Members and their kids keep asking me this question.
Consider two choices: 401k with matching money and Roth IRA.
If your 401k has no match, skip it. Yes, a 401k does reduce your income for tax purposes now and lets your eggs grow tax-deferred. If you invest 10% of your gross, say $3000 a year, you could have $1.2 million in 35 years. However, when you take it out, you may pay 25% or more in federal and state income tax. (We will likely pay Bush’s ‘free ride for the rich’ in the future.) Your tax rate is lower now. Pay the tax on the $3,000 now and avoid tax on the $1.2 million later. Inflation takes HALF your buying power every 25 years, so a MILLION BUCKS won’t buy what it used to. So add $10 a month every year to make up for inflation.
Matching funds from your employer is FREE money! Take it. If you receive 50% on your first 5% of salary, that’s $750 a year. Add that to your 10%--$3,000--and you may find $1.5 million in 35 years. You may have to pay $388,000 in tax on that, but at least you will have $1.2 million to enjoy for the rest of your life.
No matter what you do—401k with match or Roth IRA--success in retirement savings is just a matter of sticking with it. Put your savings and investing on automatic and your retirement income will be assured. Your employer or mutual fund trustee can debit your account monthly for the $250 and you don’t have to worry about retirement again. Our members show you how they did it. They bought “assets that grew by themselves.” They didn’t have to rely on bad investment advice. They didn’t have to write a monthly check.
Start TODAY! It takes 30 minutes. I will email you our FREE Guide: http://www.theinsidersguides.com/freeguide.html
Monday, April 28, 2008
Thursday, April 3, 2008
Never BUY Retail
Don't waste your money!
Did you know that your auto insurance premium includes coverages that you already have? Most of us are paying $574 for medical coverage, towing, death benefits we already have. Did you know your life insurance premium may include extra premium for Triple X reserves you don't need? Your annuity may be costing you an extra $600 a year, or $20,000 in your lifetime. You could be paying an extra $2,540 for mutual fund fees each year without any benefits. These extra costs add up to $500,000 over your lifetime. These are a few of the actual savings our members have experienced in 2007.
Our experts in banking, mortgage, education funding, mutual funds, securities, annuity, insurance—life, health, disability, long term care, vehicle, homeowner’s, business, lawsuit—vehicle purchase, estate legacy, wealth transfer, retirement spending show you exactly how to save $3,000 a year on the financial services you currently use, using our Internet interactive Guides on disc. You can automatically redirect the amount you used to waste to low-cost mutual funds, which can compound earnings to over $1 million over time. (See the actual returns chart at TheInsidersGuides.com/doityofi.html.)
Our Insiders explain how you can control your financial services costs and protect your family from risks using the products they use. Because of changes in the industry, you can buy where the professionals do—from the highest-rated firms with the lowest fees and commissions. Your advisors can’t offer these products because there are no retail commissions and fees. You can compound the earnings to build your own Wealth Reserve. Your Wealth Reserve can grow to $1 million or more over time. The Wealth Reserve serves as your “self-insurance” fund for your deductibles and supplemental retirement expenses, final expenses and your legacy. Every $100 invested is worth $10,000 later.
An example illustrates how we help members save money and use the savings to enhance their own financial situation, not the seller’s position.
Let’s say you bought MetLife insurance because you believe the agent and company are the best. You think, “MetLife is large and can last at least until I need them to pay the benefit.” However, is it worth paying an extra $17,970 on your level term policy? There are customer-friendly carriers, rated A+, the same as MetLife, charging $384 vs. MetLife’s $983 for the same $300,000 30-year term policy.
Investing your savings of $599 ($983-$384) in your Wealth Reserve for 30 years in a market index (average return) can provide an extra $175,000 for YOUR dreams not the seller’s. Do you get what you pay for? We think not. It is the same $300,000 benefit check to your family.
I am convinced that if most people considered the facts, they would take the money and drop their current policy or account. In this example, the other company has the same AM Best rating of financial strength. Its agents are also available by phone. The same regulator approves its rates. Thousands of policyholders receive benefits from the other company. The only difference is that the other company doesn’t have high expenses: expensive advertising, mascots and senior management.
I think that most people are missing the BIG secret of becoming wealthy—the miracle of compounding. $100 can become $10,000 in time. If all of us knew that over time, we could have a $250,000 Wealth Reserve within 15 to 20 years, we would become copious savers by age 8!! Since it is never too late to learn the “tricks of the trade” and save thousands of dollars, any person can become financially independent. By using our Insiders’ expertise, you can save on services you already own.
