Don’t Get Caught With Your Head In The Sand – Overcoming Financial Myths
May 3rd, 2013
A couple of months ago I was at the Denver Zoo with my family. As we strolled from exhibit to exhibit my six-year-old son, Douglas, peppered me with questions about the animals and their unique attributes.
The dialogue went something like this:
Doug: “Why is the lion so big?”
Me: “Because he is the king of the jungle”
Doug: “Why is the giraffe’s neck so long?”
Me: “So he can reach leaves high up in the trees for dinner.”
On and on this went until we arrived at the ostrich exhibit where my son asked, “What do these birds do?” Without even thinking I blurted out, “Well Doug, ostriches stick their heads in the ground when they get nervous.” As soon as I said this, my wife started laughing and quickly informed me that this was not true, but actually a myth.
Once I stopped to consider it, I realized that she was probably right. Subconsciously, I had believed, and even allowed this myth about ostriches to grow in my mind for years. This small shift in understanding got me thinking about what we do here at Paradigm Life every day. We help people realize simple but very misunderstood facts about money.
You see, just because you have a trusted source suggesting certain strategies to you that will help you to create wealth doesn’t necessarily mean that they are the best approach. Sometimes we accept everything we hear and have a difficult time separating from the good and bad advice that we receive. In actuality, to most financially related strategies and questions the best answer is, “It depends on your situation.”
Are 401k’s, IRA’s and other tax qualified plans the best place to store your money? That depends. Each situation is different and needs to be evaluated individually. What is true about these plans is that they are often touted as providing “tax benefits” because of the ability to defer your taxes until you begin taking distributions.
Stay tuned for next week where we will go over these “tax benefits” and how they will affect your financial situation.
-Ryan Lee, Paradigm Life
For more information about Paradigm Life and Infinite Banking, download our article or contact us at info@paradigmlife.net or by phone at 1-800-870-8670.
Creating a Plan for Your Children’s Allowance
January 21st, 2013As you get ready to start a new year, you may want to adjust the way that you help your children understand budgeting and money. A recent survey shows that children bring in an average of $15 a week for allowance. About 61% of parents say that they pay their children allowance and the average age that children start receiving allowance is eight. As children age, it is common that their allowance increases.
Interestingly, the money that parents are giving their children is not being saved. Rather than saving the money, children often spend the money quickly. Children often do not understand the principles or the importance of saving and it is up to parents to talk help children understand personal finance.
An allowance can provide parents with a great opportunity for teaching children about personal finance. Determining a specific percentage of money that can be set aside each week for long term and short term savings can be very effective budgeting practice.
Some parents find success in offering to match long term savings. If your child is saving for a car or for college, offer to match their savings at the time that they purchase a car or leave for school. This can be a great motivating factor throughout the time that they are saving. Helping your child understand how to handle money at an early age can prepare them to leave the nest and be self-sufficient after moving out.
Help your children incorporate good spending and saving habits with their allowance. Develop a system that works well for children and in your home. The new year can be a perfect time to develop a new system!
Avoiding the Ever Feared Audit
January 10th, 2013Being audited can be time consuming and nerve wracking. The IRS does not have the man power to audit more than about 1% of all individual tax returns on an annual basis. To figure out who they are going to audit, the IRS has some red flags that will pretty much guarantee an audit. These are some reasons that you may find yourself audited by the IRS in 2013…
1. Making more than $200,000 in a year. Interestingly, those that make more than $200,000 have a 3.93 chance of being audited and those that report an income of $1 million or more have a one in eight chance of being audited. When you make more than $200,000 or more than a million dollars in a year, you should make sure your finances are spick and span.
2. Reporting an incorrect figure for your taxable income. The IRS will get a copy of all of your 1099s and your W-2s. A simply computer program will compare what you report to the documents that are received, if the figures don’t match up a red flag is put next to your tax forms.
3. Filing for a large charitable contributions deduction. A simple formula that the IRS created will show what an average charitable donation is for your income bracket. If you exceed this donation, a red flag will be raised.
4. Claiming the home office deduction is a great way to win the “audit lottery”. You should be prepared to back up every single deduction with the proper documentation. This way, you can be sure that you have nothing to worry about should you be audited.
