What Do the Erie Canal, the Panama Canal, and You Have in Common When It Comes to Money?

So why talk about the Erie Canal?  Well, it serves to help illustrate a principle we teach in the Money Mastery program:  “Money in motion creates more money.”  Completed in 1825, the Erie Canal cut the cost of transporting goods westward by 95 percent.  And it cut the time to ship those goods by 80 percent.  This canal helped the West to be settled while many cities sprang up along the canal, the population surged and the  economic benefits exploded. From one single idea meant to make transportation cheaper in an era where moving goods was labor and time intensive sprang a whole bunch more benefits that continue to provide prosperity to this day. This is what “money in motion creates more money” means — the ability to put money, ideas, and resources to work to make more money.

Now what about the Panama Canal?  Well, its worth is similar to the Erie Canal because of how its creation put so many things in motion that created more opportunities and more money and resources. The canal is 48 miles long.  It takes 6 to 8 hours for a ship to pass through the Panama Canal rather than the many days and weeks it once took ships to travel around the coasts of South America. Since its creation in 1914, there has been an increase in the number of ships passing through it from 1,000 in 1914 to 815,000 in 2012. This equates to 333 million tons of cargo each year cutting across from one ocean to the other.  Making it possible for ships to avoid the dangerous passage around the tip of South America cutting months off travel time created an economic benefit that continues in massive proportions today.

So now let’s talk about you.  If you will examine how you make your money, how you save your money, and whether or not you are putting your money in motion to create more, you might find how to improve upon this process.  As you find ways of creating an Erie or Panama Canal in your own life, you too might be able to cut costs and multiply revenue.

Both these canals cost a lot of money and lives.  But the rewards have been astronomical in comparison — they have both made a much better life for all of us.  And so it can be with you.  If you will re-examine how your money is made and processed, you have a chance to use technology, innovations, new resources and more, to improve on what you already have.  If you can determine ways to get more income out of less time spent, you are the winner.  Wealth is not about a certain rate of return from the market. True wealth is about learning how to get your money to work for you to make you more.  Now is the time to think out of the box, just like our forebears did 100 and 200 years ago with creating of the Panama and Erie Canals.

How You Define Retirement May Mean You Will Actually be Able to Retire…

Most people have a specific amount of money they dream of having at retirement.  I hear $1 million all the time — that this would be enough by most people’s standards.  I also hear that winning the lottery would do it, although this seldom happens.   Sometimes I hear people plan on inheriting a large sum of money.  But none of these ideas are very realistic in terms of what retirement is really all about.

So what does it mean to retire, especially to you? Does it mean you stop working at the set age of 65? Does it mean sitting back with $1 million, or does it mean getting old and falling apart?

Let me offer you my definition of retirement: 

“To have enough passive income that when I wake up in the morning, I can elect to work or not.” 

This definition has some real meat you can sink your teeth into and some attractiveness to it because it is not a monetary figure or a specific age. Let’s face it, some people will not be able to quit working at 65, and some people will not accumulate $1 million, but that doesn’t mean they can’t have a good retirement.  Some people want to work until the day they die, if they’re able, and that’s not necessarily because they have to. Some people want to quit work altogether and travel the world. And some want to retire somewhere in between these two.  What I try to help my clients see is that setting up methods of creating income out of existing money and resources that they cannot outlive and does not require their active work to generate is what they really ought to be concentrating on, not trying to save a certain figure by a certain age.

What passive income means is different for every person.  What amount of passive income would you like so that you could decide to work or not? Not everyone needs a million dollars to feel like they can retire.

To think of being prepared for retirement as only saving a set amount of money, such as $1 million can be very depressing, especially when it’s pretty hard, almost impossible to save that million. It’s much easier to learn how to generate passive income that does not count on your activity for its creation.

