## Taylor Hayes

HowMoneyWorks Educator

410 S. Ware Blvd., Suite 716
Tampa, FL 33619

July 22, 2021

## Compound Interest: Math Or Magic?

July 22, 2021

### If you don’t think there’s anything awe-inspiring about compound interest—think again.

Albert Einstein asserted that it’s mankind’s greatest invention. He deemed it “the eighth wonder of the world”.(1) That’s the same guy who came up with the theory of relativity! On the other hand, Thomas Aquinas, the influential medieval philosopher and theologian, thought charging interest was unnatural and unjust.(2) How could a coin grow more coins without dark magic at play? That’s not how money works, right?

If you’re still scratching your head wondering why they had such strong reactions, let’s break down how compound interest works and see what the hype is really about!

What is compound interest? Merriam-Webster defines compound interest as “interest earned on principal plus interest that was earned earlier.” Let’s clarify that definition.

Let’s say you put \$10,000 into a bank account that pays 5% interest annually. After 1 year, the bank will pay you \$500 for letting them hold your money. The next year they’ll pay you 5% of \$10,500, which comes out to \$525. You now have \$11,025. This will keep repeating until you withdraw your money.

In the short term, that doesn’t seem like such a big deal. Having an extra \$1,000 is nice, but that won’t get your family to Disney World and back. However, over time those little gains start to accelerate. After 10 years you would have \$16,289. Another 10 years would bring the total to \$26,533 (more than double what you started with). After 50 years your \$10,000 would have grown into \$114,674. That’s over 10x as much as you started with! And that’s with no effort on your part. Your money is growing more money!

Things to consider A few things to keep in mind when working with compound interest. Your interest rate is a key driver on how quickly your money will grow when it’s compounding. Swap out the 5% interest rate for 1% and you’ll only wind up with \$16,446… after 50 years. But crank the rate up to 10% and your 50 year total is \$1,173,909!

Monthly contributions also make a big splash on your compound interest outcome. Just contributing \$100 a month to your initial \$10,000 dollars with a 5% interest rate more than triples your total to \$365,892!

So… is it magic? Those calculations may seem like sorcery. But you don’t need a book of magic spells to leverage compound interest and put your money to work. It just comes down to simple math that we’ve known about for centuries.(3) The key to growing your money is to think of it like a seed rather than something you exchange for a good or service. Make plans to meet with a licensed financial professional to discuss how the power of compound interest can help lay the groundwork for your savings strategy.

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(1) “Why Einstein Considered Compound Interest the Most Powerful Force in the Universe,” Jim Schleckser, Inc., Jan 21, 2020, https://www.inc.com/jim-schleckser/why-einstein-considered-compound-interest-most-powerful-force-in-universe.html

(2) “Of money and morals,” Alex Mayyasi, Aeon, Jul 7 2017, https://aeon.co/essays/how-did-usury-stop-being-a-sin-and-become-respectable-finance

(3) “A Simple Math Formula Is Basically Responsible For All Of Modern Civilization,” Walt Hickey, Business Insider, Jun 5, 2013, https://www.businessinsider.com/compound-interest-is-responsible-for-modern-civilization-2013-6

## The Credit Score Playbook

July 12, 2021

### If you read the last blog article, you now know how to find your credit report and credit score.

But what’s your game plan if you don’t like what you see? A low credit score can make getting and/or paying for a mortgage or car loan much more difficult since lenders are more likely to charge you higher interest rates.¹ Insurers, employers, and even landlords sometimes factor your score into their decision-making process.¹ There are few parts of your life that will be unaffected!

Boosting your score is a key step in helping to achieve financial independence and pursuing your dreams. You basically have two plays at your disposal to start putting credit score points on the board. Read on to see what they are!

Defend your score. Let’s say you get your credit report back and notice something’s wrong. Maybe your credit card company incorrectly reported a late payment or there’s negative information that’s now expired and can come off the report. Errors on your report can sabotage your credit score, so it’s important that you rally to defend your creditworthiness!

First step is you’ll need to write a letter to the credit reporting agency that’s in error. State your name and address and exactly what you’re disputing. Hunt down documents that will support your case and include those as well. The Federal Trade Commission has a sample dispute letter you can access on their website.²

If the credit agency agrees with your dispute, they’ll adjust your credit report accordingly and send you a new copy. You can also request that they send the revised report to companies that viewed the flawed version. If the credit agency denies your claim, you can take the dispute to the Consumer Financial Protection Bureau.³

Attack your score. You might see your score and realize that it’s on the low end. You’ve been late on payments, you always max your credit cards, and it shows. So what can you do? How do you go on the offensive and start lifting your number?

