Category Archives: Thoughts

Why your teachers thought you were stupid – Part 2

This is a two part article that continues from Part 1 published last week.

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  • Interpersonal intelligence: Are you usually liked naturally by most people almost immediately? Have you been told you have “something” or have “charisma”?  That in itself is a form of intelligence and can in fact be one of the highest paid geniuses.  Do people seem to trust you almost right away, without a good reason?  This means you have a magnetic personality and might be a great candidate to sell goods and services that you believe in to others.  Good sales people are not born, they are trained, but if you naturally possess a want to be around people and are genuinely interested in what makes them tick, you might have a leg up in this arena.  Selling can be one of the highest paid, most rewarding careers for the right person.  No matter what you do in life, thank a sales person because nothing in this world happens until something is sold!  I personally have always been blessed with the ability to make friends and maintain those relationships over long period of time.  I made it a point to also study sales techniques and strategies, and combining those two have given me a solid measure of success and income. One caveat with this intelligence: charming people with no true moral compass or sense of right and wrong are sociopaths.  Many a pure sociopath has been super charming and able to bilk people out of money for their own greedy purpose.  Make sure you use your power for good and not evil.  You can make money, help people, and not end up in jail!
  • Intrapersonal intelligence: Are you extremely self aware and have a natural ability to sense things about yourself and others? Can you help others explore and find tune their own inner workings?  Are you particularly spiritual?  Could you help people make big changes in their lives as a coach or mentor of some sort?  There are many people who don’t possess this ability naturally and if you do there is always a big demand for these types of services from those of us who are not gifted in this area.  I enjoy teaching and helping people but don’t believe I have any extra gift in this area.
  • Entrepreneurial intelligence: Do you have the ability to see a need in the marketplace and quickly develop a way to satisfy that need or want?  Do you get excited about the thought of launching your own business enterprise?  Would you like to bring your own (or maybe help others) bring their own goods and services to the market?   Would you like to have equity in your own business venture?  Being an entrepreneur is almost never measured by traditional tests but can be a very high paying and rewarding expertise to possess.  There is a saying that whoever knows “how” can always find a job, the person who knows “why” will almost always be their boss.  I wasn’t naturally born with this form of intelligence but have been able to develop a reasonably good talent for it in my adult years.  Just because you’re not a born natural, doesn’t mean you cannot be a success and even genius at being an Entrepreneur.  It will just require passion and work on your part.
  • Intuitive intelligence: Do you have the ability to forecast and look ahead? Do you have a natural gift to just know what to do and be right most of the time?  Do you have the ability to recognize what problems are within relationships?  Have you always been the peacemaker or go to person when people have troubles? Have you ever heard “blessed are the peacemakers?”  The ability to be intuitive with people’s emotions and know what they really need at their core has tremendous value in the market place.
  • Abstract or conceptual intelligence: This is the kind of brilliance that Einstein had but people didn’t know it for many years! The ability to think and map out things that don’t even exist yet or conceptualize easily what most people can never see in a hundred years.  This would be what is traditionally considered genius but with Einstein (and many other traditional geniuses) their early teachers didn’t see them as geniuses and they struggled with regular class work.  This will be much rarer than the other 9 geniuses but if you possess this kind of ability you could be paid great money to think light years ahead for society.  I can make no claim at all to this kind of intelligence. Can you?

Decide what areas you naturally possess gifts in and play to those strengths and stop working on your total weak areas.  This goes against traditional thinking but traditional thinking gets you traditional results.  If I were to waste my time with intelligence’s I don’t actually possess I can only achieve below average results at best even with much hard work on my part.  What will that actually get me in life? Nothing but frustration!

However, if I work on strengths I more naturally possess I might be able to achieve genius level in one or several areas and let others play to their strengths to help my weakness and vice versa.  Spend time making your natural intelligence’s even better and you will achieve genius level and have a happy and productive life.

Why your teachers thought you were stupid – Part 1

More than test score

When I was in elementary and high school I was a terrible student. I was an average elementary student and beyond a terrible high school student.  There are many factors that contributed to those (mostly me as the only factor that really mattered) results that aren’t important to this discussion.

I recall taking standardized tests that were truly designed to put all of us into a few groups and classifications.  I believe most of this organizing is done with our best interests at heart but some are also done for the ease and convenience of the teachers and staff.  If you’re classified as a dope early on you seem to be put into classes with other dopes.  While this is necessary to keep students in classes with people who are at similar levels in their academics, it is dream crushing to most students in the “dope” classes.  It can also be fools gold for those students in the “smart” classes.

