How did you feel about your money situation in 2014?
Was it better than expected? Worse?
Are you "planning" on making 2015 better, or are you committed?
Or are you going to be like many people and "should" all over yourself talking about what you're not doing.
Remember, you can't expect to have different results thinking and acting the same way you did last year.
You need a new level of commitment. You need new strategies. Besides, do you really want to end up like most who got disappointed with similar results as the previous year? Even if you did better in 2014, do you wonder why you didn't have more savings or pay off more debt?
Because I understand our human nature (being human myself), here are 3 simple ways that's worked for me that WILL improve your financial life in 2015.
- Create a spending plan by reviewing at least 6 months from 2014
- Set clear objectives for 2015
- Spend at least 3-5 minutes weekly actively tracking your money
That's it! Let me explain each of these further so you not only read it, but act (big pet peeve of mine).
1. Create a spending plan by reviewing at least 6 months from 2014
This can be the most time consuming. Fortunately, you only have to do it once in a while. A great tool to use is setting up a free account at Mint.com and connect all of your personal accounts. If you want to track business expenses, use QuickBooks or Quicken. Once you've connected your accounts, go back as far as you can, and start categorizing your income and expenses.
Warning - This is the toughest part! But once you do it, and follow the other steps, it gets easier.
Once you've done this, go into the Budgets section (or the Trend section), and view the average you have spent each month. From there, create a rough budget. Don't get too married to this number since it can change as you track month after month. There are great tutorials to help you with this. The key is to get started here and commit to doing it all year long to save yourself a lot of headache and time.
2. Set Clear Objectives for 2015
You need to have a driving force (a big "why") to inspire different habits this year! Although you may like it, I can't stand using the word "goals." Goals, in my mind, are those lofty dreams you set only to get disappointed later. I prefer to use the term "objectives" because it sounds like I'm on a mission and it MUST be accomplished. However, use whatever word works best for you.
Be sure to set objectives that you are at least 70-80% sure you can achieve. It must be measurable, believable (with some effort), and excite you! These are objectives (goals) that you cannot give up on nor be too "airy-fairy." It's okay to set an objective that is only a little better than last year. Remember, progress over perfection.
3. Spend at Least 3-5 Minutes Weekly actively Tracking Your Money
This one is the simplest, but many people fail here. Tracking your money is like working out, but WAY easier. Each week, we should be spending at least 2-3 hours exercising, right? But all I ask is that you spend no more than 5-10 minutes each week tracking your money. Imagine if you could get a super lean and fit body working out only 5-10 minutes per week! So why not spend that time tracking something that affects every aspect of your life - your money?
The neat thing about these programs, is they "remember" how you categorize. This will save you a ton of time. For example, if you shop at Costco and categorize it as Groceries, the next time you shop there, it'll automatically categorize it in Groceries. Isn't that awesome?! All you have to do is make sure they are categorized correctly, make sure your budget is working, and make sure you are profitable each month (more income than expenses).
Doing these 3 things alone will increase your odds of success this year! I've also noticed people saving money and paying off debt faster just because they are actively tracking it rather than spending whatever they have and fighting with their spouses about spending money. Acting on these simple strategies will guarantee less stress and better odds that you'll achieve your financial desires in 2013.
Now, let's start 2015 better than last year, and get to work!!!
Join me (Chris Miles of Money Ripples), and Jeff Frink, dOTERRA IPC and owner of multiple businesses, for this 4-day POWER PACKED telesummit teaching you the ins and outs of Master Marketing and how you can get everyone talking about you behind your back (positively of course!). Here's what to expect on these 30-minute recordings:
December 1st: Relax & Rake It In - Make More Money Working Less - LISTEN HERE
December 2nd: Create Exponential Growth in Your Biz - LISTEN HERE
December 3rd: Attract Your Ideal Customer, Client, or Leader - LISTEN HERE
December 4th: Get Others to Talk About You Behind Your Back...In a Good Way - LISTEN HERE
I REALLY enjoyed these calls, as I'm sure you will too. Let me know of any questions or other topic requests that YOU feel would be valuable for you or those you lead. Thanks!
Have you ever been frustrated because you weren't seeing results?
Ever wonder why it's not happening as fast as you would like it?
