Misguided Wisdom
More Than One Solution
Traditional
financial thinking of the past has always emphasized the rate of return
on our investments. The faster you want your money to grow, the greater
the risk you would have to take. Many words have been spoken and
written about risk tolerance and risk management, so I’m not going to
rehash popular current financial thinking. I do think the element of
risk is important, but only to the extent that if you didn’t have to
take a risk, and could receive positive rates of return, would you
pursue that course of planning?
It is a popular belief that the only way to make your money grow is to get higher rates of return.
Every time I hear “higher rate of return,” I ask a question: “Who is at
risk, you or the one making the recommendation?” There is another way
to increase your wealth without the worry of risk. It is called the
Efficiency of Money. Now I’m not talking about strict budgets, buying
off-brands, and doing without. I’m talking about the complete opposite.
You should have the finer things in life and enjoy them. The only thing
stopping you from improving your lifestyle is money, and more precisely,
transferred money. We unknowingly and unnecessarily transfer away most
of our wealth and it’s out of control. Have you ever stood in a
supermarket line with that ½ gallon of ice cream you forgot to get for
the kid’s birthday party, only to have the person in front of you
contest the cost of one of their items? The argument starts out polite
enough over this $.10 difference in cost, and escalates into a conflict
between the store manager and a cell phone call to the shopper’s
attorney. Finally, it is resolved with some U.N. intervention.
Meanwhile, your fudge swirl delight is dripping down your arm onto your
new shoes. The shopper leaves the store victorious in battle, proud and
happy, eager to share the success of their confrontation with all who
will listen. Did I get off track there? Not really. If we had the
passion and the knowledge to confront the transfers of our wealth, we
would surprisingly win most of the battles. Instead of a $.10 victory,
the savings could be in the thousands of dollars with no risk of loss.
There are ten major transfers of your wealth.
• Taxes
• Tax Refunds
• Qualified Retirement Plans
• Owning a Home
• Financial
Planning
• Life Insurance
• Disability
• Purchasing Cars
• Credit Cards
• Investments
We
will be discussing some of them in great detail. It will take some
encouragement by me for you to begin thinking a layer deeper than you
are accustomed to. Remember, the purpose of taking you a layer deeper is
not to uncover defects in your thinking, but to expand your thought
process through knowledge so you will be able to make better financial
decisions. Without this process, you may suffer unintended consequences
in your financial future.
When
we are finished, you will have a defining moment in the way you think
about money. You will have a greater appreciation of opportunities that
you didn’t have before. Let’s face it, finance companies, banks, the
government, credit card companies, mortgage companies, etc. are all
standing in line for their share of your money. Where do you and your
family stand in this line? At the end! We will change this. However, in
order to change this, your thought process must change.
Popular Beliefs
About
6,000 months ago, it was a widely accepted scientific fact that our
planet, the Earth, was flat. About 600 months ago, my father was told he
would probably retire to two-thirds of his income, thus, he would be in
a lower tax bracket. About 60 months ago, we were told of such enormous
surpluses controlled by the federal government that our society would
prosper from increased government programs. All of these beliefs turned
out not to be true. Tax reform acts designed to relieve tax burdens on
the public, actually resulted in the government collecting more revenue
than ever from its citizens, you and me. The shell game of lowering tax
rates while eliminating deductions has been very profitable for the
government. Back in our grandparents’ day, Social Security was the
save-all safety net they needed in lieu of the lack of retirement plans.
Although well intended it was the first step of a long journey of
dependency on the government. The 16th Amendment of the U. S.
Constitution allowed taxation of income of its citizens.1
Originally,
the idea of income tax was ruled unconstitutional in the 1890's.
Article 1, Section 9 of the Constitution states clearly that no direct
tax “shall be laid, unless in proportion to the census or enumeration
herein before directed to be taken.”2 The 16th Amendment gave new powers to the federal government that conflicted with the 10th Amendment that reserves any other power, other than stated in the Constitution, to the individual states.3
Four
score and several years ago our forefathers brought forth onto this
continent a new notion, that all men are created equal . . . when it
comes to taxes. Once again, most of the popular beliefs have been handed
down generation to generation, father to son, mother to daughter with
very little effort given to studying these beliefs. Now we are at a
point where there is confusion between myth, opinion, and fact.
Misinformation has caused all of us enormous amounts of lost money, in
the form of transfers that we’ve made unknowingly and unnecessarily. In
1913, 400 pages of tax law were created. Today almost 47,000 pages of
tax codes and rulings exist. We will continue, later on, to look into
transfers of your wealth to the government, created by the government.
1U. S. Constitution, Amendment XVI.