As you get ready to submit your tax forms, it may be beneficial to consult a professional with any questions that you have. This way, you can be sure that you can minimize your chances of having to deal with an IRS audit.
Source: http://finance.yahoo.com/news/irs-audit-red-flags–the-dirty-dozen-194425903.html?page=1
6 Things You Should Know About Cash Value
November 14th, 2012
It is really called “Cash Surrender Value”. When you enter into a contract with a life insurance company and buy Permanent Life Insurance, you have an insurance policy that is unlike any other insurance policy that exists. As you make premium payments into your policy, a percentage of your premium becomes available to you in the form of cash value. Permanent Life Insurance is a different kind of insurance and it starts with the Cash Surrender Value.
It can be protected from creditors (varies by state). Unlike other financial vehicles that can subject your money to a variety of risks, Cash Value Life Insurance has some unique elements of protection. Since cash value is not public record – short of a court order – no one knows how much of it you have. Depending on your state, cash value can have a level of protection from creditors. This can include protection from Bankruptcy, law-suits and liens, for example. Perhaps most importantly, with most cash value insurance, there is no concern over market risk since you have a contractual guarantee with the insurance company that you will not lose any money.
It provides guaranteed growth. Cash value is a contractual guarantee by the insurance company. Regardless of what the stock market does, most cash value policies are guaranteed to grow. In the case of mutual insurance companies, this growth is based on the total assets of the insurance company and not the stock market. As an incentive to keep the policy, the insurance company pays guaranteed interest based on the amount of the policy’s cash surrender value.
It earns dividends. The owner of a cash value life insurance policy of a mutual insurance company is an actual owner of the insurance company itself. As an owner of the insurance company, you are entitled to receive a dividend payment each year. It is paid out to each whole life policy holder on the amount of cash surrender value they have built within each whole life policy. This dividend payment is received in addition to the guaranteed growth of the policy.
You can access it at any time for any reason. As you build cash surrender value inside of your whole life insurance policy, as the contractual owner of the policy, you have control of its use. You can surrender (or withdrawal) the cash surrender value at any time. Or, you can take out a loan against your cash value from the insurance company. There is no qualification process, credit check or application. In the case of a loan, it is paid back at your own pace and each payment replenishes your cash surrender value.
It can do multiple things at the same time. Perhaps the most compelling component of cash value life insurance is simply this – cash surrender value is financially serving you in multiple ways at the very same time: (1) The moment cash value is created, it contains a death benefit that your estate can receive at some point in the future. (2) Cash value can be leveraged (used) outside of the policy at any time. (3) Even when the cash valued is used outside of the policy, the policy holder is still receiving contractual growth on their cash value from the insurance company. (4) A dividend payment can be paid into the policy each year. Cash surrender value can receive each one of these financial benefits simultaneously. Therefore, because of these unique characteristics of cash surrender value, each premium dollar paid is working for you in several ways at the very same time.
For more information about Paradigm Life and Infinite Banking, download our article or contact us at info@paradigmlife.net or by phone at 1-800-870-8670.
The 6 Reasons You Won’t Retire
October 25th, 2012
Few individuals are going to experience the joys of retirement. The warnings are there, start preparing now instead of later.
Retirement is the dream of every working American. They long for the day that they can finally sleep in, watch TV and do whatever else they want all day long. It is a privilege denied to them since they were kids. This dream is shared by many, but will soon be realized by few. According to a recent article, there are 6 reasons why you will never retire.
1) Corporate pensions have cut down. In recent years, many companies switched to a defined contribution (i.e. a 401k), as opposed to a defined benefit. Defined contributions equate to a set amount that you set aside to go towards a pension fund at retirement. The more you decide to put in, the better the return at retirement. Remember though that this was set-up to save companies money, meaning that you would have had a larger fixed income if you were paying for a defined benefit. Defined benefits are paychecks sent to you every month for a set amount after retirement.
2) Smaller yearly incomes are hurting your chances of retirement as well. Annual household incomes have dropped steadily since 2000. Americans are earning on average 7% less than they were a decade ago.