Here’s an example of creating a retirement using passive income:  One of my clients used active income that he generated during his working years to buy a simple do-it-yourself car wash, you know the kind where you drive your car into the bay, put quarters in, and spray down your car with a hose and soap. Taking the profits from that first car wash, he then went on to purchase two more. These car wash locations provide an average of over $12,000 monthly passive income for him, and that’s after what he spends to maintain them. He doesn’t work at any of these car wash locations, he isn’t washing any of the cars himself, but he’s making money off them. Of course, the amount of money he makes varies at different times of the year, and he has taxes to pay and bookkeeping and other maintenance costs to pay but he recently told me that if sold the three locations, he would have about $400,000 in cash. He would have to pay taxes on this amount, but it would provide him a serious chunk of change he could then also live on, if he no longer wished to continue maintaining the three sites.

Trying to come up with $1 million by a set age is pretty hard, whereas creating $12,000 a month from a business activity that basically runs itself is a lot easier. After all, $12,000 a month is $144,000 a year.  If you divide $1,000,000 into $144,000 earnings you’ll find you would be making a 14.4 percent rate of return on your money.  So wouldn’t you conclude that investing in three car washes with a total value of   $400,000 would be easier than trying and save $1,000,000 from your day-to day-work?

Now’s the time to think about defining retirement for yourself. It isn’t about a set amount of money, or a specific age. It’s about determining how you can create enough passive income so you will have the freedom to do the things you want to do once your active working years are over. Perhaps you do want to continue working as you get older. Perhaps you want to travel, or spend more time with your kids and grandkids. Perhaps you want to do philanthropic work, or finish your college education. Maybe you want to write the next great American novel, or try to get a book of poetry published. Perhaps you want to sit and do nothing all day. Having the freedom to choose what  your path will be in retirement has nothing to do with set figures and ages. It has everything to do with how well you can set up a predictable income that you cannot outlive.  Defining retirement for yourself now, when you can explore more options than just working like a dog and trying to squirrel away money might mean the difference between working until death, or free time and fun times.  There are so many options for creating passive income that I would love to share with you. Contact me today: peter@moneymastery.com.

Whatever retirement might mean to you, see it clearly, define it in writing and refer to it often so you can track precisely when you will have enough passive income to quit active day-to-day work.  Share with me your successes and I will publish on our Website. 

Statistics Will Most Likely Determine How Well You Play the Financial Game…

If someone didn’t track the numbers LeBron James posts every week, do you think he would be making millions of dollars playing basketball? Of course not.  Isn’t it true that every player gets paid according to how well they average at these numbers?

Take a look at some of these stats:

It’s fun to watch elite athletes doing amazing things we can only dream of!  Wouldn’t it be equally fun to watch your own amazing numbers in terms of your financial abilities? Those who are doing great things with their finances are seeing some amazing opportunities present themselves, just like these star athletes, things like seeing their savings grow exponentially due to compounding interest, eliminating all debt including their mortgage in a short amount of time, and having the cash flow to invest in real estate that can make them more money. The truth of the matter is, just like professional athletes who are paid based on their numbers, you will “get paid” by how well you do the following:

  • Save money each month, and not go into further debt.
  • Pay off debts each month.
  • Manage emergencies that arise.
  • Provide fun activities for your family that you don’t put on a credit card.
  • Prepare for retirement.
  • Lower your taxes.

To take the sports analogy a little further, let’s suppose the following:

If you don’t track how you’re doing in these areas, you will fail financially and be “kicked off the team” so to speak.

If you don’t track your money and end up not performing well in your own personal financial game, you may be substituted out, or traded.  In a marriage, this is called a divorce and it is expensive!

Just as in sports, if you get mad and throw a fit, you can be charged with a penalty during play. In your financial life, this is called getting into arguments with your spouse or partner over money and it causes real harm to relationships.

If you run off the court while your financial game is being played, you end up out of bounds with your money. This is called debt in the game of life and it means you end up turning your money over to others to make them more money while you go broke.

If you don’t have the right equipment, you can slip and fall, even get injured and have to sit out of the game. In your own personal financial life, this is called not being prepared for retirement or having to go into long-term care without having any way of paying for it.

So many similarities exist with regard to playing sports and playing your financial games.  It’s always best to get a coach and and learn how to practice playing properly with their help than it is to go it alone.

For more information about a financial coach (as opposed to financial advisor) visit www.moneymastery.com. Or contact me:  peter@moneymastery.com for a no cost discussion.

