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Be Thankful for Your Problems, They Just Might be Opportunities in Disguise

We’ve all heard the age-old question:

“Is the glass half empty or half full?”

Well, the answer really depends on how you look at it. If you are grateful for at least one-half of a glass of water, you will be careful and drink it slowly and not tip it over. But if you are discouraged that you only have half of a glass of water, you might disregard it altogether. The point is, we can learn to make the most of what we have or we can be angry that we don’t have more and squander all of it all together.

Here’s a few examples of what I mean:

Problems at work:  Problems at work actually provide you and your family with the income to take care of the needs of life and more importantly, the opportunity to create more wealth. You can focus on the unpleasantness of certain coworkers, products not working as they should, or the mistakes you and others make. Or you can be grateful to have a job and learn to solve problems. Problem-solving promotes growth and learning. Negativity only drags everyone down.  Why not soar like an eagle by simply looking at work problems as opportunities?

Health problems:  Okay, so these can be a real bummer and do limit opportunities, or so it seems. But with all of the advances in today’s healthcare, the difficulty is much less than it once was. Remember that your great-grandfather had to have his teeth pulled when they decayed because filling a cavity wasn’t an option 100 years ago. Rotted teeth had to be removed so they wouldn’t infect the rest of the body and result in a painful and terrible death! Imagine, just 75 to 100 years ago, dental care was that archaic. George Washington once carved wooden teeth that he would bite down hard upon to force them betweengeorgewashington his good teeth so he could chew! Now we enjoy so many advances in medical and dental care that we really should consider looking at the glass as being half full with regards to such problems. And with minimal planning of our personal finances, we can afford the insurance needed to take advantage of these wonderful advances.

Communication problems:  I think it’s so funny when I hear people complain about their terrible cell phone plan and how their coverage is so terrible, and on and on. Think back just 25 years ago… Let’s say you agree to meet your family at the state fair. You arrive on time at the gate but your family with the tickets doesn’t show. You wait for an hour and then decide to go home. Much later that night your family arrives home and tells you their sad story. Their car broke down one mile from meeting up with you. They thought they could fix it, but couldn’t. There was no way to communicate this with you. If they had access to a cell phone, like we do today, they would have been able to call you in 10 minutes and the problems would have been quickly solved.  Instead of looking at all the problems with modern day communication, how about being thankful for all the opportunities it presents us with? I am amazed every day at how much my life has been enriched financially and socially by the technology I use and enjoy every day, including the Internet, social media and cell phones.

There are hundreds more examples indicating how wonderful we have it today. So let’s examine the question again. Is the glass half empty, or half full? If you practice always keeping a happy and positive outlook opportunities will present themselves financially, socially, emotionally, and physically that you could never have imagined.  I promise… I learned this 50 years ago when I was terribly burned all over Peter2my body in a horrific car accident. During my long, and very hard recovery I had to learn to look at the glass as being half full or I truly would not have survived. This important life-lesson has been the guiding light that has directed the rest of my life, influencing greatly the opportunities I have had financially and in many other ways.

In the face of some very disturbing trends politically and financially in our country today, it is more important then ever to take a positive approach and learn all you can about possible solutions to difficult problems. For financial help, be sure to visit www.moneymastery.com today!

The Risk of Losing Use, Control, and Liquidity of Your Retirement Funds

One of the crazier things that happens in the American retirement system is that we turn over our money to investment firms, who then turn around and put the risk back onto us, but they still stand to gain as they make their money anyway. In the meantime, if we put that money into qualified retirement plans (like a 401(k), 403(b), traditional IRA, TSP, etc.), and we try to access it, we then usually pay taxes, an early withdrawal penalty, and/or we pay interest on our own money! We lose the use, control, and liquidity of our funds. If we had control of
Debtour money, we could do things like: pay off debt; acquire cash flow positive assets; make our own choices with our own money.

With all the debt that most Americans deal with, why are we locking up all our money in 401(k), IRA, and savings accounts that make us pay a penalty if we need to access them to pay off this debt?  The debt levels of many Americans are continuing to climb. Here are some debt statistics to chew on from Tim Chen at Nerd Wallet (2015):

U.S. household consumer debt profile:

  • Average credit card debt: $15,863
  • Average mortgage debt: $156,584
  • Average student loan debt: $33,090

In total, American consumers owe:

  • $11.86 trillion in debt, an increase of 1.9% from 2014
  • $901. billion in credit card debt
  • $8.17 trillion in mortgages
  • $1.21 trillion in student loans, an increase of 8.5% from 2014

Let’s think about a credit card with a 15 percent interest rate and a $5,000 balance. If you are carrying that, but you have $50,000 in a 401(k) earning a 3.8 percent cash-on-cash rate of return, you are still going into the hole -11.2 percent each year on that money! Let me put it another way, if you simply had access to those funds to pay off that credit card without a penalty, you could give yourself a 15 percent rate of return hike because you would stop paying interest!

