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Dollars and Sense

 

There are many myths concerning money, with many of them transcending generations of people in the same family. The truth is that many of these myths — including the one about how money will make you happy and solve all your problems — are false. Worse, these myths tend to limit one’s thinking and limit their financial success.

By Charlie Epstein

 

Most people do not realize they have myths about their money.

And even more people don’t take the time to analyze where these myths come from and why people hold them to be true.

I have worked with thousands of people over the past 41 years as a financial advisor. In the process, I have identified 15 myths people have about their money, which limit their financial and personal success.

A myth is defined as “an unproved or false collective belief that is used to justify something.” The biggest myth we have about money is that “it will make me happy and solve all my problems.”

Do you think money makes you happy?

Are you sure? Want to bet?

Did you know that 90% of all lottery winners go bankrupt within three to five years of winning the lottery? I’m talking millionaires. And the majority have stated they wish they never won the money. They’re miserable, depressed, and suicidal. How can this be?

“I am convinced that your money myths limit your thinking and impact how you approach your life and your finances.”

This happens because the most important thing in their life has been to get money, and now that they have it, they have no idea what to do with it. They often go on a massive shopping spree and buy all sorts of material items that don’t bring any lasting joy or fulfillment. And, more importantly, they stop working or doing anything productive to give their life purpose, meaning, and real value. What they fail to do is stop and ask themselves, “beyond money, what makes me happy?”

I am convinced that your money myths limit your thinking and impact how you approach your life and your finances. The three biggest financial myths most people have are:

1. My home mortgage needs to be paid off when I retire so I don’t have a payment;

2. I’ll be in a lower tax bracket when I retire; and

3. My home is an investment.

My father believed all three of these myths. When he retired, he and my mother moved to Florida to build the house of their dreams, on the golf course of his dreams. He was going to pay cash for that house — $500,000. He was 68 at the time. I said, “Dad, I want you to take out a mortgage instead.”

My dad was shocked. “A mortgage! For how long?”

I said, “for 30 years.”

“Thirty years!” my Dad bellowed. “I’ll be dead before it’s paid off!”

“So what do you care?” I smiled. “You’ll be dead!”

To which my father asked, “what will your mother do?”

I said, “she doesn’t play golf, and she doesn’t play mahjong, so if you die before her, I will sell that house and move her back north!”

I convinced my Dad to put $100,000 down and finance the other $400,000 with a 30-year mortgage at 5%. This was 1992. Bill Clinton had come into the White House and raised the marginal tax rate from 36% to 39.6%. There went money myth #2 — the belief he would be in a lower tax bracket when he retired (a belief I am sure many of you reading this article share).

That didn’t happen. The good news was, he could write off and deduct 40% of his mortgage payments in the first 15 years because it was all mostly interest. My dad was now ‘leveraging’ other people’s money (OPM) by using the bank’s money to take out a mortgage, and Uncle Sam’s money (USM) by deducting 40% of his mortgage payments.

The net cost for my dad to borrow the bank’s money was 3% (5% x 40% = 2%, which he could deduct, so his net cost to borrow that money was 3%). I said to my parents, “If I can’t make you net more than 3% on your $400,000, fire me as your financial advisor.” We averaged 7% to 8% on their money for the next 13 years of his life.

When my dad passed away, I sold my mother’s home in Florida, at a $100,000 loss. This was 2005, and the real-estate market in Florida was overbuilt, and no one wanted to be on a golf course. So much for the third money myth about your home being an investment. I than moved my mother back north and built her a home in an over-55 community. She was 79 at the time, and she said to me, with a twinkle in her eye, “son, do I get to take out a mortgage?” My mother is now 94, and she still has a mortgage — at 2.5%.

What does my mother care about? She only cares that she has enough money to pay for everything she desires to do. What do I care about? That I’m not tying up her money in a ‘dead asset’ — her home. She can’t eat it or drink it, and it doesn’t generate any income for her. And it is not an investment. I know I can make more than 2.5% on her money by using OPM to generate her even more income.

The key to being financially successful with your money is to understand how to maximize OPM and USM to make money on ‘the spread.’ The spread is the difference between what it costs to use other people’s money and what you can make investing your money somewhere else.

Let me add one big caveat to this discussion. If, psychologically, you must have your mortgage paid off so you can sleep at night … then pay it off. I always say psychology trumps economics. Just remember, you may feel good having it paid off, but economically, you won’t make as much of a return on your money and your assets.

 

Charlie Epstein is an author, entertainer, advisor, entrepreneur, and principal with Epstein Financial. He also presents a podcast, Yield of Dreams; yieldofdreams.live; (413) 478-8580.

Features

Moving Up to the Show

 

documentary on his one-man show, Yield of Dreams, Charlie Epstein

For the documentary on his one-man show, Yield of Dreams, Charlie Epstein visited the actual ‘field of dreams’ stadium in Iowa, a visit he said was inspirational on many levels.

