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LAYNE JENSEN

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April 8, 2021

Your Money Is Worth More Now Than Ever

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Your Money Is Worth More Now Than Ever

April 8, 2021

Your Money Is Worth More Now Than Ever

Your money is worth more now than ever.

The rich know that. They’ve conducted the surveys and done the market research to figure out how to convince you to fork over as much of your cash as possible right now while it’s at its maximum potential.

But… why?

Besides inflation, why is your money any different today than it will be tomorrow? It comes down to a simple concept that has the power to change your life. Allow me to explain.

Let’s pretend inflation didn’t exist and that your money today will have the exact same buying power as it will in the future. Someone offers you $100 either today or in 5 years. Obviously, it would be nice to have the money now. But, technically speaking, it wouldn’t really make a difference when you got the cash. In our inflation-free imaginary world, that money could get you the exact same amount of stuff today as it would at any point in the future.

Or would it?

What if you took that $100 payment and put it to work? You put it in a place with 8% interest that compounds annually. At the end of a year that initial $100 will have earned you $8, bringing your total to $108. The next year you earn 8% of $108, bringing your total to $116.64. After 5 years, your $100 will have grown into $146.93. That’s nearly a 50% increase!

In other words, your money has more time to grow today than it will tomorrow. It has more earning potential right now than in 10 years or in 5 years or even in a week! This simple but powerful truth is called the Time Value Of Money.

So what does that mean for you? What’s the bottom line?

It means TODAY is the time to put your money to work.

The clock is ticking. The earning power of your paycheck is slowly ebbing away. The time to stop being a sucker and start building your future is right now!

To learn more about the Time Value of Money, refer to the chapter by the same name in our book, “HowMoneyWorks, Stop Being a Sucker.” Don’t have a copy of the book? Contact me to get one—TODAY!

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This is a hypothetical scenario for illustration purposes only and does not represent an actual investment in any product. Actual investments can fluctuate in value and there is no assurance that these results can or will be achieved. It does not include performance risks, expenses, fees or taxes associated with any actual investment, which would lower results. Rate of return is an assumed constant nominal rate, compounded annually. It is unlikely that any one rate of return will be sustained over time. Investing entails risk, including possible loss of principal.

2 Concepts the Million Dollar Baby Strategy Puts to Work

2 Concepts the Million Dollar Baby Strategy Puts to Work

Most parents want their child to have a better life than they had.

While some parents are concerned they won’t have enough money for their own retirement, they have no idea what they can do to help their child’s retirement in 50 or 60 years. The good news is that they can do something now to put money to work for their child over those 50 or 60 years. What if you could start a small account now that has the potential to grow to $1 million dollars by the time your child is ready to retire?

The Million Dollar Baby takes advantage of 2 financial concepts:

Time Value of Money

The time value of money is the concept that money available to you now is worth more than the same amount in the future because of its potential to earn interest. Money saved today is worth more than money saved tomorrow because the money you save today has the potential to grow. That growth potential over time means you can save less today.

The Power of Compound Interest

The power of compound interest refers to the growth potential of money over time by leveraging the magic of “compounding,” which is interest paid on the sum of deposits plus all interest previously paid. In other words, interest earned on interest plus principal, not just principal.

Let’s consider a few hypothetical^ examples:

If at their child’s birth, parents put away $13,000 in an account that grows at an annual rate of 6.5%, compounded monthly until the child reaches retirement in 67 years, the account would grow to $1,000,042.

If they had waited 18 years before setting aside the $13,000, the account would grow to just $311,486 when the child reaches retirement at age 67. The loss of that 18 years leaves the child with almost $700,000 less for retirement.

For parents who aren’t able to set aside $13,000 at birth, they can still leverage the time value of money and compound interest by taking a more incremental approach. If at their child’s birth, parents put away $2,500 in a lump sum and then $250 every month for 4 years in an account that grows at an annual rate of 6.5%, compounded monthly until the child reaches retirement in 67 years, the account would grow to $1,008,059.

If they had waited 18 years before setting aside the $2,500 plus $250 every month for 4 years, the account would grow to just $313,857 when the child reaches retirement at age 67. Again, the loss of that 18 years leaves the child with almost $700,000 less for retirement.

How to start your own Million Dollar Baby program?

Step 1. Create a trust to own the account. If a parent owns the account, the account will pass through the parent’s estate upon death. With a trust, decisions are made by the parent trustee but the account will survive the parent’s death. The child can only access the trust account upon retirement or in an emergency medical situation before retirement. Depending on your budget, you can use a local attorney or an online service to set up the trust. NetLaw Inc. established a special Million Dollar Baby Trust just for this program.

Step 2. Select a long-term investment that will maximize the time value of money and the power of compound interest. Find a financial professional who will help you choose the right investment for you and your Million Dollar Baby.


– Kim Scouller


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^This is a hypothetical scenario for illustration purposes only and does not represent an actual product and there is no assurance that these results can actually be achieved. The hypothetical scenario does not take into account certain risks and expenses associated with an actual product such as performance risks, expenses, fees, taxes or inflation, if it had the results would be lower. Rate of return is an assumed constant nominal rate, compounded monthly. It is unlikely that any one rate of return will be sustained over time. Numbers are rounded to the nearest dollar in some cases. Retirement needs vary by income and cost of living - $1 million isn’t an adequate goal for every saver.

Closing The Gap

Closing The Gap

Women earn 82¢ for every $1 earned by men.(1)

The median annual salary for men is around $50,000. At 82¢ for every $1 earned by a man, the median annual salary for women is around $40,000.(2) For someone taking care of a family, how significant do you think that extra $10,000 would be?

By the time a woman reaches age 65, she will have earned $1 million less than a man who stayed continuously in the work force.(3) Consequently, retired women receive only 80% of what retired men receive in Social Security benefits.(4)

Women tend to be the primary caregivers for their children, parents and partners.(1) So women end up taking time away from their careers to care for loved ones. These career interruptions can significantly impact women’s chances to climb the corporate ladder – promotions, raises, bonuses and full retirement benefits.(3)

Since women earn less, we have less money to set aside for our financial goals. Of the Americans who live paycheck to paycheck, is it a surprise that 85% are women?(5) As a result, women own just 32¢ for every $1 owned by men. We accumulate only a third of the wealth accumulated by men.(6)

We may not see the gender pay gap or the gender wealth gap close in our generation. But women can change the financial trajectory of their lives by learning how money works and applying the 7 Money Milestones. By understanding and paying attention to all of the things that make up our financial picture – Financial Education, Proper Protection, Emergency Fund, Debt Management, Cash Flow, Build Wealth, and Protect Wealth, we have the power to take control over our financial future and create equal wealth for ourselves.