2U.S. Constitution, Article 1, Section 9.
3U.S. Constitution, Amendment X.
The
government isn’t the only player trying to share your wealth. Banks are
notorious for dipping into your wallet. One rule of the bank you must
understand. If a bank is late on doing something it’s called a
“process.” If you are late with the bank it’s called a “fee.” Most
recently, a bank charged me a $360.00 fee for not doing something - for
not setting up an escrow account for a mortgage. Think about it, $360.00
for doing nothing. When they were questioned about this fee, they said
it was simply part of the process of the mortgage. The process of
setting up nothing. When asked where that money goes . . . well, the
silence was deafening. I could actually hear the crickets chirping.
Besides mortgages, other spin-offs of their creations, such as credit
cards, home loans, auto loans, ATM’s, checking accounts, saving
accounts, and certificates of deposit (CD) all create fees. Late fees,
early withdrawal fees, minimum balance fees, debit fees, and in some
cases, a fee to talk to a teller. On credit cards, it’s almost the goal
that you be a couple of days late on your payments. Late fees are big
business, and so are chargeoffs from bad debts. To create higher
possibilities of late payments, the billing cycle has been shortened.
Instead of sending out your billing 14 days before the due date, it is
sent out 10 days before the due date, and the due date is probably on a
weekend. Wouldn’t it be terrific if we could be the bank? If you are
interested in creating your own personal bank and eliminating regular
commercial banks from your life, you must read on.
The Banks
It
is truly reassuring and comforting to know that your bank savings,
should the bank fail, is insured by an agency of our federal government
that is over $6 trillion dollars in debt itself. Someone once said,
“Banks will lend you money if you can prove it is difficult to get the
right solutions when you start out with the wrong premise to them you
don’t need it. A banker is a fellow who lends you his umbrella when the
sun is shining and wants it back the minute it begins to rain.”
Never Go Into A Bank Without A Ten Foot Pole
Let’s
get one thing straight here. You, by putting money into a bank, are
lending money to that bank, so they can lend it to someone else. They
earn interest from that loan and charge fees to it on a regular basis.
In return for you “lending” the money to the bank, you receive a pitiful
interest rate, but they also charge you fees to keep that account open
at their bank. Think about it . . . you put the money in their savings
account and receive 2% earnings. You may also be charged fees for that
savings account. They take your money and lend it to someone in the form
of a credit card and receive 18% interest and receive fees on a monthly
basis for that credit card.
Not
only do they charge us interest, but they charge fees. They raise
existing fees, invent new ones and make it harder to avoid them by
raising minimum balance requirements. Looking through my bank records
and the documents given to me when I opened my accounts, I found and
identified over one hundred separate fees banks impose on their
customers. Over the past few years the size of the fees have increased.
The banks have become a fee-based operation. They consider you naive
when it comes to the sophisticated business of banking. They determine
there are certain things you don’t “need to know.” Here is a partial
list of fees and charges I found:
Saving account feeCheck cashing fee
Monthly account fee
Automated transaction fee
Manual transaction fee
Monthly overdraft mgmt. fee
Automatic payment amend fee
VISA account fee
Withdrawal fee
Automatic payment fee
Set up fee
Unpaid bill payment fee
Checking account fee
Account special request fee
Checking overnight fee
Stop payment checking fee
Checking account statement fee
Dishonor fee
Customer investigation fee
Overdraft application fee
Online banking fee
ATM fees
International service fee
Traveler’s checks fees
ATM fees
International service fee
Traveler’s checks fees
Bank draft fee
International money transfers fee
Safe deposit fee
Home loan application fee
International money transfers fee
Safe deposit fee
Home loan application fee
Personal loan fee
Credit card replacement fee
Credit card collection fee
Cash advance fee
Telephone call center fee
Account closure fee
Wire transfer fee
Garnishment fee
Credit card replacement fee
Credit card collection fee
Cash advance fee
Telephone call center fee
Account closure fee
Wire transfer fee
Garnishment fee
Notary fee Levies
Special statement cutoff fee
Telephone transfer fee
Night deposit fee
Analyzed business fee
Loan processing fee
Tax service fee
Appraisal fee
Credit report fee
Survey fee
Closing title company fee
Recording fee
Escrow waiver fee
Special statement cutoff fee
Telephone transfer fee
Night deposit fee
Analyzed business fee
Loan processing fee
Tax service fee
Appraisal fee
Credit report fee
Survey fee
Closing title company fee
Recording fee
Escrow waiver fee
Inspection fee
Underwriting fee
Courier fee
Document prep fee
Underwriting fee
Courier fee
Document prep fee
Attorney fee
Late payment fee
Early payoff fee
Late payment fee
Early payoff fee
You
would think the government would step in and help protect its
citizens. That’s what they are paid to do, right? WRONG! You see, the
government needs the banks. The Federal Reserve, which represents banks
in this country, prints our dollars and lends them to the Federal
government, which in turn creates the ever-growing federal debt. The
government pays interest on these loans. This debt is passed on to you
and me in the form of taxation. If this debt continues to grow will your
taxes ever go down?