What teachers and administrators never tell you (because they can’t tell you what they don’t know) are that there are at least 10 areas of intelligence and only a couple can be determined by school and standardized tests.  If you’re diligent, a straightforward thinker, listen reasonably well, have a decent memory you should do well in traditional school.  If you aren’t particular good in some or all of those areas you can be made to feel stupid or inadequate.

Howard Gardner of Harvard University said there were 7 areas of intelligence and only a couple of areas were part of traditional education and tracked by schools.  Since that study, 3 more areas of intelligence have been identified by leading researchers in human development.  We will name them in a minute and spend time on each one is subsequent articles.

However, before we get into that it’s important to equip parents, children, and teachers (when possible) to understand that there are many talents children posses or can acquire in many areas that aren’t on the educational systems radar.  Children should be encouraged to do their best in the traditional world of studies but even more importantly they should be assisted in finding their other intelligence’s (we all have more than just one) and time and effort be given to those areas so they might achieve “genius” levels in a couple of the intelligence’s.

As a young boy I was always disappointed that I never achieved extraordinary grades as many of my friends and classmates achieved.  Many achieved these grades with seeming ease and others worked diligently to pull great grades.  I was always the classic C student and often less than a C student.  This meant I spent many years feeling less than my class mates in the intelligence department and many of my teachers were alright with me understanding my place (or their place for me) in the world.

I remember being 13 years old and taking a standardized test and at the end the test suggested 3 areas that I would be suited to pursue and I recall not being thrilled with any of the 3 as all were relatively low paying and none were anything near prestigious.  This was disappointing and at such a young age it could have shot my confidence straight to hell.

Keep this in mind; always remember the success of the person telling you that you probably won’t amount to much and not to get your hopes up.  That person will always be low on the success scale themselves.  How do I know that?  It’s simple, people who are positive about themselves and others would never presume to tell someone that they don’t measure up and to prepare for a future of struggle and being unfulfilled.  Only unsuccessful people would think they have the market cornered on possibilities and attempt to put clamps on your future and ability.

Successful teachers and school administrators (not necessarily financially successful because those jobs are only going to pay so much, but rather successful with thriving students and adoring parents) who are great at what they do will certainly discuss the academic results with their students but always in an uplifting possibility driven conversation.

If people in a non teaching capacity are telling you how to be successful always be careful if you accept their advice. Are they successful in their own right?  Should you be taking advice from them at all or in any capacity?  Were they at one time successful but not as much now?  What could you learn from their mistakes?  Always decide the source of the feedback you’ve been given to see if it has any legitimacy.

Here are 5 of the 10 areas of knowledge and potential genius: (I will give you my assessment of my own ability in these areas and I hope you will do the same for yourself)

  • Math skills (ease with numbers in engineering, problem solving, or with money math including percentages and pro formas and other projections and planning). In my own case I failed many traditional math classes but yet now am considered an expert in money math and financial strategies. Most teachers told me to stay away from any kind of math. This would have been a multi-million dollar mistake for me, how about for you?  My results changed with numbers once I found areas that excited my mind and I could then see how these numbers talents could help me down my own path of life.
  • Verbal skills: This must be broken down into two categories:
  1. Traditional ability to spell, dissect, place, and copyright the written language
  2. The ability to speak and present the written word but in verbal form for presentations. You might be lousy with the written word but very talented at speaking and presenting.  I am above average with the written word and very good at presenting from a platform and training and selling. You? In school you get a huge dose of topic A and almost none of topic B which is a shame because B pays much better.
  • Physical: The ability to be fleet of foot, coordinated, strong, and work diligently at your physicality. While it is true we are all born with certain physical gifts (or not born) those gifts can be made infinitely stronger with diligent practice. I was born coordinated and a decent athlete but never worked on any area diligently enough to go above a moderate level  of success beyond what I was born with at the beginning
  • Musical: The ability to sing, dance, arrange music, write music, or even produce music for others is an area given little attention in traditional education.  Many are born with a natural gift for all or some of the above and other learn how to be experts with many hours of instruction and practice.  I love all kinds of music but don’t know the first thing on how to create it or produce a show of music and or dance. How about you?
  • Vision and space: Do you have a natural talent to look at a space and envision what that space could be either on a small or large scale? To know how things fit into certain spaces?  Can you just look at a space or a piece of land and get a great vision of what its highest and best use could be and how to make it happen?  People will pay big money for people who are talented at this and very few have this gift.  I myself am a total incompetent at this and always hire people who have this gift to give me the physical vision of a certain space.