And, women need to think about their career decisions. We should consider choosing a career that pays more to women and men equally. With a company that doesn’t penalize women for time spent taking care of loved ones. A place where women can create equal pay for ourselves.

Women have made a lot of progress in pursuing higher education and professional careers, but we’ve only made incremental progress in our finances. If we want to bring about profound change, we have to make it happen for ourselves. We have the power to close the gap in our lives for ourselves and our families.

— Kim Scouller

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Sources:

  1. “The narrowing, but persistent, gender gap in pay,” Pew Research Center, April 2018
  2. Bureau of Labor Statistics, Jan 2019
  3. “Women & Financial Wellness: Beyond The Bottom Line,” Merrill Lynch and Agewave, March 2018
  4. “Fast Facts and Figures about Social Security,” SSA, 2019
  5. “Women Live Paycheck to Paycheck Roughly 5 Times as Often as Men – Here’s Why,” CNBC Make It, Oct 2019.
  6. “America doesn’t just have a gender pay gap. It has a gender wealth gap.,” The Washington Post, April 2019

Are You Brave Enough to Answer These Two Big Money Questions?

Are You Brave Enough to Answer These Two Big Money Questions?

Let’s get right to it. Here’s question one: Are you building wealth?

If you answered, ‘yes,’ good for you! Now, let’s get a little more specific… Are you building enough wealth to afford the lifestyle and independence you want until the end of your life?

If you’re like many Americans, you can’t answer that question for two reasons. First, you haven’t calculated how much wealth you’ll need. And second, you don’t know if you’re saving enough now. Have you run the numbers on your 401(k)? You might be shocked at how fast it might run out in retirement. What about Social Security? Any clue how much that will add up to? If your future financial security hinges on these two income sources, you might freak when you realize how little you’ll have to live on each month.

61% of Americans across all ages fear running out of money in retirement.(1) And it’s no wonder! We’re living longer than ever, meaning we need enough savings and passive income to last what could be 20 years (or more).(2) Being able to jazzercise and waterski with the grandkids at 75 is great—unless you’re broke.

Rather than thinking like a sucker and assuming you’ll somehow have enough for the future, it’s time to start thinking like the wealthy. They don’t put their heads in the sand and “hope it all works out”. Money—to them—isn’t anything to be ignored. They learn everything they can about how it works and start developing strategies to make it last. To the wealthy, money is not boring, mysterious, scary, or frustrating. They consider the lifestyle they want and then backwards engineer how to get there, by making money work for them.

To the wealthy, money equals possibilities, goals, gifts, and solutions to problems. Once they have the knowledge, they do everything they can to take control of their future. Money becomes wealth.

But if you don’t know how money works, your money can also become… someone else’s wealth.

Here’s question number two: How do you think about money? Do you think about money like a sucker? Or like the wealthy? It’s not a criticism. It’s a choice.

If money still seems mysterious, confusing or intimidating to you, take these two steps immediately…

Read the book, “HowMoneyWorks, Stop Being a Sucker.” (You can contact me to get a copy.) Then, sit down with a financial professional and find the answer to question one, “are you building enough wealth to afford the lifestyle and independence you want until the end of your life?”

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Sources:

(1) “Reclaiming the Future,” Allianz, https://www.allianzlife.com/-/media/files/allianz/documents/ent_991_n.pdf

(2) “How Long Will Your Retirement Really Last?,” Simon Moore, Forbes, Apr 24, 2018, (https://www.forbes.com/sites/simonmoore/2018/04/24/how-long-will-your-retirement-last/#5b6be5c77472)

How To Break Free From The Sucker Cycle

February 22, 2021

How To Break Free From The Sucker Cycle

Page 14 of “HowMoneyWorks, Stop Being a Sucker” reveals one of the biggest traps of financial illiteracy—the Sucker Cycle.

It’s a money whirlpool that sucks people into an endless loop of trying to spend their way to happiness and wealth.

Here’s how it works. You get a paycheck from someone wealthier than you. You spend it on lattes, lottery tickets, and a lot of other stuff you can’t afford—essentially handing the money back to someone wealthier than you. There’s little to nothing left to save—which is why it feels like everyone’s wealthier than you are. Every 30 days, the whirlpool races to the waterfall with the awful feeling that there’s “more month left at the end of the money.”

This financial phenomenon not only feeds the Sucker Cycle but also illustrates the very definition of financial disaster: “When your outgo exceeds your income, your upkeep becomes your downfall.“

But here’s the good news. Any of us can break the Sucker Cycle. It’s not a matter of money. It’s a matter of priority. The wealthy people of the world live by the following basic mantra: “Pay yourself first!”

From now on, every time you’re handed a paycheck—before you pay bills, buy coffee, or order pizza—make sure you take a portion of your money and put it to work—for your future!

Connect with a financial professional and put goals in place that are specific and intentional—no matter the monthly savings amount.

Saving first and saving consistently is the formula for financial success—and future fulfillment. So if you find yourself stuck in the Sucker Cycle, make a decision to stop being a sucker and BREAK FREE. Form new habits. Think like the wealthy. Pay yourself first. Leverage the power of compound interest.

The results can be astounding—AND—can create the momentum to do even more.


– J.D. Phillips


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3 Practical Ways to Put the Rule of 72 to Work

3 Practical Ways to Put the Rule of 72 to Work

The Rule of 72 is useful for all kinds of financial estimates and understanding the nature of compound interest.

Here are a few examples of how the Rule of 72 can be utilized in the real world to get an estimate about how money will compound in various situations.

Example 1 - Estimating the Growth of an Inheritance.
You inherit $100,000 at the age of 29. What interest rate must you earn for it to become $1 million by the time you turn 65? You’ve got 36 years for your money to grow to $1 million, so it will take 3.25 doubles to grow $100,000 to $1 million dollars. Dividing 36 years by 3.25 doubles equals 11. Your money must double every 11 years. Knowing that, now you can run the formula to find your interest rate: 72 ÷ 11 = 6.54.

