Wise Money Tools

[00:00:22] Hi, everyone, welcome to another wealthy and wise Wednesday. I hope you've had a good week this week, hope everything is going well for you. You know I got a thinking here today, I almost say the same intro every time, so if you are listening to two or three podcast in a row, I am always asking you how your week went and it might be the same day, so I am trying to curb that a little bit. So I am always looking for the safe side of things, you know when I think about the wealth tree and how that works and making sure that our money is safe first and then we built up a big stockpile of it, I am always trying to compare what is really happening inside the safe investment to you know obviously we want to make sure we are getting the biggest bang out of our safe money as well and when we think of safety, a lot of times our mind goes to those commercials. [00:01:23] Right now, there is just a ton of them on TV, seems to see one or two every time I turn it on and the safety is always built around gold. I can't remember the actor name. William [00:01:37] I think his name, you know he is always talking about taking money and buying gold, so and I think in history, people have thought of gold as a safe haven so to speak and of course as you know if you have listen to my videos and podcast, we like building high cash value, life insurance policy for our safe, accessible capital. So I got to thinking how this might look, I went back to 1872 and the price of one ounce of gold at the time in 1872 is 23bucks. [00:02:21] Okay, so if you have a 100 dollars, you basically will just call five ounces of gold. You could buy 5 ounces a gold for 100 bucks. Well, today gold is 1335 as of today's podcast. So five ounces' times 1335 dollars is 6675 bucks. So gold grew from a 100 to 6600 hundred. We know that same hundred bucks if it was in a whole life policy would be worth over 244,000 dollars. Just a thousand bucks back then will be worth over 2.4 million and by the way, it did about 1280% better than treasury bonds and it did about 200% more return than the DOW. [00:03:13] Now, you might ask well how can that be. [00:03:17] certainly the DOW has an average that is higher than the rate of return inside of a whole life policy right? [00:03:22] well there is a financial rule when it comes to fluctuating investment and I have said it a million times, actual return does not equal average returns and when there is loses involved, it is never going to be the same. Well as the [00:03:43] in the last 100 years, every has a losing year, well of course it has may years losing years, some very significant. So we know immediately that when an average return is quoted, that it certainly not going to reflect the average return. It is probably one of the biggest, we don't want to call it a lie but it is kind of the biggest lie of wall street is to quote averages rather than actual returns. [00:04:13] So the real financial wonder if you will of whole life is that there has never being a loss and if you couple that with what we like to use, a mutual dividend paying company who has never miss paying a dividend in well over a 100 years, so certainly in that same time period. Now you have annual compounding with no loses and Einstein actually called that the eighth wonder of the world or something like that because with no losses, guarantees are continuing compounding, it is quite a wonder and you just don't have that with a [00:04:56] well gold going back to our gold conversation, you know it is an interesting commodity and again I am sure you heard the commercial as well as I do how gold can protect your asset and if the economy just taint then gold is going to be only thing of value and you know maybe some of that is true. I don't think any of us living today have really lived in a situation where the entire economy collapse and we have to basically start over from scratch and so we basically got this I call them gold bugs, we got this gold bugs that they see gold in the future as some sort of currency replacement that they seem to think that if the US dollar crash, that gold will somehow jump in and be the currency replacement. [00:06:02] Well now, you got to think about that for just a second, gold is a hard tangible asset, right now when we use US currency, we use it often times with a piece of paper called the cheque, we often use it with a credit card and then money exchange is that way but we don't carry around you know cash so to speak and if the US dollars fails that means huge bank building are just basically goes down and so we don't really have any currency. Now that is the point where they feel like gold is going to step in and be the safe haven but do you really see people packing around gold for their transactions. I mean gold is pretty heavy and what would have to happen is [00:06:57] would essentially have to seize and only exist between two people that are in the same location to trade their you know gold for food or whatever it is. [00:07:12] If you want to purchase something for someone and the next State for instance, how are you going to get that gold there, do you drive, will we have airplanes, will we even have cars, how are we going to make that trade, so all trading will be localized almost instantaneously. So gold really becomes a very clumsy solution when or if the dollar would have fail. So I don't know, you know certainly it might be a safe haven to some of your capitals and maybe a money to just make sure you are going to have something because the reality is the most important thing and circumstance like that is food. Anyway, what is always interest to me is that if you call the number of on the gold commercial, 1800 buy gold right? You know the ones, you know these are the one who are advertising that economy could be crashing down and you need to run to gold for the safe haven but this was very interesting to me. [00:08:18] How do you buy gold, what do they accept from you to buy their gold? You got it right, it is the dollar. So they take your dollars and sell you gold and it always make me just feel that little hmm, why would they ever sell gold for the dollar, if the dollars are going to become worthless, I mean wouldn't you be hoarding all the gold you could and not selling out if you really believe that. So it is funny to me that they can tell you how bad things are going to be, how the dollars could collapse but yet, they will still take dollars if you are willing to buy their gold. Well anyway, and alternative for the same two hundred years' period has always being that has kept your money safe, accessible, liquid in the tax advantaged environment. It is guaranteed, it has always been inside of a mutual dividend paying life insurance company. This goes back to your grandparent and your great grandparent who use this kind of vehicle and it is even so much better now because we can over fund and put in more cash than our parent, grandparents, and great grandparents most likely could have. [00:09:46] So things have changed and it is proven to be a very secure safe haven for both good and bad time, through the depression, through recession, through good markets, through bad markets. So it really does become a very good alternative and a safe place to have your safe money, it is also very good bond alternative, a lot of people get out there and they buy bond fund and they buy bond directly and the reality is those could just get beat up like crazy if interest rate starts to go up like the feds would like them to and that is not going to bold well for bond holder. So this becomes a very good place, a very good alternative for those who wants bonds but don't want to take the risk nor the losses if interest rate starts to creep up and it becomes, if we go back to our wealth tree conception where the root asset are what hold up our wealth tree. [00:10:51] That is our strong and stable money, it becomes a very good place to store those rude assets and if we overfund this policy and we pack them full of cash, it also becomes our opportunity fund as well. So anyway just something to think about especially when you see this commercial, you might want to ask yourself, why do they want my cash for their gold, if this all is going to come crashing down and we all do want some sort of safe haven, some place to store our capital and it has just being proven that even better than gold, better than the dough over the last number of decades that whole life can be a really good solid place and especially if we can over fund it and really build that cash quicker. [00:11:41] So alright that is it for this podcast and video, hope you enjoyed it, hope it got your mind thinking and if you have any question as always send them to [email protected], I will answer them as quick as I can and in the meantime you have a great remainder of the weekend, the good weekend and we will see next week and until then take care.

