Save Now, Play Later
April 26th, 2010 // 4:00 am @ Andrew Rosenbaum
If you’re like most people, you may be having trouble sticking to your New Year’s resolution to save more money.
There are two common reasons why it’s hard to save, particularly in today’s economy:
1. We buy too many things to satisfy emotional needs, instead of buying only the things we really need.
We’re too willing to pay a premium for a brand that feeds our self-esteem. It’s a habit we could afford in the go-go years, but we’re finding it difficult to break now that we need to save.
The solution: Re-examine your motive for accumulating stuff.
Are you a victim of a mentality that believes “I buy, therefore I am”?
Is that the image you really want to project to your family and friends? Is that a lesson you want to teach your children?
A far better self-image is someone who is economically secure.
I define economic security as a feeling that your financial plan is on track even during volatile economic times.
Economic security gives you the confidence that your net worth will not crumble overnight.
You’ve heard the saying, “Pay yourself first.” It’s wise advice.
The first check you write each month should be to yourself in the form of savings.
If you don’t have the discipline to write it yourself, set up an automatic payment system that transfers some income each month into savings.
Of course, choosing the right savings vehicle is not always easy. That brings me to the second big obstacle to saving:
2. The roller coaster markets are still volatile, so we don’t know where to put the money we save.
The yields are small on many conservative investments, and they shrink even more after you pay the tax bill.
Fear, confusion, and inertia are discouraging people from setting money aside. If it remains in your bank account, it’s tempting to spend.
What if I told you that you could put away money each month into a financial product in which your cash value will build and that the value will be backed by a guarantee?
What’s more, any increase in cash value is currently tax deferred, and that if structured correctly you are able to withdraw some of the value without paying taxes at any age?
It sounds pretty good, right?
The product is permanent life insurance, and specifically known as whole life.
That means your family’s financial security is protected by a death benefit (also not subject to income tax under current law) if something were to happen to you.
So instead of buying a term life policy to protect your family and trying to save and invest money on your own to build financial security, why not combine both necessities into one streamlined product?
It’s the best and easiest way I know to achieve financial peace of mind.
Category : Economic Confidence &Financial Certainty &Permanent Insurance &Saving
Average Returns v. Actual Yields, & Why Whole Life is a Great Bet
December 30th, 2009 // 4:00 am @ Andrew Rosenbaum
Here’s a message for all investors who like playing with high-risk investments: Math is not money, and money is not math.
Imagine you are investing $1,000 in a mutual fund. You have a fantastic first year, earning a 100 percent rate of return, bringing your balance to $2,000.
In year two, things go poorly and the investment loses 50 percent. Your balance is now back to $1,000.
In year three, the market goes up and you earn 100 percent again, bumping your balance back up to $2,000. The fourth year markets tank again and you lose 50 percent. Your balance has now fallen back to $1,000.
Notice that your beginning and ending balances are exactly the same. Your actual yield is a big fat 0 percent.
Here’s the interesting thing. What is your average rate of return? 25 percent.
I know any investor would love to get a 25 percent return. A mutual fund with this exact performance could advertise, “Our fund has averaged 25 percent over the last four years.”
It’s a true statement. It is not illegal or blatantly dishonest. It simply fails to illustrate the fact that investors actually ending up with no return.
One of my clients is a major league hedge fund manager. He knows something about high-risk investments. But what does he have in his portfolio? A guaranteed contract –- a whole life insurance policy.
In the past year he doubled the size of his policy. In this economic environment, he told me, he needed to lower the overall risk of his investments. And a guaranteed contract is a smart alternative to treasury bills, which are currently paying a very low yield.
Here’s how he explains it in his own words:
Whole life is an investment with its own risks and rewards. But the risk is relatively low. The return is virtually guaranteed, you can borrow against it over time, and you can use it for estate planning purposes. I know that when I die my family will have enough money to manage their own lives. I could invest in ExxonMobil, but who knows what the stock would be like in ten years?”