Do You Need a Financial Parachute?

If you ever need a parachute, and don’t have one, you will never need one again.  Now apply this to your retirement.  If you don’t have a retirement, and you are arriving at that age in 5 years, you won’t have time to get one before it’s too late.

Here are national statistics to consider as you review your need for a financial parachute. 

First, the average amount of money saved in all 401(k)’s is $5,000.  ‘

Second, only 28% of employees who have access to a 401(k) actually deposit any money into it. 

Third, for those reaching retirement age of 65, they have assets totaling only $60,000. 

Fourth, 10,000 people each and every day are turning age 65 for the next 14 years.  

Okay, so what if you are nearing retirement age and you don’t have that “financial parachute?” Don’t panic, it’s not everlastingly too late, it’s just time to get serious… NOW! Everyone can improve their retirement income, no matter how late in the game, no matter how little the money.  Some things can be done to at least get a small parachute.  Please go to www.moneymastery.com and signup for the Select program, then complete the retirement worksheet. Then email your questions using the “ask a coach” feature within the online training.  This will be the best financial decision you make in your life.

Answers to Important Questions You Need to Know for Retirement…

What follows are 9 questions centered around my experience over four decades of helping people plan for retirement.  They are varied and don’t necessarily hook together, but they are quick and to the point.  See if they help you.  

  1. Are people shocked with taxes to be paid when they retire?  Yes, and no.  Some people have not accumulated very much money for retirement so taxes will not be an issue.  But for those who have saved all their money into a 401(k) plan, they will see taxes going from 15% to 25% when they add their Social Security benefits on top of earnings.
  2. What happens to people’s retirement funds when they reach age 70 Once a person reaches age 70.5 years old, they are required to take money out of all deferred accounts, like a 401(k).  This percent of balance grows as they get older so by age 80 it is close to 12% of the balance.
  3. Why should retired people stay below the 15% tax bracket?  Because this is the first level of tax, and it goes up to a higher bracket once a person reaches $75,000 annual income.  So if a person gets close to this level, it’s best to find a way to pay tax deductible items before the end of year so you don’t bump up into the 25% bracket.
  4. When should a person consider a Roth IRA?  Tax planning means to know where your level of income will be and convert funds from a deferred account into a Roth IRA years before you retire, and do it systematically so the amount you convert is low as you can get it, but still get the job done.
  5. Some folks have been able to save in a regular bank account, mutual funds and tax deferred accounts, like 401(k)s.  Where should they take their income at retirement from first?  It is best to even out your taxes over the years.  If all you do is defer everything, then at retirement and especially when age 70.5 arrives, the taxes will be much more than normal.  This really hurts to get to retirement and have to ask yourself, “Why didn’t anyone tell me about this before now?”
  6. What are some surprises most people find out at retirement People find they must have a spending plan (this is not a budget), or they will run out of money.  Up until retirement they could get along, wing-it a little because they might get a pay raise or a bonus or a large tax refund that gave them extra money to do fun things with.  But at retirement those extras go away unless you plan for them in your spending.
  7. What other surprises might someone find at retirement?  The biggest problem I see when people retire, then spend some money their first year, is that they find that within 7 years they will be totally out of money.  They kind of know this, but it hits them hard after the first year in retirement.
  8. What can a person do when they see they will run out of money in 7 years? They can slow their spending, get a part-time job making extra income, or sell an asset, and possibly get a reverse mortgage on their home to pull out extra money and turn this into income.  Many other ideas are available, but you will have to get creative. I suggest you contact me for some really great options that most other advisors will never tell you about:  peter@moneymastery.com. 
  9. Would you be willing to answer more questions that arise out of this retirement discussion Of course! It is hard for people to work at a job and learn all the rules about retirement.  They work hard and come home tired and the last thing they want to do is research tax code or call creditors. All I do is study various options surrounding the retirement decision so I can bring you lots of examples and ideas tailored to your specific situation so you won’t arrive at retirement broke, or run out of money in only a few years.  Call me or email:  (801) 292-1099, peter@moneymastery.com for a no-cost consultation.