 

Tune into the next article when we cover the other 5 categories of potential genius and how to develop each area in which you have a gift.

Black Friday = Early Retirement?

BlackFriday

Here comes the flood of sale advertising; from black Friday sales (which has now morphed into Thanksgiving day) all the way to Christmas Eve there will be loads of “money saving” opportunities. Then there will be the first of the year “lowest prices of the year” sales on everything from soaps to automobiles.

The question you need to ask yourself is, are you a “saver” or a “wealth builder”? There is a huge difference because most “savers” die broke and “wealth builders” die wealthy and live a wealthier lifestyle, especially in later years. So this holiday season and for 2016 try this little trick to get ahead and be a “wealth builder”.

When you are shopping for bargains this holiday season on gifts, food, wrapping paper, etc. save as much money as you can off of normal retail. Do this by shopping as wisely as time will permit either online or at some of the special sales events by retailers. So let’s assume you would have spent $1,000 on average this holiday season on gifts and holiday extras like meals and wrapping paper. According to the November 2015 Gallup poll the average American spends $830 dollars just on gifts so the $1,000 is very realistic when you factor in food, decorations and wrapping paper.

Now assume you are a good shopper and you are able to save $300.00 off of your total retail bill of $1,000. That is fantastic but what happened to the $300.00 you saved or did not spend? For most of us it stayed in our checking account and we spent it on other items that were “non holiday” items. So the goal is not just to save money but to use those savings to create wealth. We only will accomplish this goal by focusing cash flow and getting it out of the spending account once it is saved. If you don’t do this the money is not “saved” contrary to popular belief but it’s just spent on something else.

Let’s use technology to our advantage when it comes to cash flow. First of all make sure you have a checking and a savings account at the same bank. Then pay for your items and run your life out of your checking account. Get set up for online banking and if possible mobile banking on your smart phone. Now you just have to do a little fourth grade math twice per week. Keep track of every item you buy on sale or use a coupon for and make a note of its retail or close to retail price. Then add up what you actually paid versus what you would have paid without the discount. The difference goes into your “wealth account” which is your savings account. This whole process will take no more than 10 to 15 minutes twice per week and does not even require a trip to the bank. So during the week you were going to spend $500.00 anyway on different items but you got discounts or used coupons and got that bill down to $400.00. Now take the wealth step and go on your mobile banking application and move that $100.00 savings over to your “savings account” and have it start to build wealth for your future. You pull out your smart phone and do a 15 second transfer from your checking to your savings account and without breaking a sweat or missing the money you are taking the first steps on creating more wealth.

In the Christmas example above that $300.00 savings is put away and generates even a 6% compounded rate of return will turn into almost $1,000 in 20 years if it is first put away and then put somewhere where it will grow. So if this is done for one year faithfully and you are able to “save” $5,000 and move it over to your savings and then invest it at the 6% rate of return you will have an extra $16,500 in 20 years for your retirement savings. Now do this every year and get better at it and you will have saved hundreds of thousands of dollars for your retirement years because you focused your savings. You’re not just a “saver” like every other shopper out there you are a “Wealth Creator”!

So next time you get a discount on something make sure you pay yourself the difference and you will very quickly establish a savings account and fund your retirement savings with tens or hundreds of thousands of extra dollars for you and your family. Now make this a truly Happy Thanksgiving, Merry Christmas and Wonderful Holiday Season!

Giving Yourself a Pay Raise

The way to get a substantial pay raise in 2015 is to focus on your net income — not your gross income — by reducing your income tax liability.

Small Business
The first step is to understand how the tax system works. The current system is set up to benefit business owners at the expense of salaried or hourly employees. The only d eductions the average family receives are for having children and interest and other expenses incurred for home-ownership.

On the other hand, small business owners receives dozens of legal deductions, with many personal expenses recategorized as a business purpose. For example, automobiles used for personal use are not deductible in any way (except for moving, medical and charity miles) — but the part of the automobile use for your small business becomes a legitimate deduction. Say you drive 30,000 miles a way (yes, that’s a lot), and 15,000 were used for business. You could write off half of the expenses on the car. Most people use the government’s mileage calculation — in 2014, 56 cents per mile — meaning $8,400 of expenses deducted off of the business gross income.

What If I Don’t Have a Small Business?

