Why do We Struggle to Have Money?

By Pat Moran, AFLI

When we stop to think about how much money we make over our lifetimes, it is pretty amazing. With all that earned income, why aren’t we financially independent? As we discussed earlier, there are a lot of reasons, and lots of excuses, why we are struggling. However, it goes back to a lack of planning, because we are planning to fail!

Many of us don’t put our money to work, failing to take control of our financial lives.  One of the biggest hurdles is blaming ourselves for not making enough money. “if we earned more money, our personal and financial problems would go away!” However, in talking to many people, and looking at the stacks of research and studies on achieving financial prosperity, very little seems to do with how money we make. Instead, it’s what we do with what we make, making sound financial decisions, and putting our money to work, that has the greatest impact on happiness. We ought to be able to list a number of things to be thankful for, such as my family, my wife, friends, God, food on the table, a roof over our heads, a job, etc. that have little to do with the amount of money that we make. There are many stories throughout the media, where very wealthy people are dealing with problems just like us, or are extremely unhappy. Their problems seem to have little to do with the amount of money they make, but rather events that cause lots of unhappiness, or poor decisions.   There have been many times when we are unhappy about something, and money wasn’t the cause of the problem. It becomes easy to blame everything on financial shortcomings due to the way we were raised, our backgrounds, gender, or others, but mostly it was our decisions that created the problems. Having a plan, understanding our finances, and practicing good financial habits allows us to manage our lifetimes earnings for greater financial success, and less stress.

Regardless of your income, we can make our money stretch further if you can properly plan, and avoid mistakes. At the very least, follow a few of the principles that we have outlined throughout this booklet, and you will head in a positive direction. As you practice better habits, you will realize that personal finance becomes less difficult, and something that you do regularly, like tying your shoes or brushing your teeth. We should realize that our lifetime earnings are our greatest financial asset, the ability to make money is something that everyone can do. When you stop and think about what can amount to millions of dollars, we should easily have our expenses covered, be financially comfortable, and retire easily, but we don’t. However, chances are that if most people were handed a check for what they would earn over their workings careers, they could probably plan and solve for the many financial hurdles they have during their lives.  Or can we, because we have heard the many stories:

78% of NFL & 60% of NBA players go bankrupt 5 years after they retire according to Sport Illustrated.

  • Numerous movie stars and famous athletes have gone broke like Mike Tyson, and his estimated $ 300 million of earnings, Nicolas Cage, who made over $ 40 million in 2009 alone, or Wesley Snipes and his 3 years of tax evasion.
  • 70% of lotteries winners go bankrupt

There are lots of reasons for these failures, such as pressure from family and friends for money, trusting the wrong people, their ego’s get in the way from needing advice, or they have all the answers. However, probably the biggest (2) problems are shared by many of us, not planning for the future, and not practicing good financial skills. As talented as an actor, or athlete might be, they don’t watch their budgets, or have any wealth management skills. Lottery winners are given a huge windfall, but don’t know the first thing about managing the money. As we plan for our lifetime’s financial needs, keep a few things in mind:

  • We are first during our lifetime of earnings, meaning that we put away something first, then tackle our bills and expenses. Whether it’s getting paid every week, every 2 weeks, once a month, or when we close a deal doesn’t matter. We often tackle bill first, and hopefully save something from the money that is hopefully left over. Hopefully becomes a mouthful because usually there isn’t anything left over, so we never save or have extra money. However, now we are saving something first, and what’s hopefully left over provides spending or savings flexibility.
  • We usually can make more money by spending less, saving more. Don’t bank on future expectations, promises, dreams, or possibilities as money to spend, because when the check actually clears the bank, that is the money you should count on.
  • Many millionaires have shared stories about how they became so successful, which was hard work, save always, and LIVE BELOW OUR MEANS!
  • Make rules for your spending and stick with it, such as, “we are only eating out once a week,” “We won’t spend more than $ 10,000 on a car,” “We will save $ 400 per month” Stick to your plan, and personal affirmations can also reinforce good habits, such as “I’m on my way to a great retirement,” “I feel good about saving!”
  • Realize that every financial choice, has a cost, “If I buy this expensive car, I need to work 6 years to pay it off,” “Or by spending this much money means that I can’t make that extra payment on the house, or throw in extra money towards that college savings fund.”
  • When you arrive at the place that makes you feel happy and financially comfortable, STAY THERE! For many people, this is the place they want to be, don’t keep strecthing.
  • Finally, start saving as early as possible, and the most effective financial planning tool is a Unless you know where you are spending your money, and how much, you can’t begin to form the foundation to personal financial success.