How to Prepare Financially for 2017

Goals are helpful but everyone always complains about how hard New Year’s resolutions are to keep.  So what can you do to make the New Year financially successful and ensure that goals you set in January don’t end up on the back burner by February?  Here are some of my thoughts about money and personal organization that can bring a lot of success to your financial life in 2017:

New Year Challenge: During the first month of the year, sit down with your spouse and start the discussion by announcing that you are dead, at least on paper. Then begin asking him or her the following thought-provoking questions and see how many of them they can answer without any prompting from you. This little exercise will reveal just how organized you are financially (oh, and how well you can communicate about such things).

  1. How much life insurance do I have on my life?
  2. Where is the policy?
  3. Who is the agent to call and report my death?
  4. How much debt do I have?
  5. Will you have to sell the house or refinance the mortgage, and how do you find out which you will need to do?
  6. Do I have any savings or safety deposit boxes?
  7. What investments do I have?
  8. Do I have a will or trust?
  9. How long will it take to clear assets and take ownership of the trust
  10. Who is the executor of my estate?
  11. Do I have a burial plot paid for?
  12. Does anyone owe me money, and how can you find out?
  13. Where do I keep my tax returns and who prepares them?
  14. Does Social Security pay a death benefit to you upon my death?
  15. How much will Social Security pay you when I die, and why/when?
  16. What attorney should you use and what will be his/her average costs to settle the estate?
  17. Where will the funeral be held and what will it cost?

Now you may be thinking that some of these questions most couples would know the answer to, together. But you might be surprised by how many spouses stay completely out of the finances and let the other partner handle everything. When their spouse dies, they have no idea what to do or what problems they may have to handle.  Asking these questions gets you both thinking and gives you a chance to review exactly what each partner knows or doesn’t know and what needs to be done to get on top of things financially so BOTH people are taking responsibility for the financial success of the marriage.

I urge yo to take this challenge in the New Year as a catalyst for getting completely and totally organized financially. For more ideas on financial organization, contact me at peter@moneymastery.com. The Money Mastery Master Planner organizational system I use personally and with my clients will totally change your life and help make 2017 the best year ever!

Baby Boomers Are Silently Looking to Their Children to Bail Them Out Financially…

Fact: It is a fact that our children were not around when Baby Boomers instituted Social Security benefits for all.  Baby Boomers made this promise to themselves.  Sadly and very soon, our children are going to start waking up to this fact.  Why should they pay for this mistake?  Baby Boomers have failed to save for retirement, thus they are working into their 70’s and beyond and are putting a tax and financial strain on the younger generation.

Fact: The cost of higher education has grown twice as fast as inflation.  When the average college student graduates they owe, on the average, $35,000. Really ponder this statistic:  94 percent of those graduating with a bachelor’s degree are in debt.

Fact; Consider when Baby Boomers die, they sell their homes and securities.  This is putting downward pressure on values both in real estate and the stock markets.  Our children have not fully seen how this is going to negatively affect them just yet, especially since the first wave of Baby Boomers are just now starting to die. When more pass on, the impact of Baby Boomer deaths on the economy is going to become very clear as our children’s health care costs soar and housing prices plummet. 

What does all this mean? It means that silently the Baby Boomers have been asking the younger generation to bail them out for their financial irresponsibility for years now, and they’ve been doing it in a way that isn’t quite yet clear to those who are coming up behind them. Our children really don’t realize yet what it means for our government to keep over spending and for taxes to continue rising higher and higher to pay for socialized medicine, but they soon will…

Ten thousand people turn age 65 each and every day.  Consider this post as a warning to those people younger than 60 who are coming up behind these retiring 65-year-olds. In the next 10 years things are going to get nasty financially speaking in this country and the only way to survive the mess the Boomers and the government have created is to get personally prepared so you won’t be swept away by all of it. Think about the following as a means to do this:

  • Remove yourself from the herd right now. That means stop thinking 401(k) for retirement. It means stop spending with abandon as perhaps your parents have done for the last 25 years. It means stop getting in over your head with credit and get out of debt now.
  • Start thinking like your grandparents and great grandparents in terms of frugal living. Get away from the idea that you can always having everything your little heart desires, and start embracing the fact that money and resources may not always be at your fingertips — think more self reliance and Great Depression and less consumerism and “gotta have it now.”
  • Get emergency savings in place now. Don’t wait any longer to put away at least 3 month’s salary and as much as 6 if you can possibly manage it. On top of that, put a few stores away in the form of food and basic necessities, in case you lose your job and can’t find another one for a while.
  • In the new year, begin to manage your money in a new way.  Think Spending Plan, Debt Plan, and Savings/Retirement Plan and discover how all these must work together  at the same time.  Go here to discover why.