Your first volley is to start paying your bills on time. See if there are ways of automating your payments to make them as hassle free as possible. Second, make sure that you don’t max out your credit cards. Borrowing as much as possible at every opportunity can wreak havoc on your score. That doesn’t mean you should necessarily close all of your credit cards (that can negatively impact your score as well). But come up with a plan to limit your temptation to use plastic and start paying with cash as much as possible. Finally, avoid opening up new lines of credit, especially all at one time. Credit reporting agencies will look at how many creditors have inquired about your records to get an idea of how much debt you might accumulate.

Taking your credit score from a landslide win for lenders to a win for your bank account takes time and work. Remember that you have resources. The Federal Trade Commission has pages of consumer information on credit reporting and scoring that are 100% free and just a click away.⁴ And having a financial advisor in your corner can help boost your chances of turning around your credit score!

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¹ “The Side Effects of Bad Credit,” Latoya Irby, The Balance, Apr 2020, https://www.thebalance.com/side-effects-of-bad-credit-960383

² “Sample Letter for Disputing Errors on Your Credit Report,” Federal Trade Commision, Aug 2013, https://www.consumer.ftc.gov/articles/0384-sample-letter-disputing-errors-your-credit-report

³ “What can I do if I disagree with the results of a credit report dispute?,” Consumer Financial Protection Bureau, Feb 2020, https://www.consumerfinance.gov/ask-cfpb/what-can-i-do-if-i-disagree-with-the-results-of-a-credit-report-dispute-en-1327/

⁴ The Federal Trade Commission, https://www.ftc.gov/

## Finding Your Creditworthiness Is Easier Than You Think

July 7, 2021

A good score means they should give you a competitive rate or you might go elsewhere. A bad score means they can crank up your interest rate and make your money work for them.(1)

Do you know what your credit score is and where it comes from? It shouldn’t be a mystery. So how do you find out what your score is before getting gouged for the foreseeable future?

Reports and scores. Let’s start by fleshing out the concept of credit scores. Certain companies collect information on you—like payment history, the number and type of accounts you have, whether you pay your bills on time, collection actions, outstanding debt, and the age of your accounts.(2) This debt rap sheet is called your credit report. Its goal? To determine how reliably you’ll repay lenders if they lend you money.

Data from the credit report gets run through an equation. Each algorithm is slightly different at each credit reporting company, but they all spit out a number that’s supposed to estimate how likely you are to pay off a loan. High scores mean you’re “credit worthy”, low scores mean you aren’t. Pretty simple, right?

How do I find my personal credit information? Despite what you might think, credit reports are actually easy to find if you know where to look. The government mandated that the three major nationwide credit reporting companies (Equifax, Experian, and TransUnion) offer you a free credit report every 12 months. All you have to do is head over to annualcreditreport.com and request your report.

Credit scores are a bit less straightforward. The government doesn’t mandate free credit score disclosures, but there are still ways to find them for free. Some credit card providers, banks, and lenders participate in FICO Score Open Access Program, making it a breeze for regular people to check their credit scores.(3)

Keeping up with your credit report and credit score might feel like one of those necessary evils, however nurturing and maintaining them can pay off. What should you do once you get your report and score and you don’t like what you see? That’s what we’ll cover next time

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2. The Federal Trade Commission, Sept 2013, https://www.consumer.ftc.gov/articles/0152-credit-scores
3. “Where To Get Your Fico® Scores,” Fico Score, https://ficoscore.com/where-to-get-fico-scores/

June 16, 2021

### Women earn 82 cents for every \$1 earned by a man.¹

As women, we take time away from our careers to care for children, parents, and partners. Interruptions like these can significantly impact a woman’s chance for promotion, ability to earn higher income levels, and—for some women—vesting in full retirement benefits.²

The COVID-19 crisis has made it even harder for women. Without childcare, mothers of young children have had to reduce their work hours 4-5 times as much as fathers, widening the gender gap in work hours. It may seem small or even temporary now, but it heralds a big step backward in the progress women have made in gender equality at work. Fathers—on the other hand, who continued to work full hours during the pandemic, will likely benefit from upcoming promotions and raises over the next couple of years.³

Talk About Money If we want change, we need to start having open conversations about money. We should talk with our friends and co-workers about money over lunch. We should talk to our families and our kids about money at dinner. We have to talk about the things we’re concerned about, and stop keeping silent because we’re embarrassed, guilty, or ashamed. Have you thought about these questions:

• Can I make more money?
• How do I stop living paycheck to paycheck?
• What’s the best way to reduce my debt?
• Do I have enough money to retire?