Putting our money to work through careful planning, gives us greater control over our financial futures. Budgeting helps to create our spending plan, so that our money can work as hard as we do for it. It’s this plan that can allow us to fulfill a lifelong benefit of financial well-being.

THE LIFE INSURANCE RETIREMENT PLAN – REPORT (LIRP)

 

At American Financial Literacy Institute we’re always looking for ways to better educate our people. In particular, we created a report called the Life Insurance Retirement Plan. In this report we compare some of the differences of using life insurance as a retirement planning alternative unlike a traditional 401k or something of this nature. In particular with Life Insurance, we get some benefits that we don’t get in a traditional 4o1k or IRA. In particular, we can have tax free distributions on the back end, meaning that when the money comes out we don’t pay taxes. Unlike a 401k or IRA, we have to pay taxes on the back end, we don’t get a tax deduction upfront, but we do get the ability to have the money grow tax deferred and then have it come out tax free so it could be a really powerful story. The other thing we talk about is how Life Insurance; the investment component of it can be done in an indexing type concept. What do I mean by indexing? In particular, it’s a strategy that allows you to target the SMP 500 or a multi-asset index (there is many different investment options). As you invest in this, you don’t get 100% of the upside, but what you get is none of the downside. Meaning that if the market dropped five or ten percent, you would get zero. We joke and say “zero is your hero”. But over the last ten or fifteen years, this would’ve been a very powerful way for you to invest, protecting yourself, and actually outperforming a traditional buy and hold type strategy. On the back of this report, we explore specific examples of using a $10,000 contribution to your 401k every year, comparing that to a $10,000 contribution to a Life Insurance plan. While you do get a tax savings upfront with the 401k, because you get a tax deduction, when the money is growing in the 401k, you pay taxes coming out. With the Life Insurance example, you don’t get the tax deduction upfront, but what you do get is the money coming out tax-free! This can be a huge difference in the way of returns. In a traditional 401k, using a 7.5% growth rate (Warren Buffet cited from 1950-2011). That money would’ve grown to $268,000, meaning $10,000 a year for 15 years, $150k worth of contributions, at 7.5% would’ve grown to $268,000. And we show you using that how the money in a traditional 401k would come out. You have to pay taxes on that money so we assume a 25% tax bracket coming out with the 401k, and we notice that over that time of getting income. If we do a 30 year time horizon, you basically are going to pay over $150k in taxes while that money has been coming out of your traditional 401k. With the Life Insurance, again, we don’t get that tax deduction upfront, but we get the tax-free distributions on the back end. What that means is the $150k of taxes that you would’ve paid, you don’t pay that with the Life Insurance. The nice thing too is that as it’s coming out of the Life Insurance, it doesn’t effect your social security taxes. Unfortunately, most people don’t realize that potentially much as 50 to 85% of your social security could be taxed in retirement, depending on how much income they make. With the Life Insurance Retirement Plan, you don’t have that. The other thing is that it doesn’t effect your Medicare B Premiums. The last concept that we talked about with the report is taxes. Where are we currently in taxes? You’re not going to believe this, but we are in the lowest tax environments we’ve been in for the last 70-80 years. Most people feel with a budget out of control and the big deficits that we’re facing that taxes have to go up over the long run, so the argument can be made that deferring today to potentially pay taxes down the road at maybe a higher tax bracket isn’t going to make as much sense as you think it is. So if you think that taxes are going to go up, a Life Insurance Retirement Strategy might make more sense to you. It’s our job to educate you as to what is out there, this might be a piece to a portfolio, there are great reasons to have a 401k like potentially a company match. There’s also great reasons to maybe have some money in a Life Insurance Retirement Strategy.