3) As the number of families containing 2 working parents increases, the family has spent more money on child care than most families. Although it may not seem like a great amount on a monthly basis, the price of licensed center can range between $14,000 a year to $18,000. When you send multiple kids to childcare, the second parent’s paycheck is almost directly send to the children’s care. This leaves less money for your family and less to put in your bank account.
4) Investments aren’t paying out as well as they used to. Over the past decade, stocks have yielded a measly 1.8% increase. This means that if you invested $50,000 over the past ten years, you more than likely walked away with only $900 more than you started. Your investments are not paying out enough to rely on for a retirement.
5) Too many are saving too little in their savings. They are putting too much stock in a defined contribution pension to save them in their older age. They will not know they don’t have sufficient funds to survive until it’s too late.
6) Families used to subside on inheritances. Families would build up an inheritance for their kids—or for themselves—and then deliver the set amount of money to the right party at the right time. Whatever that amount was, it would be sufficient for their needs. Many modern families do not have an inheritance to receive—or at least one sufficient—that will pay for their livelihood from here to the end.
These are the 6 reasons why you may never retire.
That is, unless you take the necessary steps now to begin your own retirement savings. You can break the mold through your own efforts now. Use your money smart and find new ways to make money that are safe, legal and actually helpful.
Source: http://money.msn.com/retirement/6-reasons-youll-never-retire
Housing, Net Worth, and Financial Problems
October 11th, 2012According to a new study, many households across the United States actually have negative net worth. As of right now, a great many households have more debt and payments due than they actually have assets. This is a major low for the average American right now, since debt is literally outdoing earning for many of these families in a comprehensive way.
People in these situations report feeling like they are “drowning” and that there is little to no hope for them. Indeed, this pessimism is being readily felt across the country as economic conditions continue to be poor. The study also found that while the average savings of people has increased since 2008, the liquidity of their finances has not. In other words, savings have only increased enough to keep up with inflation and depressed economic conditions.
Declining home values have greatly contributed to these problems for many Americans- especially for the middle class. For many people, the home that they have is their greatest tangible asset. As prices plummet for those trying to sell their houses at a competitive price, it greatly reduces their relative financial strength.
Don’t suffer with the Nation, help the Nation rise through your asset protection
As the recession has not lifted and it is anyone’s guess if it ever will in full, adjustments are going to have to be made to our financial patterns if we want to get to a better place. Alternatives to current financial systems may be a viable way for people to gain leverage and improve their situations on the whole.
Source: http://usat.ly/KP9JUW
Debt Crisis for Those with Student Loans
September 27th, 2012The price of college tuition has received a lot of attention recently. Many people are worried about the skyrocketing prices. Whether you are a student that has to sign the loan, a parent that has to co-sign the loan, the college graduate that is overwhelmed by debt or a high school aged student that doesn’t know how to pay for college the ever increasing price of college may be something that is weighing on your mind.
A recent study showed that more and more college students are struggling to repay the private student loans that they took out in school. The report that was done by the Consumer Financial Protection Bureau and the Department of Education showed that from 2001 to 2008 the private student loan market grew from under $5 billion to over $20 billion. Then, after 2008 there was a decrease in the market again as banks began to raise the credit standards for their private school loans. In 2011 90 percent of undergraduates had co-signers, which is indicative of the tightened credit standards.
Interestingly, this pattern of school loans is similar to the subprime mortgage lending that resulted in the busting of the housing bubble. Lenders began to make exceptions for students with poor credit and lenders were providing money to students without much regard as to whether or not students would be able to pay back the loans.
After the financial crisis in 2008, it seems that more financial prudence is being used. Lenders seem to be ensuring that students are not taking out more in loans then they need.
Even with more financial prudence, there are many students that find school loans are necessary to fund their education. With college tuition doubling in the last decade and some estimates showing that student loan debt has grown to over $1 trillion, there may be no easy answer for those students attending an expensive college that do not have the funds to pay tuition.
Resource:
For more information about Paradigm Life and Infinite Banking, download our article or contact us at info@paradigmlife.net or by phone at 1-800-870-8670.
photo credit: CollegeDegrees360 via photopin cc
An Interesting Insight Into Retirement in the U.S.