I saw a question on Facebook about this. She asked, "What am I doing wrong when I desire something so badly but it isn't happening for me?"
I want to share my response with each of you too.
The short answer? It depends.
Here are a few possible reasons this could be happening to any of us.
- It may require more time to manifest - Some things just require time. You wouldn't expect a seed to grow right after planting it, would you? Sometimes, you may need to wait years to see the fruit of your labors. Just remember to be consistent to speed up that process.
- You want it TOO badly - When we are desperate for something, we drive it away because we are often emphasizing subconsciously that we don't have it. Focus on what you desire, not on what you aren't getting.
- We have a desire, but don't work for it - Very common with a lot of people. Faith without works is dead. You can't stare at a vision board visualizing and expect it to show up. We must sow if we want to reap. Visualizing, dreaming, and thinking about what you want is only the gateway. We still have to step thru it and walk down the path to get to our destination.
- You desire it. You work hard. You're patient. But it still isn't working? - This is probably because you aren't working "right." Working harder or smarter doesn't work if you are doing something incorrectly. If you fall into this category, then seek out someone who IS doing it right and have them teach you. Doing it right saves lots of time and money!
Remember also that you must keep an abundant, positive attitude to make any of this work. I believe all experiences can work out for our benefit. Sometimes not getting immediate results teaches us invaluable lessons we need to ensure we stay humble and successful longer.
If you feel your faith is being tested, that can be a good thing. Ponder on the suggestions I offered.
Which of these four do you believe is you right now?
Have you ever wondered what’s one very fast way to find your niche?
Do you ever feel like you might be good at a few things, but you still don’t know what makes you unique?
What would life be like if you could be the best at what you do…and people flock to you to get it?
This is especially important, even if you are pretty specialized in your profession or business.
Many people I coach ask me what they can do to find their niche, especially when they aren't sure what makes them unique. They will often comment how they can see where others have a niche, but feel that they don’t have some incredible talent that will make them “big.”
Ever notice that we tend to ignore our own brilliance, but see it in everyone else?
The solution is so simple, that you may question if it really works.
Most of our most elusive answers are staring us right in the face. But they are often missed because we think too hard. My counsel is to relax, take a moment, and ask one powerful question.
“What question(s) are people asking me when they say ‘Can I pick your brain for a minute?’”
Think back. Have you ever had someone ask you about how you did something? When people kept asking me how I was able to “get out of the rat race” within a few months, I decided that I needed to share those secrets.
Do you have a certain skill where someone said, “Can you teach me that?” Or, have you overcame a certain experience, such as death of a loved one, divorce, financial ruin, raising children, passed a training, etc?
Sometimes, we discredit our own uniqueness because “it’s just our life.” It’s who we are! However, there are others that have questions or problems that want answers that YOU can provide for them!
One thing you can count on is that no one has had the life that you had. Look for some experiences in your life that taught you a lesson or skill. Even if only used that one time.
For example, most people don’t know that I was one of the nation’s top amateur ballroom dancers. Nor do they know that I made it to a playoff round of “Who Wants to Be a Millionaire” in 2000 (Unfortunately, I never got on the show). These might seem random, but they are a part of who I am. From dancing, I learned that the same principles that made me successful on the dance floor also helped me make money. My ability to retain a lot of information doesn’t just help on quiz shows. It helps me retain information about money & business, and draw connections most don’t see.
Each one of you has this unique “value fingerprint” where you can provide value in ways that NO ONE ELSE CAN OR WILL! You don't have to compete when you are one of a kind. So stop trying to imitate others and be the best version of you!
In summary, ask yourself the following questions to find your niche.
- What was I being asked to teach or do when someone asked “Can I pick your brain for a minute?”
- What skill or hobby did a person ask me to teach them?
- What difficult experiences did I overcome?
- What do I constantly get compliments on (that I may downplay)?
- What “quirky” things do I do?
These questions are just the gateway on your path to prosperity. Remember to enjoy the journey as you get more clear on this. I'm still learning more about me every day. So can you! Now go find your niche to get rich!
Many of you have heard me speak about saying "no" more often because you say "yes" too much.
Not this time!
Now, don't start saying "yes" to everything. Remember Warren Buffett's quote?
“The difference between successful people, and EXTREMELY successful people; is that extremely successful people say ‘No’ to almost everything!”
