SHOW NOTES – 8 Money Tips For Achieving Financial Security in 2013
Plus, is America on the eve of another civil war?
Do You Want to Achieve Financial Security in 2013?
Today, many people have no financial game plan and, if they do have one, it is often backward. Some may have a few investments, but little in liquid savings. Others may have some savings and investments, but they are woefully under insured in the event of a personal crisis. Still others have investments that are poorly diversified. Furthermore, most people are dependent upon only one stream of income and are, therefore, financially vulnerable in the event of a sudden job loss. If any of the above describes you, take heart. It is not too late to make a positive change for your financial future. Regardless of your age or economic situation, you still have time to set financial goals. In fact, setting financial goals is one of the most important steps you can take to wisely steward the money that has been entrusted to you.
Every day, my online financial education company is helping inform Americans on how to properly diversify their savings, their investments, and their income. Because our content directly confronts the current economic challenges facing Americans, we receive many questions. The most common one I receive after lecturing on the topic of America’s economic crisis is: “What should I be doing with my money right now?” Since I do not believe in a one-size-fits-all approach to personal finances, I am always hesitant to hand out specific advice to someone I have just met. However, I do believe that nearly everyone can benefit from considering a handful of commonsense financial strategies. Of course, you should always consult with a professional financial advisor prior to making financial decisions.
On today’s program, I am going to share eight powerful money tips that I have personally used to achieve financial security in my own life and that we teach every day here at Follow the Money. I truly believe that these will 8 money tips will help you weather the current financial storm — and especially the greater one to come. These strategies are certainly not all you will need for the days ahead, but they provide a good start in the right direction as we head into a brand new year!
Here’s 8 Money Tips to Get You On Your Way to Financial Security!
“My people are destroyed for lack of knowledge” (Hosea 4:6)
For far too long, Americans have been economically illiterate. This is not acceptable if we desire to be wise stewards of the finances and resources that have been placed into our lives. Awareness is the first step in any direction. So dedicate yourself to economic awareness. Don’t shy away economic and financial terms. Buy a handful of great personal finance books. Keep up with the financial news that impact you and your investments. And don’t be stingy with what you learn but instead share it with others. We all need to educate ourselves considering the severe economic calamity that obviously lies ahead. (When the house of cards falls and the U.S. dollar completely fails is not the time to begin learning about money.)
Action Step #1 — The first action step in creating your financial game plan for 2013 is to commit to educating yourself about money, economics, and personal finance. Consider starting a small group or book discussion club of like-minded people to discuss personal financial and wise money management topics.
“But this I say: He who sows sparingly will also reap sparingly, and he who sows bountifully will also reap bountifully. So let each one give as he purposes in his heart, not grudgingly or of necessity; for God loves a cheerful giver.” (2 Cor. 9:6–7)
The first money tip mentioned above involves the mind. But this second money tip relates to the heart. Money is a curious thing. While it is completely morally neutral in and of itself, it has the unusual power of being able to destroy an individual like few other things can. Money can make our lives very comfortable, but it can also darken our hearts and cause us to rely less on our faith and more on our own abilities. For this reason, the second strategy in creating your financial game plan must be to determine how much money you are going to give away. All of us have been entrusted with what we have. Our first priority is to properly recognize this truth by taking time to decide how we will go about the joyful task of giving. Unfortunately, many people skip this most important step. They justify it by promising themselves that they will come back to it later when they actually have some money to give. But this logic is usually flawed, for if they won’t give a small gift, why would they ever give a large one?
Can you imagine how much richer our lives would be if, instead of seeking to consume all of our future wealth, we would look for ways to help others with it! It gives our lives purpose when we help a fellow man in need.
Action Step #2 — Before moving on to the next money tip, take some time to “dream” up a charitable giving plan and then take steps to put it into action. You can read more about creating a Charitable Giving Plan and can even download our free Charitable Giving Plan Worksheet here.