There you go. You need a financial vehicle that can offer no less than a 6.5% rate of return to hit your goal.

Example 2 - Estimating the Growth of an Economy.
Let’s say you want to approximate the growth rate of your country’s Gross Domestic Product (GDP). If your GDP is growing at 3% a year you can use the Rule of 72 formula: 72 ÷ 3 = 24. Therefore, in approximately 24 years, your nation’s GDP will double. Unless of course it changes. Were it to slip to 2% growth, how many years would the economy take to double? 72 ÷ 2 = 36 years. Should growth increase to 4%, GDP doubles in only 18 years (72 ÷ 4 = 18).

Example 3 - Estimating Inflation, Tuition, & Interest.
If the inflation rate moves from 2% to 3%, the time it will take for your money to lose half its value decreases from 36 to 24 years. If college tuition increase at 5% per year, costs will double in 14.4 years (72 ÷ 5 = 14.4). If you pay 15% interest on your credit cards, the amount you owe will double in only 4.8 years (72 ÷ 15 = 4.8)!


– Tom Mathews & Andy Horner


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Is Your Cash Flowing?

February 12, 2021

Is Your Cash Flowing?

How much cash do you have left at the end of the month after you’ve covered the essentials AND treated yourself? (I’m guessing not much.)

Wish your paycheck went a little further? You’re not alone—not by a long shot. Most Americans are living paycheck-to-paycheck and saving little to nothing. So how do you increase your cash flow so you can stop living in the Sucker Cycle and start saving and investing more?

In the book, HowMoneyWorks, Stop Being a Sucker, we attack this challenge head on in Milestone 5 of the 7 Money Milestones.

Here are a few tips to get your cash flowing towards your future…

Redirect your cash flow
There are a million little things that siphon away your paycheck. Credit card debt, monthly subscriptions, and your fast food habit all chip away at your income. This “death by a thousand cuts” is a foolish spending cycle that prevents you—and countless other suckers—from creating an emergency fund, protecting your income, and building wealth for the future.

That’s why it’s so important to make and maintain a budget. It’s like a map of where your cash is going. Once you have that knowledge, you can figure out where you need to dial down your spending and start redirecting your cash. Don’t get too detailed. You don’t need to get overwhelmed by spreadsheets. Try creating a one-page list of expenses, freeing up as much cash as possible. Take your budget to your financial professional and discuss how best to use this available cash.

Open up new income streams
Budgeting and cutting back on spending might not be enough. Life throws plenty of unexpected (and expensive) problems at us that might not have a budgeting solution. You may need to look for new income streams to maintain the lifestyle you want while also saving for the future.

You’d be surprised by how many possibilities there are to create additional income streams—many of which offer the chance to make money from home. Maybe now is the time to discover that your favorite hobby or area of interest is actually a way to earn some cash. That could look like a side hustle or weekend gig, but you might find that your skills and ideas are full-time business opportunities just waiting to happen! Research which of your ideas and skills are in demand, figure out how much time and effort it will take to get started, and decide how much time you’re willing to commit. (It could be easier than you think!)

Increasing your cash flow can open up a whole new world of opportunities. That extra money you have from cutting back on takeout and streaming services could be how you fuel the power of compound interest and finally start saving for retirement. That several hundred dollars you bring in from teaching guitar lessons each month could be how you pay off your credit cards and free up even more cash. There’s no doubt your options can really open up once your cash starts flowing!

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4 Simple Steps to Streamline Your Housing Budget

February 1, 2021

4 Simple Steps to Streamline Your Housing Budget

Decreasing your housing budget may mean more money in your pocket.

That’s because housing is the single largest expense for most Americans.¹ Reducing mortgage payments or rent by even a fraction can free up substantial cash flow.

The best part? You don’t have to move into a shack to make it happen. Here are a few strategies to increase cash flow by decreasing your housing costs.

Choose the suburbs over the city. On average, suburbanites save $9,000 per year on housing and child care when compared to city-dwellers.² By and large, the money you may save on the cost of living in the suburbs can outweigh the added transportation expenses. It’s not a shift for everyone, but relocating further from the city might make sense financially, at least for the short-term.

Rent until you’re ready. It’s worth considering leasing a house or apartment until you’re financially positioned to buy a house. Even if a mortgage payment seems cheaper on paper than renting, ownership can come loaded with unforeseen expenses. Flooded basement? That’s on you. Broken furnace? Also on you. Renting isn’t necessarily a permanent long-term strategy, but it beats potentially going into debt covering surprise repairs that are beyond your budget.

Find a reliable roommate. Sharing the cost of housing can free up a significant portion of your cash flow, especially in expensive cities. In New York City, for instance, having a roommate can save you up to $15,500 every year.³ Just be sure you take on a roommate that doesn’t flake out when rent is due.

Rent out a room. If you’re a homeowner with room to spare, consider leasing space to a trusted friend. The extra income can offset the cost of mortgage payments and result in more cash flow going toward saving, investing, or even paying off the house faster.

Contact me if you’re interested in learning more about how budgeting fits into an overarching financial strategy. We can review your income and expenses and make a game plan for how you can stop spending like a sucker and start saving like the wealthy.

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¹ “American Spending Habits in 2020,” Lexington Law, Jan 6, 2020, https://www.lexingtonlaw.com/blog/credit-cards/american-spending-habits.html

² “City vs. Suburbs: Where is Better to Live?,” The Perspective, 2020, https://www.theperspective.com/debates/city-vs-suburbs/

³ “What a Roommate Saves You in 50 U.S. Cities – 2020 Edition,” Nadia Ahmad, SmartAsset, May 11, 2020, https://smartasset.com/checking-account/what-a-roommate-saves-you-in-50-us-cities-2020

A Bold Strategy to Free Up Cash Flow

January 28, 2021

A Bold Strategy to Free Up Cash Flow

Need cash flow? Consider reducing your largest expenses.

Housing, transportation, and food consume more than 60% of the average American’s income.¹ If you’re willing to cut costs in those categories by just a fraction, you could save far more than eliminating smaller budget items. Think of it like this—cancelling a few unused online subscriptions is a good start, but it might not save you nearly as much as downsizing your apartment!