As women, we’re comfortable talking about anything and everything with our friends—except for money. It’s that one boundary we rarely cross. The majority of women would rather talk about their own death before they’ll talk about money.⁴ When women start asking questions and talking openly about things that are important to us, the world changes. There is power in our words and intentions.

Save More Money From a financial perspective, women say their biggest regret is not investing enough money. We hold back because we don’t feel like we know enough.⁵ Banish the doubts and do 2 things. First, start your journey to learn how money works. It’s not as complicated as you may think. Focus on the basics like the power of compound interest, the time value of money, and the Rule of 72.

Second, develop the habit of setting aside money every day or every week. This can be money from your current discretionary income. If you don’t think you have any extra income, then find it by reducing your expenses or create it with an increase in your income. Skip the latte, bag your lunch, or cut out something extra in your day or week. Without taking into account any potential growth from investing, the chart below shows how saving a little bit every day can add up over time.

Savings Amount Per Day Total In A Month Total In A Year
\$1 \$5 \$10
\$30 \$150 \$300
\$365 \$1,825 \$3,650

The Next Normal Doesn’t Have to be the Old Normal We may not see equal pay or equal wealth in 50 or 100 years or more. The traditional workplace is outdated. We can’t expect the Next Normal to be any different from the Old Normal unless we each take steps to bring about change for ourselves. It all starts with bringing our concerns into the light with real questions and open conversations.

— Kim Scouller

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## The Wealthy Love Suckers—And It Should Make You Very, Very Angry

June 7, 2021

### Do the wealthy know ways to make money that are unknown to everyone else? You better believe it!

John D. Rockefeller, one of early America’s richest tycoons, once said, “I have ways of making money that you know nothing of.” How does that make you feel? Shouldn’t everyone know the best ways to make money and create a prosperous future?

But the fact remains. There are wealth-building principles that are common knowledge to the wealthy but are largely unknown by the majority of the population.

So why is the average citizen in the dark?

How money works is simply not taught in schools. Only 21 states in the U.S. teach at least one high school class in financial education. ¹ Interestingly, all 50 states teach a class on sex ed. So the one thing you can learn on your own, they teach. And the one thing you’ll never learn on your own, they don’t. Go figure.

Actually, it does figure.

Think about it. If the financial industry were to educate consumers about money savviness, people might stop socking away so much of it in low-interest savings accounts that earn less than a 1% rate of return. And before you leave the branch do they offer you a brochure on financial concepts to help you get out of debt, avoid money missteps, and start saving like the wealthy?

Pfff—yeah right!

No. It’s like, if you’re dumb enough to open a low-interest savings account and take the free lollipop (it’s like their sucker litmus test), then they’ll try to sell you a car loan at 6% interest. ²

What a deal. You earn less than 1%—they earn 6%. It’s like a lose-lose for you, but you still thank them on the way out.

But they don’t stop there.

With your new car loan monthly payment, you might run low on cash from time-to-time. But thanks to partnerships with credit card companies, the bank can also offer you a shiny new charge card—but “just for emergencies.”

Do they make it clear how much they charge for late fees before they sell you on the benefits and points you can earn? No, that’s what the back of the brochure is for—as far away from the exciting offer as legally allowed. And you can bet it’s the same customer who opened the savings account and took the car loan who never flips the brochure over. They can always count on a customer with a sucker in their mouth to help drive their profits from late fees.

Hard to fathom there are that many suckers? It’s true…

With an overall outstanding balance of \$6,354, the average American has 3.1 credit cards. Americans—a population of 328 million people—have over 1.5 billion credit cards and a credit card debt of \$815 billion. 67% of all Americans have a credit card. ³

The financial industry thrives on customers who are stuck in the “Sucker Cycle” of foolish spending. While consumers are binging on Netflix, shipping on Amazon, and ordering from DoorDash, institutions are quietly leveraging the power of compound interest to make their customers’ money work for themselves. While consumers live paycheck-to-paycheck, financial institutions and shrewd businesses build profits sucker-to-sucker.