“Go to the ant, you sluggard! Consider her ways and be wise, which, having no captain, overseer or ruler, provides her supplies in the summer, and gathers her food in the harvest.” (Prov. 6:6–8)
Let’s face it: Americans are not good savers. Apparently, we think we don’t need to worry about having a “rainy day” fund because we assume the sun will always shine. Nothing could be further from the truth. When we talk about saving money, we are really talking about planning. In order to plan, you have to get serious about your money. You have to take control of what you have, and you must want to save. But planning to save money is just the first step. Someone once accurately said, “You can be on the right track, but if you just sit there, you may get run over.” Being on the right track by planning to save money is good, but if it just remains a plan that never gets put into action, it will never bear fruit.
However, once we do begin to work our plan by saving money, we often find distractions along the way. The road to success is marked with many tempting parking spaces. Something will always come up to compete with your plan to save. This is why I recommend automating your savings plan. This is easily accomplished now with direct deposit and automatic debiting of specified percentages of your paycheck into your savings account.
I would recommend that you begin by setting your savings rate at 10 percent and then slowly raise it to 15 percent. Others can set their savings rate higher at 15–20 percent. (Many people living in Asian countries, especially in China, have savings rates of over 40 percent!)
But what if you are just barely getting by right now with very little money to spare? Try setting your savings rate at 1 percent right now. Then, every month thereafter, you can attempt to raise your savings rate by another percentage point. This will allow you to ease into this strategy without throwing your entire monthly budget into chaos. With this approach, you could realistically have a 10 percent savings rate from your labor by the end of the year. The important
thing is to begin saving money now and saving it regularly.
Action Step #3 — Determine what you want your savings rate to be and then begin withholding it from your paycheck systematically. Do not settle for less than a 15 percent profit (savings) rate from your labor!
“A prudent man foresees evil and hides himself: but the simple pass on, and are punished.” (Prov. 22:3)
After you decide on your monthly profit (savings) rate, you will have the satisfaction of seeing your savings grow each month. The next step in your financial strategy is to build this savings into an emergency pool of liquid savings that is equivalent to six months of your gross income.
For example, if you earn $3,000 per month, your goal will be to save $18,000 ($3,000/month x 6 months). Without an adequate emergency fund, you will have to rely upon credit, family members, friends, or current investments every single time a crisis arises. But this will no longer be necessary (except in rare cases) when you have accumulated a six-month supply of cash.
There is one final rule regarding your six-month pool of emergency savings. You must keep it liquid at all times. This means that it should never be “locked up” in any way. You will not be investing this money. You must always have immediate access to these liquid funds, or else it does you no good.
Action Step #4 — Flow your profits (savings) into a savings or money market account until it reaches an amount that is equivalent to six months of your gross income, and keep it accessible and liquid at all times.
““The silver is Mine, and the gold is Mine,” says the Lord of hosts.” (Hag. 2:8)
Once you commit to a 15-percent savings plan, it won’t be long before you begin to accumulate a nice sum of money.
As your savings continue to grow, you will want to begin diversifying the funds in safe places. These funds will need to remain in highly liquid accounts, in case you need to access them quickly. The savings diversification model I personally like is the following:
By spreading your liquid savings across a variety of savings vehicles, you will help ensure that your money is not too highly exposed to risk in any one area. And by keeping only one-third of your money in U.S. dollar-denominated assets, you will protect yourself from further declines in the dollar’s purchasing power.
To learn more about foreign currencies, visit www.everbank.com. This site has a large amount of information about all of the popular foreign currencies available to U.S. citizens.
To learn more about precious metals, like gold and silver, check out our free 90-minute webinar on precious metals investing and other educational resources at www.ftmdaily.com/gold.
Action Step #5 — Protect the purchasing power of your six-month pool of liquid savings by diversifying it among a few select areas.
“Cast your bread upon the waters, for you will find it after many days. Give a serving to seven, and also to eight, for you do not know what evil will be on the earth.” (Ecc. 11:1–2)
Once you have built up your six-month savings reserve, then, and only then, it is time to think about “investing.” The difference between saving and investing has been lost in today’s financial world, which has become dominated by Wall Street banks that need your capital to survive. Therefore, they de-emphasize your need for liquidity and emphasize investing your money with them for as long as possible.
When it comes to diversifying your investments, you should seek to spread your funds among various asset classes. Today, the most common retirement plan in America consists of owning a house and having a 401(k) retirement plan. The major problem with these assets, besides being very illiquid, is that they are both completely government-controlled.