However, many people are saying "no" to everything. I asked several people what's holding them back from powerful opportunities, while others are accomplishing their dreams.
The answer surprised me - fear & overwhelm!
It's not because the opportunities wouldn't give them what they wanted. It's not because the opportunities are out of reach. It's because aren't seeing the opportunity when it presents itself. Out of fear and feeling overwhelmed, these people freeze, panic, and shut down.
Are you one of them?
For instance, were any of you during your dating days, just like me, where someone really liked you, but you were oblivious to it? Did they even try to make it obvious? At that time, I had blinders on because I had my eyes set on one or two girls. However, I would later find out that the girls who tried to drop me hints were girls I would have loved to date.
The opportunity was there but I wouldn't see it!
The same thing is true of business or financial opportunities!
How to See the RIGHT Opportunities
Here are a few helpful hints to identify the right ones:
- Know when to say "no" - Be sure you aren't saying "yes" because you don't believe in abundance of opportunities. There are ALWAYS more than enough opportunities for you. Say "no" when it won't help you get what you want.
- Know what you REALLY want - Most don't know what a good opportunity is because they don't know what they want. Get very clear about what you want, write it down, and invest in the opportunity that will help you get there.
- Be the kind of person to make that opportunity work - Most often, it doesn't work out because you are not ready for it. Each day, do a morning routine to get yourself in a place physically, mentally, and spiritually where you not only see the opportunity, but you work productively to make it successful.
- Stay Focused - Once you pick it, stick with it! Too many jump from one opportunity to the next before they give it enough time to be successful. Decide in the beginning you will make it successful. Stick with it, even when it gets tough (which it probably will at some point). Persistence pays greater dividends than giving up.
My challenged to you is to keep your eyes open to opportunities, but your eyes shut to distractions. This way, you won't overcommit, go crazy, and go broke.
When the right opportunity comes, don't wait! Take action now!
Haven't the last 5 years been nice?
Has your 401k or IRA finally recovered it's losses from the previous 9 years?
If so, good! It's about time!
It's nice to see investment balances up a little better than they were 15 years ago, right? (We won't mention how a CD would have made you more money)
Is it possible that the next year, two, or three, could rob you of your gains?
I'm going on a limb and making a prediction. Of course I can't tell the future, but I can recognize patterns from years of stock market experience. In fact, I trained over 200 students how to trade stocks and options and watch for patterns.
We'll see down years in 2015 and 2016
I legally can't give you one, especially since I'm guessing and because I'm no longer licensed to tell you where to put your retirement funds.
Also, each of you have unique circumstances and I would have to know your situation better before referring you to my investment advisor for better options.
I will warn you that whenever people become complacent about their money in retirement accounts, don't get worried, and are actually excited, that's the exact time many lose a lot in their accounts.
Why am I convinced there will be a Y2K15?
Because history tends to repeat itself in the markets, especially when political decisions are being made. Also, have you noticed that the market hasn't gone down for awhile? Guess when the market looked similar to when it does now?
See the S&P 500 chart below....
Notice 1994 to 2000?
It went up for 6 years in a row, and then down 3 years. It wasn't until 2007 (4 years in a row) when it barely hit the highs of 2000...and then it went down again for 2 more years, and finally hit 2000's highs in 2013.
So up for 6 years, down for 3 years. Up for 4 years, down for 2 years, right? It's pretty typical to see twice as many "up" years as there are "down" years.
Guess what? If 2014 stays near where it is, this will be the 6th year in a row that the market went up, just like the mid-late 1990's before we hit Y2K!
Could we be at, or near, the top of the market right now?
Could NOW be the best time to find OTHER WAYS to make your retirement money increase in case of future down years?
My hope is that when it does happen, and it will at some point, that you will be quick to act and find other ways to make money rather than waiting ANOTHER 7-13 years to make your money back.
Note: I was typing this when the market was just starting to decline that day from 17,000 points. We'll see how this plays out.
How often have we heard financial teachers use fear to get us to prepare?
They might even follow their doomsday tales with “If you are prepared, you shall not fear.”
As much as I believe that phrase to be true, I know that preparing with faith creates greater results, peace of mind, and protection from life's storms.
