Rapid Debt Elimination

We all know what our mothers told us about something being too good to be true and we know the standard answer.  We have been taught so many concepts in the financial world that anything that strays from the norm is considered to be untrue or unbelievable.

There are a lot of companies that tell you that they can help you eliminate your debt, when in reality, almost always they do more harm than good.  Credit scores go down, credibility is hurt and most often nothing is accomplished and often times you are in worse shape than when you started.

We are also told, that there is no value in free.

I want to give some financial education to you, free of charge.  If you pay attention, you will learn something.  You may even learn something that changes the way you look at banks and money forever.

Here is a link to a webinar that could be some of the most revolutionary financial education that you will ever receive, http://debtfreetraining.com.

Take time, it will be worth it.  You will probably be skeptical, but you won’t be the first one.

 

Control

I just returned from a presentation put on by VIP Enterprises. These are the guys that do an outstanding job of showing people how to maximize their personal cash flow, increase their credit scores and ultimately accelerate the pay down of both consumer and mortgage debt.

When I left the presentation, one word came to mind; control. So many of the offerings of financial advisors and planners are about relinquishing control of your money. Invest in this fund, let this money manager invest your assets; let this pension fund manager plan your retirement. If you haven’t figured it out yet, that plan isn’t working out so well for most of us. That is unless, of course, you are the fund manager. They always make money, but do you?

I know you might be thinking that you might not be qualified to manage your own money, that you should leave it to the experts. I disagree. The first order of business is to manage your liabilities. No one can do this better than you. If you only do that one thing, it should be to put yourself in a place where you have terrific cash flow, a high credit score and no debt. Will you need help and guidance to accomplish that task? That depends on how fast you want to get the job done.

Whether you employ the assistance of a mentor or coach to do that or you do it on your own, you are in control of your finances. Once you are in a place where your only obligations are to pay your living expenses, everything else is easy. That doesn’t give you permission to give control of your assets to someone else, but it makes the job of achieving financial independence much easier.

Speaking of control, there was an article in the Wall Street Journal yesterday with some sobering data on the status of State Pension Plans. The article states that the average state pension fund was only 78% funded in 2009, down from 84% in 2008. New York was in the best shape being 101% funded and Illinois was the worst with only 51% of its pension liabilities being funded. That certainly doesn’t bode well for the Illinois state employees when it comes to a retirement that they counted on.

Sure makes a pretty strong case to building diversified income streams that I teach in Wealth Without Wall Street.

What is Wealth?

When it comes to retirement planning, virtually everyone in that industry is focused on “the number”. What that means is that what we have been taught is to shoot for a certain value of our assets and that will be the magic number that we need to achieve to have a successful retirement.

For some of us it’s $500,000, for others maybe it’s $1,000,000 and for others maybe a lot more. For those people who are truly wealthy, maybe having $5,000,000 or more, they probably don’t really need to worry about things too much. That is unless they are voracious spenders and in the absence of earned income could burn through that much money in a few years.

For us mortals who have come to realize that achieving “the number” just isn’t going to be realistic then our focus will have to be on another number or numbers.

Financial freedom is really what we are all looking for. What does that really mean? Financial freedom is being in a place where you have enough income coming in from different sources so that you work because you want to not because you have to.

In my reality, financial freedom or wealth is defined as net income rather than net worth. For most of us, as we get older and look forward to whatever retirement is going to look like for us, we are looking to replace the income we earned at our business or employment.

This is where most financial advisors and planners fail their clients. It is about the income not the assets. It is also about creating a diversified income stream and not putting all of your eggs into one basket. And one more thing, it is about being in control of your income streams.

Having a $1,000,000 nest egg isn’t necessarily going to create income for you. It sounds good to call yourself a millionaire, but it just creates the problem of what can you do with it to create an income stream that will last at least as long as you do.

The problem it creates is where can you put that money so that it generates income, but not so much that the principal is at risk? There is a trade off there. The market is usually efficient. What I mean is that if you want to have a higher rate of interest on your money, you are going to have to take on a higher degree of risk. After working for so many years to accumulate that kind of money, do you really want to put the principal at risk?
Assuming you want to keep your risk to a minimum, then you are going to sacrifice your interest rate. In today’s market, a five-year CD, a safe investment, will pay about 2.5% interest. Keep in mind that you will pay taxes on that yield, so your net return will be in the neighborhood of 1.75% depending on your marginal tax bracket.

The reality is that at 2.5% interest on your money, $1,000,000 which sounds and looks really good on paper will earn you about $1458.00 per month of after-tax income without drawing down on the principal.

So much for living the life of a millionaire. Ouch.