[00:00:20] Well, hi everyone, welcome to another wealthy and wise Wednesday, hope your weeks going well for you, hey, you know I have been thinking about a lot of stuffs especially when it comes to saving and retiring. I am sure you have to especially if you are getting in that range where you might be thinking about retirement here shortly, yeah I read a startling statistics the other day that 75% of the Americans nearing retirement age have less than $30,000 in their accounts. [00:00:57] Now you don't need to be a mathematician or any kind of financial genius to realize that $30,000 probably isn't going to last very long in retirement. It went undecided almost half the meal class in America, half the meal class workers out of that you know about 49% will be poor or near poor in retirement, living on the budget of about $5 a day. I mean that is brutal, you work 40, 50 years, I mean the blood, sweat and tears of all those days of labor and most half of American at retirement are going to live poor or near poor and that is just not right and it doesn't have to be that way. Part of it is the 401k in traditional financial planning really just isn't working, if it was then wouldn't more people be retiring with enough wealth to at least last their lifetime. I mean it just seems to me, if this was just a good system, we will have a lot of people way over the wealth standard. [00:02:16] You know to maintain the standard of living in your old age, in your retirement years, how much do you need to have, what kind of net [00:02:24] do you need to have. There is a good rule of thumb that you need 20 times your annual income. Alright, so pick an easy number, if you are to earn a thousand dollars a year, you are going to need about 2 million dollars beyond what social security is going to play. If you make 75000 a year, you are going to need about a million and a half dollars in a net [00:02:52] tucked away and ready to go to work for you to make sure it last as long as you do. [00:02:58] well how is your progress, I didn't mean to make this Wednesday a wealthy and wise depressing Wednesday, you know there is a lot of people struggling with this, trying to figure out they are going to get there and the problem is we need to figure out things that you really can't figure out like you know do you think you or your spouse would ever be laid off or too sick to work, do you have any idea what day you are going to die. Do you understand this that since the day you started working, you probably should have been put in about 25 years old about 7% of every dollar you earn, you should be putting away and that again is assuming you started at age 25, if you are now 55, you need to be saving 40% of every dollar that you earn just to make sure that you are going to have enough money. [00:04:04] The other thing is you can't withdraw or spend any of those funds if you lost your job, had health problem, got divorced, buy a house, send the kids to college, all these potentially made your expenses that we run into in our lifetime. If you touch that nest egg, then you are tapping into retirement again may not turn out very well. So the optimal is to spend the last cent that you have on the day that you die but unfortunately those are just things we don't know. I remember hearing my dad say something like he wants to have his estate person write the last cheque to the mortuary and then he hopes he bounces. Basically, spend to that last moment and even get short changed and I am like well dad, thank you very much. [00:05:11] Well, you know the 401K has been around for over 30 years now and it has been kind of a preeminent model for retirement, every financial advisor and CPA's you know encouraging you to fund this but it is really failed, it has not lived up to its expectations and I think part of it is we rely too heavily on it, we need to take more responsibility about learning about money, investing, and how to control that end of our life. So many people rely on this, you know money managers or professionals if you will, they waste million dollars in fees and if they just took a little time, they can really produce much better results. You know I heard Jack Hanfield on this guy, he is the one who wrote chicken soup for the soul and he really didn't know more about investing but he knew he needed to learn more about it and one of the first question he asked was you know how much time do you spend the day watching TV? [00:06:24] Well he said, it kind of hit him hard and he wasn't sure but the questioner wasn't going to back down and then you know want to get an answer, so you know let's go through it Jack, what is going on in your day and after, he thought about the news and this and that, he ended coming up with about 3 hours a day that he spent watching TV, if you calculate that out in a year that is about 1100 hours, okay. If we take a [00:06:55] hours each week, which figure 16 hours each day times 7, we get about 112 weekend hours during the week. So if we look at that over a year time, he was basically spending 10 weeks a year, 24 hours just on TV. [00:07:18] Now that is a three hour a day, there is another studies out there that shows that people are you know 5, 7, 8 hours a day, which may add up to 15 or 20 weeks a year just watching TV, being entertained. You know you can get a college master degree studying on your own in about a year's time, if you just took a few minutes out of that TV schedule. Can you imagine the knowledge you would have if you just took 30 minutes, five days a week and cut out just a little bit of TV and you learn more about investing and controlling your financial future and you know what? Let me give you a promise, it is not that hard, in fact, I need to make a list of some really good books that can help you get through this really simply, we will start with my book right? [00:08:18] Because it is just a very simple process on how to build a system that is going to help build your wealth. You know you can look back on life and you may be able to quote your favorite TV programs, the promise you may be living just on social security and crush your fingers that you are not going to need much more money in retirement or you can take a little bit more of an active role. Again, this isn't that hard and secure not only your retirement but your future. Become an early saver, you know I remember starting my first saving account and we were pretty much broke when we first got married. Somehow I pulled together 25 bucks a month and then that turned into 50 and then a 100 and 500 and somehow I just continue to grow from there. That is what can happen if you have more of a saving mentality than a spending and certain a debt mentality. [00:09:26] We talked about that on our last few episodes, especially with what college debt is going to people. That can take you back years and years, so we obviously want to stay out of debts as much as possible. I also promise you that we will do ab episode on the difference between good debt and bad debts, so we have got to get there as well and we are definitely going to get back to talking more about the wealth tree and I think that is an exceptional way to think about money and to build your wealth. So as we go back to that and by the way I think that was episode, might have been episode three or four that if you want to learn more about the wealth tree go back to those episodes and learn more about that because we are going to talk about that in the future, we are going to talk about rude assets and what kind of places we can store money that will be a good safe solid rude asset. [00:10:23] And then the trunk asset and how the equity and businesses and home and all those kind of things playing to that and then finally our investment or our globe where we may be taking a little bit more risk but we are doing it very predictably and again the more Warren Buffet style. Because I mean come on, he is the greatest investor that has potentially ever lived and we have access to his own mind, we have access to what he did and how he did it and he is willing to share it, it is out there for the taking. Yet, what the financial advisors and you know quote on quote money managers and fee based guys do, they don't even do anything near what Warren Buffet teaches and one of the main principle he teaches is you have got to have capital when opportunities come along and unfortunate part is wall street, financial advisors, they just want you to stay invested 24/7, 365 and you never had capitals when the opportunities come along because your capitals is going down with the rollercoaster ride just like everybody else is. [00:11:34] So little things like that where the wealth tree comes into play, where we can store capital and be ready for those opportunities. So anyway, become an early saver, become an educated safer and investor. Again it is not that hard, it is really not that hard and I promise you, we will talk more about some of the books that you could read and more in depth of the strategies that you could implement but take control. You know pull that half hour a day from the TV and listen to a podcast, watch a video, read a book, all those things are going to help you become a more educated and inform investor so that you don't have to rely on the 401k and wall street and all the things that for 30 plus years just haven't been working. [00:12:25] And again, look around, look at your parents, look at your grandparents, that those avenues really build that wealth. Okay, so I knew this was only going to be kind of short and sweet, so that is it for this podcast and video, if you have any questions, always [email protected], we will answer them just as quickly as we can, in the meantime, have a great week, pick up something, read something, watch something, get a little more educated and that is about it, talk to you next week.

We have so many opportunities here in the US. However, debt is crushing our us. We've got to get out of debt and become savers and investors.

The burden of college education is affecting families for decades. Is there an answer? Do you have to go into debt to get a college degree? We talk about this and more on episode 42. Well hey, everyone Dan Thompson with you again on this wealthy and wise Wednesday, glad you can join me, hope you are having a great week. I have been thinking a lot about different topics that we can talk about and for some reason I don't know what happened but started talking to some clients about college tuition, college education for kids and I got to thinking that what a big decision this really is, you know obviously I think it is pretty common to think you want your kids to go to college and obviously that is a good thing for the most part but I don't think that we have really take into account what that really means anymore and I thought that it would be good just to kind of talk about some facts and you know some statistics and maybe come up with some solutions that might help a little bit. [00:01:22] you know first thing we got to realize is just the cost and if there is anything we can do to reduce them at all. I get a little frustrated with the college community because it seems that they are not trying to do much in way of helping kids get through school without this huge debt. So let's just talk about a few things, so what is the average cost across a country, well a public 2 years' college is about $44,000 a year and these are all averages. So what that means is that there is going to be some school more expensive and there is going to be some schools less expensive. Then the average public four-year college in state is ninety-four hundred a year, so let's go back to the two years, so $34,000 a year, you could basically in a two years' college get out of there for less than $7,000. A public four-year college at ninety-four hundred a year, so we are looking at about $40,000 to get through school there. [00:02:40] a public four years' college that is out of state is more than doubles, that gets you about $24000, so this is called twenty-five, four years that is one hundred thousand dollars' college education and a private four years' college is running at about thirty-three thousand a year, so now we are 120, 130 thousand dollars for your education. But all in all, cross the board, average cost, people spending about thirty-four thousand dollars. So again that is the highest and the lowest that community colleges, the more expensive college. You know the most expensive college out there and I believe this figure includes some tuition, some books, supplies, it might even include a room on board, I am not 100% sure. It was just a big number; $61,000 a year goes to Sarah Lawrence college. Now I have heard of a lot of colleges and I can't say I know exactly what Sarah Lawrence college is but it is 61, 62 thousand dollars a year. Quarter million dollars' education, hopefully it is really good. In comparison, MIT is fifty-four thousand a year, Harvard is forty-three thousand a year and both of those, so MIT is fifty-four and Harvard at forty-three