Our Insider’s Guides provide the names of financial products and services that are the best solutions for most working people. They explain why this is true. Then they explain where and how to buy products and services that can meet your needs. They help you buy ONLY what you need. You skip the extras that cost more but don’t help you. You buy from the best providers with the highest ratings. They also tell you which products to avoid and why they are NOT your best alternative. The Insider’s Guides cover almost all financial products and services available to you.
Buy only what you need—Never BUY retail
Did you know that your auto insurance premium includes coverages that you already have? Most of us are paying $574 for medical coverage, towing, death benefits we already have. Did you know your life insurance premium may include extra premium for Triple X reserves you don't need? Your annuity may be costing you an extra $600 a year, or $20,000 in your lifetime. You could be paying an extra $2,540 for mutual fund fees each year without any benefits. These extra costs add up to $500,000 over your lifetime. These are a few of the actual savings our members have experienced in 2007.
Our experts in banking, mortgage, education funding, mutual funds, securities, annuity, insurance—life, health, disability, long term care, vehicle, homeowner’s, business, lawsuit—vehicle purchase, estate legacy, wealth transfer, retirement spending show you exactly how to save $3,000 a year on the financial services you currently use, using our Internet interactive Guides on disc. You can automatically redirect the amount you used to waste to low-cost mutual funds, which can compound earnings to over $1 million over time. (See the actual returns chart at TheInsidersGuides.com/doityofi.html.)
Our Insiders explain how you can control your financial services costs and protect your family from risks using the products they use. Because of changes in the industry, you can buy where the professionals do—from the highest-rated firms with the lowest fees and commissions. Your advisors can’t offer these products because there are no retail commissions and fees. You can compound the earnings to build your own Wealth Reserve. Your Wealth Reserve can grow to $1 million or more over time. The Wealth Reserve serves as your “self-insurance” fund for your deductibles and supplemental retirement expenses, final expenses and your legacy. Every $100 invested is worth $10,000 later.
An example illustrates how we help members save money and use the savings to enhance their own financial situation, not the seller’s position.
Let’s say you bought MetLife insurance because you believe the agent and company are the best. You think, “MetLife is large and can last at least until I need them to pay the benefit.” However, is it worth paying an extra $17,970 on your level term policy? There are customer-friendly carriers, rated A+, the same as MetLife, charging $384 vs. MetLife’s $983 for the same $300,000 30-year term policy.
Investing your savings of $599 ($983-$384) in your Wealth Reserve for 30 years in a market index (average return) can provide an extra $175,000 for YOUR dreams not the seller’s. Do you get what you pay for? We think not. It is the same $300,000 benefit check to your family.
I am convinced that if most people considered the facts, they would take the money and drop their current policy or account. In this example, the other company has the same AM Best rating of financial strength. Its agents are also available by phone. The same regulator approves its rates. Thousands of policyholders receive benefits from the other company. The only difference is that the other company doesn’t have high expenses: expensive advertising, mascots and senior management.
I think that most people are missing the BIG secret of becoming wealthy—the miracle of compounding. $100 can become $10,000 in time. If all of us knew that over time, we could have a $250,000 Wealth Reserve within 15 to 20 years, we would become copious savers by age 8!! Since it is never too late to learn the “tricks of the trade” and save thousands of dollars, any person can become financially independent. By using our Insiders’ expertise, you can save on services you already own.
Our Insider’s Guides provide the names of financial products and services that are the best solutions for most working people. They explain why this is true. Then they explain where and how to buy products and services that can meet your needs. They help you buy ONLY what you need. You skip the extras that cost more but don’t help you. You buy from the best providers with the highest ratings. They also tell you which products to avoid and why they are NOT your best alternative. The Insider’s Guides cover almost all financial products and services available to you.
Buy only what you need—Never BUY retail
Thursday, February 21, 2008
Replace your life insurance with a self-insurance fund—Living Insurance?
You are more likely to run out of money than die in the 21st Century.
I am worried about people paying for insurance they won't need.
Consider shifting your dollars to a Wealth Reserve based on the shift in risks. Cancer rates for men have fallen 18.4 percent since 1990 when deaths peaked, and cancer-related deaths for women have dropped 10.5 percent since peaking in 1991. Improved screening and treatments for the top killers mean you can live longer but you will need the money to buy the treatments.