For most people, earning (and spending) a paycheck is the extent of their experience. But the wealthy know the real deal. To become financially independent, you must know the concepts and strategies to save, protect, and grow your money.

So what do you do about it? You stop taking the sucker and you stop being the sucker. You learn how to take control of spending, protecting, saving, and investing your money. How? You do it by reading the book, “HowMoneyWorks, Stop Being a Sucker.” It will only take about an hour.

Don’t have a copy? Contact me and I’ll help you get one.

Use that anger to fuel action. Read the book. Then reach out to me and say, “Now that I know the ways of making money Rockefeller spoke of, I’m ready to chart my own course to financial independence.” We have a clear action plan for you to follow called “The 7 Money Milestones.” I’ll help you check off each one.

Let’s do it together.

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¹ National Financial Educators Council, “Financial Literacy Statistics,” [https://financialeducatorscouncil.org/financial-literacy-statistics/]

² Claudia Assis, “New-car loans hit highest interest rates in a decade,” MarketWatch, April 2, 2019, [https://marketwatch.com/story/new-car-loans-hit-highest-interest-rates-in-a-decade-2019-04-02]

³ Joe Resendiz, “Credit Card Usage and Ownership Statistics (2019 Report),” ValuePenguin, [https://www.valuepenguin.com/credit-cards/statistics/usage-and-ownership]

## Your Emergency Fund: What you need to know.

May 17, 2021

### It really isn’t a question on whether or not you need an emergency fund.

(You do.) It’s the first line of defense when unexpected expenses show up (and they will—have kids?). Unforeseen emergencies threaten to undo your hard work and careful financial planning.

But what exactly is an emergency fund? What should it look like? And how do you start building one if you don’t have a sack of cash lying around?

What’s an emergency fund… and why do you need one? <br> An emergency fund is a dedicated amount of money to cover unplanned, unavoidable expenses. Establishing one is an important milestone on your journey to achieving financial independence! But why is it such a big deal?

Emergencies are a part of life. Nobody schedules a busted transmission or a broken arm, but you’ll need a way to pay for them when they happen. Who would have guessed that a global pandemic would force most of us to stay at home and cost millions of Americans their jobs? So it’s not a question of if you’ll need to cover something unexpected but how you’ll cover it. Without an emergency fund, you’ll be forced to either dip into your long-term savings (assuming you have them) or go into debt. For most people, either option can seriously throw off long-term financial plans. An emergency fund gives you the power to overcome sudden obstacles without sacrificing your retirement or piling up credit card bills.

Emergency fund ins and outs <br> One critical thing to grasp is that an emergency fund isn’t the same as your savings. Establishing a solid emergency fund is not a long-term goal that’s built over years or decades. Once the emergency fund is full, then you move on to other money milestones like conquering debt and saving for the future.

So how do you know you have enough in your fund? That depends on how much you make. A good rule of thumb is that an emergency fund should cover 3 to 6 months of income. That provides a buffer if you have an unexpected car repair, medical emergency, or if you’re temporarily unemployed due to an unprecedented global pandemic!

But what if you don’t have that much cash just lying around? <br> 3 to 6 months of income might seem like a lot of money to set aside, especially if you’re currently living paycheck to paycheck. Building an emergency fund will take time and budgeting. Start with a goal of saving 2 weeks of pay. Then shoot for 1 month, then 2 months, etc., until you reach your goal.

The 2 Rules of Emergency Funds

Rule 1: An emergency fund is only, ONLY to be used in case of actual emergencies. It’s not for last minute getaways, much needed spa days, or killer video game sales. If those kinds of things come along, you can use a “fun fund”, which of course is part of your regular budget!

Rule 2: The emergency fund needs to be easily accessible. Make sure it’s in an account where you won’t incur fees for withdrawals when your car breaks down or you suddenly need a new AC unit. That’s why it’s there. Just remember to refill it as soon as the emergency has passed.

Once you’ve built your emergency fund and you know the rules, you’re ready to move on to the next stages of building wealth. Congratulations!You’re officially not broke and in the perfect position to chase your financial future!