and that does not include room, board, book, supplies, and fees. [00:04:23] So again, you are probably going to attach on another ten or fifteen thousand dollars there as well, so and you know not everybody is going to get an MIT and Harvard degree or Sarah Lawrence college degree. I realize that most, I'd say a vast number of college students are somehow in state or close to instate as they probably can be. Let's just see what happens today. So if you have a child today, is you are going to send to school 18 years from now and we are just going to assume a five percent inflation rate, well a five percent inflation rate is a little bit low, it is real because college cost a really closer to seven percent in escalation. So I will throw this graph up there so you kind of see how this works but well if you look at this graph in the middle, it looks like public and state Universities, you can get out of there with about a thirty nine thousand dollar cost. In 18 years, that same thirty-nine thousand is going to turn into ninety-four, almost ninety-five thousand dollars. If we look at the graph just to the graph, a two years' community college and two years' private college, that would look like $77,000 currently but in 18 years, that is about a 186 thousand dollars with just a small inflation rate and then just private college right now, you are looking at about a 134, just a little under a 135 thousand dollars. That is going to grow to over three hundred and twenty-three thousand dollars by the time your child gets to be 18. [00:06:17] so you can see, this is huge, this is big money, these are retirement fund and that is part of this whole battle here is it more important for you to be saving, investing and preparing for your retirement, that could be as long as thirty years or should you be taking that money or saving it for your kids' college educations. You know because having two, three, four kids, you are taking hundreds of hundreds of thousands of dollars. And if the parents don't pay for it then the kids are going to have to pay for it and unfortunately kids who are typically not in a situation where they have a job that is going to be able to handle all those kinds of funds. So what do they do? They go into school debt and kids are going into school debts, I mean just like it is going out in style as they used to say and it is just hanging a chain around our kids neck and then pushing them off the dock and hope they can tread water for a very long time. It is just a burden that have never been put upon kids like it is today, I mean even back when I was younger, not many kids went into debt, somehow, it was either they worked through school, they went to less expensive schools but then the government comes along and they say hey, we are going to guarantee these debts and it is like wow. It is just crazy the amount of debt these kids take on and right now, school debts are 1.4 trillion dollars, just in comparism, that is six hundred and thirty billion dollars more than all the credit card debts out there. And we know how bad credit card debt is but we have 1.4 trillion dollars out there in school debts of which it really can never be bankrupted out of. [00:08:29] the only time it could potentially be forgiven is if you carry it for 20 years. So think about that, you are 25 years old and you carry debt for 20 years and now you are 45 years old and you might be able to get some relief from that debts. The sad part is, it has taken 21 years on average to pay these debts back. That means obviously some are paying it back sooner but some are going longer than 21 years just to get that average. I mean 21 years to pay off a school debt, that is just a burden that is just on you constantly month after month. You know I work with a dentist a while back, he has been practicing for 20 years and he still had a $100,000 in school debts twenty years later. Now obviously some do better than others at eliminating that debt when they get out of school, I mean some of the most successful people I see out there are those who got rid of the debt quickly. I can tell you story after story out of you know whether it is dental school or medical school. Now these guys are really rack up some debts, you can be talking three to four hundred thousand dollars in debt currently to get through medical school and dental school. But the ones that are wise get out of school and they kind of just mhen, they just suck it up and get tough and live like paupers for a while and they get that debt out of the way as quickly as they possibly can and then they become some of the most successful businessmen, whether again medical, dental, attorney, engineer, whatever that might be. [00:10:15] If you can get rid of that debt quickly, you have a chance to be much more successful. The critical thing is when you get out of school, if you do have debt, try to return that just as quickly as you can. There is a counter-arguments out there that says because school debt is a very low interest rate typically then you should retire all that quickly and you should be saving and investing. Well, I have just seen it way too many times, if you carry that debts, the chances are all that burden is just going to become so heavy that it gets really difficult to concentrate and just to always looking at that can be extremely frustrating. So that is just so burdensome to young families, you know they recently did an interview of how I think it was a thousand different college graduates but here is what was interesting, 70% of them were either unemployed or working in nonprofessional jobs just to make ends meet and these jobs, they do not need their college education or their college degrees to get those jobs and 20% of those that were working were already looking for another job. So what I get frustrated at is this promise and this misconception that if you get this degree, you are going to get this great job, you are going to get your debt paid, everything is just going to be you know just perfect. [00:11:46] I remember years ago, not even years ago just a couple years ago, talking with this young girl who is trying to save and put away some money, she had forty two thousand dollars in school debts and her jobs was paying her twenty two thousand dollars a year, so she was making less than two thousand dollars a month and her school payments owes like $400 or something like you know twenty or twenty five percent of her gross income was having to go pay these debts, she was not getting anywhere, just really frustrated, so she was frustrated on many accounts, one that she went into the debts, the other she couldn't find a job that paid enough that helped her retire that debt. And that is what is really hard for me to swallow is when people goes to school for these degrees that are sometimes, they are just degree to get through school, to say you have one, they will have no idea what they are going to do in life or what their interest are and yet they come out with these massive school debts. So what do you do about it? Well, the first thing I think you should do is have an objective, I mean what is your dream job, what do you really want to do and search for that and figure that out and have a reason to go to school, have a reason to get that degree so that you can achieve that particular college trained job. If you can and you probably can, walk through school, pay for it as much as you can, pay as you go. With this little debt as possible. [00:13:33] you will be better off taking six years to get through schools so that you can work through summers and have a part times jobs and take school a little slower if you have to and get rid of it and retire that debt as you go along. Stay in state and maybe at a community college, at least for those first couple of years where they are called classes where they are probably not that meaningful. Apply for grants and scholarships and anywhere you can get some money and like I always told our kids, get good grades right. Good grades help you get a few bucks, we had very success story with colleges but one of our kids did very well when it came to grants and scholarships and that kind of stuff and think he actually came out of college making money. So it can be very beneficial if you could use those things. So try to stay out of debts as you are going through school, that is the big thing because that nooks around your neck for decades to come is so frustrating. [00:14:49] well I will end on this, you know schools are so far behind technology and I don't get it, I mean school should be leading edge, it should be where you are learning the best of the best and the newest from the brightest but they are so far behind time, why is school no online, why isn't possible to jump on a computer and go to school. I mean I know it is, but why is that not pushed more and why isn't it so cheap. I mean you can learn anything right now on the internet. Let's suppose I want to be an astronomer, I can spend an entire time or semester learning right here from my computer because I was interested in astronomy, I want to learn everything about it. There is so much information out there, I could get an astronomy degree on my own right here. Now I realize that it doesn't count for anything because they want you to take their test, they want you to be in their lecture halls on and on and so I blame a lot of these on the school system and how archaic it is but I think they got this hold, I think they got this monopoly and I just don't see it changing because it is too profitable, too much money in it. Putting debt on kids is just awesome for them and it doesn't have to be that way, like I said with technology, we could be as educated as we wanted to be. So I get on this [00:16:30] get little frustrated with this archaic system that we live in and I know there are some good. Don't get me wrong, let's not throw it all out, I know there is time where you really needs to be in class with a group or with a professor of some sort. And those I get, I just think there are so many things we could use technology for and get way ahead of these things. [00:16:57] more importantly, thinking about our kids and the debts and the burden we are putting on them for years and decades to come, I just think that is a crime. So I guess the moral of this podcast and video is just doing everything we can to stay out of the debt trap, to stay out of putting that news and chain around our kids neck for the next number of years. Well that was fun right? Feel free to write to me any questions, email me, you know [email protected]. I will be happy to answer them as quick as I can, this is a good topic, it is a vast topic we can probably do two or three different podcasts on this because there is so much to talk about but I hope at least got you thinking and if you have got kids that is coming up or in school right now a hope that gives you some ideas and maybe had eliminate and avoid some of those debt traps. Alright that is it, well you guys have a great week, I will talk to you next week, take care.

Hi everyone, welcome to another wealthy and wise Wednesday on a day that the market is dropping again, well maybe not the day you actually listen to this or watch this podcast or video but the day that I am recording it, we got another six or seven hundred point drop off, this is supposedly because of China's retaliation to Trump's tariffs on aluminum and things like that we export to them. You know I am just not a fan of tariffs altogether, it basically picks and choose industries that are [00:00:57] or help them. It is just not good for anybody, you know when we have to pay an extra tariff, that is the money that we could have spent somewhere else. So if I am paying a tariff for a particular product an iPhone let's say and I am paying an extra fifty or a hundred or two hundred dollars for that because of the tariff. Well, that is another fifty or two hundred dollars that I could have been spending on some other goods, some other manufacture goods that I could be helping them out. So tariffs really don't help, there is a really good book on this by the way. If you want to take a second, his name is Henry [00:01:35] he wrote this years ago and I remember reading this several years ago, it is called economics in one simple lesson and just read through that and you will kind of get an idea that tariffs really don't help us at all. [00:01:49] but that is what supposedly driving this market down again today because a lot of our manufacturers are going to be punished for the tariffs that China have just now raised and again in retaliation to what Trump is doing. I wish we would just leave the economics alone, somehow the economic will always figure out a way, it will always let the winners be winners and the losers unfortunately be the losers. That is just exactly how the economy should work, we shouldn't be protecting any one company or helping anyone company. It should be by the merits of that company's products or services that help them become successful or not. [00:02:33] anyway that is