After the kids are grown and your spouse is your 401k beneficiary, drop your term insurance. Take your insurance premium and create a Roth IRA or tax-advantaged mutual fund. Invested in low-cost average-market index funds, your $166 a month contributions will become $588,000 in 30 years. With a Roth IRA, that half a million is tax-FREE so you can afford the new drugs or treatments that will be invented in the next 30 years.
If you keep your old insurance policy, or buy that long-term care insurance your advisor talks about, you may not be able to afford those new treatments. You have read the forecasts for social security and Medicare! You are more likely to need the money for life than for your heirs. Give them $10,000 and let them invest it themselves. See our FREE Guide: theinsidersguides.com/freeguide.html
You would have to die or move to a nursing home to receive a benefit from that premium of $166 a month for 30 years. You don’t know what will happen in the future and neither do I.
If you need nursing home care, $588,000 will get you into one of the best. If you need the treatments to keep you alive and kicking, $588,000 will help with that INSTEAD. If America adopts free health care in time, you can use the $588,000 as a life insurance benefit. All the earnings are tax-FREE to your heirs, just like life insurance.
If you don’t need medical treatments or nursing home care, you could have a big party. $588,000 buys a whole florist for your funeral too.
If your don’t believe me, do the calculation yourself at http://www.moneychimp.com/calculator/compound_interest_calculator.htm
Members of our network consider self-insuring the risk of outliving your money. They buy Living Insurance: http://www.theinsidersguides.com/selins21.html.
I am worried about people paying for insurance they won't need.
Consider shifting your dollars to a Wealth Reserve based on the shift in risks. Cancer rates for men have fallen 18.4 percent since 1990 when deaths peaked, and cancer-related deaths for women have dropped 10.5 percent since peaking in 1991. Improved screening and treatments for the top killers mean you can live longer but you will need the money to buy the treatments.
After the kids are grown and your spouse is your 401k beneficiary, drop your term insurance. Take your insurance premium and create a Roth IRA or tax-advantaged mutual fund. Invested in low-cost average-market index funds, your $166 a month contributions will become $588,000 in 30 years. With a Roth IRA, that half a million is tax-FREE so you can afford the new drugs or treatments that will be invented in the next 30 years.
If you keep your old insurance policy, or buy that long-term care insurance your advisor talks about, you may not be able to afford those new treatments. You have read the forecasts for social security and Medicare! You are more likely to need the money for life than for your heirs. Give them $10,000 and let them invest it themselves. See our FREE Guide: theinsidersguides.com/freeguide.html
You would have to die or move to a nursing home to receive a benefit from that premium of $166 a month for 30 years. You don’t know what will happen in the future and neither do I.
If you need nursing home care, $588,000 will get you into one of the best. If you need the treatments to keep you alive and kicking, $588,000 will help with that INSTEAD. If America adopts free health care in time, you can use the $588,000 as a life insurance benefit. All the earnings are tax-FREE to your heirs, just like life insurance.
If you don’t need medical treatments or nursing home care, you could have a big party. $588,000 buys a whole florist for your funeral too.
If your don’t believe me, do the calculation yourself at http://www.moneychimp.com/calculator/compound_interest_calculator.htm
Members of our network consider self-insuring the risk of outliving your money. They buy Living Insurance: http://www.theinsidersguides.com/selins21.html.
Friday, January 4, 2008
Drop your insurance: Buy only what you need
This is not what you usually hear from an insurance person. However, a new way of buying insurance and all financial services has arrived.
Based upon the model used by businesses, this approach builds on the trend of more of us who must manage our own pensions--401k, 403b and IRA accounts. Even though many of us say we don’t want to manage our own financial futures, we will be better off in the long run.
We are being forced to self-direct all our financial products. Our agents, bankers and brokers have all moved on. Typically, we practitioners of this new “self-insurance” model use our savings to build up our own reserves. This “Wealth Reserve” as I call it is a self-insurance fund I use to cover many risks so that I don’t have to buy a policy for every risk. I built a sizable reserve by buying products “wholesale.” I invest the savings.
Businesses have been doing this for a long time. For instance, most large businesses do not buy health care like we do. They buy it “wholesale.” They pay the claims from their own account. The insurer acts as the administrator—following the employer’s plan to decide it your claim should be paid. The business funds the claim account only to the extent necessary to pay claims. The insurer makes a fee for processing.
