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Your Money Team

by with No Comment BUDGETINGBUSINESSDEBTINSURANCEINVESTINGMONEYPERSONAL FINANCERETIREMENT

During speaking engagements, I like to talk about financially successful people and how they are constantly focused on building their respective empires. One of my favorite examples is Beyonce and Jay-Z. This is what most might call a power couple. As a power couple, their time (like most others) is precious, and I’d assume the two of them are really busy. Busy being parents and being moguls. So when do they find the time to become experts in all the various components of financial planning? They don’t! Highly financially successful people (from my research over the years) all do the same thing regarding their financial affairs. They have a group of people they work with to keep their finances on point. This group of people is called the Money Team. 

In my opinion, EVERYONE needs a Money Team! (Yes, that includes me too) This team of professionals is comprised of the following (not in order of importance):

  1. Banking professional
  2. Tax professional
  3. Insurance professional (there are numerous you might need)
  4. Investments professional
  5. Real Estate professional
  6. Attorney (there are numerous you might need)
  7. Financial planner

I’m sure some of you reading this are saying, “I can’t afford to pay all these people.” And that may be the case now, but think about it this way. You are making an investment in these professionals to ensure that your financial house is in proper order. Remember, do you really have the time or want to devote the time to become an expert in all seven of those areas? Some may decide to go the Do-It-Yourself (DIY) route, and that’s perfectly fine. So keep at it as long as you get the results you desire. 

However, experience has taught me that many DIYers tend to lag behind in accomplishing financial goals in the time frames they initially set. Plus, because they don’t work with experts, they sometimes make or have made questionable financial decisions that weren’t in their best interest. Nobody is there to validate the decision(s) in question, so many DIY financial people don’t achieve the financial success they dream about.

When discussing the Money Team with people, one of the first questions most ask is, “Why do I need all these people?” Let me break it down for you, and I’ll tackle each team member’s importance in order.

Banking professional – Banking has changed over the years, and the industry relies heavily on conducting business virtually. However, what hasn’t changed is that people will always need to borrow money. So when you need money, looking good on paper or on the computer is one thing, but having a relationship with a lender could prove highly beneficial for your transaction. If you don’t believe me, ask a business owner who has tried to get a loan from a financial institution with no previous relationship.

Tax professional – Everyone should pay their fair share of taxes and not a cent more. And everyone should make it a point to avoid any issues with the IRS. If you’re a business owner, you should know what you can and can’t do from a tax standpoint based on how your business is structured. If you don’t work with a tax professional, you’re probably paying the government more money than you should. Having a tax professional is critical to your financial success because they pay attention to the tax laws and codes that are constantly changing, be it federal, state, or local. And, you don’t have the time (nor do you plan on making any) to do that kind of research to stay up-to-date with all the taxes changes. 

Insurance professional – There are various types of insurance you might need to consider having during your lifetime: life, disability, health, umbrella, business, and long-term care, just to name a few. This might prompt you to connect with multiple insurance professionals because particular licenses are needed to sell certain types of insurance. Thus, you must make sure the insurance professional is properly licensed. No matter what kind of insurance you’re looking to add, the process should go in this order. With the help of your insurance professional, you (1) determine how much insurance (whatever type it is) you need, then (2) explore the various options based on the need. The process should always follow those steps.

Investments professional – This team member has fallen out of favor (somewhat) because many people feel they can use technology and do their own investing, be it for general purposes or retirement. While I know this to be true, studies have shown that the average person gets better investment returns over the long haul simply because they work with an investment professional. Why? Because this professional will help you not get emotional when it comes to making investment decisions. Just ask yourself, what did you do with your investments back in 2008-2009? Did you run scared and take your money out of the market? Or did you invest more and capitalize on one of the greatest bull market runs, which started in the latter half of 2009? Having someone close to you who can help you make prudent investment decisions is why this person is so important. 

Real Estate professional – Whether you’re looking for your first home, an investment property, or working to build your commercial real estate empire, you will probably need this expert to assist you. The real estate market is like any other market, it will ebb and flow, and at times it’ll be a buyer’s market, and during others, it will be a seller’s market. So it will be easier for you to navigate the market if you have this professional by your side.

Attorney – When it comes to legal matters, you will need assistance from a legal professional. Like the insurance expert, you might find yourself enlisting the services of multiple attorneys depending on your specific need and making sure your attorney is properly licensed. So, for example, if you have an estate planning need and want to make sure your family will be good long after you’re gone, you’ll probably be better served by an estate planning attorney instead of a divorce attorney. 