Start one immediately and have the intent to make a profit. Many things then may be deductible, such as:

  • Automobiles.
  • Meals and entertainment.
  • Business trips and travel.
  • Catering.
  • Salaries paid to qualifying children.
  • Medical expenses.
  • Small business equipment.
  • Utilities used in conjunction with running a business even if using your home as place of business.

Be warned: If your intent is just to create tax deductions — and you have no real intent to transact business or try to make a profit — then you are creating fraud.

You don’t need to rent office space and incur thousands of dollars of expenses for your new venture. Your venture could be started at your kitchen table on a shoestring. Think of all the legendary businesses that started out this way.

Be Like Dell or Gates

Michael Dell started Dell computers out of his dorm room, and Bill Gates started Microsoft (MSFT) from his parents’ garage. Millions of other businesses started this way, creating billions of dollars in salaries and benefits for employees and profits for the business owners. This is why the tax system is set up to benefit small business — which can create jobs and wealth. Some sample businesses that could be launched on a shoestring:

  • Consulting on an area where you have expertise.
  • Internet sales and marketing. You can have an Internet store running in a few hours.
  • Network marketing companies. Gone are the days of ordering loads of stuff and trying to resell to friends and family members. Most companies handle all the shipping and order taking themselves and ship directly (assuming there is a physical product for sale) to your customer.
  • Being a referral agent for an existing business. Many businesses will be happy to pay you a referral commission if you send them business. Depending on the type of business, some licensing may be required.

Nobody will ever care more about your money than you so find a tax preparer/ accountant who understands these concepts who you can work with for years to come.

Earn Extra Money Renting Out Your Stocks

Stocks

Many investors rent out their stocks every month to generate potentially larger returns. Of course, when they do that, they don’t call it renting: The term they use is a “covered call.” That’s when you sell an option to another investor to buy your stock at an agreed-upon figure, called a strike price.

Why would you rent your stock? Let’s consider a hypothetical example: Maybe you bought 1,000 shares of a company some time ago for $18, and the stock has performed nicely, but now seems to be stuck in a range, hovering around its current price of $23. You don’t mind owning the stock. But it’s not doing much.

A bullish investor could pay $23,000 to buy the shares from you on the open market. Or he could buy 10 call options for $2 per share, or $2,000 total investment. Each call option gives the right but not the obligation to buy 100 shares of the stock by a certain date at a specific price. Only some stocks are optionable, via the Chicago Board of Options Exchange.

As Time Goes By

The value of those call options will generally rise and fall with the value of the stock. So if that stock hits $27, the investor can use the option and buy all the stock or can just sell the option without ever owning the stock. So if that investor bought October $25 calls for $2, they could now be worth $3.50 each, or $3,500. That’s a nice profit of $1,500 on a $2,000 investment. (This example excludes commissions and the difference between the bid and the ask price. And yes, the valuation of options is complicated.)

But remember, every day that passes toward the option’s expiration day means these options become worth a little less money. If that stock goes down, the options become worthless, and the total investment of $2,000 could be lost.

If the stock rises to the strike price of $25 or higher, you will probably be called, which means you have to sell your stock at $25, which is not terrible because you bought it for $18 — plus you received $2,000 for the option. If that stock does not make it to $25, then you keep the $2,000 and the stock.

You could sell the next month’s call option at $25 for maybe another $2,000 — or sell a call further into the future for more money. This could be a good strategy if you are long (meaning you already own it). But it might not be optimal. After all, if you bought the stock at $18 and think it’s heading toward $40, then it would not be advisable to sell it at $25.

Some Other Considerations

  • Stocks that are more volatile have higher options pricing.
  • You must be approved to trade covered calls by your broker. With experience, you can also be approved to deal in advanced option trades.
  • A “covered call” means you have covered your option sell by actually owning the stock before you sold the call. Uncovered calls could be riskier.
  • Selling a covered call is no more risky than owning the individual stock, so it is allowed inside of individual retirement accounts. Buying calls and put options (options bought when you are betting that a stock will go down in value) are riskier and are not allowed with retirement funds.

Never buy a stock just to sell the call. Make sure you like the stock on its own merits, because if you buy it to sell a call, and the stock tanks, you could still lose much of your investment, regardless of the extra you could make on renting it out.

Are you in the Retirement Danger Zone?

retirement sign

A bad investment can be a serious wealth stealer, but as much as it matters how much you lose, it can matter equally when the loss occurs. As you approach or enter your retirement years, declines in the value of your portfolio can be especially devastating.