Here’s how it works…

You’re ready to get your financial house in order, attack your debt, and start building wealth. Let’s say you earn about $70,000 per year. $40,000 goes towards housing, transportation, and food, you spend $5,000 on non-necessities, and the rest goes towards insurance, healthcare, and education.

Looks good, right? But when you crunch the numbers, you realize you can’t put away enough each month to reach your savings goals. What a momentum-killer! How are you going to free up cash flow?

By totally eliminating non-necessities like coffee from the shop and streaming services, you could get back $5,000 dollars a year.² Not bad, but not great either.

Or—to save twice as much—you could scale back your housing, transportation, and food expenses by 25%. It might seem radical, but it’s worth considering if it can help get you to your goals.

The takeaway? Before you hack away at your lifestyle, consider your non-discretionary spending. It’s an aggressive strategy, but ask yourself if there are ways you could slash your rent, mortgage payments, car payments, and grocery bill. If so, take advantage of them—they could free up far more cash flow than by just cutting non-necessities.

Not sure how to cut back on your top expenses? Stay tuned for creative strategies for reducing your spending on housing, transportation, and food. Articles that outline how you can save money on the largest items in your budget are on the way!

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Why You Should Study the Wealthy

January 22, 2021

Why You Should Study the Wealthy

Want to be financially independent? Study the wealthy.

Why? Because observing the wealthy is one of the most effective guides for creating— you guessed it—wealth. By using the wealthy as your guide, you can reduce debt, increase cash flow, and protect what you earn.

To study the wealthy, pattern their behavior.

Start by observing your social circles. Ask yourself who in your contact list is building real wealth…maybe a friend, family member, or mentor. Got someone in mind? Talk to that person. Spend time with them, hang out with them, and ask them questions. You’ll begin to absorb their insights, habits, strategies, and ways of thinking just by being around them!

If no one in your circles fits that description, it’s not hard to study the wealthy from a distance. Read the biography of a successful businessperson, watch a CEO’s TED Talk, or follow respected financial experts on social media. Be consistent. It takes time to unlearn unhealthy habits and replace them with new, beneficial behaviors.

Also, consider reading the HowMoneyWorks: Stop Being a Sucker book. It’s the quickest path on the market today to learning how wealth is built. You’ll come away with a fresh understanding of what’s possible with your paycheck and the milestones you need to hit.

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3 Painful Consequences of Minimum Payments

January 19, 2021

3 Painful Consequences of Minimum Payments

Do you send in more than the minimum payments on your credit cards each month? (The correct answer is ‘yes.’)

If you are making more than the minimum payments now—you’re thinking like the wealthy!

A minimum payment is the lowest amount you can pay on your credit card bill without suffering a late payment penalty. We all know making minimum payments may be necessary for a short period if you’re freeing up cash flow to pay down a bigger, more urgent bill. However, paying just the minimum for the long haul can lead to long-term negative consequences.

Just like any time you have to deal with challenges in life, considering long-term consequences is vital to success. It can wake you up from thinking and acting like a sucker with your money. It can give you the laser focus needed to pay off debts so you can start building wealth. What’s at stake? You know, just your future.

So what are those looming, long-term consequences of making only the minimum payments on your credit cards?

Consequence #1: You end up paying mostly interest forever. OK, maybe not forever, but it will feel like it. By making only the minimum payments over a long period of time, you’re basically giving the credit card company free money—your money. You’re not even paying down the principal for the item you originally purchased with your credit card. You’re basically paying a subscription to the credit card company for holding your debt—a monthly service for which you get nothing.

Here’s an all-too-common example:

Let’s say that an unexpected expense tightens your budget. As it stands, you owe $10,000 in credit card debt at a 20% interest rate with a minimum payment of 2%. In order to cover the basics like housing, food, and medicine, you drop your credit card payments to the minimum amount of $200 monthly.

In this scenario, it will likely take more than 30 years and interest payments of over $35,000 to fully eliminate your credit card debt. The credit card company becomes richer, and your financial future is squandered.
 Consequence #2: You can hurt your credit score. When you hold high debt on a credit card for a long period, even if you’re making minimum payments on time, your credit utilization ratio (or the percentage of available credit you’re using) can rise. If it remains above 30% of your credit card limit for long, your credit can take a substantial hit¹—hurting your ability to borrow for a car, education, or home mortgage—and hinder qualifying for lower interest rates on those loans. This all equals financial limitations for your future—less cash flow, higher interest payments, less money to save for the future.

Consequence #3: You never start saving. Today, the responsibility to save and build wealth falls on the consumer—that’s you! Your 401(k) and Social Security check may fall dramatically short of providing the income you need for the lifestyle you want during retirement. The earlier you start saving, the better chance you have of closing the gap on the money you need for the future. Paying minimum payments on your credit cards is a dangerous habit that can prevent you from saving enough.

You don’t have to fall victim to these consequences. You can create a strategy to knock out your credit card debt by paying more than the minimums. How much more? As much as possible—until your credit card debt is gone. That big sigh of relief and your new ability to save will be well worth it!

An important caveat: Paying the minimum on a credit card while you build an emergency fund or pay down another debt can be advantageous, as long as you’re working with a licensed and qualified financial professional to reduce debt methodically.

Learn more about reducing debt in the book, HowMoneyWorks: Stop Being a Sucker. Email, text, or call me to discover how you can get a copy ASAP!

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How Inflation Eats Up Your Savings

How Inflation Eats Up Your Savings

Inflation is financial erosion, a slow and steady force that eats away at the value of money—YOUR money.

Here’s how it works. The trend is that over time, the prices of goods and services tend to rise. As a result, the purchasing power of your paycheck, your savings, and your retirement income is reduced.

The sucker ignores inflation—an abstract concept they may feel they have no control over. But the wealthy understand inflation and prepare for it—calculating the impact into their budget, their future purchases, and their retirement goals.

Here’s an example that drives it “home”…

Let’s say that in 1980 you received a $100,000 inheritance check. You were diligent enough to put the money into an account earning 2% annual interest. Your hope was that one day it would grow and be enough for you to afford a $200,000 dream home—a brick estate with a one acre yard, five bedrooms, three garages, and a pool in the back.

After waiting patiently for 40 years, retirement has arrived. The growth of your inheritance money had exceeded your goal—you now have over $220,000. Time to buy your dream home!