He told me he thought that whole life has a bad rap, which encourages people to think they can outperform the policy. To quote him again,
Many savvy investors believe they can stimulate the characteristics of life insurance benefit on an after-tax basis – it has to be after tax because money accumulates within a policy tax-free. They think they can take $10,000 a year and invest it, but what happens is they never do it, and their portfolio is skewed.”
My hedge fund client really understands risk, and he certainly understands rewards.
Category : Financial Certainty &Financial Planning &Investing &Market Volatility &Permanent Insurance &Stocks & Mutual Funds
Accumulating v. Utilizing Wealth
December 23rd, 2009 // 3:59 am @ Andrew Rosenbaum
Accumulated money means nothing if it’s not utilized properly. There’s a huge difference between accumulating money and putting it to good use.
Accumulating without utilizing is like buying a cruise to the Bahamas then never going.
The basic premise of the accumulation theory is that collecting money — gathering a “nest egg” — guarantees financial protection.
But no amount of money guarantees happiness or, for that matter, security. Many Wall Streeters are discovering this.
I believe in the utilization theory, which says money gains meaning by how it is earned and used.
What is true is that money is a tool and, like all tools, it is designed to do a job. It’s up to you to use that tool to enhance your happiness.
People who enjoy lasting wealth have a deep understanding of money — what it is and what it is not. Money isn’t as important as the asset that produces it.
With the utilization theory, the idea is to limit the risk that the asset will lose its power to provide financial security for you.
The more risk we take on, the more stress and pressure we experience, regardless of how much money we have or make. The more we use money to transfer risk, the more economic confidence we feel.
Purchasing a guaranteed contract that provides a reliable return, virtually risk-free, and ensures your family’s financial security if you die, is a wise use of money.
Category : Accumulation v. Utilization &Economic Confidence &Financial Certainty &Financial Risk &Permanent Insurance
Can You Spot Your Investment Flaw?
December 9th, 2009 // 4:00 am @ Andrew Rosenbaum
The federal government says the country is coming out of the recession. My biggest fear is that, with the market recovery, people with a lot of ground to recover in their portfolios will chase risky high returns again.
But with high-risk investments you will inevitably lose your money. That’s not financial planning; it’s legalized gambling.
A wealth swing coach helps you spot your investment flaws. Investors try to outsmart market volatility. They mistakenly believe they can cash in at the top, then balance their portfolios to preserve their wealth.
They rarely do. Sooner or later, the market will turn down again and they’ll have lost the opportunity.
Trying to outplay market volatility is like trying to control the weather. It’s impossible.
Remember the old expression, “save for a rainy day”? Don’t assume it will always be sunny.
As a golf fan, I like golf analogies. Tiger Woods never tries to outplay the weather. He doesn’t take wild risks. He meticulously measures, plans, and calculates every move he makes.
He starts out playing conservatively and defensively. Only if the weather’s right and only if he thinks he’s playing well does he go on the offensive.
So balance your investments by including assets that will endure no matter whether markets are sunny or stormy, and you’ll be better prepared if other investments decline.
Category : Financial Certainty &Financial Planning &Investing &Market Volatility &Wealth Swing Coach
Economic Confidence: The Goal of Your Financial Plan
November 17th, 2009 // 11:13 am @ Andrew Rosenbaum
What most clients really want in simplest terms is economic confidence. They don’t want a tremendously complex plan that requires luck for it to work.
Economic confidence can only be experienced if their plan is designed to work under almost any circumstance. The certainty would be derived by mitigating risk as much as possible, while simultaneously providing for what I call the “hit list.”
The “hit list’ is my pet name for the universally-shared objectives all people want to see their plan provide them with, including the following:
- Optimized cash flow
- Maximized actual rate of return
- Legally pay the least amount of taxes
- Have more tax-free and tax-advantaged money
- Feel greater security by balancing risk/actual return
- Make philanthropic and charitable giving possible
- Enjoy a near-guaranteed financial safety net so that higher risk financial ventures become tolerable
- Know that one’s wishes for their family’s ongoing financial needs will be planned for and realized no matter what
- Have a scientific measurement that verifies your plan’s ability to achieve all of the above goals, free from rhetoric or salesmanship
These are the positive outcomes that people seek. They also want to ensure protection from the following negative outcomes:
- Possibility of premature disability
- Possibility of premature death
- Unforeseen income and estate tax situations
- Unexpected lawsuits
Does your financial plan give you economic confidence?