Now, those on the other side of the argument, like the lawmakers and politicians, will say that if we allow the public to use their retirement money to pay off debt, no one will have enough money to retire! This is crazy in my opinion.  Imagine being told you don’t know enough to use your own money in the best way possible? How can we when we know this money is trapped?  This keeps us more in debt, so that even if we have been lucky enough to save up some money for retirement, Americans are still retiring in debt, which means they don’t have enough income to provide for their needs. This is partly because they don’t haveRiskGame the use of their own funds during their lifetime; they are either penalized or taxed for using it, or both.

If Americans had control of their own money, they could live without any debt, and redirect all the interest they are paying to banks back into their own families’ estates, and then create a rich legacy for themselves and their families. Since we have turned over our retirement money to Wall Street, we lose control over our future.

Losing the use, control, and liquidity of your money is another major risk to your retirement. Stay tuned for additional posts on risks you face with retirement funds and go to www.moneymastery.com for more information on debt and retirement planning.

 

Stocks to Crash Worldwide in 2016… Really?

A January 2016  article in the “Gold-Eagle” online newsletter by I.M. Vronsky emphatically states stocks will crash worldwide in 2016. Following is an excerpt from the article:

One of the most reliable truisms of stock markets worldwide is that “history is prologue”…and that market cycles are immutable…where only time and magnitude change.  During the past 20 years Wall Street has enjoyed three bull markets…and the first two were followed by devastating bear markets. Specifically, U.S. stocks fell 37% in the 2000-2002 bear market, while the DOW stocks index plummeted 54% in the 2007-2008 debacle. And it is imperative to take note that the current U.S. bull market is one of the longest secular uptrend periods in history of rising stock prices. Consequently, as history is testament, an eventual and inevitable bear market will soon follow.  What is probably unique this time is the fact that major stock markets worldwide appear to be moving in lethal concert with the U.S. in developing bear market trends of declining stocks.  

If you were to take at face value these predictions, and plot them as to when and how many you see, I wonder how many are correct?  One such group has only announced a crash coming and never an up-swing.  They will be “correct” anytime the market crashes because that is all they forecast.  Then they point to their printed record of calling the crash correctly.  This has caused me not to trust any of these prophecies.

Here is my summary of what this all means to you and me, on a personal level.  

  • Control your own spending and eliminate your own debt.
  • Take control of what you can and don’t worry about that which you do not control.

Trotty Veck once said:  “There are two things you should never worry about.  That which you have control of, and that which you don’t.”  I suggest you stay informed, but not to worry about these so-called “accurate” forecasters.  In my experience, they are going to be right one out of five times.

Simple Ways to Cut Down on Spending

If you have a hard time controlling how much money you spend, it might be because you’re not aware of the little expenses that add up over time — the little things are really what make it so difficult rather than big, lavish purchases. By changing your habits just a little bit, you can stop spending money on these little, near-daily expenses and start building a surplus that can be used to pay down debt and add  more to savings.

Here are a few simple ways you can cut down on spending:

  • Be smart at the grocery store. Try to buy items in bulk when they’re on sale if you know you’re going to need them in the future. Also, whenever possible, try to avoid brand-name products if there is a reasonable, comparable alternative in a generic brand. Make thorough lists before you go to the store so you only get what you need.  Beware, however of buying too much in bulk that could go wasted.
  • Bring your lunch to work. All it takes is about 10 minutes to prepare your lunch. Whether it’s through cooking a little extra for dinner the night before or waking up just a little bit earlier to make yourself a sandwich and pack some fruit, you’ll save a lot of money by not going out to lunch every day. People who create a historical pictureshutterstock_199803179 of their spending are always amazed at how much money they spend eating out every year.
  • Go out to eat less. Along the same lines, a spending plan will help you see how much you are spending on restaurant food and help you plan for special occasions rather than just routinely eating out.  It’s significantly less expensive to cook at home than to go out to eat. Try limiting yourself to once a week and see how that works. You’ll be amazed at how much money you save.
  • Carry cash. Studies have shown people will spend 30 percent more when they only ha1207ve a credit card on them. Sometimes credit and debit cards do not feel as “real” as hard, cold cash. By having cash in your wallet, you have an automatic limit on the amount of money you can spend.
  • Change your routine. If passing by Starbucks every morning is too much of a temptation, for example, try going to work a different way.
  • Do it yourself (DIY). Rather than paying other people to shovel your sidewalks, cut your grass, or do other simple tasks, do them yourself. You will save a lot of money and might learn some important skills along the way.