Financial planner – This member could serve as your team’s quarterback. They aren’t trying to sell you any particular product, but they work with you to give you clarity about your financial situation. Essentially, this team member helps you see your entire financial situation from a 5,000ft view. Plus, as they work through the planning process with you, they will probably ask to coordinate their efforts with your other team members. For example, if your financial planner is having a retirement conversation and trying to figure out if a Pre-tax or a Roth contribution is better within your 401k, they will want to consult with your CPA or accountant. Lastly, you may meet with your financial planner at some agreed-upon frequency, like quarterly, twice a year, or annually. This will ensure that everything is going…as planned. 

The key takeaway here is time. You don’t have enough time in the day to become an expert in everything. Let the experts do their job because their sole purpose is to help you do the heavy lifting. Becoming a financial rockstar isn’t easy when you go at it alone. But, having your Money Team in place will allow you to get back to living life with a lot less stress.

The #BuildWealth Movement® works tirelessly to Disrupt Generational Poverty® for everyone so their kids, kids, kids can live a life of privilege.

you need a planner

You Need A Financial Planner

by with No Comment BUDGETINGBUSINESSINSURANCEINVESTINGMONEYPERSONAL FINANCERETIREMENT

Financial planners were put on this earth for one reason, to help people get and keep their financial houses in order. But so many people avoid financial planners. Why, exactly is that? Are you one of those people who think you’re better off on your own? Perhaps. Are you the person who says you don’t make enough money; therefore, there’s no need for you to meet with one? Or maybe you’re the person who says, “I don’t want someone all up in my business.” Whatever your reason, you should seriously consider having a conversation with a financial planner because the data doesn’t lie! As a society, we are seriously failing at financial planning.

If you have some time, research this piece that the National Association of Personal Financial Advisors published in 2012. The findings are quite disturbing. In that piece, they reference an organization, the National Foundation for Credit Counseling, which conducts an annual consumer financial literacy survey. Take a look at their survey in 2013 and 2014. It should come as no surprise, but the numbers continue to be extremely disappointing year after year. And, if you’re wondering how things are going today, not much has changed. On the flip side, this should encourage any financial planner to continue to reach out to and follow up with their clients, ask those tough questions, and challenge their clients to be better financial stewards.

Financial planning shouldn’t be something that we fear, but something we should embrace. If you are someone who doesn’t have a plan, you need one. If you’re someone who already has a plan, maybe you’re overdue for a review. No matter your situation, having a financial game plan will most certainly guarantee you financial independence (however you define it) at some point in your life. And just like that adage says, if you fail to plan, you plan to fail.

The #BuildWealth Movement® works tirelessly to Disrupt Generational Poverty® for everyone so their kids, kids, kids can live a life of privilege.

up and down

The Ups And Downs of the Market

by with No Comment BUSINESSINVESTINGMONEYPERSONAL FINANCE

Are you afraid of the stock market? If so, hopefully, there is a good reason as to why you are scared. If your reason isn’t one from experience in dealing with the market directly, then that’s a significant problem. Many people have professed that the stock market is a terrifying place simply because the market could be up or down on any given day, which is defined as market volatility. Because of the constant change that plagues the market, many opt to keep money safe, typically in banking-related products or a shoebox at the house. If you are trying to make money work for you over the long-term, then the stock market is where a portion of your money needs to be.

The fear of the stock market, like anything else, stems from a lack of understanding. The first thing you need to understand is that there are two types of market cycles; bear markets and bull markets.

Bear markets: (pessimistic outlook) the stock market is declining, and we tend to see investments losing value. Investors who get into the market during this period tend to ride the investment down and then sell out after significant losses, locking in their losses.

Bull market: (optimistic outlook) the stock market is trending upward, and we see investment gains. Investors see more significant returns, which prompts them to take a more aggressive approach than they’re comfortable doing. People often get into an investment after the biggest gains have been made, and the actual return to the investor may be much smaller than the investment reports.

Typically, investors will shift between being bearish/bullish on the stock market based on factors such as global economic concerns, national economic data, and corporate financial performance.

Knowing the market cycles is helpful, but now you’re probably thinking about one or both questions; When is a good time to get in the market? When is a good time to get out? This would be classified as “market timing”; you’re trying to buy when stocks are at their lowest and sell when they’re at their peak. Historically speaking, the stock market’s best performances (in any given year) come on a handful of days. No investment professional has a crystal ball allowing them to see into the future, so your best bet is to avoid market timing at all costs. Of course, you may run into investment people who claim they can time the market but keep in mind, it’s not sustainable over the long-term.