“Dollar-cost averaging” describes how you can benefit even when the market goes backwards — if you don’t need to withdraw your money anytime soon, and continue to regularly invest when prices are low. Let’s say you invest $500 a month in a mutual fund. When the fund is $15 a share, you’re buying more share than when it’s $20. Then when the market comes back and your fund hopefully goes up, you own more shares, so your gains will be bigger.

However, dollar-cost averaging assumes that you are in the accumulation phase of life and will keep putting in fresh money toward retirement for awhile. It also assumes you have enough time before you’ll need the money to allow your portfolio to rebound from any significant downturns.

If you’re in the distribution phase of life and are taking funds out of that mutual fund, what you run up against is the phenomenon of “reverse dollar cost averaging.” If you are taking out $3,000 a month to help cover your retirement expenses, and you have to sell shares at the lower $15 apiece price, you’ll need to sell more of them, which means you won’t be holding them when they recover. And sales like that can cause you to run out of money quicker.

Enter the Retirement Danger Zone

The retirement danger zone begins when you get within 10 years of your scheduled retirement date, and lasts for the remainder of your life. Any losses you take during this phase can dramatically affect the quality of your later years. Many older people who experienced such pains to their portfolios in 2007 and 2008 found that they couldn’t afford to retire on schedule, or had to go back to work to supplement their income. According to the Federal Reserve, the median net worth for Americans ages 55 to 64 went down approximately 33 percent from 2007 to 2010.

Stock indexes are hitting records again now, and enthusiasm may be causing some people to forget just how fast the market can turn. It is critical for those in the retirement danger zone to begin to reallocate more of their retirement funds toward rock-solid products that remove any risk of market loss. Below are some places you could reallocate money from stock and bond mutual funds to places with much less volatility. The old rule of thumb is that you will sacrifice decent growth to preserve your principal. In many cases, that is true.

  • Savings accounts have a pitiful rate of growth and should be used strictly for a liquid emergency fund. The principal is protected and FDIC-insured.
  • Money market accounts are usually very safe and offer a higher — but still low — growth rate than savings accounts. They are very liquid.
  • Fixed annuities offer better rates than above but are not liquid. Annuities come built in with an early withdrawal penalty that can wipe out modest gains if funds are needed sooner than expected. Don’t confuse a fixed annuity with a variable annuity that tracks the markets and hence are subject to large losses. Variable annuities are not a place for retirement danger zone money.
  • Certificates of deposit offer more interest than savings accounts but take away liquidity. CDs are for defined periods from 30 days to a number of years. The longer you agree to not touch the money, the more interest the bank will pay.
  • Fixed indexed annuities are a hybrid of fixed and variable annuities that will protect your principal in down markets but allow you to participate in a portion of the gains in up markets. You can also buy a lifetime income rider that will assure a certain income for you and your spouse’s lifetime. They are illiquid for the first seven to 10 years, depending on the product. They could be a great place for IRA funds to grow safely.
  • Cash accounts allow people to deposit funds with some life insurance companies on a fixed rate of return that is usually more attractive than what banks offers. When banks are paying 0.5 percent, some of these accounts pay 3 percent. These accounts are generally liquid — but if you withdraw from the account, you must withdraw the entire balance.

How you can avoid being a victim of a Ponzi Scheme

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History has seen countless shams, schemes, thefts and frauds — but how many con artists put their names into the language by their efforts? Charles Ponzi was an Italian con man who became famous (or infamous) in the 1920’s when the pyramid investment scheme he ran collapsed spectacularly. By the time the dust settled, it was clear he’s stolen $20 million from investors — the equivalent of $200 million in today’s dollars.

When the story hit the papers and the size of the scam became clear, Ponzi’s name became mud, and was forever linked to flim-flam schemes. The truth though, is that investment frauds have happened for centuries, and they are still frequent today. The most famous and largest to date was that of Bernie Madoff, who bilked investors over 30 years out of an estimated $65 billion in 2008. It’s estimated that at any given time, there are dozens of active Ponzi schemes that have yet to be exposed.

What It Is

At the heart of every classic Ponzi scheme are two things: an investment with (allegedly) an exceptionally attractive return, and a great story about just why the returns can be so extraordinary. Promissory notes are many times offered at high rates of return — so high that they should set off alarm bells among potential buyers. When an investment promises a guaranteed compounded monthly return, you can almost guarantee you are in trouble. These fraudulent promissory notes are never collateralized with anything of real value.