 

 

**ACCESS THE REPORT HERE**
http://aflinstitute.org/wp-content/uploads/2017/10/AFLI-LIRP.pdf

AFLI | UNDERSTANDING YOUR MONEY

 

AFLI’s Mission is empower people to take better control of their financial lives. We do this through educational workshops giving unbiased informative information and ongoing content and materials. According to various studies as many as 90 percent of American’s site financial stress as the number one concern in their lives. In our four building blocks to financial wellness program we focus on understanding your money, solving the insurance maze, investing 101, and retirement planning basics. Block one, understanding your money, focuses on building a sound financial foundation and discusses how to maximize lifetime earnings, the importance of budgeting, managing your debt, having an emergency cash fund, and the power of goal setting and savings. By partnering with companies, organizations, and municipalities, AFLI is committed to reducing financial stress and giving people the tools they need to feel good about making decisions with their money!

 

 

WATCH THE VIDEO: https://www.youtube.com/watch?v=WXIb0S44hag

 

To Request a Block 1 booklet for FREE, please email info@aflinstitute.org

HEALTHCARE: HEART ATTACKS

Heart Attacks

 

Sometimes referred to as the “silent killer,” heart disease is officially the leading cause of death, claiming over 700,000 people a year.  A single EKG’s and MRI can cost over $5,000, hospital stays can average over $20,000, angiograms can be as much as $30,000, and a heart bypass can cost over $70,000. Drugs can be very expensive, not to mention rehabilitation and ongoing maintenance.  The CDC Foundation estimates that we spend over one billion dollars a day treating heart disease and strokes, with one out of every six healthcare dollars spent on heart care.  The U.S. spends more on healthcare than any other country, estimated by CNBC to total over $3.4 trillion dollars a year with an average of over $10,345 per person.

 

Over 155 million people are covered under an employer sponsored heath insurance plan.   However, the Kaiser Family Foundation reported that over 27 million Americans don’t have health insurance, with the Hispanic community making up the largest demographic without insurance.  The leading reason that people don’t have health coverage is that it was unaffordable, and with healthcare costs continue to increase at alarming rates, it will only become more prohibitive.

START NOW

We could go on and on with savings ideas, but starting small, and adding different savings ideas on a regular basis starts to make a big difference.  It’s about taking small steps to reach the bigger goal, and getting a few wins along the way keeps us motivated.
If we make savings a habit, it’s not difficult.  It’s also very important to set realistic financial goals that are achievable, and to make savings simple.  As we touched on earlier, writing down our goals keeps us accountable, and tracks our priorities to get meaningful results.  If we set saving goals that require big results, chances are we will fall short.  I have seen several studies that estimate only 8% percent of people actually achieve their New Year’s goals, because we make them too hard or unrealistic.  If we don’t know how to set reasonable expectations, or to build a goal plan that we can’t sustain financially, a wish list per se, we will fail. Let’s say that we set a goal of having a down payment to buy a house in 1 year, but it’s going to take $12,000.  Rather than focus on the larger dollar amount, break it down into smaller benchmarks along the way to help get this done, such as $1,000 every month
For example, make a goal to save the same amount every month for 12 months, or cut back on (2) monthly expenses, and put that in savings.  Maybe it’s a priority to pay off our debt; simplifying your approach can make it easier, like shrinking an overall debt down by 10% over the next 3 months, or paying off the highest interest rate debt first.  It becomes easier to stay on track, and to review our progress.  Most importantly, when we see that it’s working, it gives us a psychological boost.   The key is to have a plan, stay focused on your goals, implement better financial habits, and manage your money so you can get results!