September 12th, 2012The Net Worth of Individuals
A recent study published findings of a longitudinal study that surveyed retirees from 1993 through 2008. The study showed that there are a wide variety of financial situations for the retired individuals within the United States. Although almost half of retirees will have just $10,000 when they pass away, this number is not necessarily indicative of their lifestyle or their standard of living.
The net worth of our retired generation may be a better measure of their financial situation. The net worth takes savings, home equity, Social Security, pension benefits and more into consideration. Those that are single and retired had an average amount of assets just around $142,000. The retirees who had a spouse die previously had assets of $235,00 and the couples where the surveyed retiree had died but the other spouse was still living had average assets of $692,000, according to this study.
Some people have stated that the elderly in our society are not doing well financially while others have stated that the elderly are doing well financially, but there is so much variation amongst the retirees, that neither of these statements is wholly accurate.
Correlations Between Wealth and Survival
There were strong correlations between wealth and survival in this study. It showed that those retirees that have accumulated more wealth will live longer. The study also showed that married couples usually have a higher level of retirement income and a higher amount of financial assets than their single counterparts.
Preparing for your retirement and doing what you can to ensure you are able to maintain your standard of living will pay off in the long run. If you want to live longer, this study shows that it is extremely important to have money throughout your retirement.
Resource:
http://www.marketwatch.com/story/half-of-americans-die-with-almost-no-money-2012-08-29
For more information about Paradigm Life and Infinite Banking, download our article or contact us at info@paradigmlife.net or by phone at 1-800-870-8670.
The European Economic Crisis and Higher Retirement Ages
July 5th, 2012Effects of European Debt Crisis
As the European debt crisis continues to make headlines around the world, American International Group Inc. (AIG) Chief Executive Officer, Robert Benmosche, believes that governments around the world are going to have to understand that people are going to have to work later into their life. As the average life expectancy increases, it is important that people get prepared to work into their 70s and 80s.
Benmosche, who turned 68 last week said that if people decided to work later into their lives it would make “pensions [and] medical services more affordable. They will keep people working longer and will take that burden off of the youth.”
Higher Retirement Ages in Greece
As the European crisis continues, Greece has shown signs of exiting the euro. If Greece decided to go through with it and abandon the euro, it could be disastrous for the country and Europe seems to be working to prevent that from happening.
As of right now, Greece has an average life expectancy of about 81.3 years with an average retirement age of 59.6. This is one of the lowest retirement ages in Europe. It seems that as the life expectancy continues to become higher and higher the working population is going to have to get used to the idea of working into their later years. A retirement age of 60 or 65 may not be plausible for the entire working population at this point.
Resource:
For more information about Paradigm Life and Infinite Banking, download our article or contact us at info@paradigmlife.net or by phone at 1-800-870-8670.
Rural Economies in the West and Midwest are Strong
June 21st, 2012Agricultural Businesses Strengthen Economy
A recent survey of banks serving rural areas showed that the economy is remaining strong in 10 Midwest and Western states. The reason that these rural areas are able to maintain a strong economy is because these states have strong agricultural businesses. The Rural Mainsteet survey showed an overall economic index that rose to a 58.5 in May from a 57.1 in April. The index ranges from 1-100 and when an economic index is anywhere above 50 the score suggests that there is growth ahead.
The survey covers Colorado, Illinois, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, South Dakota and Wyoming. The planting conditions were great this spring. Farmers were able to start planting early and the growing conditions seem to be prime for a successful year.
Economic Forecast
Although the numbers are very positive right now, Ernie Goss an economist from Creighton University, projects that the economic growth will slow as a result of crop prices dropping when the global economy weakens. Even the farm equipment sales index increased which shows that farmers are continuing to buy new equipment.
Goss believes that the economic situation for farmers is strong because there is an increasing demand for U.S. crops in developing nations. Farmland prices and equipment sales are also higher as a result of the current low interest rates and the strong farm income.
Resource:
For more information about Paradigm Life and Infinite Banking, download our article or contact us at info@paradigmlife.net or by phone at 1-800-870-8670.
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