Two Important Questions That Need to be Answered. Is it building wealth or avoiding poverty?
Economizer Red Zone #71026
Almost everyone gets this wrong!
Proper financial planning is not to make people rich. That is not what all financial gurus and the talking heads profess. Listen well, the real goal should be preventing you from becoming poor. Marketing “getting rich” is way sexier than avoiding poverty
Every advisor hammer home that you must build wealth, but greater success will be achieved by preventing poverty.
Poverty can be prevented by using guarantees.
Wealth-building requires positive outcomes in uncertain circumstances.
Positive events must occur that are completely out of your control.
Three quarters of people arrive at death or retirement with less than $28,000.
It is impossible to have $28,000 support for years of retirement. Yet way too many of us will have to face that challenge.
Over the years I have asked hundreds of people this one simple question:
If you had the choice, would you want to be rich or would you want a guarantee you will never be poor?
(98 percent say they want the guarantee they will never be poor)
I follow up with this question “If I could show you a way that even if you completely ran out of money, you would never run out of income, would that be important information to know?”
Almost 100% answer yes!
Looking at retirement planning through this questioning is not sexy. Especially when so many people are bombarded with multi millions in advertisements about building wealth. The financial companies brainwash millions to think building wealth is the answer.
If you don’t understand this then you could be in trouble. ALL Financial Institutions follow these 4 rules:
They want your money.
They want your money systematically.
They want to hold onto your money for as long as possible.
When the time comes, they want to give back as little as possible.
Let’s look at a bank, for example. How does the bank make money? Banks do not sell goods or services; they act as intermediaries between you and your money. For any bank to generate a profit, they need your money. Your deposit allows the bank to loan your money to others.
If a bank’s objective is to have control of your money, how do they incentivize you to give it to them? They offer interest rates, account sign-up bonuses, etc. Once the bank has your money, the objective is to hold onto it for as long as possible. This allows them to lend money and generate profit for the bank. Banks incentivize longer investment periods by offering higher interest rates the longer you keep your money with them.
Why is this important?
What financial institutions do with your money is entirely contradictory to what they tell you to do with your money. Institutions glamorize the “Miracle of Compounding Interest,” but they do not follow this principle. Financial institutions keep the money they have in motion.
The object is to use the velocity of money in motion to get your dollar to do more than one thing and get two or three dollars in value for every dollar spent.
Look at this objectively:
You work every day- saving
Many times, doing without.
You pay all the taxes
You take all the market risks
You suffer the market downturns
You pay all the fees associated with any money management or advice
Then why do financial planners and institutions argue that you must build wealth and achieve great returns, but they never focus on building an income that will last as long as you and if applicable your spouse shall live? (I hate to say this there are more commissions, lots more, with ongoing management of your money than one would ever think.
Don’t forget: Your primary responsibility is to make sure you will never be poor. You must also understand that building pension like income is the only basis for a successful retirement plan.
Two more questions:
Are you creating guaranteed income for life?
If not, what is your plan B?
Steps to take:
Develop Your Plan B