maybe a little more economic and politically minded than we need to be. But read that book and it gives you a better sense of how the economy works and why tariffs really don't help any of us in the long run. But every time the market drops, I seem to get a few panic emails or phone calls or some kind of indication that people are really nervous and they don't know what to do and I find that when I get those calls or those conversations, it is because of really one thing, these people think they are investors or maybe they really aren't. So let's talk about the three types of, we will call them investors, so we have got traders, speculators, and then what I call real investors. So what does a traders do, how do they take their money and make it work? Well they basically tend to buy and sell very quickly and quickly to one trader from another, might mean minutes, might mean seconds, might be days, might be you know a month or two or even maybe a year but the idea is that they are trading that stock for instance and they mainly go off their charts and momentum and [00:04:03] and moving averages and what they are trying to do is that they are looking at opportunities where something has either gotten cheap for some reason and they can buy it at a quick profit and watch it ride up but they are very trader oriented, meaning they are not looking at the company as a company. They are looking at it as a stock or investment, as something that they can make a quick buck off it. There are lot of traders and there are probably more traders out there now than ever before and what telltale sign as to whether or not this market might be tapping out is how many trading advertisement and enticement do you get on a daily basis. [00:04:59] In fact, I was listening the other day to a radio and this happens in L.A, well actually should say up to L.A 06,07 where trading company were opening oh, let us teach you how to trade. In fact, you can even trade off our money and we will show you how to reach charts and graphs and suddenly you become a trader. Well those are the first people to go when the market crash, because they realize that trading is a momentum play and as long as the momentum in your favor, you are going to usually do okay but momentum goes against you pretty quickly when market starts to sell-off. [00:05:39] the next thing we have here are speculators and this is probably the vast majority of the American public, because the speculator kind of think they are investors, they are not looking to trade, they are not running off with charts and graphs. What they are really doing is that they are typically buying into mutual funds, maybe into stocks or bonds but they are doing it on a regular basis. They don't really know what they are buying, they might be using an advisor who is telling them to buy XYZ fund and they are just investing, speculating and they really don't know what they are buying. So here is a little quiz for you, let's suppose you have a 401K and in that 401K you have got some mutual funds, if I will ask you, number one what mutual funds do you have, that might be a difficult question to answer but if I asked you what stocks or what companies do the mutual funds owned or even the top five or top ten companies that they owned. That would probably be an even more difficult questions to answer. Most people who think they are investors have no idea what they have invested in, they don't know why the mutual funds company bought it, they don't know anything about the fundamentals of the company, they are just simply speculating, that this mutual fund manager, this financial advisor that they know what they are doing and they are going to protect you from harms when the day comes. [00:07:20] and that never happened by the way. In fact, most mutual funds by prospective, in other words by their bye-laws, they have to stay as much as 80, 85, 90% invested at all times no matter what the markets are doing. So you might want to find that out as well. Can your mutual funds, you know sell off and pulling the cash and wait for brighter days? Most of them can't again because you are paying them to invest the money not to sitting cash. So what I call the investing public are really speculators, they are hoping that historically because the market gone up x% that they were to and so they speculate and they put in to these investments that they may or may not go up and the main thing is that they have no idea what the company is that they are buying or why. [00:08:23] Now, contrast that with an investor, what an investor does is they really, they understand the company, they understand the number and they understand the company's revenue and cash flow and frequent cash flow debts, and all of the things that make a company you know successful and not successful by understanding the numbers, they understand the products they sell, they understand the market they sell and they understand who their competition is and they have done a lot of research to make sure that this is a kind of company that they want to own because if you do it as an investor, what just you know one of the greatest investor of all time have said it, you know. Who knows how many times on this podcast and video, but you know Warren Buffet have really given us the model investing formula and the first thing he does is he says well, I want to understand this company, I want to make sure, I know what they are doing, what they selling, I like the product, I feel comfortable with product, I mean that is just first and foremost. He wants to be able to understand the company, if he doesn't understand it, he walks away. They he wants to understand the numbers and their profit, their projections, their revenues and cash flow and all the different things that goes into the numbers then you are an investor. [00:09:43] so here is another example for you, have you ever watched shark tank? So you know shark tank, got those five sharks up there and they are grueling this business owner as to what they do and the numbers and the revenues and all the projections because they want to make sure that before they do any investing that this company have a pretty good chance of being successful and the first thing you will hear often is you know I just don't even like what you are doing, I am out or I don't get it I am out. So they are kind of taking Warren Buffet philosophy right from the start, if they don't like it, don't get it, don't understand it or you know any of their products or services. They are just out immediately, then it is all about the numbers, you know what were your sale last year, what kind of revenue do you project? And then it became a negotiation as to the value of the company and then the price they are willing to pay. That is an investor and I find when this market start dropping like this, the two types of quote, unquote investors that are panicking are typically traders and speculators. Because they don't know why they bought the companies, they don't understand the numbers and they don't know how to live through some sort of sell off and actually take advantage of it and think of it more as an opportunity to buy more of their favorite company that they love because they don't understand or they know what they have even bought into. [00:11:30] so here we go, I got another market drop, how you are even feeling about it, how you are nervous, do you have any idea of what you own, do you know why you owned it, do you know if this company is something that you really like, appreciate, maybe buy, maybe buy their products or is it just something that you let financial advisors and mutual funds buy and you hope that it is something that you like. You know a lot of people out there want to feel good about where they are investing the money, you know you may be very pro-something or very con-something and you may own something that you have a moral hatred towards. Whatever that might be, [00:12:23] buy companies that you know make things with sugar. Alright, well that is because they think sugar is killing off their kids, who knows? Other maybe that is gambling or cigarettes or alcohol or medical devices or whatever that you know maybe you have a moral opposition towards but you might own them. It is always interesting to kind of go through that with people to see what they actually own and say oh my Gosh, I didn't know I was investing in the company like that and maybe from a moral perspective, you don't care what you own as long as it makes money and I am not trying to pass any kind of judgement here, all I am saying is that if there are companies that you are not necessarily wanted to help and support and you own them, you are kind of indirectly helping and supporting them. [00:13:25] so take a look at that but again in this market, when they are dropping off, it is a good time, it is actually a better time to have done this many months ago before this market started dropping to see if you are owning what you think is important to you, what you like and are the numbers making sense. There comes a time with almost any good companies out there that they get overpriced. There is a difference between values and price and you need to understand that, what is the actual value this company and where is the pricing relationship to its value. Is it overpriced, is it underpriced? And again using Warren Buffet philosophy, we want to buy in when it is underpriced. When market is irrational and they sold off way more than they should have. The values up here, the prices down here, we understand the company that makes you a good investor and it is not that hard, I probably make this more complicated than it should be but it is really not that hard, it takes a little bit of understanding, little bit of education but you can literally become a very good investor. [00:14:40] so here we are, market is dropping, how do you feel? Take a quick step back, reevaluate, are you a trader, are you a speculator or are you an investor? And a lot of time when I see investors right now, they are hoarding cash. Warren Buffet has a hundred and five hundred and ten billion dollars in cash right now. He sees no values in this market and he is not buying a whole lot of stuff and that tells me that as an investor, he is being very patient. He is probably going to be the guy who is buying in like crazy if and when this market has a significant drop. So think about that, maybe it is time to be just packing away the capital and putting away enough so that when the time is right, you truly can be a good investor. [00:15:37] Now there is a fourth type of investor that we really are to include in this discussion as well and that is those that just want to get out of traffic. If you recall several weeks ago, I did a podcast and video on getting out of traffic. Wall Street and financial advisor just want you constantly in the middle of traffic with all these oncoming risks of market risk and inflation and interest rate and risk and all the different things and every time you try to get on the sidewalk, they are pushing you back into the middle of the road. Well there are times and this might be I don't know 5, 10 years away from retirement where you just want to be out of traffic, you just want to make sure you have got plenty of assets and that those assets are going to be there when you retire and that those assets can produce some income for you as well and you just want out of traffic, you don't want to take the market risk, you don't necessarily want to be studying the market and figuring out what you should invest in, it is just time for you to kind of take a breather, sit back protect the pile of money that you have got and not worry about it again. And that type of investor is certainly someone that it makes a lot of sense especially when again you are five or ten years from retirement and you want to protect that capital and those are really things where we can help because we have got some great strategies for helping people protect their capital and then produce an income that they really can't outlive. [00:17:22] so if you have some question on that be sure to shoot me an email as well. But you don't always have to be a speculator, you don't always have to be a trader, in fact, you don't even always have to be an investor and you can protect your money, in fact, with some of these thing out there, you can go up with the market and participate on the upside but you never have to take a loss if the market goes down and believe me there is a lot of people who likes that idea right now, especially as they are seeing 401K and IRA and different investments dropping with this market condition. So it is certainly a consideration if you are getting close to retirement or again if you just want out of traffic. So that is it for this week, any other questions, make sure you shot them to [email protected]. Answer them just as quickly as we can, any suggestion on features, podcast and videos, I will be happy to take those suggestions as well. Alright well you have a great week and until next week take care.