But while you waited, inflation was growing too. It increased at the average annual rate of 3.1%—more than tripling the average costs of goods… and houses.¹

Your $200,000 dream home with three garages and a pool in the back is now for sale at over $600,000.

The takeaway is that you can never ignore the impact of inflation on your goals for the future. You need to know how it could impact the value of your 401(k), the equity in your home, and the death benefit of your life insurance policy.

If you haven’t factored in the impact of inflation on your dreams for the future, there’s no time like the present. Consider scheduling a conversation with your licensed and qualified financial professional today to discuss strategies to beat inflation!

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¹ “Average Annual Inflation Rates by Decade,” Tim Mcmahon, InflationData.com, Jan. 1, 2021, https://inflationdata.com/Inflation/Inflation/DecadeInflation.asp

Are You Keeping Your Checking Account In Check?

January 8, 2021

Are You Keeping Your Checking Account In Check?

There are many culprits that can hamper your ability to build wealth.

Believe it or not, your checking account might be one of them.

A checking account is designed to give you quick, flexible access to your money—not grow it efficiently. That’s why the interest rate for an average checking account is negligible—less than .06%.¹ It might as well be zero if you’re considering it as a savings tool for the future.

But you may already be thinking, “no one would consider their checking account a savings vehicle.” Then why do Americans have so much of their money stashed in them—$2.2 trillion in 600 million checking accounts, to be precise. ²

The answer can only be that they don’t know how money works. Otherwise, they would have moved their cash to an account that leverages the power of compound interest with a higher interest rate long ago.

The sucker likes seeing a big balance in their checking account. The wealthy like seeing big deposits moved into their wealth building vehicles.

Do you have too much money sitting in your checking account?

As a rule of thumb, only keep enough cash in your checking account to cover everyday expenses like utility bills and groceries. Move what’s leftover into accounts and vehicles where it can accrue interest at a faster rate. And consider scheduling a conversation with a licensed and qualified financial professional to discuss which saving vehicles are best for you!

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¹ “Average Bank Interest Rates in 2019: Checking, Savings, Money Market, and CD Rates,” Chris Moon, ValuePenguin, Dec 9, 2020, https://www.valuepenguin.com/banking/average-bank-interest-rates#:~:text=and%20CD%20Rates-,Average%20Bank%20Interest%20Rates%20in%202019%3A%20Checking%2C%20Savings%2C,Money%20Market%2C%20and%20CD

² “Checking Accounts Shrink by Nearly 100 Million Accounts Since 2011,” Tina Orem, Credit Union Times, May 8, 2018, https://www.cutimes.com/2018/05/08/checking-accounts-shrink-by-nearly-100-million-acc/#:~:text=Using%20bank%2C%20thrift%20and%20credit,or%20about%202.2%25%20per%20year.

5 Ways Parents Can Teach Their Children About Money Over the Holidays

December 22, 2020

5 Ways Parents Can Teach Their Children About Money Over the Holidays

The holiday season is an ideal time for your kids to learn, teach, and model how money works.

Yes, the long lines and Black Friday stampedes have become synonymous with the worst of consumer excess and foolish spending. But with its joy and light, the holiday stretch also brings high expectations to give generously. That’s a noble cause if you know how money works, but it can be a slippery slope if you don’t. Having a giving spirit is an admirable trait and considering the needs of others should be part of every family budget if possible. However, overspending on gifts, no matter how good your intentions, can throw you drastically off course financially, stealing from your future and creating hardship for years.

The holiday season is a great opportunity for families to discuss when to give with a heart that’s three times bigger—AND—how to make money decisions like the wealthiest Who in Whoville.

Here are 5 surprisingly simple ways for families to teach and model essential lessons for children about how money works this holiday season.

Give your child cash… and teach them to save it.
Opening up a card is always a bit of a letdown on Christmas morning… unless it contains some cold hard cash! Gifts of money are perfect opportunities to teach children about the importance of saving. Before they blow their “present” on a new toy, in-app purchases, or candy, sit down and have a money conversation with them. Explain that the dough Santa left in their stocking has the power to grow and grow via compound interest. You don’t have to be a grinch and make them hoard all of it. But you might be surprised at how eager they are to save once they discover the growth potential of their money to help them purchase something even bigger and better down the road.

Help your child with their holiday budget
This process starts well before the leaves change colors and snow covers the ground. Collaborate with your kids to guide them in deciding how much they should spend per person over the holidays. Help them develop a post-holiday budget as well. Work with them to nail down a percentage of any holiday cash gifts they’re comfortable saving (20% is a good starting point) and hold them to it! Don’t be discouraged if they give you a low number. That money has time to grow and could still make a difference for their long term goals like buying a car, paying for their education, purchasing a home, or even saving for retirement.

Wants vs. Needs
Explain to your kids that the holidays are not about things. They’re about remembering what really matters, like relationships, family, memories, and traditions. Model self-control for your kids this season. That might mean foregoing luxury gifts, especially those that depreciate in value. Practicing financial discipline not only sets a great example for your kids to follow later in life, it’s also good for them in the short-term. Removing the stress of overspending and holiday debt can open the door to realistic expectations, peace of mind, and meaningful experiences. And for your family, a light-hearted mood during the season of giving will be worth its weight in gold.

Show your kids how price tags really work
Price tags are liars. The true cost of that $500 you spent on trinkets, toys, or tech will be far higher if you factor in future earnings had you saved that money. Make sense? This is a radical shift in thinking—a wealthy way of thinking. Giving is good, but consider also teaching your kids that when you buy something you’re also giving up the time value of that money—its potential to earn more money for you over time. Teach them that one day they may be able to have far more by being smart with their money now.

The real spirit of giving
The subtitle of the HowMoneyWorks book is Stop Being a SUCKER—not Stop Being a GIVER. No one wants to turn their kids into little Scrooges. Once they have the knowledge to start building wealth, they have the potential to give back in ways that would have been impossible for someone trapped in a cycle of foolish spending (which includes giving gifts they can’t afford). Teaching your children how money works means positioning them to have more for themselves AND to provide more for others. They’ll be able to give—and receive the joys of giving—for a lifetime.

Ask me how you can get a copy of HowMoneyWorks: Stop Being a Sucker. It explains these concepts in a way that makes it easy for you to teach your kids all about how money works.