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## Amplifying the Financial Literacy Message through National Media

May 5, 2021

### Our mission is simple, singular in focus, and massive in scope: End financial illiteracy in America.

Ambitious? Yes. Impossible? No. In fact, with enough educators in force, an easy to understand guide book from which to teach, and the passion Americans have to control their own financial futures, we feel as though the odds are in our favor.

Yet even with thousands of energetic, excited educators, we realized from the beginning that our dream would require years, maybe even decades, to accomplish.

That wasn’t acceptable.

So we brainstormed. We lost sleep. We pushed ourselves for an answer, and then we finally realized what we needed to do, which was to amplify our message through the mass media. Not just social media, but mass media, meaning TV, radio, print, and online. We realized that with the implied endorsement and megaphone of the media, our dream could be attained in 10 years or less.

The question was: Would the biggest players in the press embrace the HowMoneyWorks book?

CNBC was first out of the gate to fact check the book and lend their support. ABC/WOR radio New York was next, calling it an “instant financial classic.”

In the opening months of the book’s release, the media has celebrated it at every turn. We’ve appeared on many TV shows, radio programs, and had hundreds of citations online.

As in any massive undertaking, one of the key requirements is credibility. People want to know that what they’re doing is widely accepted by experts with no financial connection to the product. After all, if you’re going to put your heart and soul into something, you want to be sure that it’s worthwhile. Fortunately, the press has responded exactly as we expected—with overwhelming coverage and support.

We’re predicting that the press coverage for this book will last until we end the scourge of financial illiteracy. This is when every American will be educated in the basics of personal finance, and will be fully equipped to chart their own course to financial independence and a comfortable retirement.

– Steve Siebold

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## Is Diversification for Dummies?

April 30, 2021

### Do some digging, and you’ll find mixed opinions about diversification, especially among the wealthy.

Billionaire investor Mark Cuban said diversification is “for idiots.”¹ Warren Buffett claimed diversification is really just a “protection against ignorance” for novice investors.² Dozens of articles across the web reach the same conclusion—diversification can be an unnecessary precaution.

There IS a kernel of truth in their opinion… If you’re in that special class of billionaire investors.

Both Mark Cuban and Warren Buffett made fortunes by investing. And every investment they make is based on careful research, expert advice, and decades of experience. They have little need for diversification because their moves are calculated. To them, diversification would be like putting training wheels on a motorcycle—an unnecessary precaution for a fast and powerful machine.

But what if you’re still in first gear on the road to wealth?

Diversification can serve as a useful safeguard—your personal financial training wheels. Diversifying investments across multiple assets with varying degrees of risk can help soften the impact of losses within your portfolio. In other words, putting your eggs in more than one basket can help compensate for lack of expertise.

Are you leveraging the strategy of diversification? How diversified is your portfolio?

Contact a licensed and qualified financial professional ASAP and start planting the seeds of your future wealth.

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¹ “Robinhood and Reddit: A timeline of two apps tormenting Wall Street,” David Ingram and Jason Abbruzzese, CNBC, Jan. 28, 2021, https://www.nbcnews.com/tech/tech-news/robinhood-reddit-timeline-two-apps-tormenting-wall-street-n1256080

² “Horizontal diversification in action,” Winnie Makena, The Standard, Apr 28, 2021, https://www.standardmedia.co.ke/business/article/2001411132/horizontal-diversification-in-action

## The Rule of 72 Explained

April 26, 2021

### In our book HowMoneyWorks: Stop Being a Sucker, we introduce the Rule of 72, a mental math shortcut for estimating the effect of any growth rate—from quick financial calculations to population estimates.

This formula is especially useful for financial estimates and understanding the nature of compound interest. Rates of return may not be the easiest subject for consumers since it isn’t taught in schools, but this simple rule can help show the significance of a percentage point here or time horizon there.

Here’s the formula: 72 ÷ Interest Rate = Years to Double. If you know the interest rate (or rate of appreciation) or the time in years, dividing 72 by that number will give you a good approximation of the unknown number.

When will your money double?* 72 ÷ 1% = 72 years to double 72 ÷ 3% = 24 years to double 72 ÷ 6% = 12 years to double 72 ÷ 9% = 8 years to double 72 ÷ 12% = 6 years to double

Here’s an example: If you’re receiving a 9% rate of return, just divide 72 by 9. The result is 8. That means your money will double in approximately 8 years. Maybe that’s not fast enough for you and you prefer your money to double every 5 years. Then simply divide 72 by 5. The result is 14.4. Now you know you need a 14.4% return to achieve your goal.