This costs the business less because the money to pay the claims is actually part of the working capital of the business. It is not sitting in an insurer’s investment account paying interest before it is needed to pay claims. For large claims, like brain surgery or death, the business buys catastrophic insurance. Some companies have their own (captive) insurer (reserves) to save even more.
How can you use this example? Let’s take homeowner’s insurance. Did you know that many agents purchase the standard HO-3 homeowner’s policy for their own coverage, but with a $2,500 deductible? That policy takes care of 99% of the claims and saves them 20-30% a year. They understand that they need to maintain the property to prevent it from deteriorating faster than it needs to. But by investing that 30% savings each year, they build a Wealth Reserve that earns them interest and will cover the deductible if they ever need it. So, over 10 years, they save $2,000 in premiums and earn interest on the funds.
Taken together for all your risks, you can build a large Wealth Reserve. For instance, we have helped people save over $3,000 a year on financial services, including banking, mortgage, education, mutual funds, securities, annuity, insurance—life, health, disability, long term care, vehicle, homeowner’s, lawsuit, vehicle purchase, legacy, wealth transfer, retirement spending . . . almost any service. Over time, those savings will compound to a $500,000. This fund can be used to pay for your insurance, retirement, and health care needs. Some clients plan to save $120,000 on long-term care insurance this way. Others have dropped their life and disability insurance—placing the premium in investment accounts that compound at the market rate over time.
When I was just 22 and working part-time during college, I was induced to buy permanent life insurance. I later cancelled it when I could not afford the $1200 annual premiums. I was in grad school and taking out loans to finish an MDiv. The agent representing Columbus Mutual probably earned all of that $1200 in the first year. I got little back when I couldn’t make the payments.
The agent did not explain that I would be better off buying a mutual fund instead of insurance. This was probably 1970. By the end of the 1960s there were around 270 funds with $48 billion in assets. No one advised me to invest in mutual funds at that time. My high school and colleges mentioned nothing about the miracle of compounding $1200 a year in a mutual fund at the average market rate of 12% per year. I think I would have paid attention if someone had told me it would be worth $1 million by the time I was 60.
1970 $ 0
1980 $ 23,233.91
1990 $ 99,914.79
2000 $ 352,991.38
2008 $ 933,673.59
There are few financial literacy programs in high school or college even today. Consequently, even in 2006, the Jumpstart Coalition for Personal Financial Literacy found that half of high school seniors failed to answer basic money questions. Schools don’t teach basics of saving, investing, compounding, and getting what you want, so parents are expected to. This leaves the blind leading the blind. Parents teach spending but few are role models in investing with compound interest. The subject we miss but need the most is about investing in the market. 86% of young people got it wrong. It is no wonder the U.S. savings rate is negative.
For Example, question 26. Kelly and Pete just had a baby. They received money as baby gifts and want to put it away for the baby's education. Which of the following tends to have the highest growth over periods of time as long as 18 years?
44.8% a) A U.S. Govt. savings bond
34.8% b) A savings account
6.3% c) A checking account
*14.2% d) Stocks
* correct answer is d. Ibbotson Associates data: Stocks average 11.4% per year, bonds 5%, CDs 3% over time.
Based upon the model used by businesses, this approach builds on the trend of more of us who must manage our own pensions--401k, 403b and IRA accounts. Even though many of us say we don’t want to manage our own financial futures, we will be better off in the long run.
We are being forced to self-direct all our financial products. Our agents, bankers and brokers have all moved on. Typically, we practitioners of this new “self-insurance” model use our savings to build up our own reserves. This “Wealth Reserve” as I call it is a self-insurance fund I use to cover many risks so that I don’t have to buy a policy for every risk. I built a sizable reserve by buying products “wholesale.” I invest the savings.
Businesses have been doing this for a long time. For instance, most large businesses do not buy health care like we do. They buy it “wholesale.” They pay the claims from their own account. The insurer acts as the administrator—following the employer’s plan to decide it your claim should be paid. The business funds the claim account only to the extent necessary to pay claims. The insurer makes a fee for processing.
This costs the business less because the money to pay the claims is actually part of the working capital of the business. It is not sitting in an insurer’s investment account paying interest before it is needed to pay claims. For large claims, like brain surgery or death, the business buys catastrophic insurance. Some companies have their own (captive) insurer (reserves) to save even more.