Here are a few tricks to the investing game that will help you deal with the volatility of the stock market:

  1. Get invested and stay invested. Don’t let short-term market fluctuations drive your long-term strategy. As a reminder, you should invest in the long-term and not try to “time” the market.
  2. Consider asset allocation; this is an investment strategy that involves spreading your money across the major investment types, like stocks (equities), bonds (fixed income), cash, and equivalents.
  3. Utilize dollar-cost averaging; this strategy involves investing the same amount of money into your investment, regardless of the market is up or down. This allows you to buy more shares when prices are lower and fewer when prices are high. Over time, this results in you lowering the average cost of your shares.
  4. Re-evaluate your attitude toward risk; it’s important to do this as you go through the various stages in your life.

Hopefully, this will help rid you of some of that fear about the stock market. Also, there are PLENTY of financial services professionals who can help you determine the best investment approach for your situation. And if you opt not to work with a professional, there are countless resources for the do-it-yourself investor.

I wish you all the best, my fellow investor!

The #BuildWealth Movement® works tirelessly to Disrupt Generational Poverty® for everyone so their kids, kids, kids can live a life of privilege.

LI faq

Life Insurance FAQ

by with No Comment BUSINESSINSURANCEMONEYPERSONAL FINANCE

Life insurance is an extremely important product that should be a part of EVERYONE’S #buildwealth plan. Here are some common frequently asked questions as it relates to life insurance.

How much life insurance should I own?

There is no single right answer! Some experts will recommend that you have an amount that is equal to 6 – 10 times your annual gross salary. Others say you should opt to have 2 times your annual gross salary. Coverage amounts are individual and certainly not “one size fits all.” The really nail down how much, it’s best that you meet with a financial professional and complete a personal needs analysis.

When should I review my current coverage?

Your situation has probably changed since you first purchased your life insurance policy. If something were to happen to you today, would your family have enough coverage? Generally, it’s recommended that you meet with your financial professional once a year, however, if you have done any of the following since you purchased your policy, you should review your coverage as soon as possible:

·        Purchased a home

·        Had a child

·        Married, divorced or become widowed

·        Changed jobs

·        Taken out a large loan

·        Started a retirement or college fund

·        Started your own business

·        Began caring for an elderly relative

I already own life insurance, should I purchase life insurance on my spouse?

If your spouse contributes to the family’s annual income, then he or she should have adequate life insurance coverage to help replace his or her income in the event of their death. If you spouse does not earn an income, life insurance can still play an important role in helping to pay for valuable services he or she provides; for example, providing child care, elder care, maintaining the home and running the household. Make sure to meet with a financial professional, who can help you determine the proper amount via a personal needs analysis.

Should I purchase life insurance on my child?

Some people scoff at the idea of purchasing a policy on their child but there are a few reasons you may want to consider it:

1.      You can generally purchase life insurance at the lowest possible premium. If your child were to purchase the same amount of coverage when he or she becomes an adult, the annual cost would generally be much higher

2.      You can help ensure that he or she has life insurance protection for life. If the child develops health problems as an adult, he or she could become uninsurable and may not be able to obtain life insurance coverage. In some families, a grandparent purchases a life insurance policy for the child. Also, keep in mind that some states limit the amount of life insurance that can be purchased on minors.

3.      While it’s not a popular option that is widely discussed, some people decide to purchase life insurance on a child to save money for their college education or some other use. Permanent life insurance policies build cash value, and over time, this could grow into a substantial amount of money.

Do I need individual life insurance if I have group life insurance through my job?

YES! Participating in our group life insurance is a good idea because you may be able to receive life insurance at a lower, group rate. If your group coverage is convertible – meaning, when you leave the company you can convert it to an individual policy without evidence of insurability – the individual policy you convert will generally have high premium cost compared to other policies. If your group coverage ends, you can apply for a new policy, especially if your healthy. Otherwise, you may not qualify or may have to pay higher premiums depending on your age and health status. Group life insurance my not provide an adequate amount of death benefit to meet all of your needs.

Consider supplementing your group policy with an individual policy. An individual policy is one that you own, thus it isn’t tied to your employer and you won’t have to worry about your premiums rising every year. With a n individual policy, you won’t need to wonder whether you still qualify every year or if you will lose your life insurance if you change jobs or get laid off. It’s insurance coverage that stays with you.

The #BuildWealth Movement® works tirelessly to Disrupt Generational Poverty® for everyone so their kids, kids, kids can live a life of privilege.

money personality

Understanding Your Money Personality

by with No Comment BUSINESSMONEYPERSONAL FINANCE

People have different ways of dealing with money-related issues. The characteristics that drive these differences are linked to your unique personality style. Understanding your money personality might be the first step into better managing your financial affairs.

