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Know the Rules about Your Privacy… Or Lack Thereof

Money Mastery Principle 5 teaches: Know the Rules. In this post, I will illustrate the importance of knowing the rules when it comes to your financial privacy.

Following is a redacted privacy policy that you will notice is pretty much the same as every other privacy statement you have ever come across.  At the top the publisher will reference federal law that gives consumers the right to limit sharing of their personal information, “but not all sharing.”  

What this means is that federal law allows marketing to you at every level unless you know the entity’s particular rules of privacy and take action against them.  Examine this privacy notice and you will see you can only limit three things:

  1. “Our affiliates’ everyday business purposes;
  2. “Our affiliates to market to you; and
  3. “Non-affiliates to market to you.” 

Neither you nor I can maintain the actual privacy of our personal information!  Pretty much anyone can use your Social Security number and income, account balances and payment history, and transaction or loss history and credit scores.   This is horrible!

Okay, but you may say, “but look, they provide a phone number to call and ask to limit your information towards the bottom of the notice.”  My response to that is, “so what?”  Look at all the ways they can still share and sell your information off to so many other marketing organizations!!

Research shows that the vendor can sell your information off for some small fee.  Let’s use 17 cents for each purchase of your private information.  I use 17 cents because if you go to buy qualified information this is a standard rate that’s often used. Run the calculations:  This vendor sells your private information once a day for the entire year.  This means your personal information just paid the vendor $62 that year.  In other words, your personal Social Security number, income and payment history, and credit scores just made them a profit of $62.  Now can you see why you get so much junk mail?  Can you see why you get spammed and marketed all day long?

Can you do anything about junk mail offers?  You cannot stop them.  If you send the offer back as “return mail” and tell them to stop then they know this is a good address and will keep sending marketing materials.

Can you do anything about marketing offers through your email? You can block the sender and even report spam, but surely they are smarter than all that reporting.  All they have to do is move your personal information over to a new URL and start again.

What is the worth of federal law limiting your privacy?  I think it is not worth the paper it is printed on.  Nevertheless, I still make the phone calls and limit what I can and feel you should, too.  There needs to be more discussion and further legislation to prohibit this travesty. While not much can be done at this point, at least knowing the rules will put you in a position to take action and try to fix problems when the opportunity arises. Not knowing the problems prevents you from doing anything about them should the chance ver arise. 

5 Ways to Make Sure You Know the Rules of the Financial Games You Are Playing

Knowing the rules of the game is one of the 10 Money Mastery Principles I teach my clients.  As simple as it sounds, you wouldn’t believe how many people do not understand this concept or who think it’s not that important. What you don’t know CAN hurt you, and I can personally attest to that. It is vital that you understand the contracts you have entered into when it comes to your mortgage, credit card usage, and insurance policies. If you don’t understand the rules, those who do (namely insurance companies, banks, and mortgage lenders) will run right over the top of you in an effort to get more money out of you.

Here are 5 things you should do to make sure you always “know the rules:”

  1. Don’t get overwhelmed by the amount of information you need to know. Remember, you don’t have to know everything, you just need to begin by knowing something.
  2. Take the time to learn the rules. It usually only takes 30 minutes to learn what you absolutely need to know in order to make informed decisions.
  3. Don’t trust others to know the rules for you. Take responsibility for your own financial well being and do what is necessary to ensure success: hire a professional if needed to help you understand the rules. This can usually be done for as little as $300.
  4. Do first things first. Avoid the temptation to dabble in risky behavior before you are secure enough financially to afford that behavior. Pay off high-rate credit card debts first and know the rules of the credit card game before you play it.
  5. Give yourself 24 hours to consider a financial decision. Never feel pressured to make an important financial decision on the spot. Take 24 hours or overnight to consider all the issues to which you will be obligated by signing a contract, and re-read anything related to the rules of that contract before signing.

Why You Must Know the Rules of the Financial Games You Are Playing

For the last several posts, I have been expounded on 10 financial principles that are absolute and unchanging and that if applied will dramatically change your financial life.  Today’s post will cover Principle 5:  

Know the Rules.  This principle teaches that you do not need to know everything financial but you do need to know where to go for information that is important for you — that means reading and understanding all contracts you enter into and relying on financial mentors and professionals as needed. In today’s world of easy credit many people feel they are entitled to play very complex financial games, like using a credit card for example, without paying the price to learn the rules of that game. Ask questions!  The answers could be worth thousands of dollars to you.