Charlie Epstein joked that he has more people working for him on his one-man show — Yield of Dreams: A Financially Entertaining Experience — than he does at the financial-services company he founded, now part of Hub International.

Only … it’s no joke.

Indeed, over the past 21 months or so, Epstein, known to many as the 401k Coach, has hired comedians, directors, stage managers, animators, and more (the cast of supporters keeps growing) as he prepares to bring his show to the stage — in this case, the Northampton Arts Center — on Aug. 26 and 27.

That show, which has been delayed in some respects by COVID-19, will indulge both of Epstein’s passions — acting and financial advising, both of which he’s been doing for decades now.

The acting? That’s been a passion since childhood, and a diversion that was a big part of his life for more than a dozen years. He’s done everything from standup comedy in New York to another one-man show at the former CityStage called Solitary Confinement, in which he played seven roles.

The financial advising? That, too, has been a passion that has taken a number of forms, from books — Paychecks for Life and Save America, Save! — to a podcast to a video series.

Bringing the two worlds together has become yet another passion for Epstein, one that will put him on a live stage for the first time since he did an off-off-Broadway show just before 9/11.

After the final production of that show, he said a voice inside him told him it was time to leave the stage and move onto other things, including the books and the 401k Coach entrepreneurial endeavor.

“I’d pretty much accomplished everything I wanted to,” he recalled of his acting career. “I was done.”

Turns out, he was only done for a while. OK, a long while.

What brought him back was a desire to present his message in a new, different, and more entertaining way, and in the process, spread the message and attract new customers.

“We’re calling this a financially entertaining experience,” he said, “because the show asks the question: ‘what did you want to be when you grew up? And what happened to that promise?’ Everyone made a promise to themself growing up, only how many people kept the promise? My promise to myself was I always wanted to be an entertainer, and I kept the promise and figured out to successfully navigate living in both worlds.

“Most people are not pursuing their life’s passions — they are stuck in a job that is less than fulfilling, working for a paycheck, hoping one day they will finally get to do what they have always dreamed of.”

“Most people are not pursuing their life’s passions — they are stuck in a job that is less than fulfilling, working for a paycheck, hoping one day they will finally get to do what they have always dreamed of,” he went on. “In this show, I’ll bust your myths about money that hold you back from living the life you have always dreamed of.”

To do so, he’ll draw on some of his own real-life experiences, specifically with his acting career.

“I had basically taken three to five months off a year from 1988 to 2001,” he told BusinessWest. “And I discovered that the more time I took off from my financial business to pursue my acting and entertainment career, the more money I made every year.”

As noted, this show has been in the works for more than two years now and was inspired by a desire to return to the stage. Epstein said he met with Mike Koenig, serial entrepreneur, author, podcaster, and founder of the Superpower Accelerator, in the early fall of 2019 to discuss his plans.

“He told me that I should be like Leno and Letterman and all the great comics who have shows and hire my own comedy team to help me write these ideas that I had,” Epstein recalled, adding that, in exchange for being named producer of the show, Koenig said he would find the comedians — which he did.

“I flew out to La Jolla, California, and holed up for two days in a condo he [Koenig] has overlooking the Pacific,” Epstein went on. “I was there with three comedians, and I basically acted out all the ideas I had in my head. And with those three comedians, we crafted the outline of the one-man show. Then I went home and wrote 168 pages from October to Thanksgiving, then went back out to California in January for another two days of going over things. Then COVID hit, and we spent the next three or four months on Zoom, editing, writing, and acting things out.”

Subsequently, he has hired a director, a stage manager, a lighting designer, animators, and more to bring the show to life. He also traveled across the country for the filming of a documentary on the making of the show, created by Emmy Award winner Nick Nanton. There were location shoots in a variety of settings, including a mountaintop in California, New England, and the actual ‘field of dreams’ in Iowa, the one made famous in the movie starring Kevin Costner, a visit that Epstein said was inspirational on a number of levels.

“It’s like a shrine — it was fantastic being there,” he said, noting that he rented out for the field for two days so he and his crew could film at dusk. “I finally got to do what I always wanted to do, like James Earl Jones — walk into that cornfield like a ghost.”

Epstein, who is now spending several hours a day rehearsing, will perform Yield of Dreams: A Financially Entertaining Experience twice at the Northampton Arts Center, on Aug. 26 and 27 at 7 p.m. There is no cost to attend those shows; seats can be reserved, and that aforementioned documentary can be viewed, by downloading the app at yieldof dreams.live.

After those shows … the plan is to take the show on the road, as they say.

“The goal is to go city to city, tour the country, and teach people that they, too, can achieve their dreams,” he said, adding that the timing for such a show is ideal because many people have been cooped up during COVID, thinking about the present — and the future.

“They’re thinking, ‘I’m working in a job I can’t stand for a paycheck, and I’m miserable. Why don’t I just go for my dream?” Epstein said. “That’s what this show is. It’s me living my passion and trying to be an inspiration to other people.”

 

—George O’Brien

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