But the scam then must produce returns as promised for its investors, and usually, they do, for months or even many years — double digit rates of return year after year with no loss. How? With fraud, of course!

In most of these cases there is never any actual investing being done (though in some cases, there are initial attempts at legitimate investment in the short term). Instead, the “profits” come via the old “robbing from Peter to pay Paul” method. New investors’ money goes right back out the door to pay older investors, thus keeping them happily unaware that their original capital is at serious risk. Or rather, some of the money is used to pay returns to investors; much of it goes into the con artists pockets.

The long-term success of such an evil enterprise is highly dependent on the salesmanship of the con artists involved. Still, regardless of how good at selling they are, the reckoning will eventually come when too many investors want their original capital back — not just their dividends and returns. The house of cards can also collapse if too little new money is taken in to pay investors their promised returns. For example, during the financial crisis of 2007 and 2008, people went running for their capital to get them through some tough times, and investors in Bernard Madoff’s funds started trying to divest. He didn’t have nearly enough cash on hand to pay people back, nor the investments to liquidate, and his decades-long scam was exposed.

Despite all the press the Madoff case received, there are still crooks trying to use similar methods to steal your money. New schemes are uncovered every year, and usually after they are exposed, the investors manage to recoup about 5 cents on the dollar of their money. Those who might have been considered lucky enough to have gotten out before the collapse aren’t home free: bankruptcy trustees will go after them in what is called a “clawback“; even charities that received ill-gotten donations from the con artists are subject to having to reimburse of the donations.

One more subtle problem these scammers produce is that fear of them causes many people to shy away from legitimate investment opportunities. But rather than giving in to that fear, get educated instead. Here are some ways to differentiate between legitimate investments and scams.

Signs of a Possible Ponzi Scheme

  • You never receive real collateral for your investments, just promissory notes and statements
  • The rates of return you’re getting seem too good to be true (20 percent annually is generally the low end of these promises but Charles Ponzi promised 50 percent and even 100 percent rates of return)
  • You earn consistent strong returns with no losses, regardless of market behavior. There are legitimate financial products that offer and deliver stable returns with no market risk (such as some annuities) but these are backed by old, valuable companies with many assets on the books. And they don‘t pay those too-good-to-be-true returns.
  • You’re told complicated yet compelling stories about why the returns are so strong. Ponzi himself told the tale of postal reply coupons that could be bought and sold with different currencies producing huge profits
  • If you hear the terms “exclusive private placement,” that can be a red flag that something is amiss.
  • Recognize that new start up ventures are more prone to be frauds than older ventures, but remember that Madoff’s scheme ran for 30 years.

Steps to Take Before You Invest a Dime

  • Do your due diligence by researching the salesperson personally, as well as the company offering the investment. In these days of Google, and with the easy ability to to a criminal background check, you’d be foolish not to check these out. Get an official photo identification of your salesman. Is he really John Smith, or is that an alias?
  • Check with all relevant regulatory authorities and the Better Business Bureau for any complaints or investigations of any kind. These could include the Securities and Exchange Commission, state financial and securities commissioner’s office, along with the Financial Industry Regulatory Authority.
  • Ask what the collateral is for your investment
  • Find out who will be handling the closing of this investment? Are you giving them a check made out to their company? Maybe your attorney should handle all paperwork and work on your behalf to help verify whom you’re dealing with.
  • Referrals and references are important, but not nearly enough for a large investment because the people referring you could be victims of the con and not even know it yet
  • Don’t let greed overcome your good judgment. If your inner alarm bells are going off, listen to them and find another investment

The risk of getting taken a Ponzi scheme is much reduced if you invest with major brokerages and insurance carriers. Working through these kinds of companies doesn’t guarantee a good return, but it does give you the opportunity to make or lose money via above-board investments.

When you deal in private placements, venture capital, and private offerings, you must take extra care and time to evaluate that you are in fact, being offered a legitimate opportunity. There are tremendous amounts of money made and lost in such ventures but the risks are higher, so never put all your hard earned eggs in one basket.

Finally, if you’re going to take a chance and make a higher risk investment, invest only an amount that won’t seriously affect your lifestyle if it’s lost, whether due to the natural vagaries of the markets, or to the scheming of Ponzi’s modern disciples.