Well, hi everyone, welcome to another wealthy and wise Wednesday, glad you could join me today, hope your week is going great in today's episode and video, what I thought I would do is talk about the best way to buy cars and I am going to be jumping on to my screen and showing you my screen here as we go along because I have got this neat load of calculator that I think would give us a lot of better feel for how this works. So what basically the premises and I am going to talk about how paying cash for cars can be an extremely expensive opportunity cost long term. [00:01:10] So you are probably told ever since you are a kid, you know never finance always pay cash if you are listening to the gurus so to speak on the radio. They are always going to tell you to pay cash as if cash has no value. What I want to point out is cash has a tremendous value and capital, cash, we like to call it capital because that is what really gives you an opportunity in life is if you have capital, you have cash. You have heard the term cash is king but when is cash, king? Well, cash is king when everybody else is fleeing and running from a market where you can jump in and take advantage but there is a really interesting dilemma here when it comes to paying for the car. [00:02:00] now let's just put a couple things out there. The first of, I can't really address this in detail, what I am going to do is going to this in much more details in my course that is coming out here in the next couple of weeks but that is going to, we are going to really dissect this and help you understand even more in details but the whole premise is this, a car is a depreciating asset. I mean I always use this analogy that if I had this great investment for the year that was going to cost a $100 today, I guarantee you in 5 years it is going to be worth $50, you know how much do you want to invest. That is what a car is, it is an automatic asset that is going to be depreciating over the next several years but we are always told to pay cash so we can save, save, save pay cash. Save, save, save pay cash. How many times do we do this in our lifetime and that is what I kind of want to show you on this calculator is what that really costing you in terms of future value or future wealth because it is very expensive when we pay cash. [00:03:13] so the other concept that we have talked about before is we finance everything we buy even when we pay cash. We are either paying somebody interest for the use of their money or we are giving up interest when we pay cash and use our money. So obviously the banking system that we teach kind of, is the best of both world, we finance it ourselves so that when we are paying interest, we are ultimately getting that back into our pockets and so we are using our money and just like the bank would in lending and paying back. So let's jump on to this calculator here really quick and let see if I can show you a couple things as to what the real cost of paying cash for cars is. [00:04:04] Alright, so we are on the calculator and this calculator kind of need, we have developed quite a few calculators over the years and this one is the cost of paying cash and again these calculators are going to be part of the course and you will be able to get on them and use them anytime you want. But let's just go through a quick little scenario here, let's say we have got somebody who has been a good saver and they have $75,000. They also in addition to that saves $10,000 a year and because they are very wise saver, when they get increases in their salaries at work or when they get bonuses or if they own their own businesses as their businesses grows, they tend to put in more on that money that is increasing rather than spend it in their lifestyle. So we are just kind of saying we increase our savings by 3% each year. We are going to give a whooping rate of return here, something that is probably not attainable consistently over time but let's just say you get an 8% rate of return on that money. We are going to go out for 30 years and what we are going to do is purchase some cars. [00:05:22] We are first going to save because that is what we have got to do so we are going to save, save then we got cash to pay for the car. So we are going to save for the next 5 years so we are going to say in 5 years, we are going to buy our first car then from that point on, what we are going to do is we are going to buy car every, let's just say every 5 years. Now what is really interesting is when we buy cars, we are thinking of it in terms of one car but how many families have two or three cars right? Which means they are probably replacing old car maybe every two or three years. We are just going to use one car in this example and the new one being bought every year. I am going to use 30000 as the price of the car, we are going to assume we buy something new but if you looked around lately, $30,000 is not buying you, you know the best most luxurious car out there, there are [00:06:18] entry-level value anymore. Well, we would just call it moderate level value, so we are going to pay $30,000 and every 5 years those cars increase in price, so we are just going to say they increase in 3% just to make it easy and I don't know if you are in the sales tax state or not. There are only a few states in the country that aren't, so let's just put in 5% for sales tax, that might be a little low like in the state of California and then of course for Washington and let's see is it Washington and I can't remember the other state don't have a sales tax. Oh it is Oregon, no Washington does, Oregon doesn't. [00:07:06] and let's just say it cost you a $15000 a year for this insurance to insure the car and every time you bought a new car, that insurance has also gone up by 3%. So what does this look like, what is this telling us? Over here, our results so hard to say, you see that three times fast. So the future value of your money if you didn't buy any cars will be 2.4 million dollars so that taking $75000 that you have today adding 10,000 a year plus and then each year increasing that 10,000 by 3% and then getting an 8% rate return. Again we know those are probably some out their number as far as rate of return. But nevertheless you will get the picture here. So you can have 2.4 million dollars had you bought no cars. Now again we kind of live in the society where you are going to need a car here and there but let's see what this does to our wealth. So the [00:08:09] of cost of those cars is $343,000 in other words this is just a pure cost of the cars but the actual account value has dropped from 2.4 million down to 1.4 million. [00:08:26] So basically, those cars ended up costing us $944,000. Now the reason why that is, is because every time we take cash out of our account to go pay for account, what is happening is we are losing the opportunity for that money to earn in this case 8% for us forever. So if I take $30,000 to put it in a vehicle and that $30,000 can never make money for me again. And what that total up to is $944,000 true cost of this cars. [00:09:05] now let's go look at it in details so we can see exactly how this flows. So we are saving and saving and our original 75000 by year five is 177,000 we take out $30,000 for the car and you can see that our last feature value is 33,900 just in that year and as we go along so our year in the cash value after the car purchasing is 143 and then it grows again to 246 and then we take out 34,000 for the next car and now we are down to 241 and you can see how that goes. So again without touching this account, we'd have over 2.4 million dollars because of the cost of the cars were down to 1.459 million. Those true cost of cars cost us 944,000 dollars. So you can see that cash does have a value, paying cash for car may not make the most sense when we start thinking about the opportunity that, that money is going to cost us long term and each car I pay for $30,000 let's say, I know in five or six years is probably going to be worth 15 and so ultimately every time I buy car, I just get further and further behind the wealth that I could have had. [00:10:44] So again, there are ways to combat that and one of the ways to combat that is to create your own banking system to where you are financing the car, you are ripping the world and you are containing that wealth that normally would be lost and bringing it back into your control. So there you have a quick little calculator on the cost of paying cash for cars. So next time somebody says to savings pay cash, you are going to know better, you are going to know you better figure out a better way or this is going to really make a din in your wealth long term. [00:11:21] again we are going to go over this in more details, we are going to have a several different other examples, we are going to show what will happen if you make 6%, 12%, going to show you what happens and how to pay yourself back and if you can even build your wealth further as we go through the course but I kind of want to give you a little taste of this calculator and this calculator is going to be available for those who have our course. Well that is it for this video, this podcast, this episode, hope you enjoyed it, hope it is worthwhile, hope it really opened up your eyes, as always if you have any questions or thoughts coming, [00:11:59] remarks whatever, send them to [email protected]. I am happy to answer them just as quickly as I can and until next week, you have a great week, be productive and be helpful, serve somebody, do some good stuffs out there in the world and will talk to you later. Take care.

Hi everyone, welcome to another wealthy and wise Wednesday, hope you are doing good whether you are listening to the podcast or the video, hello. And today I wanted to talk about this concept that is very prevalent in financial planning world and the concept is called dollar cost averaging and essentially I think it gets misused quite often because dollar cost averaging is different than what most people think. [00:00:59] if you are investing in let's just 401K and each month, you invest in it, that is often referred to as the dollar cost averaging. When in reality it is just investing regularly and it is because you don't have a lump sum or you are not using a lump sum and you are just taking a portion of your income each week and you are investing into a mutual fund or your 401K or whatever that is. Well, that is technically not dollar cost averaging, even though many financial advisers called it that. Again it is just investing regularly kind of have the same effects, sometimes you buy high, sometimes you buy low and it is supposed to average out your purchases. [00:01:48] But true dollar cost averaging is only applicable when you have a lumps sum. Let's just a $100,000 to invest and you want to get it in the stock market but you are wondering oh should I put in the entire sum now or should I put in a little bit here and there and that is truly dollar cost averaging when you decide to spread that out. Let just say you know over a year period of time and let me just give you an example and the real question then becomes does this dollar cost averaging actually works? Because if it does, we want to take advantage of it and if it doesn't we want to avoid it. And again we are talking about having a lump sum, you are maybe you are just retiring and you have now got all these money sitting in the 401K, you want to roll it over into a portfolio or some sort and the question is, do you just dump it all in, maybe you sold the house, you have got this equity that you want to invest now, I mean there is a lot of reasons why you might have a lump sum. [00:03:02] could be just because your business and the income you bring in and you have built up this capital and now you are trying to decide do I jump in all at once or do I spread this thing. Let's look at a couple examples, let's just take Apple since it is a very popular company, let's just take Apple stock. Let's say you have a $120,000 and you are trying to determine if you should just you know dump in a $120,000 into Apple right away or take $10,000 a month for the next 12 months and use the strategy of dollar cost averaging. Okay, well first you have got to understand that, that is really not investing in a nutshell, that is more speculation. [00:03:51] only time investing is investing is when you really understand what you are investing in and why you are investing and you are buying at a lower price than its values. Always kind of referring to