Here are a few ways that you can prepare with an abundant, fearless, faith-filled perspective so you can prosper & flourish:
I believe that this one is most often overlooked but is the foundation for financial freedom. If you aren’t spiritually prepared and in sync to receiving inspiration, everything else could collapse.
Ask yourself these questions:
- Am I living with integrity (doing what I know I should be) in all areas of my life?
- Do I seek inspiration through prayer?
- Do I meditate often?
- Do I focus on serving others instead of only serving myself?
- Do I acknowledge abundance by donating at least 10% of my income BEFORE paying myself?
By putting our focus here first, the other areas of preparedness come more easily. Focus on the spiritual aspects, and the financial benefits will follow.
What do I mean by work preparedness? Dieter F. Uchtdorf said that there are two principles in any economy – work and education.
Imagine for a moment that the monetary system failed worldwide. Money was no longer an option. How would you exchange to get the goods that you need?
Being able to exchange goods and services with others allowed the entire community, as a whole, to prosper faster. When everyone worked together to prosper, their abundance increased more and all essential needs were met more easily than living life as “every man for himself.”
Work is at the heart of prosperity. An economy is run by those that labor to provide a valuable service or product to others.
When people stop working, society fails. When we expect others to take care of us, no one will be able to take care of us. Work is essential to prosperity.
A key principle of work is this - Exchange creates wealth. The faster and greater the exchange, the more wealthy everyone becomes. The more we withhold our labor or our request for labor, the more impoverished we become.
Think of the Great Depression. Out of fear, people either stopped spending money (hoarding) or gambled it away. When you stop spending money or asking others to provide goods or services to you, people don’t get paid. When they don’t get paid, you won’t get paid either. A lot of people were unnecessarily out of work because people didn’t have the faith in this timeless economic principle of exchange.
Education is also critical here. In order to improve our value in society, we need to have the necessary skills and knowledge that will help deliver on those goods and services. Education does not necessarily mean schooling in the traditional sense. It can be acquired in many different ways, such as becoming an apprentice, reading books, attending classes or workshops, self-teaching thru YouTube, etc.
The key here is to always strive to increase our understanding and knowledge. When we do so, we increase our value. As our value increases, so does our wealth.
J. Richard Clarke once said:
“Is it possible [we] are becoming part of a “conspiracy for mediocrity” by being content with [our] present knowledge and skills? Pride of workmanship has always been the heart of a competitive free-enterprise system. There are too many tradesmen who will not pay the price to become craftsmen, teachers who do not teach, repairmen who do not repair, farmers who do not farm, leaders who do not lead, and problem solvers in every field who do not solve problems.
Our labor should be honest labor and quality labor. The only honorable way for each of us to share in the world’s wealth is to exchange our own goods and services for those produced by someone else....”
Having with the right knowledge and skills that serves others allows us to be prepared, regardless of the economy or government decisions about our currencies. This is why I don’t fear a financial collapse.
I never ask, “How can I make more money?” I ask the question that is the cause of money and prosperity, “How do I serve or add more value to more people?” THAT is why education and work go hand in hand for preparedness.
As you work on preparing yourself spiritually, educationally, and occupationally, you must have your finances in order. Financial preparedness includes:
1. Pay tithes and offerings, or donate 10% to charity
2. Live within your means
3. Build an emergency savings (At least 6 months expenses)
4. Have the proper insurances
5. Be wise with your surplus
6. Food, water, and gas storage
7. Extra clothing
I'm not going to spend a lot of time going into each of these in this post, but there are other posts where I have addressed several of these. In this area, what's important is that you start somewhere. You don't have to have all of this done now. Work little by little to prepare yourself financially.
The one overarching principle I hope you get from these three areas of preparation is the principle of stewardship. I believe we are here on this Earth to learn how to manage and increase our stewardship to serve others and be happy. We have stewardship over our bodies, minds, families, neighbors, time, and money/physical items. How well do we take care of these people or things? Are we trying to make life simpler by eliminating these from our lives, or are we trying to improve and increase them?
That’s the point of all of this.
How will we manage our stewardship to be best prepared, no matter what storms come our way? Preparing with faith brings confidence and peace of mind when others panic. You will become a beacon of hope when hopelessness becomes the norm. This won’t only bless you and your immediate family, but generations beyond you, and the lives that you touch. As Malachi said in the Old Testament, “All nations shall call you blessed.”