Is it too Late to Leave a Nice Estate For Your Family

When my mother entered her 70s, she began focusing more on what she would leave for her kids than her own financial well-being. She was more than fine; she had assets and steady income from two pensions, Social Security and an annuity. If you’re in that phase of life, you may have similar priorities. The question is: Do you know the best ways to increase your estate?

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Most people mistakenly believe that once they stop working, their net worth will shrink as they draw on assets for living expenses. Many people who are still working into their 60s and 70s also believe that it’s too late to add any significant wealth to their estate. Neither of those has to be true — if you have a well-designed plan.

Whole Life Policy

Let’s consider a client who is 64 and plans on working another 10 years. He is reallocating some existing assets and putting some extra cash into life insurance. We are not talking about an end-of-life policy sold by the truckloads by TV personalities with a $10,000 payout to cover funeral expenses. This might be a good call if you have very little in assets and worry about your kids paying for your funeral. This client has some resources, so we could do something a little more creative.

He elected to fund a whole life policy with $25,000 a year for eight years for a total of $200,000. His starting death benefit is $310,000. If he dies in the next eight years, his family would receive $310,000 to $508,000, depending on when that happens. If he reaches 72, he will have the entire $200,000 that he put into the policy over those eight years back in the form of cash value in the policy. He is free to take loans and disbursements, or just let the money sit and grow during the rest of his lifetime.

Should he reach 85, he would have more than $376,000 of cash value in the policy — even though he has only paid in $200,000 into it. Upon his death, his family will receive more than $470,000 of tax-free cash. He will more than double his estate by simply reallocating assets and letting tax-free compounding and guarantees go to work. Meanwhile, he can access the cash he is funding the policy with. If he does, he will lower the death benefit, but he has no need in the foreseeable future.

Fixed Indexed Annuity

Another client, who is 70, had concerns about leaving money behind to benefit a child with a mental handicap. The first step was finding a rock-solid trustee to make sure any money benefits the child after the death. Since the client was 70, the cost of life insurance was prohibitive.

The client had put away $300,000 for the child. The last market downturn had cost $130,000, but most of those losses have been recouped.

The client was very clear on wanting no market risk and elected to go with a fixed indexed annuity with a death benefit rider. This rider guarantees that the $300,000 will never decrease in value and will increase at a minimum of 4 percent — plus any indexed market gains. The least average growth rate combined with the 4 percent percent guarantee means that if the client dies in 10 years, the client will leave behind more than $650,000 in cash. If the client lives only five more years, annuity will leave behind $488,000.

A fixed indexed annuity can also have a lifetime income rider that guarantees you income no matter how long you live and even if the underlying cash goes to zero from income withdrawals. The National Association of Fixed Annuities has more information about how these products work.

 

Image Credit iStockPhoto -by nanita

From Employee to Entrepreneur – What You Need to Know

Do you long for more independence or wealth? Maybe you should start your own business.

StartUp

A successful business can open up opportunities, options and freedom like very few jobs can offer. Starting a business will take time and require you to re-examine your priorities. The only thing we all have the same amount of is hours in the day. High-income business owners use their 24-hour allotment differently than employees.

Small businesses are a huge factor in the growth of the U.S. economy. True, the recession hit wannabe entrepreneurs hard. According to the U.S. Small Business Administration, the rate of new start-ups went down 12 percent from 2007 to 2010.

Getting the Money

Most businesses are started with a large investment — made with owner equity, borrowed funds or both — in goods, space, equipment, labor, marketing and other factors.

When you think of borrowing money, banks of course come to mind. Find out what banks specialize in your type of business. Network with others in your industry and find out who is helping them with financing. To get a loan, be prepared with a business plan, personal financial statement, an explanation of your experience in this type of venture, additional collateral, relevant industry facts about growth rates and demand and other pertinent information.

Finance companies and venture capital firms might be a better fit. Be very wary of companies wanting large upfront fees to simply review your application. Files for many small business ventures can be reviewed and underwritten with very little upfront costs other than an appraisal.

The Unique Selling Proposition

The most important part of any business is getting many people interested in what you have to sell. One critical point is a “unique selling proposition” that can separate you from most of your alleged competition. Some famous examples are Domino’s (DPZ) “Fresh, hot pizza delivered to your door in 30 minutes or less or it’s free” and Subway’s promotion of healthy subs with its Jared weight loss campaign.

A USP should quickly tell prospects what’s in it for them, and it should be used in all of your marketing messages. The USP is not necessarily a slogan but could be a mission. One of mine is helping families all over the country create tax-free generational wealth. It is simple and to the point, and many prospects want to know more.

