CHANGE IS A JOURNEY, NOT A BLUEPRINT
Benjamin Franklin once said, “The only things in life that are certain are death and taxes.” He was referring to the fact that life is full of change. Sometimes we initiate the change and sometimes outside influences bring about the change. Whichever the case, you can be certain things will change.
Life is not static, but with change comes opportunity. In calculus we had to calculate the point at which a ball thrown up would reach a stopping point and begin dropping again. By using this example, we can determine whether we are in a process of improvement or a process of decline.
Only you can make the choice about how you handle the roller coaster ride of life. By accepting that change is an inevitable journey, vision and strategy often emerge, many times creating an improved situation, an improved you.
Below are some ideas that may appear to be changes in your thinking pattern. We suggest you journey through them to see if a new, possibly improved, vision and strategy emerges for you.
OUT-OF-THE-BOX THINKING ABOUT MONEY
1. Stock Markets go up but don’t always stay-up as evidenced by recent events. Asset location is as important as asset allocation especially if you have a need for cash for lifestyle expenses. Having at least a portion of your money tucked away in accessible, interest crediting accounts allows you options for sources of cash in down market conditions.
2. Listed are several facts about Medicare that should know:
- If you don’t enroll when required you will forfeit Social Security.
- The law on this forfeiture was created in 1993 and upheld by the courts on January 11, 2013.
- Medicare Part B premiums are inflating at 7% annually.
- Cost of Living adjustments on Social Security did not increase in 2016.
- Medicare Part B premiums are automatically deducted from Social Security if you are collecting. If not, Medicare bills quarterly for the premiums.
- Medicare premiums are increased substantially if you are financially successful and in a high income tax bracket.
- Medicare determines your Part B premium by looking back on your tax returns for the two previous years.
3. How are you saving for retirement? Are you saving first and then adjusting your lifestyle to meet your savings objective? Or is your focus on your current lifestyle and then saving the remainder? What do you think is the most effective strategy for securing your financial future?
4. Do you have the answers to the four most important questions when securing your financial future and having your money last as long as you do?
- What rate of return do you have to earn on your savings and investment dollars?
- How much do you need to save on a monthly or annual basis?
- How long will you have to work doing what you’re currently doing?
- Will you have to reduce your standard of living at retirement?
5. There are two ways to increase your existing pot of money. You can find other products with apparent higher rates of return. This is usually the most commonly perceived way of increasing your wealth. This involves taking on additional risk. Risk is associated with potential loss. The second, more uncommon method, is to increase the efficiency of your money. This does not involve risk, but requires a good understanding of wealth transfers. Wealth transfers occur in three forms—protection, expenses and taxes.
6. Six things you should know about wealth transfers:
- Wealth transfers are a liability. The liability can be a current or future liability.
- They are hidden. You need a trained eye to find them.
- They can be a huge obstacle to creating wealth.
- They hinder cash flow.
- Many advisors are either unaware of them or do not deal with them.
- They can be minimized, corrected, or avoided.
7. It is important to think about the amount of cash needed in our golden years to maintain a present lifestyle. Let’s assume a married couple, both in good health with no apparent chronic health conditions. According to IRS tables the probability of at least one of them living to 91 years old is fifty percent. That also means a probability that one will live longer than 91 years. Our lives may be very different in those golden years, but the need for cash for lifestyle expenses will still be there. We must plan accordingly.
8. Inflation is a hidden tax! We would be “up in arms” if the government declared a 100% tax on our investment income. However, very little is discussed when we experience a 3% increase in our cost of living. Take a look at this example comparing 100% tax on Interest income vs. 3% inflation and no tax:
9. What does your financial future look like? Are you planning your financial future by design or default? If you are not proactive, then you are designing by default. Both are plans, and one, most likely, will have a far greater impact on your family’s life and future income. Remember the wisdom of Warren Buffet: “Someone is sitting in the shade today because someone planted a tree a long time ago.”
10. What is Human Life Value? This is the amount of money needed to replace your income when an unexpected event occurs such as death or disability. The way to protect against this loss is to purchase life or disability insurance. You transfer the risk to an insurance company. You can only purchase the insurance if you qualify. You buy it with your good health. You pay for it by making premium payments. If you get to a point where you need it, you most likely won’t qualify due to your poor health. There is a time in all of our lives when the DOU (day of uninsurability) sets-in.
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