Today everything is fast-paced and technology is changing so fast it is hard to keep up with.  But keep up we must.  Financially speaking, we must take the initiative to know what is happening while it is happening.  If we act like the ostrich and bury our head in the sand, we will get run over by a freight train, flattened more than a pancake!  Don’t put your head in the sand. Instead be proactive when it comes to money matters.

Screen shot 2016-08-08 at 5.11.53 PMWhat do I mean by “know the rules?” Let’s use dice to illustrate what it means to know the rules of the financial games we play. Do you know what is on the opposite side of the number 2 on a die?  And what is opposite of number 3?  The rule of dice is that the opposite sides always add up to the number 7.   Managing money is just the same.  Learn the money rules and know in advance what is on the back side of your decision without having to sweat so much of what you now worry you don’t know.

So often people don’t take the initiative to learn the rules in advance of needing them.  Sometimes we trust someone else to help us make our decisions, when we could have taken a little time and read, interviewed or asked for counsel from a professional.  Don’t allow laziness to cost you big bucks through inaction.  Contact me for more information:  peter@moneymastery.com.

Welcome Change, Then Manage It

Did you know…

Technology is increasing so fast now that the average employee’s position will be replaced or changed every six-and-a-half years? This according to Paul Zane Pilzer in his book God Wants You To Be Rich.   “Did you know that one 1915 workersdaily newspaper has more information about the world than all the knowledge your grandparents learned in a lifetime!” says Pilzer.  That’s just plain crazy! And amazing to think that somehow we are dealing with all of it.

The world has changed rapidly over the past 60 years and those who want to succeed will have to change with it.

For example, in 1985 there were approximately 100,000 people employed in a $2 billion industry manufacturing vinyl records. But by 1990, virtually all these workers had been displaced as the digital CD swept the music world. Who could have foreseen in 1985 that an almost 100 year-old industry that had survived two world wars would dissolve itself in less than five years?

The manufacturing and repairing of mechanical carburetors is another example of how quickly things can change. Electronic fuel injectors, created in the 1980s, have replaced carburetors with cheaper pricing, double the gas mileage and virtually no repairs. Fuel injectors cut air pollution in half and seldom break down. And the most important benefit is that they are less dependent upon oil. The only people who complained when the fuel injector came along were the mechanics and engineers who did not have the skill or will to learn about them. The rest of the world has adapted nicely!

In 1929, when the stock market crashed and the Great Depression began, GreatDepressionmany people who had cash on hand made a killing buying properties during forced liquidation sales. In other words, they took advantage of a changing economic market and fared well while others suffered. This was only possible because they were prepared for change.

You too can take advantage of change by ridding yourself of debt and being prepared for the future with a reserve savings account. Learn to welcome change. Work with change. Don’t shy away from it or become intimidated by it.

Money Mastery Principle 6 teaches that the rules are always changing, so be sure to follow these tips in welcoming and dealing wisely with change:

  • Put forth the effort to know the rules.
  • Realize that the rules will always change!
  • Don’t be afraid of change — embrace it.
  • Keep up-to-date on changes in your career field
  • Always keep the BIG PICTURE in mind.

You Are Your Best Bet When It Comes to Managing Your Money…

I have seen a trend developing  as I work with my clients that seems to be getting more popular — that of turning the management of personal finances over to others. The idea of getting rich “automatically” through the automated deduction and deposit of appropriate amounts of money into and out of various debt reduction and savings programs is particularly compelling.

It’s an idea that’s garnering a lot of attention these days from individuals and families that are confused by what they need to do to manage their own money, and enticed by the idea that an entity other than themselves will do the work required to help them succeed financially. They assume falsely that other people should know the rules of the complex financial games they are playing and will be kind enough to share all of them.

They often trust their economic well being to strangers for several reasons: 

1. They lack the knowledge they need to be confident in the financial choices they must make.

2. They lack the discipline to take appropriate action for themselves.

3. They trust that others, including insurance brokers, investment brokers, financial advisors, and financial institutions will do better at managing their money than they will.

4. They trust in a system that pays compounding interest on savings and investments without considering to what degree that system is subject to market downturns, inflation, taxes, fund management fees, and outright corruption.

5. They assume that other people will have enough interest to take care of their money as well as they would themselves.

What I have found  is that all of these notions are extremely risky, and that itshutterstock 2_160261025 is always better for an individual to work to protect and grow his or her own money rather than trusting other people and programs to do so.

Of course, as you go about making financial decisions, you are required to trust others to some degree. However, trust is composed of two elements:

  • Trust that the person or entity providing the service won’t try to cheat you.
  • Trust in the competency of that person or entity to deliver as promised.