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How Rockefeller Made His Billions

December 10, 2020

How Rockefeller Made His Billions

I’ll bet you don’t think you have much in common with John D. Rockefeller.

After all, he was America’s first self-made billionaire.¹ At the time of his death in 1937, he was worth over $340 billion in today’s money. How rich is that? If you combined the wealth of Warren Buffett, Bill Gates, and Jeff Bezos, Rockefeller would still be richer. We’re talking hard-to-imagine rich. Think Scrooge McDuck doing the backstroke in his money vault—but even richer.

But Rockefeller wasn’t born with a silver spoon in his mouth. Before he became a mega-wealthy oil tycoon, Rockefeller grew up in a humble country home in upstate New York. The only thing that set him apart from his friends and neighbors (and you) is that he learned a pivotal lesson about how money works when he was just a kid.

At 14 years old, Rockefeller had saved up $50 ($1,500 in today’s money) selling turkeys and doing chores for neighbors. Like many 14-year-old boys, young Rockefeller received some shrewd advice from his mother.

She encouraged him to lend his $50 to a local farmer. It was arranged that the money would be paid back in 12 months with 7% interest. A year later, the farmer made good on the deal, returning to Rockefeller the $50 plus $3.50 in interest.

It was around this same time that a neighbor hired Rockefeller to dig potatoes for three days. Rockefeller was paid $1.12. Rockefeller’s New York Times obituary said that “on entering the two transactions in his ledger he realized that his pay for this work was less than one-third the annual interest on his $50, and he resolved to make as much money work for him as he could.”1

What if you had learned that your money could make money when you were fourteen? I’ll bet you would have spent less on movie tickets and clothes and done everything you could to put your money to better use! But many parents aren’t as savvy as Mrs. Rockefeller. Which is why their kids become adults who end up “digging up potatoes” their entire lives so to speak, just like their parents did.

Many adults have never discovered the power of compound interest. So they can’t show their children how to put money to work to build a future they could never earn with just hard work. But they should.

It’s not too late to get your family to start thinking like the Rockefellers.

Here are two practical, very doable things that you can use to leverage the power of compound interest for you and your family, starting today!

Find a high-interest account and start saving. You probably don’t know any farmers who need quick cash. But that doesn’t mean you can’t put your money to work. Actually, the problem is usually that there are too many options! Fortunately, you, like a young Rockefeller, have wise counselors you can turn to. Contact a licensed and qualified financial professional to have a conversation about your vision for the future. They’ll have insights into which strategies and steps best align with your goals. There are many amazing ways to take advantage of the power of compound interest, even if you only have a small amount to put aside each month.

Teach your children about how money works. Would Rockefeller have stopped digging potatoes and built an oil empire if he hadn’t discovered the capacity of his money to grow? We’ll never know. But the same is true for your kids. The sooner they learn that their money can earn money, the better chance they’ll have to stop wasting time and start seeking how to put their money to work.

Ask me for a copy of the HowMoneyWorks: Stop Being a Sucker book.

It explains concepts like the Power of Compound Interest and the Time Value of Money at a level that anyone high school age and above can understand. You might enjoy reading it yourself!

You have more in common with the wealthy than you’ve been led to believe. Their techniques can be yours. Don’t wait for financial wisdom to knock you on the head from out of the blue. Meet with a financial professional and start learning and teaching your loved ones about how money works.

Once you’ve done that, you’ll really be thinking like a Rockefeller!

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¹ The New York Times Book of the Dead: Obituaries of Extraordinary People, edited by William McDonald, 2016.

Face it. You’re a Sucker

December 7, 2020

Face it. You’re a Sucker

Most people don’t know how money works.

In 2018, a global survey asked over 100,000 people in 15 different countries 3 simple questions about interest, inflation, and risk diversification. 70% failed to answer all three basic questions correctly.1

The cumulative effect of that lack of knowledge can result in some sketchy decision making. So are you wondering how you’d do? See if you know the answers to the following questions…

• How much interest will you pay over the life of your car loan? • What about over the life of your mortgage? • How much life insurance do you need to protect your family financially? • How much do you need to save for retirement? • Are you on track with that? • If you’re not on track, at what age will your money run out? • How much will Social Security pay you each month? • How much monthly income will your 401(k) provide? • How old will you be when it runs out?

If you can’t answer questions like these, ask yourself if you’re like so many others who assume there will always be enough and hope everything will turn out OK.

How is that possible?

A lifetime of wild guesses and blissful ignorance explains why so many people facing retirement panic when they see how little they’ll be forced to live on for the rest of their days. Is this true for you? If so, you could find yourself saying “Wow! I thought it’d be a whole lot more.”

It’s time to face it. You’re a sucker.

Does that offend you? Good, it should. Let it be a wake-up call. When you don’t know how money works, you can be taken advantage of time and time again.

You’re a sucker. Own it and you’ve taken the first step toward not being one.

Being financially illiterate sucks. But knowing how money works will help you transition from sucker to student and from student to master. The whole point is never to be fooled again.

Not by banks.

Not by credit card companies.

Not by online offers.

Not by employers.

Not by family or friends.

Not even by the number one person in your life responsible for making money—YOU!

But how do you transition from sucker to student? Well, every student needs a teacher. YouTube videos and online tutorials are great if you need a quick fix around the home. But unless you’re REALLY handy, would you try to tackle a major plumbing job in your house based on a video you watched online? Of course not. It’s too involved and too important. You need someone with experience who does that sort of thing for a living—in other words, you need a plumber. In the long run, your personal finances are even more important than a busted pipe in your home. That’s why it’s critical to work with a licensed and qualified financial professional, who can help you repair your finances and keep them flowing smoothly.

Also, consider shadowing a money mentor. Who do you know that’s financially successful? Become their friend so you can discover what they did (and do) right. Observe their daily habits and how they make decisions. What time do they wake up? How do they use credit cards, if at all? Where do they put their money? Do they make financial decisions with their partner or separately? What you could learn from a financially-savvy friend could pay dividends down the road.

And if you need a beginner’s guide, consider the HowMoneyWorks: Stop Being a Sucker book. It’s a super-readable crash course on the basics of financial literacy that you can read in an hour but think about for a week. Just ask me how you can get a copy!