The concept of retirement you have been taught is a lie!
Billions of dollars of marketing, and hundreds of thousands of financial advisors & so-called "experts" will tell you saving 10-20% of your income for 40 years will make you financially independent.
(Don't worry. I have an answer at the end of this.)
Let me explain why....
Figures Don't Lie, But Liars Figure
I read an article from Ben Stein, actor and economist, shared an experience he had as a boy in the 1950's. He told his father (an economist at Harvard) that he learned the world would run out of food in the following 10 years. His father assured him it wouldn't happen. Ben insisted that "figures don't lie." His father's response was, "Figures don't lie, but liars figure."
Notice this Twitter post from Dave Ramsey....
Most of us would say, "It must be true." However, if you use an online calculator, you'll see that his math is wrong. You would have $979,000! Almost $200,000 less! He can't even get that number right. And that's not adding to the fact that the market DOES NOT get 12% returns consistently. Although the S&P 500 index "averages" more than 10% a year, actual yields are less than 8% a year. And those numbers don't include fees or inflation. Read more about that HERE.
What about inflation? If we calculated inflation on a conservative number of just 5% per year (Shadow Stats has this actual inflation number much higher), your "real-feel" amount would be $139,000.
What does this mean? It means in 40 years, you would feel like you only had the equivalent of $139,000 today. Now understand that many financial advisors are advising retirees to only pull out 3% a year to allow their money to last the rest of their lifetime.
That means saving almost $1 Million in 40 years, pulling out $30,000 a year would only feel like $4,200 a year! Being a millionaire in 40 years could feel like poverty! Nailed it!
So how much would you need to save earning 6% and dealing with 5% inflation to pull out the equivalent of $60,000 a year (before taxes)? In other words, how can we save $2Million (after inflation) to live off 3% a year ($60,000/year)?
Here we go!
Saving for 40 yrs?
- Need to save $7,350 A MONTH ($88,200 a year) to accumulate over $14 Million (equivalent to $2,000,000 after inflation)
Saving for 30 yrs?
- Need to save $8,830 A MONTH (almost $106,000 a year) to accumulate $8,646,000
Saving for 20 yrs?
- Need to save $11,650/month (almost $140,000 a year) to accumulate $5,308,000!
Can you save that much?
Does this depress you? It should!
THIS IS WHY I QUIT BEING A FINANCIAL ADVISOR MORE THAN 8 YEARS AGO! I COULDN'T STAY IN INTEGRITY RUNNING NUMBERS THAT OVER-PROMISE BUT WILL UNDER-DELIVER!
It's nearly impossible to save your way to live a middle class lifestyle!
"Thanks for the depressing topic, Chris. So what's the answer?"
ANSWER: FOCUS ON CASH FLOW GENERATING INVESTMENTS/BUSINESSES
I learned quickly in 2006 that I didn't need to save $2 Million to retire. I did it with closer to $2,000!
I generated streams of income that didn't require me to be full time. In fact, I only worked about 2-4 hours a week in my business, and made about $4,000-$4,500 a month. Remember, based on traditional planning's numbers, you would need to save $1.5 Million to live off of 3% a year ($50,000 a year).
This rocked my world! From that moment on, I realized that I wanted to create businesses where I could leverage systems to generate cash flow. This is why I am one of the few people out there teaching business owners to forget about retirement accounts, and focus more on increasing profit and systems in their businesses.
The cool thing is that we're making sure their personal finances are in order too!
Even if real estate is your focus, I have clients that can generate that kind of income with less than $300,000, even if property values never increased! If you had $300,000 in a retirement account, a financial advisor would recommend you only pull out $9,000 A YEAR! LAME!
If you believe stuffing money in mutual funds is the way to go, I would have you consider waiting 5-10 years when you hear more Baby Boomers talking about this "Retirement Scam."
Oh wait! They already are! , TV shows like 60 Minutes, have already done shows on this topic.
Do what's proven to work - invest for cash flow. Avoid doing things that haven't worked for decades - saving in retirement funds.
Let me start by saying that I believe in creating wealth with your mind, using principes of faith, or as some call it - The Law of Attraction.
But I am sick and tired of hearing people talking about trying to manifest money, and wonder why they still have money problems.