Who
is happy with this whole scenario? Yes, the banks. They charge interest
on that debt. It costs the banks very little to print the money to give
to the government. It costs the government very little to dole out this
money. However, we will spend our entire lives paying on this debt in
the form of taxes, without ever coming close to paying it off
completely. That is why you will never see the government aggressively
go after the banks. They need each other!
15 vs. 30
The
two most common types of mortgages sold today are the 15-year and
30-year mortgages. Once again, misinformation clouds the choice between
these two types of mortgages. In the 15-year mortgages, people assume
the shorter the loan period, the less they will have to pay. Secondly,
they believe they will save interest payments. With this line of
thinking, you must conclude that, once again, the best alternative would
be paying cash for the house. Let’s get out the microscope and take a
look at these two mortgages.
Person
A chose a 30-year mortgage for $150,000.00 with a 6.5% loan rate. She
knows that under those terms her monthly payment will be $948.10. Person
B obtained a 15-year mortgage for $150,000.00 with a 6.5% loan rate. He
knows that his monthly payment for that loan will be $1,306.66. Person A
believes that her monthly payment at $948.10 is a good deal because it
is $358.56 per month cheaper than the $1,306.66 payment for the 15-year
mortgage. She is going to invest the savings of $358.56 per month into
an account that averages a 6.5% return for 30 years. This grows to a
tidy sum of $396,630. Person B, who wasn’t born yesterday, plans to save
$1306.66 a month for 15 years after he makes the last payment on his
15-year mortgage. He too predicts a 6.5% average return for those 15
years, and his investment would grow to an impressive $396,630.00. NOTE:
It’s the same amount as Person A’s account. I have to ask you: Which
person would you rather be? In making the above comparison, I assumed a
6.5% mortgage loan rate and a 6.5% rate of return on their monthly
payments. What would happen if both Persons A and B thought they could
get an 8% average rate of return over that period of time on their
investments? Person A’s $358.56 per month for 30 years at 8% would grow
to $534,382.00. Person B’s $1,306.66 per month for 15 years would total
$452,155 at an 8% earning rate. That’s a difference of $82,227.00 in the
favor of Person A. The compounding of interest works in Person A’s
account, causing the money to grow to a larger sum. Remember, Person B’s
banker told him he would save money with a 15-year mortgage. Hold on
there, Kemosabe. You’re thinking, “If I took a 15 year mortgage, my
interest rate might be lower than that 6.5% 30-year note.” You’re right.
Let’s say the interest rate was 6.0% on that 15-year mortgage. Then
both Person A and Person B invested the difference at 8% return just as
we described above. You’re probably thinking, “Ah hah! Got you!” Try
again. Person A’s savings still ends up $35,697.00 greater than Person
B’s account. Don’t forget, Person A also received 15 more years of tax
deductions that created an even greater savings.
Enough Is Enough
Getting
financial information and advice from a bank can be a huge mistake.
Their focus is to control your money and collect interest and charge
fees WHENEVER they can. They will steer you to their bank products when
it comes to investments and saving, not because those products are the
best choice for you, but because they profit from sales of their
products. Also, the financial consultants housed in banks cannot sell
other company’s investments or products, even if another company’s
product is better suited for you and your financial profile. But they
don’t tell you that, they merely give you the idea that their bank’s
products are the best for you. The less informed you are the better bank
client you become. No one is safe. If you need “banking service” (that
is an oxymoron, by the way), find yourself a local credit union. It is
the lesser of two evils.
As
discussed in previous chapters the ideal solution would be to create
your own “banks.” Follow the rules of basic banking. Learn to pay your
banks back, save the interest and whenever possible, deduct interest
payments when the law allows. Your “banks” will be funded by eliminating
or reducing the ten major transfers of your wealth. The savings could
be staggering.
The Federal Reserve: Bridging The Gap To Plunder
The
central core of banking under the guide of the Federal Reserve is very
simple: An ability to print money at very little cost, which has no real
value, no backing of gold or silver, and loan it out to purchase things
that do have value. This in return provides value to the unbacked money
printed. Holding property liens on things you purchased gives the banks
the right to book these as bank assets, minus the balance of the debt.