the Warren Buffet strategy and that is true value investing but we are going to throw that out the door right now and we are just going to assume you just like Apple stock, which is a good start but you don't know if it is valued high and low and so you are more of a speculator, you just want a $120,000 worth of Apple and the question is do you dump it all in now or put it $10,000 a month. [00:04:34] so let's look at starting out January 2nd, 2008 and what happened in 2008, we all know it is one of the worst years on record where everything just dropped down. So had you drop in a $120,000, January 2nd, 2008 well you would have lost about 56% of your money if you would have just look at it the next year and that is simply because you probably didn't look at value and price and you just jumped in. Now, had he used Dollar Cost Averaging in that situation, so January second, you put in 10000 February second, 10,000, March 2nd 10,000 and so forth. Then you would have only lost only 39%. [00:05:26] so dropping it all in January 2nd, 2008, you lose 56%-dollar cost averaging, you are only losing 39% so it made sense obviously to use dollar cost averaging in that scenario. That is when the market is pretty much losing all through the years. So let's that same experiments if you will, let's just go one year or later where the market has already taken in a hefty dive, prices are down, this by the way is when you should be buying when prices are below value and so it is January 7th, 2009 and now you have got that same choice, am I going a dollar cost average or am I going to dump it in. So here we could have more than double the portfolio value by investing in all at once, while dollar cost averaging returns two times less. [00:06:25] So dollar cost averaging basically does not work very well when we are in an uptrend, when market is moving on while you are buying less and less each month because the market keeps on escalating. We would have been much better off dropping it in all at once. So let's just simulate and investing a $120,000 into SNP500 index, the symbol for this is SPY and let's just say we are going to take again that same 10000 dollars over the next few months and we want to determine whether it is better to invest it all at once or to spread that out every month at $10,000 a month. Well, in the past 27 years, if you took every 12 months' investment in there, the investment within the SNP500 had you just invest it all at once, you return would have been about 8.77%. Using dollar cost averaging over those same period, your return would have neem 4.77 percent. [00:07:36] almost half the return using dollar cost averaging than you would have gotten putting it in a lump sum. Now, there are two reasons for that; one is just simply because a dollar cost averaging in upmarket, you are getting less for your dollars but the other is the drawdown or the low return in money-market or cash. So in other words, if you had a $120,000 you can put that in some sort of money market check in or saving account and that has such a low return that it ends up you know some of that money is getting zero return for the whole year while you are waiting for it to get into the market. Maybe not zero, maybe half a point or who knows, maybe lockout and get a point but anyway the idea is you have got a lot of money sitting there in cash and money market is doing nothing for you. So in the past 27 years, dollar cost averaging really hasn't worked, yet it is one of those things that is preached from the puppet so to speak every day from traditional financial advisers and again I have given a little slack because most of the people that I am working with are just looking to invest on a regular basis because they don't have a lump sum but for the most part those who come in [00:09:05] advisor with a lump sum, dollar cost averaging has proven over the last 27 years to really be a failed concept. [00:09:16] so what we have got to do if we do want a dollar cost averaging, more importantly and this is so much more important to dollar cost averaging, this is just buying when the price is lower than the value and substantially lower. You know Benjamin Grant, Warren Buffet, Charlie [00:09:32] they like values or prices when they are below about 50% of its value, so as you analyze your stock, if you go back to Apple and we look at its cash flow and when we look at its revenue, where it could be in the next 10 years, we will say okay, Apple have a fair value of 100 dollars a share. Well, what Warren Buffet and Benjamin Grant and all these people preach is that you should probably buy that when the price is about 50% lower than its value. So it is 50 dollars this year, what happens when the market becomes irrational and they do, becoming irrational actually within a 10-year period a time. [00:10:17] have a year or two in there where they are irrational and it gives you an opportunity to get in when the prices are below value, that is the most important thing. [00:10:27] because otherwise we are just speculating. If we don't really understand the value of a company and where it could be in 5 or 10, 20 years from now, then we are just speculating, we are just saying, oh I like this phone and I like Apple so I am going to just invest into it. Rather than really analyzing and understanding where a good price point will be. That is the most important thing, if we can determine price against value, that is a good opportunity and that's with anything whether you want to buy real estate, a business, gold, Apple or anything in between, those things have to be evaluated so that you are getting [00:11:11] and the prices below the value. [00:11:14] the second thing is if we are going to sit in cash or capital, if we are going to put it in a storage facility, we would like to do it in a place that give us a better return than a money market or cash or check in or savings or even a bond because all those things are taxable and once great storage place where you can store this money and get an above average return is in the high cash value life insurance because you not only have a tax free growth on that money but you have access to it whenever a market drop and you can take advantage of it. So to really combat this thing, you want to store your money in a facility where you get a better than average return, some tax benefits, access to it, and then when we have an opportunities come along whether it is an individual stock, whether it is real estate, gold, cryptos whatever you love and it has an opportunity there because the price is way below its value then you can get involved in that way. [00:12:33] but you really need to do your research, you really need to understand what your opportunity is, what you are looking for, you are looking to buy a business or some sort of an investment and then taking advantage of dips once you have even got in there, then you have another terminology called averaging down. If I love Apple at a 100 and I can buy it a 50 and I buy that 50 but then it subsequently drop to 30, I have really got to love it, that is even better and I averaged down and I can buy on dips and if it goes to 10 but I still see the fundamentals and the companies still moving forward, then I am even happier now I can even average it down further and so if I have done my homework and I really know what is going on inside that company or that business, then I want to take an advantage when those market even drop or dip further. [00:13:28] so rather than just pre-determined intervals, I am going to put $10,000 in on the second of the month, every month because you are speculating then you know build a strategy that is going to let you store your capital in a nice safe location, you can be very patient and keep building it up, I mean you might go 3, 4, 5 years before you even access that money for opportunities and that is okay. Main thing is, it is getting above rate of return. It is in tax free and liquid environment and you can take advantage. Dollar cost averaging in a nutshell really isn't working, it is a hyped strategy by most financial advisers and it is used incorrectly or I should say the terminology is used incorrectly. Investing regularly is not dollar cost averaging and so when we have a lump sum, we are better off storing that capital until we have opportunity coming along, where price is below value. [00:14:36] how many times can I say that? Well that is the last time I am going to say because we are out of time, we are ending this podcast and video right now, so I hope this was good information for ya, or wasn't too confusing, especially if you are listening in but if you are any questions, always shoot them to [email protected]. I will answer them just as quick as I can and also take advantage of the subscription and make sure you are always stay tuned to the podcast and video. Anytime you want a strategy session reach out as well and we will take it from there. That is it for this week, great to be with you and thanks for tuning in and have a great week and we will talk to you next week. Take care.

Investing in a retirment plan assumes you are going to save money in taxes in the long run, but will you? What are your choices? How do they work? How can you WIN with a retirement plan? [00:00:21] Hi everyone, welcome to another wealthy and wise Wednesday, I hope you are doing great? Welcome to the podcast, welcome to the video whichever you like first, I am probably a little late getting this out today, sorry about that I have had this week where I pushed all these subs to come in and put in a different floor and do a little remodeling at my office and is normal subs go, we ended up getting delayed so I have been pushing, pushing and finally got in the studio here to knock out this podcast and video. I am trying to make this somewhat timely, we are about 4 weeks away from the due dates for taxes, April 15. So right now, as of right now if you are a partnership or S-corp, or a corporation, you got to have your taxes in by tomorrow or at least get an extension in there and then we have got about 4 weeks before our individual returns and LOC done and I wanted to kind of talk about some of the things to get ready to plan for and the big one, [00:01:46] seems to talk about, every CPA seems to encourage and that is some sort of a retirement plan. [00:01:52] rather than going to many different one you could possibly have, there is essentially four that I think most people use; the 401K, IRA and of course the [00:02:06] rate that goes along with that and a 403B. For those of you who don't know the 403B is, this is for nonprofit, it is for government, it is for school teachers, it is basically called a tax-sheltered annuity and 403B is just kind of like 401K for nonprofit. And of course the 401K where you hopefully if you put it in you get some sort of a merge from your employer and then the IRA, that is a self, kind of a voluntary investment on your own with no match, although there is [00:02:54] IRA, probably got to throw that in there because the [00:02:58] IRA is where a, it is called a self-employee pension. Sometimes if you work for a small business, they will set up a [00:03:08] to help fund your IRA. [00:03:13] they all pretty much work the same except for the [00:03:18] and I will jump on that at the end, but the others are tax deferred which means you are going to put money in and you are going to get a tax deferral on that money. That just means you are not going to pay tax today on that money, so if I put in $10000 into a 401K or maybe my wife and I both contributed to an IRA and the equal $10000. That $10000 that we are not taxed on today, eventually we will be taxed. Tax deferral, there is another way to sat tax deferral we say tax postponing because you are just postponing the eventual tax that someone will have to pa at some point along the way. What I want to kind of point out to you today though, there is only one way to win in the retirement plan, you can make the arguments that there are two ways to win but the real way to win in retirement plan is just simply this, you have to put money in at a higher tax bracket that when you take it out. [00:04:32] It is really that simple, if I tax deferred my money and I made 20% tax bracket and 10 years later, I decided to take that money out because I am retiring and I am still in the 20% tax bracket, well I probably didn't win or lose. But if I put that in at a 20% tax bracket and I take it out as a 15% tax bracket then I win. I actually ended up not paying less tax on that