The answer is simple - The principles of money only work when you work.
Let me explain further....
There's an old scripture from the Bible that says "Faith without works is dead." I interpret this as meaning that you don't have faith in something unless you DECIDE to act, and then actually do it.
For example, I have had several people say, "Chris, I would love to do events, but I'm scared. How do you do it?" My response is typically, "I just do it." I don't over-think things. I commit, take the first step forward, and then keep walking.
Wealth and money can come so much faster if you simply commit AND THEN TAKE THE FIRST STEP. You'll notice that the following step is a lot easier. An object in motion remains in motion. An object at rest will remain at rest.
Faith-filled action is as much of a habit as inaction. Success is as much of a habit as failure. Work is as much of a habit as laziness. Which habit will you develop?
To further explain faith, it is more than just believing that money will come to you. It's a "knowingness" that the money or opportunity is already there, and is about to physically show up. You know it so deeply, that you can see, touch, hear, and feel it in your mind and you are not even surprised when it shows up because you are already moving in that direction.
I remember in August 2009, my wife's and my financial situation was still VERY tight. I wasn't in the hole by $16,000 a month anymore, but we had family members helping us with food still. In frustration, my wife exclaimed, "When is this going to end?! Maybe you should just go get a job again."
Frustrated by her frustration, I told her "I don't know how long this will last, but I KNOW I need to stay the course. Watch! There will be a day when I told you so!"
I slammed the door as I left the house. I KNEW that I could sense things were already shifting, but we hadn't seen the money yet.
NOTE - There is almost always a lag time between the value you provide and the money that shows up.
About 2 months later, we were earning between $8,000 - $10,000 a month. I reminded my wife of our argument, but I didn't say "I told you so." I let her remember that ;)
That is what I mean by faith! Moving forward and acting to create inevitable results. Many people just wish for things. The key is to stop wishing and start working! Do it consistently. Lasting wealth is created when you are consistent like a marathon runner, not a sprinter.
Remember, the biggest part of the word "attraction" is "action."
Have you been wondering if you should refinance your home, or buy a new one?
Did you realize that banks can still reject you with an excellent credit score?
There are 3 main things a bank will look for to determine whether you should get that loan, that in some cases, could save you hundreds, or even thousands, of dollars each month!!!
Here they are....
- Cash Reserves - Do you have 6-12 months of house payments saved in case you lost your job or had a financial hardship. For example, if the house payment would be $1,500 a month, they would want to see at least $9,000 in savings. If you are trying to purchase the home, they will want to see this AND the down payment in savings for the last 2 months or so. If you are currently draining your savings, even slowly, they may deny the loan.
- Credit Score - This is still important, but not always necessary. Having at least a 680 credit score is preferred. The ideal is 740 and above. Presuming everything else is in order, you likely qualify for the best interest rates. WARNING - DO NOT APPLY FOR OTHER LOANS WITHIN 90 DAYS OF APPLYING FOR A MORTGAGE. ALSO, DON'T CANCEL CREDIT CARDS AFTER PAYING THEM OFF! THIS COULD RUIN YOUR CHANCES!
- Low Debt to Income Ratio - Banks don't care how much you owe. They only care how much you are required to pay each month. This is the opposite of how most people think. Most people think stress comes from "having a lot of debt." This isn't true. Stress happens when you can't make your monthly payments. Banks know that you are risky with high monthly loan payments compared to your income. This is why it's typically unwise to have a 10 or 15 year mortgage. If things go wrong, you are stuck with a bigger payment AND the bank is more willing to foreclose on you. As a rule of thumb, you don't want your mortgage payment much more than 25% of your income. Your total monthly payments shouldn't be much more than 40% of your income. For example, if your gross income is $5,000 a month, you don't want a mortgage payment much higher than $1,250 a month, and your total payments shouldn't exceed $2,000 a month. If you need to get your total monthly payments lower, pay off the loan that has the highest monthly payment for the smallest balance, NOT the highest interest rate. The bank will like it more, and you will get that loan faster.
If you can meet these 3 criteria, you'll have a good shot at getting the loan. Lately, I've had several clients refinance their homes to cash out equity to improve their cash flow. For some, they save a few hundred a month. For others, it can be $1,000 or more each month!
