month. Interest rates for unsecured, personal credit can be as high as 22% – 25% annually. 

When the Federal Reserve raises the discount rate, it impacts the prime rate (the rate of interest that banks loan its customers with good credit) by causing an increase approximately a few weeks after the Federal Reserve announcement. Shortly, after the prime rate increases, mortgage rates and other lending will increase commensurately. 

Unless it is necessary, purchases of large items on credit during a time of rising rates is not recommended.  For example, your home may be valued much higher today than it was two years ago. However, the home you would need to buy for your family, if you sold the primary residence, would cost you more for the same home than it would have two years earlier. It is the natural cycle of value and borrowing. 

As the money supply in the United States begins to tighten (less money in circulation), inflation will begin to lower. It is an economic certainty that the U.S. markets will expand and contract. This is the manner in which it has always performed.  The hardest questions to answer are: When will the economy expand (boom)? When will the economy contract (recession)? The person that knows the answers to these futuristic questions may sell you some ocean-front property in Arizona. 

Economics is a difficult subject for many of us. It is critical that risk be considered in all financial transactions, including loans. For additional information, and planning for your future, contact a CERTIFIED FINANCIAL PLANNERTM professional. Be careful, it’s a jungle out there!

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How To Remain Prudent During Market Cycles

What goes up must come down! Whoever authored this statement of life events and business activities should receive the award for the Most Obvious Statement. However inane the statement, it does contain a little truth when applied to our current economic cycle in the United States.

Factors such as inflation, supply chain disruption, interest rate increases, U.S. Government fiscal policies and continued underemployment in our country have caused significant volatility in the markets. It has been a literal rollercoaster for the various market indices used to measure performance of the exchanges in the U.S.

At the start of 2022, the S&P 500 Index was at 4674.77 and closed on May 6, 2022, at 4175.48. This decline of 16.26% has caused investors to worry about the future of their retirement assets. To mitigate the emotional impact of such a decline, consider past market declines and learn from the period of time after the correction. For example, by remaining calm and investing in a well-diversified portfolio, you will recover your unrealized losses in the future. If you are planning to make a large purchase during a market downturn, it may be fiscally more responsible to consider bank loans which carry a much lower rate of interest. Once the markets recover and the value of your portfolio is an unrealized gain, sell a portion of the investments to liquidate your debt.

Another measure of thriving during market cycles is to utilize noncorrelated investments that respond better to inflationary pressure. For example, real estate is a sector of the economy that maintains cash flow and value during market declines. Think about this approach to your income needs during a period of market contraction. Real estate investors continue to collect rents on a monthly, or some other predictable period, basis no matter the state of the economy. 

Of course, no investment is immune to such historic market events as the Wall Street Crash of 1929 or Black Monday in 1987. The key to facing any market disruption is to not allow emotions to control your decision making. One of my favorite quotes of Warren Buffett, “Be fearful when others are greedy and greedy when others are fearful” comes to mind during times we are currently experiencing.

Lastly, remember that you most likely took several decades to amass your retirement assets. The intention of these assets is for them to last you several decades in the future. Unless the need for capital was immediate at retirement, your portfolio will grow and contract as market conditions change. By maintaining a long-term perspective, you will be better suited to investing in positions that are below their book value and allow for a growth opportunity in the future. There are positions that are available for you to make reasonable long-term returns while the overall economy is in contraction.

Keeping perspective and maintaining a well-diversified portfolio will help you weather the storms of the economy much better than attempting market timing. Predicting markets is not an approach that serves you well. If you wish to evaluate your portfolio, contact a CERTIFIED FINANCIAL PLANNERTM professional. Worry never solved a challenge.

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Staying Focused is the Key

Ask any all-star athlete the secret to their success and they will tell you – focus. This past weekend at The Masters in Augusta, Georgia, Tiger Woods initiated his triumphant return to professional golf. During his post-round interview after he finished the tournament, Woods used the word “focus” several times to describe to the interviewer what his secret was in returning to competitive golf after such a devastating automobile accident.

Life is similar to a sport, perhaps a marathon race. It is difficult for many of us to see the long-term impact of initiating and maintaining a savings plan from age 20 to age 67. As my dad often used the “stick and carrot” analogy, the younger investors can’t taste the carrot due to the overwhelming length of the stick. For those that can maintain the zeal for living a life prepared for unexpected instances that require substantial resources, success is often the outcome.