money than I would have 10 years ago had I paid the tax then. But if I put the money in and I defer it when I am in its 20% tax bracket and now I eventually take it out at a 22 or 25% tax bracket, well I lose. There was no reason to defer that tax and take it out at a higher rate. [00:05:32] so what I always encourage people to do is kind of look at their situation especially young people, I mean if this is your first job out your college and you are already stuffing money into a 401K, there is a good chance you are in the lowest tax bracket you are ever going to be in and it might make a lot more sense just to get rid of the tax now and then eventually put it in a place where you may never pay tax again. But, sadly you walk into the employer the first day and the HR person grabs you and they signed you up on a 401K and you are in a 15% tax bracket and so to be retiring, maybe not soon, but 40 years later retiring in a 25 or 30% tax bracket. And even though we have got a little tax relieve recently from the current administration, that can change quite quickly and the truth is we still haven't really done anything about the deficit with 20, 30 some say even a 100 trillion dollars in unfunded liabilities were in a situation where taxes just may have to go up over the next 10, 20, 30, 40 years and if that is the case, again you may be in the lowest tax bracket you will ever be in. [00:06:54] so you want to kind of access that. The other thing to look at is where you are at on the corporate ladder or what you plan on doing in business for your work and if you are more of an entry level right but you plan on you know obviously making a lot more money in the future, again it might make sense just to get rid of the tax now rather than defer it at the lowest tax record you may ever be in and then pay it later when you are in the higher tax bracket. Now tax deferral just basically means that someone is going to have to pay the taxes at some point. If you have an IRA for instance and you die, you wife can continue to carry that or your husband whichever way you want to look at that. The spouse can continue to carry that IRA and keep it deferred but sooner or later someone is going to have to pay the taxes. There are some strategies that can be used, multi-generational strategies where you can lower that tax rate and spread out the income over a couple different generations. But someone is going to have to pay some sort of tax sooner or later, that is what tax deferral essentially means. [00:08:13] now the [00:08:13] rate is a little bit different because you actually pay the tax now but all the growth from that point on is not only deferred but it is tax free when you finally take that out. There are some limitation on what you can do there but the idea is you are paying the tax now and then deferring it or actually eliminating it from that point forward. We are finding a lot of people are opting to convert their IRA and even 401Ks that have what are called in-service distributions and converting those to [00:08:55] again, thinking that they might be in the lowest tax bracket that they are going to be for a while and just you know taking advantage of what is happening in the current tax situation 2018, might be a really good year to look at your tax situation and if it has come down at all, maybe converting some of your retirement plan to a [00:09:17] could be a good move. [00:09:20] okay now, there is another theory out there that talks about tax deferral and what it does is it doesn't even look so much on the current tax rate that we are in. In other words, it is not looking oh you are in the 20% tax bracket now, you are going to in an 18% tax bracket when you retire or you are in 25% tax bracket now, you are going to be in a 30% tax bracket when you retire. So those are things to definitely consider and I think that is an overwhelming first consideration before you start plowing a lot of money into retirement plan. But the second one is kind of interesting and what it does is that it uses this theory that today's money, the dollar I have in my mind today is more valuable than that dollar is going to be worth in 10 or 15 or 30 years from now. So it is an inflation kind of scenario where basically says if I can keep that dollar today and let it grow for me, when I look at it, inflation adjusted after tax return. I know that is a mouthful, what they suggest is that you are gaining about 2% return each year because of the fact that, that dollar is becoming less valuable. So you are able to say if you will a more valuable dollar today and then when you pay your tax in the future, you are paying with a less valuable dollar. [00:10:57] it is kind of the same with the mortgage. You know when you look at your mortgage and you think should I pay this off? Well one way to look at it is let's say you wanted to add an extra 100dollars a month to your mortgage, well that $100 today is much valuable and useful today than that same $100is going to be 15 or 20 years from now. So the idea with the mortgage is yeah even though your mortgage might stay the same at $2000 a month, what happen is that you are eventually paying that mortgage with less valuable dollars. So in real terms maybe it feels like $2000 today but 20 years from now that $2000 may have a purchasing power of 15000 or maybe eleven or twelve hundred because the dollar and inflation is helping the dollar lose its value. [00:12:05] I know it gets a little confusing and I don't mean to do that but this theory about tax deferral is just saying that I am going to hold on to my most valuable dollars today and I am not going to pay to tax today and if I defer that and ultimately pay the tax out of less valuable dollars, the calculation you know this theory said that you are going to gain about 2% a year on those dollars. And then pay the tax later with less valuable dollars and that may be true, don't know the answer to that but the idea is that in 35 years, if you took a 35 year lifespan, the value of tax deferral is worth about 55% more. So there you go. Take that for what it's worth. I do like the idea of thinking about your mortgage in those terms because if you want to pay off your mortgage today, again those are the most valuable dollars whereas later, 10 or 15 or 20 years from now, you still got the same mortgage payment but you are paying them with less valuable dollars, so you are actually kind of winning that mortgage game. [00:13:20] the bank anticipates that you are going to refinance or you are going to move or you are going to sell your house for some reason probably within the five [00:13:31] period of time. So they don't have to worry about that because they know when you move to the new house or you refinance you are going to set up again for using your most valuable dollars in those early years for your mortgage. I just got to think of that, that is very complicated. They will make it too complicated. What I really want you to focus on is here we come, here is April, should you be putting money into an IRA, a [00:13:57] if you have been putting in a 401K and you are stuck but accessing whether or not that is a good move, whether or not you should maybe get rid of the tax now because now we will finish this discussion up, we are talking about two other locations which is the [00:14:12] IRA and high cash value life insurance. Because [00:14:18] of course is something that you have already pay tax on, so if I put $5000 into a [00:14:23] I am going to get taxed on $5000 now. But no matter how much it grows, that $5000 could grow to 10 million and I will never pay tax on the difference on that growth. [00:14:39] that is absolutely huge because you know you can take that [00:14:43] and do some potentially wonderful things. Now the downside to the [00:14:48] because you still got fifteen, nine and half rules, there are some provision that if you use some of the money for your first home, there are some little things like that, that let you access that money a little easier and then of course what you can do with that can be a little bit constraining because you have this custodian or this administrator who has to approve what you do with a [00:15:13] now of course you can easily go and buy stocks and bonds and meet your fund in traditional investment like that, you can get into [00:15:21] and real estate, etc. There is some custodian, lot more expensive when you can potentially buy some rental properties and that kind of stuff. But those custodians like I said the administration that knows if fairly expensive. [00:15:37] the other side is using high cash value life insurance because that too is like a [00:15:42] you are going to pay the tax before the money goes in but then if it is managed right and you avoid the, you know you stay within the IRS guidelines. Two things are to your advantage; one is really no limit to how much you can put in, the other is it is going to grow tax deferred and tax free if managed properly. And the other side of it is you have had access without any restrictions. There is no custodian, no administration and you can use it for anything you want, anytime you want for any length of time you want, so a lot of people use it so that they can build capital and then build to buy business or build to buy their next house, or their next cars, I like it for opportunity to take advantage of market that drops so that you can do the old Warren Buffet style, when prices drop, you pay to get an advantage on it and get to buy in real good pricing where you know pricing value don't always equal. Value maybe down here and like we are seeing today in this market prices up here, what you want is when the prices is below the value, it gives you the opportunities to jump in. [00:17:06] so using high cash file life insurance, no limitation putting pretty much as much as you want and then have access to it with no restrictions whatsoever and again handling it right will be tax free as well. So it is kind of like a rough on steroids essentially. So those are some of your choices that you have coming up here in the next few weeks and whether or not it makes sense to invest into retirement plans, if so which one? I am happy to kind of you know work that through with you if you have any question about your particular situation, we kind of access what might work best for you and your particular situation and where you think you are going to be in the next 5,10, 20 years because that is obviously an important consideration as well. [00:17:56] again are you in the lowest tax bracket you ever going to be in or you are just kind of getting started and you are going to probably be in a higher tax bracket or are you in very high tax bracket? There is a potential that you are going to be in the lower one when you finally retire. By the way, let me just throw something out at you on that, I talked to a lot of retirees, rarely do I see someone say yeah, I am in a lower tax bracket than I was when I was working, in fact, often times it is just the opposite. They have lost all their deductions, kids are out of the house, no home exception, all that kind of stuff and now they have got all these money coming in, social security, they have got their pension, they have got money coming in from investment and they tend to stay in the same tax bracket, if not even higher tax bracket and if you take too much money from your investment account, now your social security get taxed, so it is an ongoing battle that we never get rid of and retirees are not necessarily retiring in lower tax bracket that they were when they were working. [00:19:02] so all that kind of have to be considered so that you make the best decision based on your situation and where you think you are heading in the next 5, 10, 15 or 20 years, 30 years. And that way we can give you the most bing for your buck. So there you go, this lower retirement plan consideration review and I hope it has been helpful to you. Again, if you have any questions feel free to reach out, send it to [email protected] and I will answer them just as quick as I can. Anytime you want to have a strategy session and just kind of walked through some of the things that you might consider in your situation I am happy to do that as well. Be sure to subscribe to the podcast and video so that you can always staying on top of this stuff and be as knowledgeable as possible because that is going to make you a better investor. Alright till next week, have a great wealthy and wise Wednesday and then we will talk to you then. Take care.