Risk

Most of us think of risk in a one-dimensional fashion. Usually risk is thought of as risk to capital. You make a decision to invest some of your money into some type of financial instrument and, hopefully, you think about what are the chances that you will lose some or all of your money.

The risk to capital is obviously an important one, but it is not the only one. Risk to capital will come into play when it comes to coming up with your “number” that I have spoken about previously.

When it comes to planning for retirement there are other risks to consider.

Inflation Risk

Inflation is the rise in prices over time. As prices rise over time, your money can purchase fewer good and services. Inflation is especially dangerous for those who are retired, a retired people depend more income sources that are not adjusted for inflation. Inflation will affect anyone who purchased goods and services. Inflation can have a dramatic effect on the buying power of your money. One dollar in 1946 would only be worth nine cents in 2007. Another way of looking at it is an item costing one dollar would cost $10.79 in 2007. If future inflation mimics the average inflation over the past 60 years, $1.00 today will be worth 67 cents in 10 years, 45 cents in 20 years and just 31 cents in 30 years.

The loss of purchasing power is a risk that all of us face. While we are in our working years, we don’t feel the impact of inflation risk nearly as much as when we are retired and living on our investments. When we are working, hopefully our income at least keeps pace with inflation. While we might not be getting ahead, at least we aren’t losing ground. During retirement, the picture can be much different. We don’t have an employer providing with a paycheck and annual increases in our income. Our income have to come from different sources; social security, pension and investment income. While social security and possibly our pension (assuming we have one) are subject to annual increases based on cost of living, our investments have to keep up with the cost of living. Assuming that the income received from investments is taxable.

Longevity Risk

While most of us hope to live healthy long lives, living longer than you expect can cause very serious problems. Many people who plan their retirement assume they will live to a certain age. Often this age is their “life expectancy” which is based on the average life span of people in the past. Life expectancy at retirement is an average with about have of retiree living longer than the stated life expectancy age.

Life expectancy constantly changes as you grow older. For example, while a man who is age 65 today is expect to live to age 81, an 81 year old man today is expected to live to age 88. If you are married and both age 65 today, there is a 50 per cent chance that one of the two of you will live to age 95. People age 65 who are planning or only have the financial resources to last 15 years could and very well run out of money before they run out of time. Being too conservative with your financial resources early on could put you at financial risk later in life.

Michael McNamara

withoutwallstreet@hotmail.com/303.800.0543

Running and Money

I am an endurance runner. More serious than some and not nearly as serious as others. I run for many reasons. It helps me stay as fit as I can while I grow older, it’s great therapy (running shoes, shorts and a t-shirt are still much cheaper than the therapists couch) and most of the good ideas I have ever had have come to me when I am running. My favorite time of the day to run is early in the morning. It’s quiet, there aren’t that many other people out yet and it’s also a time that I can reflect.

It was about four years ago that I came up with an idea to write a financial book. Titles are usually tough to come up with, but Wealth Without Wall Street came easily. I think it also came in an early morning moment.
In early 2007, when I had the original idea to write the book, we had just finally recovered from a dramatic downturn in the stock market that took place from 2000 to 2002. By the third quarter of 2007, we had finally erased all of the losses incurred and the stock market reached the same level as when it peaked in 2000.

That downturn got me to thinking about all of the people who were planning to retire during that period. That everything changed for them. If they entered 2000 with a market-related portfolio with a $1mm value, by the end of 2002 that value could have decreased by 40%-80%. Assuming that they didn’t sell, by 2007, they might have gotten back to break even.

As Yogi Bera once said, “it’s déjà vu all over again” and in late 2007 the market meltdown repeated itself. This time it wasn’t just the stock market that took a beating, real estate went right along with it.

The financial lives of so many people changed during that period. Some may never recover. Today the real estate market hasn’t seen any significant recovery and the stock market is still 14% lower than it was in late 2007 which was where it was at its peak in the year 2000. So fundamentally we have gone an entire decade without any real gains in the market as measured by the S&P 500. If you want to take into account the impact of inflation, you could make the case that anyone who stayed the course is underwater by as much as 20%-25%.

I have been in the financial world for over twenty three years in one capacity or another. I have worked as a traditional stock broker, I have sold annuities and life insurance, I have owned both residential and commercial mortgage companies. My background offers me a unique perspective when it comes to personal finances.

My purpose for writing the book is to make people aware that there is a whole world of financial opportunities out there that take many different forms. My book is meant to take a broader perspective than just where to put your investment dollars. I hope to educate you on how to manage your debt, how to create perpetual streams of income that you cannot outlive and other revelations that will put you in control of your financial future.