This rule, long known to accountants and bankers, provides a close idea of the time needed for capital to double.

If you think that a difference of 1% or 2% is insignificant—think again! You seriously underestimate the power of compound interest. If one account appreciates at 9% and another at 12%, the Rule of 72 tells you that the first will take 8 years to double while the second will need only six years. This formula is also useful for understanding the nature of compound interest.

Examples:*

• At 6% interest, your money takes 72 ÷ 6 = 12 years to double.
• To double your money in 10 years, you need an interest rate of 72 ÷ 10, or 7.2%.
• If inflation grows at 3% a year, the prices of things will double in 72 ÷ 3, or 24, years. If inflation slips to 2%, it will double in 36 years. If inflation increases to 4%, prices double in 18 years.
• If college tuition increases at 5% per year (which is faster than inflation), tuition costs will double in 72 ÷ 5, or about 14.4, years.
• If you pay 17% interest on your credit cards, the amount you owe will double in only 72 ÷ 17, or 4.2, years!

The Rule of 72 shows that a “small” 1% change can make a big difference over time. That small difference could mean buying the house you want, sending your kids to the college they choose, retiring when you wish, leaving your children the legacy they deserve, or settling for… something less. Doing the math with the Rule of 72 can give you critical insight to hit your goals down the road by shifting your strategy accordingly.

By the way, the Rule of 72 applies to any type of percentage, including something like population. Can you see why a population growth rate of 2% vs. 3% could be a huge problem for planning? Instead of needing to double your capacity in 36 years, you only have 24. Twelve years were shaved off your schedule with one percentage point faster growth.

The Rule of 72 was originally discovered by Italian mathematician Bartolomeo de Pacioli (1446-1517). Referring to compound interest, Professor Albert Einstein (1879-1955) is quoted as saying: “It’s the greatest mathematical discovery of all time.” He called it the 8th Wonder of the World—it works for you or against you. Make sure you put this shortcut to work the next time you consider an interest rate. When you save, it works for you. When you borrow, it works against you!

— Tom Mathews

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• The Rule of 72 is a mathematical concept that approximates the number of years it will take to double the principal at a constant rate of return compounded over time. All figures are for illustrative purposes only, and do not reflect the performance risks, fees, expenses or taxes associated with an actual investment. If these costs were reflected, the amounts shown would be lower and the time to double would be longer. The rate of return of investments fluctuates over time and, as a result, the actual time it will take an investment to double in value cannot be predicted with any certainty. Investing entails risk, including possible loss of principal. Results are rounded for illustrative purposes. Actual results in each case are slightly higher or lower.

## 5 Myths You May Still Believe About Long-Term Care

April 14, 2021

### When a loved one needs extra help to take care of herself at home or needs to go into a nursing home,

the costs—averaging a total of more than \$200,000¹—can be devastating. But the impact on families can be felt far beyond the pocketbook: An estimated 34.2 million Americans provide unpaid care to adult family members,² leading to greater incidence of depression and heart disease among caregivers, the majority of whom are women.² Anyone who has seen first-hand the destructive impact of these situations has at least thought about the need to protect their family from the threat of long-term care. But the vast majority haven’t taken action.³ That needs to change. Since change starts with financial literacy and education, let’s review the five most common myths about long-term care.

Myth #1: Medicare and health insurance plans cover long-term care. Private health insurance does not cover long-term care. Medicare only provides extremely limited benefits in a few very specific circumstances. The Medicare.gov website clearly states that Medicare does not cover most long-term care situations. There is one government insurance program that does cover long-term care: Medicaid. But to qualify for Medicaid, one must have income at or below the poverty level⁴ and in most states have less than \$2,000 in financial assets.⁵ So unless one plans on being absolutely broke in retirement, they need to have a long-term care solution in place.

Myth #2: Long-term care means that you go into a nursing home. When we think of long-term care, we often think of an old lady wasting away in a nursing home. While a nursing home is certainly an example of a long-term care setting, only about 1/3 of care takes place in nursing homes.⁶ The majority of care takes place in a private residence. So if your stubborn father says, “I’d rather die than go into a nursing home,” your response should be, “fair enough, but how are we going to care for you at home?” When planning for long-term care, you should focus on solutions designed to help keep you in your home for as long as possible. Because no one wants to go into a nursing home.