Does this mean that these are poor investments? Not at all!
Instead, they should simply be considered as a good addition to your overall financial game plan and nothing more.
Some people will say that diversification is only important for those who do not know how to invest. This is false. The truth is that diversification is the ultimate protection against an out-of-control government and federal tax code.
Earning, saving, and investing in America today have become a game. And the rules of the game are found in America’s tax code. Those who learn the rules, and play accordingly, can prosper financially in this country. Those who fail to learn the rules, and play by them, will be punished.
Who makes the rules? The federal government.
Since the federal government can change the rules at any time, your only real defense is to diversify across a wide variety of asset classes with different tax treatments. This way, if the rules change suddenly, you will not be wiped out. For example, the tax code currently favors investing in real estate and tax-deferred retirement accounts. However,
if the tax code were to change, which it could at any time, then those who have all of their investments in these vehicles could be in for a big surprise. For this reason, smart investors and astute business owners seek out the best tax advisors money can buy.
When I approach investing, I look for investments that have favorable tax treatment and provide inflation protection. The best hedges against inflation are hard assets. These include precious metals, commodities, energy, fine art, and more. Basically, hard assets are tangible assets that you can physically touch and handle. Two of the more exciting areas of hard assets right now are precious metals and agricultural commodities.
Here at our organization, we have created an inflation-proof investment philosophy called P.A.C.E. investing. This is an acronym: P= Precious Metals, A= Agriculture, C=Commodities, E= Energy.
We have been focusing on these areas for several years, and the benefits have been immense. Since 2007, I have been urging individuals just like you to consider diversifying their investments into these areas.
If you desire to invest in the markets, do so carefully and after much research. You owe it to yourself and your family to distinguish between fact and fiction in the stock market. Not only will a keen awareness of the economy allow you to protect your current assets, but your future wealth depends on it.
Action Step #6 — Protect your growing investment portfolio by keeping it diversified among a variety of asset classes, and commit to learning the “rules of the game.”
Savings Plans — IRAs and 401(k)s
“Render to Caesar the things that are Caesar’s, and to God the things that are God’s.” (Mark 12:17)
Two of the most popular financial products used for retirement are IRA’s (Individual Retirement Accounts) and employer-matching 401(k) plans. What you should know about these two retirement savings vehicles is that they are both government-created and, therefore, government-controlled plans. Under these government-controlled plans, the federal government makes all of the rules, both on the money going in and on the money coming out.
Today, many financial advisors are advising their clients to “max out” their contributions to their company 401(k) plan and to traditional IRA plans. Their motive in advising their clients to contribute to these tax-deferred plans is likely rooted in the desire to help them accumulate enough money to retire comfortably. This is a good goal, but I believe that this method may have more risks than meet the eye. To understand why I am cautious about aggressively funding these plans, you must first understand what it means that these two products are “tax-deferred.” When a financial product offers tax-deferred savings, this means that taxes owed on the future growth of the savings are allowed to be “deferred,” or delayed, until the person begins receiving distributions at retirement. So far, so good.
Many financial advisors consider the tax-deferred savings provided by the 401(k) and the IRA to be a huge benefit to their clients. The logic goes something like this: since the client will be spending his entire working lifetime in a higher tax bracket and will retire in a lower tax bracket, doesn’t it make sense to delay the payment of taxes until he retires and is in a lower tax bracket? Because Americans will be in a lower tax bracket at retirement than in their working years, many consider the tax-deferral provided by the 401(k) and the traditional IRA to be the greatest retirement savings vehicles ever invented.
Sounds good, right?
Then let me ask you a question: Based upon what you know so far about the economic challenges facing America, do you think taxes are going to be higher or lower in the future?
If you said that taxes will likely be higher in the future, then you now realize one of my main concerns about these popular retirement savings plans. The logic behind stuffing them full of money breaks down once you think about it longer than five minutes.