Let’s take a quick dive into the 5 personalities:

1.     Deniers: a denier might say something along the lines of “retirement is just too far away,” and they would be considered your procrastinators. A denier feels strongly that getting their financial house in order will take too much time and effort; thus they tend to be pessimistic in their thinking. A denier usually ends up worse off financially at retirement and, as a group, tend to have less education and fewer financial resources than the general population. As a denier, you will require simple programs/initiatives (like having payroll deduction, so you save money) to motivate you to act in your best interest. Keeping the process simple is what you desire.

2.     Strugglers: a struggler is someone who lives paycheck to paycheck and is prone to a setback if a crisis were to arise. They will deem themselves financially successful if they can save a little bit consistently. An investment program, like dollar-cost averaging, would be suitable for a struggler. With the proper education, planning, and a bit of motivation (from an accountability partner), a struggler can avoid a future crisis.

3.     Impulsives: an impulsive will make a financial decision on a whim. They are well aware that they should have a financial plan and should be saving regularly, but they always have something else to spend their money on first. Since an impulsive can be hot and cold when it comes to their financial decision-making, working with a financial professional and impulsive will need to build a solid upfront relationship, enabling their interactions to flow smoothly.

4.     Cautious Savers: although they are skilled at saving, cautious savers tend to be very careful when investing. They find it easy to save a set amount of money each month but will typically consider conservative investments. Cautious savers are incredibly analytical and meticulous when it comes to all things financial planning related.

5.     Planners: planners are willing to take risks and have the ability to make financial decisions on a gut feeling. However, they have supreme confidence in their financial outlook because they have a well-defined saving/investing plan. Planners are extremely goal-oriented, which drives them to monitor how much they are saving/investing regularly.

No matter which category you fall into, everyone needs to have a financial plan. Many people look to friends, family, and co-workers and want to mimic what they are doing, but that’s not always a great course of action. Understanding your money personality will enable you to customize your plan to fit your needs.

The #BuildWealth Movement® works tirelessly to Disrupt Generational Poverty® for everyone so their kids, kids, kids can live a life of privilege.

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Wealth Building Strategies Your Advisor Didn’t Share With You

by with One Comment BUSINESSINSURANCEMONEYPERSONAL FINANCERETIREMENT

Many people don’t know (and probably don’t care) that September is Life Insurance Awareness Month. It’s the one month out of the year that life insurance gets its time in the sun. I want to share some alternate uses for life insurance that many advisors never share with their clients to pump up this incredible product.

1. The Roth Alternative 

The “Roth” IRA was created back in 1997, and it was set up to provide an individual with tax-free money during their retirement years. Other employer-sponsored retirement plans (401k, 403b, 457b, etc.) also adopted the Roth feature. Currently, if you have an IRA or employer-sponsored retirement plan that has “Roth” in front of it, you’re telling the IRS to tax the money that’s currently being contributed into that account. And, if you follow a few simple rules, you can receive your distributions tax-free during retirement.

There were only two problems with the Roth IRA specifically: 1) if you earn too much money, you are not allowed to open one, and 2) the contribution amounts are limited (2020 limits – $6,000 if you’re under age 50, $7,000 if you’re 50 and over). Income limits don’t apply to employer-sponsored plans, and the contribution limits are higher than an IRA, but they still have a cap.

With these problems known, people began to search for another way to invest their money for retirement. They hope to receive tax-free money during their retirement years, and the solution – a properly structured permanent life insurance policy.

2. Create Your Own “Bank”

You will not have to concern yourself with setting up a physical (or online) financial institution for starters. Also, for the sake of keeping things simple, this strategy involves you utilizing a properly structured permanent life insurance policy. Here are the primary reasons people consider creating their own “bank” or what some call the “family bank”:

  1. The cash value usually earns a much better growth rate than any solution you would find at your financial institution (High-yield savings/checking or CD’s).
  2. The growth, as well as distributions you take, are not taxed as long as a small amount of death benefit stays in force until you pass away
  3. When you borrow money, your full cash value continues to grow inside the policy despite any loans you have against the policy

For each of the alternate uses of life insurance I’ve shared with you, I highly recommend that you speak with a financial advisor or insurance agent. These strategies are not typically shared with the general public. Once you connect with a financial advisor or agent, you will now be equipped with some good material to discuss at your next appointment.

The #BuildWealth Movement® works tirelessly to Disrupt Generational Poverty® for everyone so their kids, kids, kids can live a life of privilege.