While the ideas expressed here can be applicable for individuals of any age, I really wrote this book for baby boomers. At 58, I am smack dab in the middle of the baby boom generation. Most of the people that I have worked with in my financial career are baby boomers. No matter if I was taking a loan application, working on a financial strategy, I have had the opportunity to look at the personal finances of hundreds and hundreds of people. I can tell you that, with a rare exception, most people of my generation are in terrible financial shape and totally unprepared to retire or quit working.

Now that the first of the Baby Boom Generation is turning sixty and beginning to collect Social Security, we are being inundated with TV commercials and newspaper advertising from such financial firms as Fidelity, Schwab, Merrill Lynch, Vanguard Funds and a whole host of others. These companies fall under the category of what I’ll call the Wall Street mentality. They are all hoping to capitalize on the 70 plus million of us (that includes me by the way) who are either at or within a few years of retirement age.
If you were born between the years of 1946 and 1964, you are a baby boomer. For most of us it’s time to wake up and smell the coffee. Retirement in right around the corner and unless you’ve got well into seven figures put away, you are going to be facing some very harsh financial realities. That being said, it’s not too late.

What I hope to accomplish is to share with you perhaps a different mindset when it comes to income in retirement, however you might define it. So stay tuned for upcoming ideas that will provide you with real meat and potatoes ideas and options.

You can reach me at any time, my email address is michael@brentwoodequity.com and my office number is 303.800.0543.

Credit Tip of the Day

Want to Increase Your Credit Score by 70 Points or More?

Make your Payment before the Statement Closes!!

Here is that tool!!

Each of our credit cards has a statement closing date which reflects the final day which new transactions are added to that month’s statement. Interestingly enough, that is generally the same date which our credit card company reports our information to the bureaus for the month. Obviously, that is the date most of our accounts have the highest balance. Instead of waiting to get our statement to make our payment for the month, call the credit card company and ask them when the statement closes. Make your payment each month before that date and watch your credit scores climb! The positive influence of having the lower balance reported to the bureaus for the month instead of the higher balance can clearly be big!!

I wanted to give thanks to our Credit Expert, Matthew Pillmore from VIP Enterprises for this worthwhile tip.

You can control your financial future by becoming more “lendable” with a higher credit score. Controlling your financial future is what Wealth Without Wall Street is all about.

It’s About The Income

Having been in the financial world for so many years and having met and been exposed to countless financial advisors, I am going to say that virtually all of them have got it wrong. They are focusing on the wrong goal when it comes to financial advice.
When it comes to retirement planning, virtually everyone in that industry is focused on “the number”. What that means is that what we have been taught is to shoot for a certain value of our assets and that will be the magic number that we need to achieve to have a successful retirement. For some of us it’s $500,000, for others maybe it’s $1,000,000 and for others maybe a lot more. For those people who are truly wealthy, maybe having $5,000,000 or more, they probably don’t really need to worry about things too much. That is unless they are voracious spenders and in the absence of earned income could burn through that much money in a few years.
For us mortals who have come to realize that achieving “the number” just isn’t going to be realistic then our focus will have to be on another number or numbers.
Financial freedom is really what we are all looking for. What does that really mean? Financial freedom is being in a place where you have enough income coming in from different sources so that you work because you want to not because you have to.
In reality, financial freedom or wealth is defined as net income rather than net worth. For most of us, as we get older and look forward to whatever retirement is going to look like for us, we are looking to replace the income we earned at our business or employment. This is where most financial people fail their clients. It is about the income not the assets. It is also about creating a diversified income stream and not putting all of your eggs into one basket. And one more thing, it is about being in control of your income streams.
Having a $1,000,000 nest egg isn’t necessarily going to create income for you. It sounds good, to call yourself a millionaire, but it just creates the problem of what can you do with it to create an income stream that will last at least as long as you do.

Control

It’s a two syllable word and most of us know that we don’t have a lot of it in our lives. When it comes to our finances, we should all have as much as we can.
Relinquishing control to other parties and circumstances is starting to look like a really bad idea. The fundamental control we should all exercise over our money is debt. It is a four-letter word and should be treated as such. At the end of the day it is the one thing that we can exercise the most control.
When was the last time that your financial planner or advisor gave anything more than lip service to paying off all of your liabilities? The problem is they are not trained to nor do they have any clue how to deal with it. You might also consider that they don’t get paid any money to help you with it. We have all heard of advisors getting paid for managing your assets. When was the last time you heard of an advisor getting paid for managing your liabilities?
In my opinion, having a strategic plan to increase your cash flow and accelerating the elimination of your liabilities should be in place before you begin about thinking about a plan for managing your assets. Like many things in the financial world, finding a resource to help with this process is critical. Most people don’t know how to do it on their own. Over the past ten years, Matthew Pillmore and his company VIP Enterprises has created a hands on system of accomplishing three goals:
• Increasing cash-flow
• Increasing credit scores
• Accelerated debt elimination
Wealth Without Wall Street is built on the foundation of those three principals. It should be the foundation and common denominator of any personal financial or strategy.