In addition, why start with the premise that you are going to be in a lower tax bracket upon retirement? Shouldn’t your trusted financial advisor be creating a pool of money for you so that you will be in an even higher tax bracket when you reach the retirement finish line? The whole logic behind these plans seems a bit counterintuitive. These plans also lack cash flow and provide you with little liquidity. If you have to access this cash, or to begin a cash flow stream, at any point prior to the government-mandated distribution age (currently 59-1/2), you will be hit with a penalty, with few exceptions. These tax-deferred plans are also huge targets of estate taxes, which means that if you pass any of this qualified money on to your heirs at death, the government will take a nice chunk for themselves, again with few
exceptions. If you desire to have more control over your own finances, these plans are poor choices.
And don’t forget, since they are government-controlled plans, guess who makes all of the rules? What if the federal government decides to help solve the Social Security crisis by placing a 40 percent surcharge on all withdrawals from 401(k)s and IRAs beginning in the year 2020?
Could they do that? Sure, they could.
Always remember, he who makes the rules, wins.
And your government makes every rule and controls every aspect of the 401(k) and IRA savings vehicles. And while no one can predict future tax law, placing your trust in politicians to keep their hands off your money is a bold wager. Putting your money into a tax-deferred plan is like placing your retirement savings into a lockbox and giving the key to the government. How much of your money do you think they will give back to you? I personally do not want to gamble with the government. I would rather pay the hungry beast their tax money now and walk away than defer the taxes owed only to pay them when the government is even more desperate.
Therefore, I suggest that you consider all of your options before simply placing all of your retirement money into a government-controlled tax-deferred plan. Those who wish to pay taxes up front on a portion of their retirement savings can consider funding a Roth IRA, (or a Roth 401(k) if your company offers one.) A Roth IRA differs from a traditional IRA in that you pay the taxes up front and withdraw your money and earnings tax-free at retirement.
Of course, the government knows that this is a sweet deal so they have strict income guidelines on who can participate in these types of plans. There are other creative strategies for those who do not qualify for a Roth IRA.
Finally, understand that your retirement savings plans are not a part of your six-month savings reserve that I have recommended you maintain at all times. Retirement is a long-term need and should not be 100 percent liquid, as a rule. Your six-month savings reserve is for short-term needs and should remain liquid at all times. Because our nation has such poor savings habits, many people only save for retirement but have no liquid savings for emergencies.
Confusion over this matter has been the reason that many Americans have had to begin borrowing from their 401(k) or their IRA (long-term savings) just to cover short-term needs. You can avoid falling into this trap by choosing to save for both short-term needs and long-term needs.
Action Step #7 — Use tax-deferred savings accounts like IRAs and 401(k)s with caution. If you work for a company that offers a matching 401(k), take advantage of the match. If you are still more than 15 years away from retirement, consider a Roth IRA.
“The Lord has blessed my master greatly, and he has become great; and He has given him flocks and herds, silver and gold, male and female servants, and camels and donkeys.” (Genesis 24:35)
Today, millions of Americans are one paycheck away from bankruptcy or foreclosure on their homes. If you were to lose your job today, would you still have an income one month from now? If not, I would definitely urge you to consider diversifying your income by adding another income stream. Just as you should spread out your savings and investments, I also believe you should diversify your income. It is my personal belief that everyone should have a minimum of two streams of regular income during their working years, and a minimum of five streams at retirement.The nice thing is that you do not need a lot of money to create multiple streams of income. But you do need some creativity and a willingness to work hard. Over the years, my wife and I have created several passive income streams, which means they come in month after month regardless of whether we work or not. By diversifying your income through the creation of multiple streams of income, you will be placing a safety net under you and your family in the event of unforeseen circumstances. People who have diversified income also experience the peace of not feeling trapped in their jobs and of not constantly being at the mercy of their employers. When you have multiple streams of income, you can breathe a lot easier knowing that if one stream dries up, other steady sources continue to come in.
I have found that sometimes the best types of income streams can be found by examining your own hobbies and passions. Determine if there is a way to turn them into a steady stream of income. However, it is not always possible, or prudent, to monetize your passion. Instead, look for areas where people experience “pain” in life and seek to provide relief. If you will focus on solving other people’s problems, you will never run out of work. The whole point of diversifying your income is to generate a number of different paychecks. As the U.S. economy continues to weaken, you will be glad you did.
Action Step #8 — Commit to adding another stream of income to your financial life in the next 12 months.