I am optimistic about freedom and the American Dream, but problems and pressures will come along we have not experienced in our lifetimes, problems only our grandparents and great grandparents understand.  When economic disaster hits cash is KING and the only way to get that cash is to start managing your finances differently today than you EVER have before. Learn how to create a cash surplus now by contacting me: peter@moneymastery.com.

Retirement Questions Answered by an Experienced Financial Adviser

Are people shocked with the amount of taxes to be paid when they retire?  Yes, and no.  Some people have not accumulated very much money for retirement so taxes will not be an issue.  But for those who have saved all their money into a 401(k), yes, they will be very shocked when they see taxes going from 15 percent to 25 percent whenTaxes they add their Social Security benefits on top of everything.

What happens to people reaching age 70?  Once a person reaches age 70.5 years old, they are required to take out money and pay tax on all deferred accounts, like a 401(k).  This percent of taxes to be paid on the balance grows as they get older so by age 80 it’s close to 12 percent of the balance.

Why should retired people stay below the 15% tax bracket?  Because this is the first level of tax, and it goes up close to the $75,000 income range.  So if a person gets close to this level, it’s best to find a way to pay tax-deductible items before the end of year so as not to be bumped into the 25 percent bracket.

When should a person consider a Roth IRA?  Tax planning means to know where your level of income will be and convert funds in a deferred account to a Roth IRA years before, and do it systematically so the amount you convert is as low as you can get it, but still get the job done.

Where should I take income for retirement first, a regular bank account, mutual funds, or a tax-deferred account like a shutterstock_128683532 (534x800)401(k)? It is best to even out your taxes over the years.  If all you do is defer everything, then at retirement and especially when age 70.5 arrives, the taxes will be much higher than you have paid in the past.  This really hurts to get to retirement and have to ask yourself, “Why didn’t anyone tell me about this before now?”

What are some surprises most people find out at retirement?  People find they must have a spending plan, or they will run out of money.  Up until retirement they could get along, wing-it a little because they might get a pay raise or a bonus or a large tax refund that gave them extra money to do fun things with.  But at retirement those extras go away unless you plan for them in your spending.

Anything else that may surprise people reaching retirement?  The biggest problem I see when people retire, then spend some money their first year, is finding out that within seven to eight years they will likely be entirely out of money!   They kind of know this, but it hits them hard after the first year in retirement.

What can a person do when they see they will run out of moneyscreen-shot-2016-09-16-at-2-31-17-pm
in 7 years at retirement?
  They can slow their spending, get a part-time job making extra income, sell an asset, or possibly get a reverse mortgage on their home to pull out extra money and turn this into income.  Many other ideas are available, but a person will have to be creative, and will need help from an experienced financial coach.

Will you be willing to answer my personal questions about retirement?  Sure! It is hard for people to work at a job and learn all the rules about retirement.  They work hard and come home tired and the last thing they want to do is do research on tax codes or call creditors and ask what happens when they retire. All I do is study various options surrounding retirement decisions and have coached thousands of people on how to apply these options wisely and responsibly for the past 35 years; this is my life and I’m happy to share my knowledge with you. Contact me today for a no-cost conversation:  peter@moneymastery.com. I will bring you more examples and ideas to the table of how to make income work, even if you think you might arrive broke at retirement.

What Will You Do about Money If You Live to Be 100?