Myth #3: Long-term care is only for the elderly. Many people are shocked to learn that 37% of Americans receiving long-term care are under the age of 65.⁷ One of the major reasons for this is that long-term care doesn’t only arise from getting old or getting sick. Sometimes long-term care claims stem from accidents or injuries—not illness. So something like a car accident or a traumatic brain injury can suddenly put you into a long-term care situation—even in the prime of your life.

Myth #4: It won’t happen to me. None of us wants to picture ourselves in a long-term care situation. We recoil at the thought of being a burden to our family—whether that burden be financial, physical, or emotional. But the fact is that 70% of us will need long-term care at some point in our lives.⁸ So if you don’t want to be a burden, you need to start planning now.

Myth #5: If it doesn’t happen to me, I will have wasted money on long-term care insurance premiums. If there’s a 70% chance you’ll need long-term care, there’s a 30% chance you won’t. Since there’s a 100% chance you want to retire comfortably, a 100% chance you want your kids to be able to go to college if they want to, and a 100% chance you want to protect your family in the event you die early, you need to prioritize the sure things in life. By the time you allocate money to cover all of the absolute necessities, there may not be any money left over to protect against things that are likely, but not guaranteed, to happen. In response to this conundrum, the financial services industry has evolved to create new products that can allow you to focus on the sure things while also protecting against long-term care. If you need it, these new solutions will cover your long-term care costs. And if you’re one of the lucky 30% of people who won’t need long-term care, all of the benefit for which you paid can go to your family in the form of a large, tax-free, lump-sum payment. Often, you can kill two, three, or four birds with one stone. That’s how money works!

Don’t be a sucker. Refer to page 87 of “HowMoneyWorks, Stop Being a Sucker” to begin increasing your literacy on this important financial concept. Then contact your financial professional to get started.

– Matt Luckey

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¹ “Genworth Cost of Care Survey 2019,” genworth.com/aging-and-you/finances/cost-of-care.html and “Long Term Care Statistics,” LTC Tree, Dec 2018, ltctree.com/long-term-care-statistics/

² “Executive Summary: Caregiving in the US,” AARP, June 2015, https://www.caregiving.org/wp-content/uploads/2015/05/2015_CaregivingintheUS_Executive-Summary-June-4_WEB.pdf

³ “The State of Long-Term Care Insurance: The Market, Challenges and Future Innovations,” National Association of Insurance Commissioners, May 2016, naic.org/documents/ciprcurrent study_160519_ltc_insurance.pdf

“General Medicaid Requirements,” LongTermCare.gov, Oct 2017, https://longtermcare.acl.gov/medicare-medicaid-more/medicaid/medicaid-eligibility/general-medicaid-requirements.html

“Financial Requirements—Assets,” LongTermCare.gov, Oct 2017, https://longtermcare.acl.gov/medicare-medicaid-more/medicaid/medicaid-eligibility/financial-requirements-assets.html

“Long-Term Care Insurance Facts - Statistics,” The American Association for Long-Term Care Insurance, 2020, https://www.aaltci.org/long-term-care-insurance/learning-center/fast-facts.php

“The Basics,” LongTermCare.gov, Oct 2017, longtermcare.acl.gov/the-basics/

⁸ “How Much Care Will You Need?,” Oct 2017, longtermcare.acl.gov/the-basics/how-much-care-will-you-need.html

## Your Money Is Worth More Now Than Ever

April 8, 2021

### 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

April 1, 2021

### 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

March 22, 2021

### 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?

March 5, 2021

### 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: <br>

(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

### 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

February 15, 2021

### 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. <br> 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. <p> 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. <br> 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. <br> 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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February 12, 2021

### 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 <br> 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 <br> 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

### 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

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

² “New Survey Finds Americans’ Spending Habits Are Ruining Their Retirement,” Cameron Huddleston, Yahoo! Finance, Jan 1, 2019, https://finance.yahoo.com/news/survey-finds-americans-spending-habits-100000015.html#:~:text=New%20Survey%20Finds%20Americans’%20Spending%20Habits%20Are%20Ruining%20Their%20Retirement,-Cameron%20Huddleston&text=GOBankingRates’%202018%20Retirement%20Savings%20survey,worth%20of%20expenses%20in%20retirement.

## Why You Should Study the Wealthy

January 22, 2021

### 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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