Precious Metals Market Update with Tom Cloud
Next, we are joined by Tom Cloud with this week’s Precious Metals Market Update.
Tom joins Jerry to discuss the fiscal cliff deal and how it will impact the future of gold and silver prices.
In 2012, gold rose 7.03%, silver rose 8.91%, platinum was up 9.67%, and palladium rose 7.23%.
Tom lays out his thoughts on what precious metals investors should be watching next…
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What Jerry Thinks: Are We On the Eve of the Next Civil War?
And while I expect to have a very profitable year with my investments and businesses, I can’t seem to shake this nagging suspicion that 2013 may also be one of the most devastating years in American history. Sadly, our nation has become a shadow of its former self.
What happened to America? How did a nation that was so prosperous and so unique in its approach to government end up completely bankrupt and run by tyrants?
What Jerry Thinks – Are We On the Eve of the Next Civil War? >>
Jay Peroni CFP – Weekly Investing Idea
In this week’s investing idea, Jay shares three healthcare REITs for 2013. These three REITs combine two of Jay’s favorite sectors for 2013: health care and real estate.
John Bearss – Retirement Income to Last a Lifetime – Annuities and Life Insurance
Finally, in this week’s Retirement Minute segment, financial advisor John Bearss explains the basics of Required Minimum Distributions.
>> John Bearss is a financial advisor with 26 years of experience. In addition to offering holistic retirement and financial planning advice, he also provides FTMWeekly listeners with 100% free financial coaching on our Five Levels of Financial Freedom. To schedule your free coaching session, call John Bearss directly at (888) 914-9909. Or you can email him at john @ cfanetwork.org
About Your Hosts
(Economist, Best-Selling Author)
Jerry Robinson is an economist, published author, columnist, licensed insurance agent, radio talk show host, and international conference speaker. Robinson has been quoted as an economic authority by USA Today, FoxNews and many other news agencies. His columns have appeared regularly in numerous print and web publications, including WorldNetDaily, Townhall, and FinancialSense. In addition, Robinson is also the Editor-in-Chief of the popular economic newsletter, Follow the Money Quarterly. He enjoys spending time with his beautiful wife, Jennifer, and his newborn son.
(Financial Analyst, Business Owner)
Jennifer Robinson is a financial analyst with experience in corporate finance and the financial services industry. Jennifer is the co-host of Follow the Money Weekly radio, a show dedicated to exposing the truth about money and the economy. Jennifer is also a licensed insurance agent and a contributing writer to the quarterly economic forecasting newsletter, Follow the Money Quarterly. She has written on a wide variety topics, including diversification of savings, stock option trading, and emergency preparation. Jennifer is currently the National Director for the Christian Financial Advisor Network and is the Vice President of FTMDaily.com. She holds a Master’s Degree in Finance and enjoys operating businesses with her husband and business partner, Jerry Robinson. Jennifer’s newest joy is her role as a mother to son Jerry Robinson Jr.
Tom Cloud, Precious Metals Expert (Turamali, Inc., President)
Thomas Cloud is the Chairman of the Board of Turamali, Inc. and has a long and successful advisory track record in both financial planning and tangible assets. His expertise as an financial counselor and thorough knowledge of the products he recommends has attracted an impressive list of individuals and major institutions from across the United States. Since 1977, Mr. Cloud has devoted his attention to all areas of tangible asset investing offering a “hands on” approach to each and every Turamali, Inc. client. For more information about Precious Metals Investing, click here.
The Retirement Minute with John Bearss
John Bearss, Financial Advisor (Christian Financial Advisor Network)
John R. Bearss is a Financial Advisor with over 25 years experience and is a part of the Christian Financial Advisor Network. His specialty is helping clients who are nearing retirement to generate a lifetime stream of income.
Investing Insights with Jay Peroni, CFP
Jay Peroni, Certified Financial Planner (Christian Financial Advisor Network)
Jay Peroni is a Certified Financial Planner and is a part of the Christian Financial Advisor Network. He has been creating and managing stock portfolios for individuals for nearly two decades.
TAGS: Infinite Banking Concept, Becoming Your Own Banker, Nelson Nash, Financial Podcast, Jerry Robinson