Home Posts tagged money
Special Coverage Wealth Management

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.

Banking and Financial Services

Dollars and Sense

By Steve Siebold

It is now not only the start of a new year, but also the beginning of a new decade. Maybe the last 10 years weren’t exactly your greatest, financially speaking. Maybe you are still dragging around an excess amount of credit-card debt, or you simply haven’t done a good job putting enough money away for retirement.

Whatever the case, the new decade can be different, and it starts with what goes on between your ears.

If you are really serious about taking control of your financial situation in the coming years, start by examining your relationship with money. Here are six changes to make when it comes to how you think about money.

Money Is Your Friend

If you have struggled financially your entire life, chances are you have a bad relationship with money. You may even see it as an evil force that you associate with greed or crooks. The more you see it as a negative, the harder it’s going to be to acquire any of it.

Start by changing your outlook on money, and see it for the positives it really presents, like possibility, opportunity, and freedom. Money isn’t everything, but it does make life easier.

Money Is Infinite

Sadly, most people are stuck with the limited belief that they can only make so much money in a year. They’ve been led down this path by well-meaning but misguided people their entire lives who sold them on the notion that this is the way it has to be.

This is so untrue. In a free-market economy, you can earn as much as your heart desires. The key is solving problems for people. The more problems you solve and the more value you bring to the marketplace, the more money you make.

It Starts with Your Expectations 

The majority of people believe the only way they will ever get wealthy is by guessing the lottery numbers or going to the casino. In the new decade, self-made millionaires expect to make even more money than they made in the previous decade, and there’s no talking them out of it.

“The more problems you solve and the more value you bring to the marketplace, the more money you make.”

You have to expect big things to happen, and this will make you bold, aggressive, and fearless in the pursuit of wealth. Even if you don’t know how it’s going to happen just yet, it starts with a belief that it will.

Separate Logic and Emotion 

Most people use emotion when making financial decisions, and this is one of the worst things you can do. Self-made millionaires, on the other hand, use emotion to motivate them, but stick to pure logic when it comes to money.

Logic means not buying the million-dollar mansion that you can’t afford. Emotion is dangling that big house in front of you like the proverbial carrot in front of the rabbit to make you work harder.

Focus on Your Reason

Behind any defined goal there is always a reason. Why do you want whatever it is you are after? In this case, why do you want more money? Is it for your family? Do you want to take a big trip next summer? Do you finally want to be financially free? When you focus on your ‘why,’ it’s going to push you to take action in achieving those financial goals. Figure out your why and never take your eyes off of it.

Watch Your Dialogue

Begin monitoring everything you say to yourself and others. When you talk about money, is the way you use your language programming you for success or failure? Next, begin listening to the way people around you use their language when it comes to money. Ask yourself the same question about them.

This is an eye-opening experience. What you’ll find is that the masses are always talking about running out of money. The self-made wealthy, on the other hand, are always talking about how to make more of it.  

The Takeaway

As we enter a new decade, make the decision to take control of your finances once and for all. Your thoughts and beliefs about money won’t make you rich on their own, but it all starts here.

If you are rich, keep thinking the way you are thinking. If not, it’s time to change the way you look at money in 2020 and beyond.

 

Steve Siebold is author of the book ‘How Money Works,’ and a self-made millionaire who has interviewed more than 1,300 of the world’s wealthiest people over the last 35 years; www.howmoneyworks.com

Retirement Planning

Life Lessons

Retirees say they are considerably less concerned than pre-retirees about their money lasting throughout retirement, but worry more about the financial and lifestyle implications of declining health, according to new research from MassMutual.

Retirees are confident that their retirement income will last as long as they live and that they will have enough money to meet their retirement lifestyle goals, with nine in 10 retirees saying they feel confident compared to roughly half of pre-retirees, according to the MassMutual Retirement Income Study. Pre-retirees worry most about not having enough money to enjoy themselves, four times more than retirees (28% versus 7%), who are most concerned about healthcare costs (29%).

“While we’re working, many of us think about retirement in terms of our leisure pursuits, a kind of permanent vacation that requires more disposable income,” said Tom Foster Jr., head of Retirement Plans Practice Management with MassMutual. “Retirees’ experience tells us that health concerns become increasingly prominent, especially as many retirees begin experiencing health issues and their subsequent costs.”

Overall, pre-retirees worry more than retirees about not having enough income in retirement (78% versus 51%), changes in Social Security benefits (81% versus 69%), and low interest rates hurting income (69% versus 57%), the study finds. When asked if their retirement income would last as long as they live, 91% of retirees and 56% of pre-retirees answered affirmatively.

Retirees’ confidence may stem from finding they need less income than many pre-retirees anticipate. Overall, 60% of pre-retirees expect to need at least two-thirds or more of their pre-retirement income to live comfortably in retirement, while 44% of retirees find that to be the case, according to the study. More than a third of pre-retirees believe they will need 75% or more of their pre-retirement income in retirement, while one-third of retirees report needing less than 50%.

“While many retirees can manage their expenses to lower income levels in retirement, the rising cost of care may steadily reduce their lifestyles as they age,” Foster said. “Once you’re older, it may be impossible to make up for any increasing income needs by simply tightening your belt. It’s far better to err on the side of having more rather than less income than you anticipate needing, especially as costs for care continue to escalate.”

The average 65-year-old couple could pay almost $490,000 in total health-related costs throughout retirement, according to HealthView Services, a software company that projects healthcare costs.

On the spending side of the ledger, 70% of pre-retirees anticipate spending less in retirement than they did in their working years, a proposition that does not always work out, the study finds. While half of retirees say they spend less, the rest find they spend about the same (41%) or more (8%).

Pre-retirees also are more inclined than retirees to say they wish they had started saving for retirement sooner. Eighty-four percent of pre-retirees would have started saving sooner compared to 55% of retirees, according to the study. Those sentiments were more likely to be expressed by those with assets of less than $250,000 or respondents who had siphoned money from their 401(k) or other retirement savings plan before retirement through a loan or withdrawal, or who suspended contributions.

The internet-based study was conducted on behalf of MassMutual by Greenwald & Associates and polled 801 retirees who have been retired for no more than 15 years and 804 pre-retirees within 15 years of retirement. Pre-retirees were required to have household incomes of at least $40,000, and retired respondents had at least $100,000 in investable assets and participated in making household financial decisions. The research was conducted in January 2018.

buy ivermectin for humans buy ivermectin online buy generic cialis buy cialis