[00:00:21] Hi everyone and welcome to another wealthy and wise Wednesday, hope you are doing great, hope your weeks are going good so far and we are going to finish strong. You know last week we talked a little bit about some winning tips to help you in your financial situation and I want to add to those this week, some of them are a little bit interesting because you know I don't really like to dissect people's lifestyle and there is certain things that you just kind of stay away from but on the other hand these are some good things to at least think about while you are going through your week and where you are putting your money so we will get there just a second. [00:01:02] So first one I want to talk about is just putting your savings on autopilot and all that mean is well if we go back to last week, one of the tip was to pay yourself first. From the book, the Richest Man in Babylon and which one to do is to make sure that every week, every month, every time you get a paycheck or some sort, you want to put some of that in savings and have it on autopilot and that could easily be your banking system because that is where you want to build the majority of your capital for opportunities and things that might come along in your life anyway. But if you get it out of your hands, if you get it out of your eyesight and you can put it just a little further away than the checkbook. Then you are going to tender it just kind of forget about it and build that saving and then ultimately build your investment portfolio as well. So just put it on autopilot, I remember way back in the way when I was getting started where you are a young couple, when you had a little baby, when I can't afford much but I think it was 25 bucks or something, I started putting $25 away in each pay period and then that grew to 50 and then a few 100 and then you know from there so if you just put your savings on autopilot. [00:02:34] Now we are going to talk a little bit about taxes in just a seconds but one thing that you really should do when we kind of again hit on this last week in our podcast is to make sure that when you get these new tax savings that should be coming out of your paycheck these next few weeks, put that away and don't put into your spending habits or it would just be lost. So let's get you on autopilot. [00:03:01] The next thing and this is one of those funny ones. I am not a coffee drinker so I can't really relate to this but it is amazing, I look at some statistics of people who buy coffee every day and what that adds up to, I don't know how much a coffee so I Google that really quick and it looks like anywhere between 2 and 5 bucks if you went to star bucks is what you know a typical coffee will cost you. Some people do this two or three times a day but if you only do this two or thrice a day and even if you only spent the minimum, the two or three bucks. You probably at least get into 50/60 dollars a months and if you think about that in a career span of you know most people work 40 or 45 years of their life. And then if you went out and bought coffee every day in that period of time, it can add up to a lot of money just a 20 years span and if you spend $50 a month on that kind of stuff that is about 29 or 30 thousand dollars if you are getting an average rate of returns on your money. So when you are holding that coffee next time, think is this worth $30000, if you go 40 years that is probably going to be pushing 80-100 thousand dollars in money that you could have had, had you not drank it down. [00:04:35] Okay, so the next one is ditch credit cards that have annual fees. There are so many credit cards out there with no annual fees and they are not that hard to find and all you really had to do is look up credit cards with no annual fees. I recently just switched to one of them now, I have been running with a gold America express card for a mile and then I got hit with this annual fee and I say I am not going to pay annual fee for this credit card so I called them up, not only did they wipe out the annual fee but they hooked me up with another credit with no annual fee and it still give me the miles that I was looking for, for potential airline miles. But those can add up and again this is a wasted fee that doesn't have to be there. [00:05:30] Now another thing you could do to try and save a little bit more money each money, each year and that is increase your insurance deductibles, this can be your car and your home and any other kind of insurances that you have where there is a deductible, if you raise those that will typically lower the premium and if you take and you save the difference between what you are paying and then what you are paying now because you increased your deductible, that can add up to a lot of savings over the year. And you will be surprised how fast you saved that difference. So for instance if I had an auto insurance where my deductible was $100 and I raised that to maybe even as high as 1000 dollars but then save the difference in the premium, you will be surprised how fast I save that extra $900 so that it is there even when I do need to pay the deductible. If you could do that for several years, then that 900 grows to 1800, grows to [00:06:42] you know pretty soon you will have thousands and thousands of dollars there, that can help upset that higher deductible. The only downside to that, so be careful is you raise your deductible, you lower your premium and then you go again the [00:07:01] the next day, so let's not do that. [00:07:02] the next thing to maybe look at is rounding up your mortgage payment, this works well if you are trying to pay your house off as quick as possible, so let's say your mortgage payment is I don't know $1236, you know round that up to 1260 or even 1300, you will be surprised with that little extra principle does for your mortgage and how fast that can pay off. Because if you think about it this way, during the first five years of a mortgage. It is like 96,97% of all those payments just went to interest anyway. So if your mortgage was a thousand dollars you might find only as much as 40 or 50 dollars each months goes to principal and the rest goes to interest. So adding another 40 or 50 dollars a month actually doubles your mortgage payment for that year. So think about that and again this is for those who wants to get their mortgage paid off sooner, just round up to the next dollar might help you get there that much quicker. [00:08:09] another thing to do is to avoid like a plague, overdraft fees. Now I know a lot of times it happens accidentally because we don't balance our checkbook, I have even been guilty of that. Recently, maybe last 20 years I have always put maybe line of credit on my checkbook because sometimes we don't balance like we should and my wife and I will write a cheque and then we will cover with savings and other funds and then lo and behold, we get this overdraft and that fee can be crazy expensive. I have seen people overdraft by a dollar and their overdraft fees can be as much as 50. Talk about a profit center from the banks, so either get some kind of overdraft protection or better yet balance your checkbook, know how much is in there and avoid those overdraft fees. That is a huge rate to return for the bank, often times I think mhen I will be happy to give you a dollar if you give me 50 back, that is essentially what is going on with the bank. Even if their overdraft fee was only 20, that is still a huge amount of money. A dollar, or 10, or 15 dollars and you get you know 20 back, that is a pretty way to return for the banks, so let's not make them any more in fees than we have to. [00:09:42] here is another kind of a funny one and kind of goes along with the coffee, I don't know funny is the right word but anyway it is something to think about and that is lunch. What some many people do at lunch, they go out and make their spending anywhere from let's just say 5 to 10 to 12, 15 dollars just for lunch. So you might consider if you are trying to get out of debt, if you are trying to save some money, maybe pack a lunch. A lot of time it is a little healthier and certainly cheaper than fast food. But if you think about somebody who is out to eat every day and maybe they are spending two or three hundred dollar a month. Again if we kind of calculate that out over the next 20 years, that could be a 100,000 dollars or more and if we do that over a 40 years working career, that could be a quarter million dollars. Now, think about it this way, if you are going to retire tomorrow would a 100 or 200 thousand dollars more in your retirement account make any kind of difference? Yeah I think it does and you will just be surprised how much money is spent, that just goes through our hands, we don't think much about it between coffee and lunch and dinner and this and that and suddenly it is 100 of thousands of dollars that could be in our pockets. Now here is the thing and this is why I say I don't want to be some kind of micromanagers, we want to enjoy life, I mean we work, we like to spend and enjoy a few things and certainly if you are not in a situation where you are up in debt up to your eyeballs and you are on a good savings programs and it does look like you are going to be retiring just fine. You know I am not trying to tell you don't go out and eat but unfortunately so many people who just live paycheck to paycheck and part of their problem was saving is that spend money on this kind of things. So think about your next time you look at that sandwich or that hamburger and you think wow this could represent a 100 or 200 thousand dollars or more in my retirement income if I could just save this money. SO anyway see what you think about that. [00:12:11] the next thing is if you get a big tax refund then what you want to do is get with your personnel department and adjust your W4 so that you reduce to what holdings so that you will get to take more money home with you. There is no reason to give the government a free loan for 8,9,10 months because that is exactly what is happening. You don't ever get interested on a tax refund, you have essentially just overpaid, giving the government a loan for free and then when they pay you back, they don't pay you any interest on it. Try not paying your taxes and see if they don't charge you interest and penalties for missing your tax date. So if you are going to get this huge tax refund come this April, let's adjust your W4 so that you take more home but what are we going to do with that, we are going to save that money and we are not going to put it into our spending habits. [00:13:18] and the last one, I think this is pretty obvious but unfortunately not practiced very much and that is pay off your credit card each month. Okay, you know even today in this very low interest rate environment, credit cards are still charging 13,18, 21%. I mean can you imagine that, they can go out and get money a 3 or 4% and then turn around and charge you 18-20%. The amount of money they are making on people who carry balances is enormous. There is no reason to do that, so if you use a credit card, pay it off each month and then you don't ever have to pay those high interest rate. Well another thing that might be kind of interesting, this little strategy that we have incorporate over the last number of years and that is we use our credit card for major purchases and expenses but we do pay them off at the end of each month. But I have got a few credit cards that gives me back cash back, I use that cash back because it is really just free money to me to buy gift cards at restaurants. So I never have to pay for a lunch or dinner, essentially I do my credit card charges right, I pay them off so I am not paying any interest and cost many things to run it through the credit card. I get cash back on that credit card and I use that cash back to buy gift cards for lunch and dinner and I can't remember, I mean it has been quite a while since I have ever had to put out money for lunch and dinner because I have either gift cards or cash that I can use for lunch and dinner. Now I will be going out and eating lunch isn't an expense, it is not costing me one way or another, I am just running it through my credit card and my credit card company without making any interest on me is paying for all my lunch and dinner. And whether that airline ticket you can use your cash to buy just about anything, I have just decided that I never have to pay for lunch or dinner again when I go out and this just worked out perfectly. [00:16:01] So there is a few other tips you can use, hopefully I have incorporate one or two of them in your lifestyle, I think the biggest of them all is just make sure you get a monthly annual savings plan and it is on autopilot, you never have to think, you don't have to write a check, you don't have to do a thing, it is just automatically being saved building up your capital so it is there for your future opportunities that might come along and then the next one I think is just making sure you are not giving the government a free loan, bring home as much money you possible can without getting to a point where you are going to [00:16:43] in the air but just making sure you are bringing back and not overpaying your taxes, so that again you can have more money go on autopilot. [00:16:54] well that's it for this week, any questions, feel free to reach out [email protected]. Any suggestion, anything you would like to talked about on future podcast, happy to hear your comments and your suggestions on that as well. Be sure to subscribe to the podcast and/or the video and stay tuned this week, we got some really good stuff coming up that I think is going to be beneficial, I think I mentioned last week that we have got a new infinite banking mastery course coming out and that is going to be really exciting and really help people get a better handle on how all these works. Well, other than that I think that is it for this week, it has been great to talk to you and I hope you had a good reminder of the week and a nice weekend and we will talk to you next week and until then take care.

7 Winning Financial Tips!

1. Know where your money is and where it's going! Put a GPS on your cash!
2. Change your W4 and save the additional income you'll get from reduced taxes.
3. Build Emergency and Cash Reserve account.
4. Knock out some debt!
5. Pay your self first!
6. Build your banking system for capital, planned purchases, opportunities, tax advantages.
7. Learn and educate yourself about investments.