Potential Customers Are Online

Thanks to the Internet, you have a worldwide marketplace at your fingertips. But how do you get just a tiny fraction of the billions of people online to check you out and do business with you?

A website is an absolute to be taken seriously. A website needs to be “sticky” (meaning the content urges people to stick around) and should generate leads by giving away something of quality. All prospects need do is to give their name and email address to get this free item. Most of your leads are not ready to do business with you right away, but if cultivated inexpensively over time via email and occasional snail mail, they can be worth a fortune to your business.

Internet marketing can generate leads to a targeted group of people. Google (GOOG) AdWords and Facebook (FB) marketing can be quite successful for entrepreneurs who take the time to understand how they work.

To start a successful business, spend time researching with the U.S. Small Business Association and elsewhere. Spend money on business training. Make it a priority to make your dreams of business ownership and financial possibilities come true.

Wealth Without Stocks! Why haven’t I heard of this before?

The indoctrination of the stock market is most powerful

Turn on your television, your phone, your computer, and any other device you care to name and you will almost certainly be greeted by the day’s stock averages such as the Dow Jones, NASDAQ, and S&P 500, among others. You will be instantly updated as to the direction of the market. There are entire television channels that are on 24 hours a day and 7 days a week that do nothing but report on the stock market; such as CNBC. How boring to have to follow those for hours every day.

When that kind of media blitz has been happening now for generations it is small wonder why people are unaware that they can, in fact, create much wealth even without stocks or mutual funds. This philosophy is NOT about being anti-stock market; there is certainly a place in every wealth plan for stocks or funds somewhere along an individual’s stages of wealth. The problem is that the vast majority of people have no idea of the many other ways that are available to grow and protect wealth. When me or my teammates and staff work with our clients from all over the country they are always fascinated when we start to discuss many of the alternative options to grow and protect wealth.

bags of money
Most of the topics we will cover in future posts are not only virtually unknown to most of the world but when used properly they can be extremely powerful. I am so excited to put all these wealth vehicles in one place that I can’t wait to begin to put this powerful information in your hands. We are going to cover debt reduction strategies, creative real estate strategies, private pension and self-directed IRA strategies, just to name a few.

We talked earlier a little bit about why the stock market is such a major force in almost every investor’s life but there is also the fact that you don’t need any knowledge to put your money into the market. Most Americans simply select what kind of investor they are; which will include aggressive, moderate, and conservative (Translation is how much money you can afford to lose). Just like that, they are signed up for their employers 401k, which will be their main retirement savings and investing plan for the rest of their lives. More than 80% admit to really having no clue what they signed up for to any great degree and certainly no knowledge of how their money was being invested. They just get their investing amount taken out of every check and let it ride!

The good news with that philosophy is that you don’t need any extra knowledge; the bad news is that you are making one of the biggest financial decisions in your life blind. You are investing (not saving, in most cases) money and just blowing all of your income. Although this is far from perfect, it is better than not doing anything at all. It’s fast, easy, and painless to get started funding your future. So you don’t have to be a financial expert to begin to accumulate wealth. That system is hands off from you and will allow you to focus on other things that are important in your life. The money is given to Wall Street (most of the time) and invested through mutual funds into many different kinds of stocks. However, that system also comes with enormous costs in the form of market losses and huge opportunity costs that we will talk about more in an upcoming articles.

The wealth without stocks philosophy is not that simple (it is pretty easy but not that simple) and will require you to obtain some niche knowledge to take advantage of the markets that are available to you in your quest to build wealth. If you are reading this than I am going to assume that you are the kind of person who is willing to shut off the television to further their own education for even one hour per night. You are willing to sacrifice time on Facebook® and every other social media time suck that are available to us. If that is a true statement than you will have the opportunity to grow and protect wealth at an accelerated rate that should far outpace your colleagues who have bought into the old financial plan described earlier. I want to congratulate you for being one of the few that actually will take the time to design their finances and secure an abundant future.

You are about to be launched into a secretive world (in comparison to the stock market and mutual fund world) that will make simple sense to you. Think of these articles like your own personal wealth buffet and you are free to choose whatever is to your liking and leave the other strategies on the table untouched. However, what will happen for many of you is that you will implement one of two of the strategies and then come back to the well of knowledge to see what else might be a fit for your goals. Just because it is not a fit for you today doesn’t mean it won’t be a fit for you tomorrow.

Just be open-minded and ready to learn!

All the best to you,
John Jamieson