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¹ “The New Social Contract: a Blueprint For Retirement in the 21st Century —The Aegon Retirement Readiness Survey 2018,” Aegon—Center for Longevity and Retirement, May 2018, https://www.aegon.com/contentassets/6724d008b6e14fa1a4cedb41811f748a/retirement-readiness-survey-2018.pdf

You Are Richer Than You Think

You Are Richer Than You Think

The sucker believes that becoming a millionaire is next to impossible without a 6-figure annual income.

The wealthy know that nothing could be further from the truth.

It’s time to start thinking like the wealthy by recognizing that YOU are richer than you think.

Discovering your hidden wealth begins by following these three simple steps: 1) Reduce Your Debt 2) Increase Your Cash Flow 3) Save More Money

Zoom in to unpack each of these steps…

Reduce Your Debt
Regardless of your salary or income, the first step to becoming a millionaire is to take control of your debt, rather than cursing the bills when they arrive in the mail each month and mindlessly paying the minimums. Taking control requires rethinking, organizing, evaluating, and reducing debt efficiently.

Rethinking means removing the emotion attached to your debt, whatever it may be—anger, embarrassment, shame, frustration, hopelessness. It’s like washing the dishes. A stack of plates and a period of time. It’s just another task to complete.

Write down all of your debts, total balances, monthly minimum payments, and interest rates for each. There they are. You can see them all. Now it’s time for war.

The next step is to evaluate which one to pay off first. Choose the debt with the highest balance or lowest balance—OR choose the one with the highest interest rate. With the first victim selected, start putting all the cash you can muster toward paying off this debt. Instead of buying lattes, burgers, lottery tickets, and that cool new graphic t-shirt—dump your cash into debt payments. You’ll have the rest of your life to fill your closet with new tees. Make sure you continue paying the minimum payments for all your other debts too—on time.

When you make the last payment for the first debt do a little happy dance (really important). Then select the next highest debt or lowest debt, whichever strategy you choose—and put as much monthly cash toward paying it off as you can. Include the money from the minimum monthly payment from the debt you just finished paying off. This gives you a compounding effect to your debt reduction strategy. The more debts you pay off, the bigger your debt paying power becomes and the faster you’ll start reducing those debts. The process will actually become fun as you feel the power that comes from knocking each debt out. Trust me.

Along with paying off your credit card balances, student loan debts, and car loans, you should also take a look at your mortgage if you’re a homeowner. If you can refinance your home for a 1% lower interest rate or even lower, it may make sense as a way to lower your monthly payments and lower your mortgage debt. Make sure you work with your financial professional to see if this is a fit for you.

Increase Your Cash Flow
Now that your debt is moving down, you should have more cash freed up. But when it comes to cash flow, more is always the merrier. Here are some tactics for freeing up even more cash flow so you can make the jump from sucker taking a licking to millionaire in the making.

First, look at your monthly spending. Take the last two or three months and categorize everything that isn’t a necessity. How much did you spend on eating out, clothes, entertainment, impulse buys, home improvement, travel, and gifts? With the total in hand, cut the amount in half. You should also take a close look at your monthly subscription payments—how many streaming services do you really need? Cancel services that you’re not using.

So now you have your new non-essentials budget. Congratulations, you just increased your wealth-building power and simultaneously stopped living above your means!

Second, if you’re employed, request a meeting with your boss and ask for an increase in salary or wage or ask for more hours. All they can say is ‘no.’ If they agree, even if it’s just by a small amount, you just increased your cash flow once again. You’re on a roll.

Third, consider starting your own business. You may have thought about starting one in the past but it wasn’t the right time or you were too busy. Now is exactly the time to seriously examine the possibilities. What have you always wanted to do? What are your talents and abilities? What new business opportunities do these times present?

Fourth, you may not want to start a full-fledged business, but you could have a side gig or hustle to earn a little extra in the mornings, evenings, or weekends. Do you like making things, organizing, cleaning, serving, driving, crafting, zooming, or talking on the phone? What can you do with your time, enjoyments, and skills to make a little extra dough? There are endless opportunities out there for entrepreneurs. Find your fit and boost your monthly income—even if it’s only by a few hundred a month.

You have reduced your debt and increased your cash flow. Now you can use that extra monthly cash to start building wealth. The next step is to save like a millionaire.

Save Money
Saving money on a consistent basis, regardless of the amount, is the true secret to financial victory. The strategy is simple. You take all the monthly cash flow you can spare and start saving it into an account with the best interest rate, growth potential, tax advantages, and principal protection you can find. This is where a financial professional is key. Don’t go it alone.

These habits have created more millionaires than any other story, company buyout, or stock market windfall in the history of the world. The 8th wonder of the world—the power of compound interest—is the magic dust that will always work in your favor if you’ll put it to work.

Saving money is more about the decision than anything else. Just like breaking the cycle of foolish spending, you must DECIDE to save money on a consistent basis. When you do, over the years and decades, you will win because you’re employing the Time Value of Money and the Power of Compound Interest. This is the one-two combo that millionaires use to reach their status.

With a little less debt and a little more cash flow, you can start saving a little bit over a long period of time to become richer than you think—perhaps even a millionaire!

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Why Everyone Wants Your Money NOW

November 20, 2020

Why Everyone Wants Your Money NOW

Instant Gratification Has Overtaken Your Financial Power.

“Waiting sucks!” Like weeds in a field, this wealth-strangling lie can overtake every financially illiterate mind. If you don’t know how money works, you may succumb to society’s financially destructive desire for instant gratification.

It’s time to learn how money works, Old MacDonald, because a field overtaken with weeds produces no harvest. Start pulling up the weeds of instant gratification by asking yourself this…

In today’s world you can buy now, one click order, get no interest down, and enjoy same day shipping—but have you asked why? Why is it so ridiculously easy for you to spend your money?

Is it…

A. Because they’re committed to your convenience? (You’re not that naive.)
B. Because you’ll buy from their competitor if they don’t? (Getting closer.)
C. Because they want your money, they want it all, and they want it now?

Know the answer? It’s “C.” Understand that your need for instant gratification is a conditioned response. From birth, you’ve been brainwashed to want everything ASAP. They know this—THEY’RE THE ONES who brainwashed you. Why? Because they want your money—all of it! Picture a tiny stopwatch inside every dollar you own. When the start button is pressed, the dollar starts earning interest. Each dollar is ticking away, earning money for someone. Is it you, or is it the institution that has your savings account, car loan, mortgage, student loan, paycheck, or your next pumpkin spice latte? Every dollar that passes through your hands will earn money for either you or someone else. Every time you put your hard earned cash in the hands of someone else, you’re handing out little money stopwatches that never stop ticking.