Category : Featured Content &Financial Certainty &Financial Planning
The Big Picture: Microeconomics v. Macroeconomics
November 17th, 2009 // 10:32 am @ Andrew Rosenbaum
Microeconomics is the study of economic parts that appear unrelated to the whole, or without consideration for the whole.
In contrast, macroeconomics is the study of how every economic choice relates to and impacts your entire financial world. This view redirects one’s financial decisions because of the powerful understanding that each decision is inter-connected.
From any individual’s vantage point it appears that the earth is flat, but seeing it from space verifies that it is round. This simple analogy illustrates the radical difference between micro and macro.
When one takes a global view of their financial world things look radically different in contrast to how it’s seen from the traditional perspective.
Seeing your financial world from a macroeconomic perspective allows the trained eye to discover two things. I not only see the tiny flaws, but more importantly the hidden possibilities, specific to each client’s life.
The financial flaws and possibilities are never precisely the same for any two people, but if they go undetected the erosion of wealth is always the same. We must correct the flaws, and capture the possibilities to increase efficiency.
One of the biggest reasons why this matters so much is that the microeconomic approach to personal finance teaches the false concept “high risk = high return.”
In contrast, the macroeconomic planning methodology I use is based on “wise risk = safe return.”
Every investor I’ve ever met was risk tolerant until they lost money. With high risk you will invariably lose your money because it is no longer financial planning, but rather legal gambling.
Being willing to shift from the traditional micro view of money to a more global and
comprehensive view will maximize your enjoying greater economic confidence. In macroeconomics it is not only important what you do. It is of equal importance what you do not do, for what you don’t do can financially destroy you.
Category : Featured Content &Financial Certainty &Macroeconomics
The Wealth Swing Coach: Maximize Lasting Wealth with Certainty, Not Luck
November 16th, 2009 // 3:58 pm @ Andrew Rosenbaum
My book, The Wealth Swing Coach, explains how you can achieve lasting economic confidence and financial peace of mind, regardless of market volatility.
Why the title?
Well, I was once watching Tiger Woods taking practice swings, while a gentleman carefully studied his swing. The commentator mentioned that this man was Tiger’s swing coach, Butch Harmon.
I was somewhat shocked.
I knew Tiger was perhaps the greatest golfer in history, yet he still had a swing coach? Despite his skill, Tiger cannot see himself swing. Harmon’s vast knowledge enables him to spot tiny flaws in even the best golfer’s swing.
What the swing coach does for the world’s greatest golfer is exactly what I do for some of the world’s smartest executives and entrepreneurs.
I’m their wealth swing coach.
My book explains how you can become a more efficient investor by rethinking your attitude toward money and definition of wealth.
Here’s an excerpt that describes my philosophy of wealth and financial planning:
“Investors should stop pursing high-risk investments and begin to seek ‘safe-risk’ investments instead. My great fear is that investors who lost money taking big risks in the last few years now will take even bigger risks to try to recoup their losses in a hurry.
“What people need most is financial peace of mind. They need a financial plan that works whether the markets go up or down. They need to stop chasing high returns. My message is that it’s time to shift your financial goals from amassing wealth to ensuring lasting economic confidence no matter what.”
Purchase and read The Wealth Swing Coach to enjoy the following benefits:
- Reveal the hidden flaws that invariably result in money worries and erode financial efficiency.
- Learn how to get the closest thing to a lock-down guarantee as possible with specific financial contracts.
- Absorb a new financial strategy that will increase your economic confidence with certainty, not luck.
- Learn why it is better to “utilize” money than to merely “accumulate” it.
- Discover a new asset class hidden from the general public, which offers tax-free and tax-advantaged growth.
Category : Articles &Featured Content &Financial Certainty &Life Insurance &Wealth Swing Coach