We've even had people qualify for homes that couldn't qualify previously, even though they have made on time payments for years!
Don't let a few obstacles stop you from getting that loan that could get you the home you want, or free up the cash that could be the difference between financial peace and financial bondage! It might be easier than you thought.
Have you ever wondered if your life insurance is as cool as you think it is?
Even more importantly, how do you know you're not costing yourself thousands of dollars for no good reason?
I get a ton of questions almost daily about life insurance.
What's the right kind?
"My insurance agent said.... What do you think?"
Let me just set the record straight about life insurance, and then give you the top mistakes most people make when getting life insurance.
I believe everyone has some sort of financial value, and therefore should have life insurance. That being said, I trust very few life insurance agents out there because they think like life insurance agents, not like stewards, business owners, or real investors.
If you think you have a great agent that makes you the exception...you probably aren't the exception. They are likely costing you up to thousands of dollars of wasted money each year, whether from the insurance or the lost opportunity cost of what you could be doing with that money.
So let's address the common mistakes I see happen. Remember, it's not your fault if you have made these mistakes. You were making the best decision with the information, or misinformation, you were given. So here they are....
- Life insurance is "life" insurance, not death insurance - The purpose is not just to cover your loved ones' needs, but to allow you to have permission to use your money more productively WHILE YOU'RE ALIVE! Why? Because having life insurance enables you to use your money to create wealth today instead of hoarding it in a lame savings account "just in case."
- My agent knows what's best for me - Your agent knows what's best based on what the insurance companies teaches them to teach you. I know this because I have experience with life insurance for almost 13 years AND I've coached other insurance agents that admit this. Who do they work for? Even if they broker with different companies, who educates them about life insurance? For me to learn a better way to do life insurance that takes into consideration your cash flow, costs, and not take money away from your ability to produce with your business or investments, I had to separate myself from their education completely. There are much better ways to do life insurance that is in YOUR best interest, not the companies' interest.
- Wrong type of insurance - Closely tied with #2, most insurance companies like to market term insurance because it's cheap and rarely pays out. Insurance companies I have dealt with will admit that only about 1-2% of term insurance ever pays out! That's a huge money maker for them when people just want cheap insurance. Why else do you think it's cheap? And don't think all term is the same. If you can't convert it to a solid permanent policy, like whole life insurance, it's not worth having if you have the choice. This applies to group insurance thru work. This ends up being a big waste of money, especially if you are older than 35 years old. Conversely, only buying indexed universal life insurance or whole life insurance doesn't mean it's good for YOU either. Many will oversell that to you and take money out of your pockets where you can't use it to make money today.
- Wrong amount - Believe it or not, most insurance agents will under-insure you. Again, the company doesn't want to insure you for too much. In fact, they will NEVER over-insure you. They don't want you to have the incentive to end your life. Typically, they will only allow you to have 5-20 times your annual income. A good rule of thumb they use is your current income times the number of working years left (such as age 65). For instance, if you're 40 years old, they will allow about 20 times your current annual income. My recommendation is to get as much as they will let you have. One of my relatives got $50,000 of life insurance in 1963, and thought that was almost too much for a 19-yr old back then. However, is that really worth much today? Do you think that even $1Million will be worth much as you think in 10-20 years?
- Wrong company - When considering companies that will be more secure during rough times, and typically pay you better dividends on your permanent insurance, then use a mutual company (not one traded in the stock market) that has paid dividends for at least the last 90+ years in a row.
- Permanent policy structured incorrectly - This one happens a lot!!! I'll get a new client who will say, "I got a universal life/whole life policy. That's good, right?" I'll look at it and find out they pay too much for too little. Not only are the premiums higher than they should be, but they will have less cash in the beginning because they are paying the agents' commissions up front. This one makes me upset sometimes because the company teaches them to do it that way. However, that only puts people in a risky cash flow position that blows up in their faces during lean times. It took me several years working with my insurance agent to find the right balance to this where it serves the business owner/investor, instead of the insurance agent. I LOVE cutting my insurance agent's commissions when referring clients to him. Interesting point though - he makes more money than most agents because he does it from the correct, abundant perspective.
In summary, don't assume your insurance agent is doing what's best for you. He/she might have the best intentions, but ignorance is very expensive, especially to you.