How can you use this example? Let’s take homeowner’s insurance. Did you know that many agents purchase the standard HO-3 homeowner’s policy for their own coverage, but with a $2,500 deductible? That policy takes care of 99% of the claims and saves them 20-30% a year. They understand that they need to maintain the property to prevent it from deteriorating faster than it needs to. But by investing that 30% savings each year, they build a Wealth Reserve that earns them interest and will cover the deductible if they ever need it. So, over 10 years, they save $2,000 in premiums and earn interest on the funds.
Taken together for all your risks, you can build a large Wealth Reserve. For instance, we have helped people save over $3,000 a year on financial services, including banking, mortgage, education, mutual funds, securities, annuity, insurance—life, health, disability, long term care, vehicle, homeowner’s, lawsuit, vehicle purchase, legacy, wealth transfer, retirement spending . . . almost any service. Over time, those savings will compound to a $500,000. This fund can be used to pay for your insurance, retirement, and health care needs. Some clients plan to save $120,000 on long-term care insurance this way. Others have dropped their life and disability insurance—placing the premium in investment accounts that compound at the market rate over time.
When I was just 22 and working part-time during college, I was induced to buy permanent life insurance. I later cancelled it when I could not afford the $1200 annual premiums. I was in grad school and taking out loans to finish an MDiv. The agent representing Columbus Mutual probably earned all of that $1200 in the first year. I got little back when I couldn’t make the payments.
The agent did not explain that I would be better off buying a mutual fund instead of insurance. This was probably 1970. By the end of the 1960s there were around 270 funds with $48 billion in assets. No one advised me to invest in mutual funds at that time. My high school and colleges mentioned nothing about the miracle of compounding $1200 a year in a mutual fund at the average market rate of 12% per year. I think I would have paid attention if someone had told me it would be worth $1 million by the time I was 60.
1970 $ 0
1980 $ 23,233.91
1990 $ 99,914.79
2000 $ 352,991.38
2008 $ 933,673.59
There are few financial literacy programs in high school or college even today. Consequently, even in 2006, the Jumpstart Coalition for Personal Financial Literacy found that half of high school seniors failed to answer basic money questions. Schools don’t teach basics of saving, investing, compounding, and getting what you want, so parents are expected to. This leaves the blind leading the blind. Parents teach spending but few are role models in investing with compound interest. The subject we miss but need the most is about investing in the market. 86% of young people got it wrong. It is no wonder the U.S. savings rate is negative.
For Example, question 26. Kelly and Pete just had a baby. They received money as baby gifts and want to put it away for the baby's education. Which of the following tends to have the highest growth over periods of time as long as 18 years?
44.8% a) A U.S. Govt. savings bond
34.8% b) A savings account
6.3% c) A checking account
*14.2% d) Stocks
* correct answer is d. Ibbotson Associates data: Stocks average 11.4% per year, bonds 5%, CDs 3% over time.
Wednesday, December 12, 2007
TIME creates wealth—the perfect present
This is the perfect birthday present for a young person. Because of the power of compound interest, you can start your loved one on the path to financial freedom that they will remember for a lifetime.
You can start small or large. You can establish an account for any person of any age. Even if they have not been born yet, you can lay the foundation for a better life.
The nice part is that you can do it easily and quickly.
You can start with as little as $100 by bank draft.
Fill out the application (download http://www.tiaa-cref.org/pdf/forms/mf-app.pdf) and send it to TIAA-CREF.org, one of the most secure pension providers.
Depending on the age of the recipient, you can be the owner with them and leave them the money as a transfer or they can be the owner from the start. If they have earned income, the ROTH IRA will add another 25% tax-FREE earnings to their retirement nest.
The point is to get them started with an equity index mutual fund early. Since this fund does not trade stocks, the tax bite is minimal. TIME creates wealth, not fast trading. As Warren Buffett, one of the world’s best investors, said,
“We continue to make more money when snoring than when active.”
berkshirehathaway.com
Look at what your gift can provide in the future because of compounding:
$100 is worth $10,000 later. $1,000 gets $100,000 and $10,000 gets $1,000,000.
If you start your gift early, providing $100 a month for 8 years before age 26, the child can have $36,000 at 30, $100,000 at 40, and $1 million at age 65. (http://www.saferchild.org/power.htm)
You can use this gift to help them go to college, start their life, buy a home, start a business, or just have as a basis for financial security later in life. You can structure it the way you want. When you or they take money out, the tax can be as low as 5% depending on the owner’s income level and type of account. See our FREE Guide: http://www.theinsidersguides.com/freeguide.html
They can use it later in life as a reserve to help them through a crisis or just to remember you as they spend it. Ether way, this reserve could provide wealth for life. What a perfect birthday present.