Need more tips for cutting down your spending? Contact us today at Money Mastery.


Emotional Reasoning Hurts All Financial Decision-making

Principle 1 of the 10 Money Mastery Principles states: SPENDING IS EMOTIONAL.  We all know this to be true, because we are emotional animals.  Life is far more fun when we are having grand emotional experiences like seeing a newborn baby, watching a sunset, eating a delicious new desert, or skydiving.  Our emotions are exciting  but they can also prove to be challenging, especially when it comes to money.  How hard was it for you the last time you had to explain to your spouse why you spent more than you had for something silly? Or how emotional did you get the last time you had to make an investing decision?

Consider what financial guru, Keith Fitz-Gerald, discovered from three university studies on the emotionality of money (taken from  Total Wealth,  May 14, 2015):

“Researchers at three major universities — Stanford, Carnegie Mellon and the University of Iowa — published findings showing that brain-damaged individuals made better investment decisions than the rest of us.

To be precise, what they studied was the impact of injuries that prevented the brains of the injured from processing emotional stimuli and, by implication, responses to those specific inputs. 

Researchers found that when they compared the findings to folks with no brain damage, the ‘injured’ individuals made significantly better investment decisions.

That’s because the human brain is wired to evaluate economic and investing information using connections and pathways that are closely linked to emotional inputs. You’d think this kind of decision-making would involve logical brain pathways but that’s not true.

This is why making decisions with your money can be very challenging, especially when the markets are complicated and the investing landscape emotionally charged like it is right now. Because you are taking what should be a logical decision and using emotional receptors to make it.

As co-author of the Money Mastery principles who has coached thousands of people on how to manage their own money with confidence and efficiency, I can tell you from experience that you should do everything you can NOT to use these “emotional receptors” when making financial decisions.

How can you avoid using these receptors?

  1. Build a spending plan.  Go back 12 months and examine theSavings Plan way you spent money over the last year.  See what “categories of spending” show up and then total the amount you spent in each category. See if anything surprises you.  Did you spend more money that you took in?  Did you spend far more money on eating out and fast food than you actually thought you did? Did you buy more clothes and spend more money on entertainment than you imagined? Yes… well let’s blame it on those pesky receptors.  If you will build a 12-month historical spending plan, then from that historical picture determine your values and priorities for spending going forward, you will be able to make spending decisions while you are in a fairly unemotional state. This will give you a better chance at eliminating those receptors at the point of purchase. A plan helps you use more of your logical brain when making financial decisions.
  2. Place your spending categories in a tracking system such as a phone APP, electronic device or on paper. This will allow you to easily record, at the point of purchase, every expenditure you make in each spending category and most importantly, see what you have left to spend in that category for the month, thus avoiding over-spending.  By looking at what you have to spend in monthly segments you can cut off emotions and see the effect your spending will have on other areas of spending and on your financial picture overall.

What about debt? How did you get into the debt in the first place?  Restore CreditWell, the answer is those pesky receptors.  The solution is to create a spending plan and track the plan. As you do, you will create a surplus that can be used to accelerate debt payoff. As long as you have surplus each month, you are not going deeper into debt and you can use the surplus to pay down debts much quicker.

What about retirement planning?  Most people take more time and effort planning their yearly vacation than they do their entire retirement future.  How can you hope to be successful if you never plan?  I know why many people don’t like to plan for retirement, they don’t know where to start, how to prepare the numbers, and haven’t saved anywhere near enough, so they avoid this subject all together. However, when I help them take the emotion out of this by teaching them how to build their own retirement plan (which is based on things they absolutely control right now such as spending and debt) they get excited about all the possibility their future holds.

All of us can eliminate the emotions that undermine financial decisions by doing everything the Money Mastery way, or we can get in an accident and have head injury. Both will help take the emotional drama out of money — you decide which route you’d like to take.