Experts think that any of us living today, who reaches age 65, healthy and vibrant, will easily make it to age 100.  Whoa! That will change things financially, to say the least.  In the “old days,” between 1960 and 1980, people who reached retirement age lived just four to eight years past retirement to about 69 for men, and 72 for women. It wasn’t too big of a stretch to have between five and 10 years of retirement income saved . But consider working 35 years, then retiring for 35 years instead of just 5 to 10.  I read an article in 1983 that said by the year 2000, many people would be retired as long as they worked. At the time I balked at that idea — NO WAY! I thought. But the fact is, those numbers are a reality now and that longer retirement period is presenting some very challenging problems we all need to think about:

  1. How will you afford to live 35 years into retirement? 
  2. Will you need to work more years than you had originally planned, until age 75, for instance? What if you can’t because of poor health?
  3. Will you have to reduce your living costs drastically to make ends meet?
  4. What about inflation? If the inflation rate keeps averaging 5 percent screen-shot-2016-09-16-at-2-31-17-pmper year as it has been doing, living on a fixed income for 35 years is not going to work very well.
  5. People may be living longer, but especially in the United States, where the standard American diet is so poor, you won’t be living to
    a ripe old age in good health. What if you’re one in four people who will require long-term care? This is expensive at between $2,500 and $6,000 per month.
  6. Social Security will be bankrupt in 2034, according to the Social Security Administration’s annual report, so what do you do if you can’t count on even that income in retirement?
  7. If you are one of the many retired persons who is divorced, what will you do to live on just one retirement income instead of two?

The old way of looking at retirement planning may not work for you anymore. Trying to save using a basic 401(k) is passe. It’s time to get creative and look at real estate, life insurance, annuities, and leasable resources as other options for creating a predictable retirement you can’t outlive. I suggest you read the book MONEY, What Financial Experts Will Never Tell You Full of case stories and practical, holistic approaches to financial planning and retirement that are easy to apply, this book is a BookCovermust-read. Get it in time for Christmas and give it to your kids as well. They will for sure be living longer than you, in most cases, and will have to be ready for a long retirement period. Why not prepare them for that now?  Get going, as time will keep marching forward. Will you be pleasantly surprised when you reach retirement age, or will you be horrified and shocked at what you have done to yourself financially by not taking things seriously today?

What Impact Are the Baby Boomers Going to Have on You?

The oldest Boomer was born in 1946, just after World War II and is age 70 today.  The youngest Boomer was born in 1964 and is age 52 today.  There are 78,000,000 Boomers that make up 29 percent of the U.S. population.  Those are the statistics, so what do they mean to you?

I have three older brothers. They were bigger, stronger and faster than me in every way.  I looked up to them and tried to match what they did:  swimming, tennis, basketball, etc.  I did not realize for many years that they stretched me into being better than I would have ever been.  The same can be true for you, too, if you will watch and learn from the Baby Boomer generation; you will learn both good and bad from their example. The way they have handled retirement savings, for instance, is not looking good.  The average Boomer reaching age 65 today has less than $60,000 in total assets, according to the U. S. Census of 2010.  This should be a sobering statistic to you, if you are younger than the Boomers, and a wake up call to do something different with your retirement than they have.

Another way you can learn from the “older” generation is what to do and not do with healthcare. Out-of-pocket costs for anyone reaching age 65, until death, are predicted to be $200,000 per person or $364,000 per couple. How can anyone with a paltry $60,000 in total assets pay for these costs? The answer is they can’t and that’s where it’s getting really messy for the Baby Boomers. Let me be clear about this figure as it hovers around the quarter-of-a-million-dollar range! Good grief! This is a shocking statistic that you need to take seriously, now, while you still have a chance. Now is the time to look into getting long-term care insurance or setting up a health savings account or exploring other options. I urge you to contact me for options:  peter@moneymatery.com.

And here’s another thing to think about in terms of how Baby Boomers will affect the housing market, potentially to your benefit. As the first wave of Boomers begin to die in the next few years, more and more houses will be coming on the market with fewer people to purchase them, causing prices to go down. Author Harry Dent has said about the aging of America that when when people die, they certainly don’t buy anything ever again.  Or said succinctly, dyers are not buyers.  Get prepared now to take advantage of options that will come available to those who have the financial capital to act on those options due to the coming changes in the economy due to the changing demographics of the Boomer generation.