You can start small or large. You can establish an account for any person of any age. Even if they have not been born yet, you can lay the foundation for a better life.
The nice part is that you can do it easily and quickly.
You can start with as little as $100 by bank draft.
Fill out the application (download http://www.tiaa-cref.org/pdf/forms/mf-app.pdf) and send it to TIAA-CREF.org, one of the most secure pension providers.
Depending on the age of the recipient, you can be the owner with them and leave them the money as a transfer or they can be the owner from the start. If they have earned income, the ROTH IRA will add another 25% tax-FREE earnings to their retirement nest.
The point is to get them started with an equity index mutual fund early. Since this fund does not trade stocks, the tax bite is minimal. TIME creates wealth, not fast trading. As Warren Buffett, one of the world’s best investors, said,
“We continue to make more money when snoring than when active.”
berkshirehathaway.com
Look at what your gift can provide in the future because of compounding:
$100 is worth $10,000 later. $1,000 gets $100,000 and $10,000 gets $1,000,000.
If you start your gift early, providing $100 a month for 8 years before age 26, the child can have $36,000 at 30, $100,000 at 40, and $1 million at age 65. (http://www.saferchild.org/power.htm)
You can use this gift to help them go to college, start their life, buy a home, start a business, or just have as a basis for financial security later in life. You can structure it the way you want. When you or they take money out, the tax can be as low as 5% depending on the owner’s income level and type of account. See our FREE Guide: http://www.theinsidersguides.com/freeguide.html
They can use it later in life as a reserve to help them through a crisis or just to remember you as they spend it. Ether way, this reserve could provide wealth for life. What a perfect birthday present.
Tuesday, November 20, 2007
Every $100 you invest becomes $10,000 to spend later
Yes, it's true.
Children need to know early that there are ways to grow savings to be able to afford what they want. If they knew $100 invested will grow to $10,000 later, they will see why it is worth investing. Right now, saving $100 in a bank account paying 1.2% does NOT offer much attraction.
Here is how $100 becomes $10,000. In year 1, your investment of $100 in a tax-FREE account like a stock mutual fund Roth IRA may not grow to $113. Don't sell the shares. They will go up. In the year 5—$182, year 10—$330, year 20—$1,089, year 30—$3,595, year 39—$10,529.
Children know someone owns their favorite store--ToysRUs, Sports Authority, or Walmart. Now they own part of the store. They make money when other people buy from their store. This is how they can understand how they earn money. At night, there are children all over the world buying at their store. It works during the day too. Every time someone buys, they earn a penny.
“We continue to make more money when snoring than when active.”
Warren Buffett, one of the world’s best investors berkshirehathaway.com
The growth of the $100 to $10,000 over time by itself is a “miracle” that can inspire even adults. In fact, if we updated this phenomenon at every age, teens might want to calculate how fast they could save enough for a car or game console. Teens could figure out in math class with an Internet future value calculator that by investing $100 a month from their jobs, they could have $1,200 in 1 year or $4,000 in 3 years. As they start their first job, young adults could have $25,000 in 5 years to buy whatever they need and pay off their student loans. Most don’t.
Of course their parents have to cooperate by not short-circuiting this lesson by buying the items for the kids. Teens need to understand where parents got the money to buy things. We aren’t teaching them where the money comes from. We aren’t teaching them about investing since Many of Us don’t wait till we have the money to buy things. We just use the “magic” of borrowing. They never learn how to problem-solve with money and they've never learned how to defer what they want.
How did we get here? There is now $915 billion in U.S. credit card debt. It all started when Bank of America launched the nation's first general-purpose credit card in 1958. It simply dropped 60,000 of them in a mass mailing to residents in Fresno, California. The bank hoped to attract customers with a new type of "revolving" credit line, which could be used for purchases everywhere and paid off over time. Every vet wanted a house, car, and fridge immediately to make up for the lost time of WW2.
Revolving credit accounts allow us to buy without thinking. Now, we don’t even think about whether we really need the item. We don’t consider the total cost either. Credit finance charges can KILL you slowly--like smoking. We are giving away our futures when we use credit. It works just like the “miracle” of compounding—only in reverse. We pay off our credit cards over 30 or 40 years because we can’t stop using them. Some will pay 5 times the price of the item over time.