My experience shows that people must be on guard in both areas. Although the vendors that provide the financial products and programs you buy into (such as investments, credit card programs, insurance policies, etc.) aren’t usually trying to cheat you, the biggest risk you take in trusting others with your money is their own incompetence.

One of my clients I’ll call Maria, was an account executive from Miami, Florida and learned this lesson for herself when she filed her tax returns one year. She filed her forms using a CPA to help her and told me she had felt comfortable with everything the accountant had done, but she just had a feeling she should look over them before she mailed them. That’s when Maria discovered a big error, in her favor. Once that error was corrected, Maria received $3,500 instead of a mere $1,800 she would have gotten back if she had not decided to check the documents herself.

Another couple I worked with that I’ll call the Tamakis learned the hard way about trusting others to disclose everything they needed to know to make a sound financial decision. They decided to refinance their home in order to consolidate debt. Their credit was immaculate so they knew they qualified for the  7 percent interest rate (which was considered low at the time). When it came time to close the loan, they were informed that the best rate they could get was 9 percent. The Tamakis were shocked by this, but when they questioned the rate, the loan officer claimed that their were some glitches on their credit report that prevented them from getting the lower rate. Embarrassed, they asked no further questions and didn’t even check their own credit report; they simply began making payments.

A few years later, after I had begun coaching them and they had started applying certain financial principles, they decided to have their loan checked out by a mortgage specialist. The specialist discovered that the Tamakis were completely qualified for a 7 percent loan, but that the lender had charged the 9 percent rate in order to arrange an inflated brokerage fee of $14,000. shutterstock_250088392Because he had disclosed the extra 2 percent up front and the Tamakis had not questioned it, he got away with $13,000 more in brokerage fees than he was entitled to. The Tamakis cried foul and the lender promptly revised the loan, negating nearly $11,000 in excessive fees.

Knowing the rules and not being afraid to question are vital in today’s world where many people will deal with you legally, but not always ethically. Remember, other people who know the rules will often take advantage of those who don’t. And while the notion of entrusting your money to automatic savings and investment programs seems enticing, and allowing others to take care of your taxes, retirement, debt elimination and other financial concerns seems easier than taking responsibility yourself, only you can ensure that you will keep the money you are already making, and have the opportunity to make much more.  

“Beet Thinning” Your Retirement Planning…

We have too much information available to us today, especially when it comes to retirement planning.  This gives us a false sense of confidence, so we think we can “do it ourselves.” But human nature shows that when we have too much on our plates of which we don’t understand, we procrastinate making decisions. Having lots of information often causes confusion.

Let me illustrate what I mean with an experience I had growing up in Idaho with beet-thinning. Our neighbor had planted a big field of beets and hired some of our family to thin their beets.  They explained to us that if we did not thin the beets, by cutting out two for every three beets growing, none would grow big enough to eat.  I tested this theory and left a few beets over in the corner of the field untouched, just to see what would happen.  Sure enough, the beets got so crowded in the dirt with each other, that when I harvested, they were all stuck together and tiny. By contrast, the beets we thinned grew big and were wonderful upon harvesting, so large as to dwarf the small ones.

Thinning beets taught me a grand lesson about planning for retirement. The secret to good retirement planning is not in the gathering and collecting of adequate information but in thinning out all the stupid and wrong information that will do you no good.  It is the process of “thinning” where we learn the most and can make the best decisions.  Do the research to gather information about retirement, but then thin it out until you have the few golden nuggets that make the most sense for your personal situation. Not everything that you read about applies to you.  Think thin, to have more!

“Forever Learning” Is Exciting…

As I proceeded through college, I recognize now, many years later, that it was there that I learned how to learn.  The subjects were generally helpful, but innovations and technology have out-paced most everything I was taught at the university. What I really received from my education was a desire to learn and the how-to behind learning.

An example from my university education that shows how technology has made specific subject matter obsolete was the way I was taught to program Fortran at the university, a computer language  that was recognized by a computer in 1975, by punching holes into a thick card.   The computer Fortran worked on was as big as an entire room!  And you had to keep the cards in the right order, or nothing worked.  I remember having to learn how to flow-chart my simple mathematics problem on a piece of paper, then transfer that to a key-punch typewriter to create the program.  Today, all of that technology is more than obsolete. But what I learned by doing this new programming 40 years ago that remains as relevant and fresh today as it was then, was to “flow chart” my ideas first, then input the data.  I have used that principle many times since — getting my idea in simple terms in front of me first, then working on the rest of the details to complete a project. The computer programming language may be gone, but the powerful organizational principle behind it remains. This is what I mean when I say I learned “how to learn” from these educational experiences.