It’s time to reclaim the earning power stolen by your need for instant gratification.

Money you put to work today has the potential to earn more interest than money you put to work tomorrow. Why? Because it has more time to grow. Those who know how money works never want to waste a single day of earning potential.

Did you think it’s a coincidence that taxes are taken out of paychecks now but tax refunds are not paid until the next year? Ever wondered why financial companies hold funds for a few days rather than release them to you immediately? They pay it out only after they’ve squeezed out every possible day of earning.

They’re not doing anything wrong. They’re just taking full advantage of the Time Value of Money. It’s time you did too.

It’s good if this makes you mad. You should be—you’ve been treated like a sucker. Your logical mind and personal finances are covered with the weeds of instant gratification. This threatens ALL your goals for the future.

Start ripping the weeds out by reading HowMoneyWorks: Stop Being a Sucker today. Ask your HowMoneyWorks financial educator how you can get a copy immediately.

The book coupled with guidance from your licensed and qualified financial professional can help you increase your financial literacy, stop the counterproductive behaviors of instant gratification, and start thinking—and acting—like the wealthy.

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Why You Must Know How Money Works

November 16, 2020

Why You Must Know How Money Works

There’s an old saying: “What we think about, we bring about.”

The expression holds true over the course of our lives in determining both our struggles and our successes. What you think about becomes your reality.

What will your reality be?

It will largely depend on how you think about money.

If you’re like many, you think primarily in emotional terms. You get excited to buy something new. You grow frustrated when paying bills. Because you find the mechanics of money uninteresting and confusing, you end up like so many others—never learning how money really works.

No big deal, right? But here’s the thing about money. It’s not like cooking, golfing, or any other skill you can get by without. If you don’t know how to properly grill salmon, who cares? If you can’t drain a 20-foot putt, so what? But if you don’t know how money works, you might wake up every day wondering why life SUCKS.

That’s a strong word, but yes, not knowing how money works… sucks. It sucks up your time. It sucks up your freedom. And, most importantly, it sucks up your income. So where does it all go? It goes to your mortgage lender, your credit card company, your bank, Apple, Amazon, Netflix. You know—the guys who know exactly how money works. W.C. Fields said, “It’s morally wrong to allow a sucker to keep his money.”

This is what you’re up against. You become a sucker. They become wealthy.

The world is full of people who are happy to tell you what to do with your money.

Fortunately, you have tools at your disposal to transform your sucker mindset into a money mindset. Here’s how to start:

Test your literacy with the HowMoneyWorks challenge. In five quick questions, you can discover if you have the knowledge you need to help make measured financial decisions and alter your future for the better. Ask me for the link and we’ll review your results together!

Read the HowMoneyWorks: Stop Being a Sucker book. It’s designed to help you learn how money really works so you can stop being a sucker, start being a student, and be the one to call the shots throughout your life with confidence.

Meet with a financial professional. When your car is broken, you go to a mechanic. So why not do the same for your finances? A licensed and qualified financial professional can give you the knowledge you need to answer questions like “How do I get the best rate on my mortgage?” and “How can I pay off my credit card debt?” and “Am I financially prepared for an emergency?” Plus, they’ll help you leverage that knowledge by working with you to prepare a financial roadmap for your future.

Grand failure or grand finale?

You choose. It all starts with your thinking. It all starts with knowing how money works.

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What Does it Mean to Be Financially Literate?

November 9, 2020

What Does it Mean to Be Financially Literate?

People with a high level of financial literacy are able to make informed decisions by putting their financial education to work.

Understanding how money works is practical by nature and can be a make-it or break-it knowledge base and skill set for one’s life. Financially literate people are able to organize their money to meet their future goals—regardless of what those goals may be—by simply being smart with money. This is usually best accomplished with the assistance of a financial professional.

Financial literacy is becoming increasingly essential in today’s evolving world. A lack of financial literacy could lead to a wide number of financial difficulties for people, contributing to important social issues in our nation including poverty, job scarcity, and wealth inequality.¹ It can also create stress that can have a negative impact on mental and emotional health.² Financial skills can help provide benefits that go beyond mere financial awareness. They can also lead to an improvement of personal well-being because those who are financially literate usually have greater success and peace throughout their lives.

To understand what financial literacy means it’s important to know and follow the correct steps—like the 7 Money Milestones—which can be found in the book HowMoneyWorks: Stop Being a Sucker. Having financial literacy adds to the values, skills, and self-confidence necessary to make insightful, strategic money decisions. Yes, becoming financially literate takes a little work, but the outcome can greatly improve quality of life.

Financial literacy helps people understand relevant money concepts. Knowing about the Time Value of Money is a great example. This concept informs us that the money available now is worth more than the same amount in the future because of its ability to earn interest. Concepts like this create urgency, inspiring people to increase their financial education, and then use that knowledge to take action and create healthy money habits.

Financially literate people:
- Ask the right questions of their financial professional

- Are aware of the reasons behind their decisions

- Set aside part of their income on a regular basis

- Make plans for the future

- Protect their family in the event of sickness or premature death

- Set financial goals and make plans to achieve those goals

- Set aside savings for emergencies

- Keep their financial obligations under control

- Monitor their spending patterns

- Understand concepts such as loans, credit, and debt

- Are aware of the services banks provide

- Are knowledgeable about investment options

- Do not spend more than they earn

- Have an understanding of tax-related issues

One of the best resources that teaches the basic knowledge, skills, and behaviors of a financially literate person is the HowMoneyWorks: Stop Being a Sucker book. If you develop the skills outlined within, you can consider yourself well on your way to becoming financially literate.

— Tom Mathews

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¹ “COVID showed why we need to make financial literacy a national priority,” Carrie Schwab-Pomerantz, Fortune, Sept 24, 2020, https://fortune.com/2020/09/24/personal-financial-literacy-health-schwab/

² “The Link Between Physical and Financial Health,” Marcus by Goldman Sachs, Feb 27, 2020, https://www.marcus.com/content/marcus/us/en/resources/personal-finance/physical-and-financial-health

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