For example: You will have to pay $161 per month for 10+ years to pay off your debt of $10,050 at 15%. You will spend at least $19,360 to pay off that $10,050. (If your rate is 25%, you will pay $25,080 for $10,050.) You pay almost double for that $10,050!
That’s not all—THE REAL COST IS MORE!
Think of it. If you did not have to use that $161 each month to pay the $10,050 in debts, you would be able to use the $161 per month to make money. You could have made about $37,036 in the 10 years using a stock mutual fund. So the REAL cost of that $10,050 debt is actually $56,396!! The lender gets the $19,360 (to pay the debt over time) and you gave up earning $37,036 from the $161 payment per month for 10 years. That is enough for a down payment on a house!
Most people buy things they don’t need on credit and pay the minimum at rates that hit 29% for some. So we give up our future: house down payment, education funding, business start up, or retirement funding. Unfortunately, many people never pay off the whole debt. It is $915 billion—most on the shoulders of debt addicts.
Mississippi proposes to do something to break the cycle of debt. Following the success of Child Trust in England, MS will create a $500 investment account for all children born in the state. The initial endowment of $500 would be provided by the state to each newborn, and total additional state-tax-deductible contributions of up to $2,000 per year could be made by family members, friends, churches, charities, and others. Child account holders could use the accounts for any purpose at age 18 - including a college education, home ownership, or investing in a small business.
Our members do the same using existing accounts. See our FREE Guide: theinsidersguides.com/freeguide.html
Children need to know early that there are ways to grow savings to be able to afford what they want. If they knew $100 invested will grow to $10,000 later, they will see why it is worth investing. Right now, saving $100 in a bank account paying 1.2% does NOT offer much attraction.
Here is how $100 becomes $10,000. In year 1, your investment of $100 in a tax-FREE account like a stock mutual fund Roth IRA may not grow to $113. Don't sell the shares. They will go up. In the year 5—$182, year 10—$330, year 20—$1,089, year 30—$3,595, year 39—$10,529.
Children know someone owns their favorite store--ToysRUs, Sports Authority, or Walmart. Now they own part of the store. They make money when other people buy from their store. This is how they can understand how they earn money. At night, there are children all over the world buying at their store. It works during the day too. Every time someone buys, they earn a penny.
“We continue to make more money when snoring than when active.”
Warren Buffett, one of the world’s best investors berkshirehathaway.com
The growth of the $100 to $10,000 over time by itself is a “miracle” that can inspire even adults. In fact, if we updated this phenomenon at every age, teens might want to calculate how fast they could save enough for a car or game console. Teens could figure out in math class with an Internet future value calculator that by investing $100 a month from their jobs, they could have $1,200 in 1 year or $4,000 in 3 years. As they start their first job, young adults could have $25,000 in 5 years to buy whatever they need and pay off their student loans. Most don’t.
Of course their parents have to cooperate by not short-circuiting this lesson by buying the items for the kids. Teens need to understand where parents got the money to buy things. We aren’t teaching them where the money comes from. We aren’t teaching them about investing since Many of Us don’t wait till we have the money to buy things. We just use the “magic” of borrowing. They never learn how to problem-solve with money and they've never learned how to defer what they want.
How did we get here? There is now $915 billion in U.S. credit card debt. It all started when Bank of America launched the nation's first general-purpose credit card in 1958. It simply dropped 60,000 of them in a mass mailing to residents in Fresno, California. The bank hoped to attract customers with a new type of "revolving" credit line, which could be used for purchases everywhere and paid off over time. Every vet wanted a house, car, and fridge immediately to make up for the lost time of WW2.
Revolving credit accounts allow us to buy without thinking. Now, we don’t even think about whether we really need the item. We don’t consider the total cost either. Credit finance charges can KILL you slowly--like smoking. We are giving away our futures when we use credit. It works just like the “miracle” of compounding—only in reverse. We pay off our credit cards over 30 or 40 years because we can’t stop using them. Some will pay 5 times the price of the item over time.
For example: You will have to pay $161 per month for 10+ years to pay off your debt of $10,050 at 15%. You will spend at least $19,360 to pay off that $10,050. (If your rate is 25%, you will pay $25,080 for $10,050.) You pay almost double for that $10,050!
That’s not all—THE REAL COST IS MORE!