Younger people look at me with disbelief when I explain the power of compounding to them. To paint the picture in a manner that “shortens the stick and sweetens the carrot”, I ask them to look at their investment account every six months. One of the first statements they utter is “Wow! Look how much I saved and I didn’t miss the money.” Albert Einstein, the great physicist, was credited with a quote about compound interest: “Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t, pays it.”

To create a system of focus pertaining to your finances, it is critical that you automate as much of the process as possible. For example, if you are participant in an employer-provided retirement plan, your investment funds will be automatically deferred from your paycheck and invested in the manner you direct your employer. This is a simple method of automating your savings and also receiving consistency in the process.

If you work in a company that does not provide an employer plan, you can accomplish the same automation with an ACH (automated clearing house) election. This process works very similarly to that of your employer election. By filing a form with your wealth advisor to transfer a certain amount of money at a fixed frequency, you will not be required to physically write a check, prepare an envelope or worry about finding a stamp to mail the deposit. Your life will be much simpler from an investment standpoint and you can worry about things such as fishing, golf or running.

If you wish to automate your savings for retirement, it is critical that you have a plan in place to accomplish your goals. See the advice and create a plan for your future by visiting a CERTIFIED FINANCIAL PLANNERTM professional. Take control of your future and you will enjoy less stress in life. See you on the pickleball court!

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Know Where You Will Land Before You Jump

What if you purchased an investment that the insurance salesman informed you would give you annual payments for your lifetime? What if you were 83 years of age? The reasons for the preceding questions are due to the factual case of a client that came to our office.

One of our retiree clients began asking questions about an insurance product that paid annual lifetime payments and earned an unusually high rate of return the first two years. Puzzled by the initiation of the conversation on this topic, I asked her why she was interested in this product. What transpired was a conversation that both shocked and irritated me.

The client’s mother is a widow and 83 years of age. She began to regale me with a story of her mother and a friend attending a free luncheon where they were introduced with a story about “guarantees” and “lifetime income”. Of course, with no understanding of what she was buying, her mother was informed by the salesperson, or she understood him to state the fact, that her money was insured.

We asked the daughter to bring her mother to our office to personally discuss the matter and confirm the facts of the purchased investment. After a few minutes of her mother describing the event and “nice young man” that spoke, she provided a copy of the contract for our review. Quickly I noticed the product came with a 12-year surrender period. Keep in mind, the lady was 83 at date of issue. 

Complicating matters was that she had placed all her liquid cash except for $50,000 in this investment. After our discussion, she was quite upset and acknowledged that she and her friend had made a mistake buying the long-term, illiquid product.

The story doesn’t end with our conversation. Due to the recent purchase of the product, we informed her that she was in her 20-day Free Look Period and that she could cancel the product purchase with proper notice given the insurance company. We assisted her in the cancellation process, and she thanked us for helping her understand the investment more comprehensively.

These types of incidents occur too frequently to the elderly in our communities. Without knowledge of the products in which money may be invested, the elderly are prime targets for unscrupulous salespeople.

I should point out that the person selling the long-term investment to the elderly lady had a proper insurance license and wasn’t a CERTIFIED FINANCIAL PLANNERTM professional. 

The lesson learned is that nothing in life is free. This has been borne out from my father’s teachings when I was a little boy. There is always someone paying the bill for the service or product you supposedly receive for free.

Want to know how the story ended? The elderly lady received her sizeable amount of investment back and was provided a plan for her future that addressed cash flow, estate, and tax matters to empower her to make good decisions. She has a reasonable amount of reserve for potential emergencies and no longer eats free meals offered her by strangers. So, as the storybook always reports, all lived happily ever after.

Investing requires understanding, education, and awareness about the strategies you employ for your future. Don’t invest your money in sophisticated strategies that are incomprehensible. Consistent investing over a period of time in a fully diversified portfolio that is easily monitored and rebalanced gives you greater comfort and confidence in your future. Seek out the advice of a CERTIFIED FINANCIAL PLANNERTM professional to help you understand your investment portfolio. One of my favorite quotes of Abraham Lincoln applies in this situation: “The best way to predict your future is to create it.”

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