A Different Perspective

I am an endurance runner. More serious than some and not nearly as serious as others. I run for many reasons. It helps me stay as fit as I can while I grow older, therapy (running shoes, shorts and a t-shirt are still much cheaper than the therapist couch) and most of the good ideas I have ever had have come to me when I am running. My favorite time of the day to run is early in the morning. It’s quiet, there aren’t that many other people out yet and it’s also a time that I can reflect. It was about four years ago that I came up with an idea to write a financial book. Titles are usually tough to come up with, but Wealth Without Wall Street came easily. I think it also came in an early morning moment.
The book is about 90% complete at this point and I am shooting for mid-summer to have a completed version. In the meantime I am going to be taking excerpts from the book and sharing them with you in this column, at least for as long as Patrick will have me.
In early 2007, when I had the original idea to write the book, we had just finally recovered from a dramatic downturn in the stock market that took place from 2000 to 2002. By the third quarter of 2007, we had finally erased all of the losses incurred and the stock market reached the same level as when it peaked in 2000.
That downturn got me to thinking about all of the people who were planning to retire during that period. That everything changed for them. If they entered 2000 with a market-related portfolio with a $1mm value, by the end of 2002 that value could have decreased by 40%-80%. Assuming that they didn’t sell, by 2007, they might have gotten back to break even.
As Yogi Bera once said, “it’s déjà vu all over again” and in late 2007 the market meltdown repeated itself. This time it wasn’t just the stock market that took a beating, real estate went right along with it.
The financial lives of so many people changed during that period. Some may never recover. Today the real estate market hasn’t seen any significant recovery and the stock market is still 14% lower than it was in late 2007 which was where it was at its peak in the year 2000. So fundamentally we have gone an entire decade without any real gains in the market as measured by the S&P 500. If you want to take into account the impact of inflation, you could make the case that anyone who stayed the course is underwater by as much as 20%-25%.
I have been in the financial world for over twenty three years in one capacity or another. I have worked as a traditional stock broker, I have sold annuities and life insurance, I have owned both residential and commercial mortgage companies. My background offers me a unique perspective when it comes to personal finances.
My purpose for writing the book is to make people aware that there is a whole world of financial opportunities out there that take many different forms. My book is meant to take a broader perspective than just where to put your investment dollars. I hope to educate you on how to manage your debt, how to create perpetual streams of income that you cannot outlive and other revelations that will put you in control of your financial future.
While the ideas expressed here can be applicable for individuals of any age, I really wrote this book for baby boomers. At 58, I am smack dab in the middle of the baby boom generation. Most of the people that I have worked with in my financial career are baby boomers. No matter if I was taking a loan application, working on a financial strategy, I have had the opportunity to look at the personal finances of hundreds and hundreds of people. I can tell you that, with a rare exception, most people of my generation are in terrible financial shape and totally unprepared to retire or quit working.
Now that the first of the Baby Boom Generation is turning sixty and beginning to collect Social Security, we are being inundated with TV commercials and newspaper advertising from such financial firms as Fidelity, Schwab, Merrill Lynch, Vanguard Funds and a whole host of others. These companies fall under the category of what I’ll call the Wall Street mentality. They are all hoping to capitalize on the 70 plus million of us (that includes me by the way) who are either at or within a few years of retirement age.
If you were born between the years of 1946 and 1964, you are a baby boomer. For most of us it’s time to wake up and smell the coffee. Retirement in right around the corner and unless you’ve got well into seven figures put away, you are going to be facing some very harsh financial realities. That being said, it’s not too late.
What I hope to accomplish is to share with you perhaps a different mindset when it comes to income in retirement, however you might define it. So stay tuned for upcoming issues that will provide you with real meat and potatoes ideas and options.
You can reach me at any time, my email address is withoutwallstreet@hotmail.com and my office number is 303.800.0543.

Managing Liabilities

No matter what anyone says about “good” debt or “bad” debt.  In my opinion it is
all bad.  Most financial advisors/planners pay only lip service to the
subject.
They really aren’t to blame, because they really don’t know any
better.  No one has really taught them the right way to manage and eliminate
liabilities.  As a matter of fact, in my experience, other than making major
changes to lifestyle, very few people know how to accelerate the elimination of
liabilities.
Matthew Pillmore and his company VIP Enterprises is the exception to
this rule.
His company teaches fundamental methods of managing your budget,
increasing your credit score and rapidly paying down your liabilities without
any major sacrifices in lifestyle.
Do yourself a huge favor and check it
out.
Your first effort to creating Wealth Without Wall Street is to manage
your debt.  It is the ultimate in taking control over your financial future.