Think of it. If you did not have to use that $161 each month to pay the $10,050 in debts, you would be able to use the $161 per month to make money. You could have made about $37,036 in the 10 years using a stock mutual fund. So the REAL cost of that $10,050 debt is actually $56,396!! The lender gets the $19,360 (to pay the debt over time) and you gave up earning $37,036 from the $161 payment per month for 10 years. That is enough for a down payment on a house!
Most people buy things they don’t need on credit and pay the minimum at rates that hit 29% for some. So we give up our future: house down payment, education funding, business start up, or retirement funding. Unfortunately, many people never pay off the whole debt. It is $915 billion—most on the shoulders of debt addicts.
Mississippi proposes to do something to break the cycle of debt. Following the success of Child Trust in England, MS will create a $500 investment account for all children born in the state. The initial endowment of $500 would be provided by the state to each newborn, and total additional state-tax-deductible contributions of up to $2,000 per year could be made by family members, friends, churches, charities, and others. Child account holders could use the accounts for any purpose at age 18 - including a college education, home ownership, or investing in a small business.
Our members do the same using existing accounts. See our FREE Guide: theinsidersguides.com/freeguide.html
Saturday, October 27, 2007
Buy security--NOT insurance for children
Many parents and grandparents want to help secure the future for their offspring. Life insurance is NOT the way to do it.
Since 1976, the best way to provide a financial basis for the next generation is a stock index mutual fund contribution. An index fund does not produce a large tax bill but assures your child of beating 88% of all similar funds over the long term. BusinessWeek 11/03. Start with $2000. The child can take over making contributions when they get a job. By age 30, they will have $100,000 (inflation-adjusted) and by age 66, $2 million—now that’s SECURITY. Here is the only financial plan they need: http://www.saferchild.org/power.htm
As you can see, your child will have even more cash available for life than any life insurance policy can provide. Childhood mortality is very rare today so children are more likely to run out of money than die. No matter what happens to social security or pension plans in the future, your child can take care of themselves. At age 67 they can spend inflation-adjusted $100,000 a year in retirement. It is all due to compounding market rates of return on contributions you made from birth.
How do you get this plan started? Use our FREE guide to set it up in 1 hour: http://www.theinsidersguides.com/freeguide.html. Children can start their own TAX-FREE Roth IRA as soon as they begin earning money—age 22 or earlier. Their part of this plan provides tax-free earnings so these amounts are more valuable than a pension plan which is taxable.
Depending on how and when you set up your part of their plan, they could have enough money for a down payment for their first home, for disability, for education funding or medical emergencies.
Investing is about TIME not about picking the right fund. This plan may earn 10% per year on average since it is based upon investing in stock market returns. Your $2,000 contributions, starting at birth, make it more likely that these estimates will be quite accurate. Even if you start late, investing $16,000 before your child hits age 20 will give them a running start to build the Wealth Reserve they will need in life not death.
Do it for them so they can learn how to become independent.
Since 1976, the best way to provide a financial basis for the next generation is a stock index mutual fund contribution. An index fund does not produce a large tax bill but assures your child of beating 88% of all similar funds over the long term. BusinessWeek 11/03. Start with $2000. The child can take over making contributions when they get a job. By age 30, they will have $100,000 (inflation-adjusted) and by age 66, $2 million—now that’s SECURITY. Here is the only financial plan they need: http://www.saferchild.org/power.htm
As you can see, your child will have even more cash available for life than any life insurance policy can provide. Childhood mortality is very rare today so children are more likely to run out of money than die. No matter what happens to social security or pension plans in the future, your child can take care of themselves. At age 67 they can spend inflation-adjusted $100,000 a year in retirement. It is all due to compounding market rates of return on contributions you made from birth.
How do you get this plan started? Use our FREE guide to set it up in 1 hour: http://www.theinsidersguides.com/freeguide.html. Children can start their own TAX-FREE Roth IRA as soon as they begin earning money—age 22 or earlier. Their part of this plan provides tax-free earnings so these amounts are more valuable than a pension plan which is taxable.
Depending on how and when you set up your part of their plan, they could have enough money for a down payment for their first home, for disability, for education funding or medical emergencies.
Investing is about TIME not about picking the right fund. This plan may earn 10% per year on average since it is based upon investing in stock market returns. Your $2,000 contributions, starting at birth, make it more likely that these estimates will be quite accurate. Even if you start late, investing $16,000 before your child hits age 20 will give them a running start to build the Wealth Reserve they will need in life not death.
Do it for them so they can learn how to become independent.
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