Such experiences have set up a “forever learning” attitude in me. If we do not continue to read books, go to continuing education classes, check out searchshutterstock_166288760 (640x427) engines and explore on our own, we will be ineffective at solving the problems of today.  For example, my mother is age 93.  She has never had a desire to have an email address, or do social media.  However, we children purchased her a smart phone and she loves looking at all the pictures posted onto Instagram by all her grandchildren.  In a sense, even though she has resisted modern technology to some degree, she is benefiting from embracing a “forever learning” attitude by allowing herself to take advantage of new opportunities for information distribution. If my mother at age 93 can use a smart phone, certainly the rest of us can take advantage of all the tools and technology available to us to continue our search for knowledge.

A few years ago I became familiar with www.Kahnacademy.org, www.mooc-list.com, and many other Web sites that have free training on tons of subjects from highly accredited institutions like Harvard, Yale, Northwestern University, etc.  The resources available for anyone who has access to the Internet is nothing short of a miracle.

Now, when it comes to financial education, there is certainly no excuse these days for ignorance, since we have access to so many information resources. As Money Master Principle 5 teaches, you must know the rules of the financial games you are playing. If you don’t know the rules but the other people who are playing the game with you, such as credit card companies, mortgage lenders, and banks, you are going to be taken advantage by them and you’re going to get burned.

There are all kinds of information sources out there that make it easy to get knowledgeable about your own personal financial situation. You do not need to know everything, but you do need to know something, and that something is how you are dealing with your spending, borrowing, savings, and taxes. If you do not know how to manage your spending, while at the same time getting out of debt and saving for the future, all while reducing your taxes, then you need to get that knowledge. Contact me if you want to learn more because each of these four areas must work together at the same time. If they don’t, it won’t matter how much you learn, you won’t be learning the right things, which is the same as not learning at all.

I read a bumper sticker that said, “If you think education is expensive, try ignorance.”  This is so true.  It is so important to keep learning and growing and trying new things.  New-found knowledge and abilities can add a lot of zest and excitement to your life.

What You Don’t Know about Social Security Could be Hurting Your Retirement

We hear so many people today say that Social Security is just not going to be there. Further, most people approaching retirement are nervous about how to maximize their Social Security benefits. And then there is the problem of taxation on benefits as they are received. What to do?

I would like to make a case for the fact that Social Security benefits can be a huge value to you, and may provide a good foundation for your retirement income.

First, let me address the ability of the Social Security Administration (SSA) to pay the amount of income they now forecast for you on your statement of benefits. Here’s what the SSA says on its Web site:

“Without changes, in 2033 the Social Security Trust Fund will be able to pay only about 77 cents for each dollar of scheduled benefits. We need to resolve these issues soon to make sure Social Security continues to provide a foundation of protection for future generations.”

My assumption from this statement is that there isn’t a “cliff” that our nation will get to at some point in the future and all of a sudden everyone falls off and no one gets any more benefits at all. What it sounds like is we will get something, but maybe not what is currently projected. We need not assume that there won’t be anything at all but we can’t expect to be paid everything that is owed.

Second, in light of reduced payouts, allow me to discuss my observations about how you can maximize your Social Security benefits. Few people know anything about what the rules are surrounding Social Security (and it is vital that you know the rules of the financial games you are playing as taught by Money Mastery Principle #5: Know the Rules). We hear a lot but do not know anything for sshutterstock_284334773ure. This means we all need to study a competent source that will guide us in making good decisions. I suggest you study up on what the SSA says about your benefts, and then visit face-to-face with a person at the SSA office in your local neighborhood. Ask questions, get documentation, then once you feel you can talk intelligently about Social Security, go to a different qualified source outside the SSA and get their perspective as well.

What can knowing the rules in this case be worth to you? Studies show that most people lose an average of $30,000 of Social Security benefits by not knowing they even exist. Read, review, study, visit competent sources and be prepared before you reach age 62, the earliest age you can receive these benefits.

Third, be aware of the way SS benefits can be taxed. If you make too much income from other sources, your Social Security benefits will be subject to income tax and this can have an impact on your retirement. This usually happens only if you have other substantial income. There is more information about this at http://www.ssa.gov/planners/taxes.html. In future blogs I will explain in more detail the impact taxation can have on Social Security benefits.