All the money that has been created by the banks is created out of
nothing. In November, 1910, a secret meeting was held on Jekyll Island
in Georgia.1 Present at this meeting were Senator Nelson
Aldrich, Chairman of the National Monetary Commission, associate of JP
Morgan, father-in-law to John D. Rockefeller Jr. Also present were:
Abraham Pratt Andrew, Assistant secretary of the U.S. Treasury; Frank A.
Vanderlip, President of the National City Bank of New York,
representing William Rockefeller and the international banking house of
Kuhn, Loeb, and Company; Henry P. Davison, Senior partner of JP Morgan
Company; Charles D. Norton, President of JP Morgan’s First National Bank
of New York; Benjamin Strong, head of JP Morgan’s Bankers Trust
Company, and; Paul M. Warburg, partner in Kuhn, Loeb, and Company, a
representative of the Rothschild banking dynasty in England and France,
brother to Max Warburg, head of the Warburg banking consortium in
Germany and the Netherlands.2 Every one of the participants
was pledged to secrecy. It was only after many years and much research
that the meeting and its purpose was uncovered. What formed out of this
meeting was a banking cartel, a proposed monopoly of the industry. By
doing this they would create control of the financial monetary systems;
yours, mine, and the government's. Even creating a name for this cartel
was well thought out. They agreed that the word “bank” should not be
used in its title. Thus, the birth of the Federal Reserve, a cartel
agreement with five objectives:
1) Stop the growing competition from the nation’s newer banks;
2) Obtain a franchise to create money out of nothing for the purpose of lending;
3)
Get control of the reserves of all banks so that the more reckless ones
would not be exposed to currency drains and banks runs;
4) Get the taxpayers to pick up the cartel's inevitable losses, and;
5) Convince Congress that the purpose was to protect the public.3
Specifically,
the Federal Reserve was designed as a legal private monopoly of the
money supply, operated for the benefit of the monopolists under the
guise of protecting and promoting the public welfare. Constitutional
restraints prohibited the federal government from printing paper fiat
money.4
Fiat
money is money that has no valuable asset; gold, silver, etc., to back
it. However, there is no such restraint on the Federal Reserve. But,
the banks, i.e. the Federal Reserve, wanted the government to have a
system to pay for the money they printed for the government. Say the
magic words: Sixteenth Amendment. These gold and silver reserves were
still sufficient to back all its printed money. As the country continued
to grow and the advent of government social spending increased, the
government surpassed the ability to back its fiat money. In its own
wisdom, the government eliminated its gold and silver standards.
Remember the days when our printed money stated that it was a silver
certificate right on the front of the bill? That’s gone. So are our gold
and silver stockpiles. Now the printed money says "Federal Reserve
Note" across the top. Since that change, the national debt (not the
deficit, they are two different things) has spiraled out of control. Our
country’s debt is compounded because the Federal Reserve charges
interest on that debt, which is repaid by the tax revenues collected by
the government.
1 G. Edward Griffin, The Creature from Jekyll Island. California: American Media, 1994.
2Id.
3Id.
4United States Constitution, 10th Amendment.
Understanding
how the government, banks, and Federal Reserve relate to each other
will open your eyes to the transfers of your wealth that they have
created, controlled, and profited from. Remember, they are the ones
constantly reminding us that they will help us financially. The reality
is, between the three of them, we transfer away over two-thirds of our
wealth over our lifetimes. All the plans and products they support
create unintended consequences for us and more profits for them.
Fuzzy Wuzzy Thinking
Imagine
being confronted by two salesmen selling laundry detergent. The
first salesman says, “Well, you would be stupid to buy a detergent that
doesn’t create enough suds to clean.” The other salesman says, “You’re
stupid if you believe what the first guy said.” Great comparison, eh? No
matter what you do, you're stupid by someone’s account. I have heard
professionals in the financial industry tell clients essentially the
same thing. “You would have to be dumb to pass this up.” “It wouldn’t
take a rocket scientist to figure this out.” “How long do you want to be
ripped off?” There are hundreds of statements like these made every day
implying that you’re stupid. I was watching one of these so-called
financial expert's TV show, we'll call her Ms. Fuzzy, and I was amazed
how many times she implied the callers were stupid. She did it in a nice
way, but the implication was that the caller was stupid, and she
wasn’t. Ninety percent of what she told people was simply her opinion,
NOT fact. To be an expert, Ms. Fuzzy knows she must deal with lower
intellects to maintain her lofty title of "expert." But when cornered,
Ms. Fuzzy reverts to belittling the caller rather than giving the caller
a legitimate answer. Then she dismisses the caller’s ideas as "dumb"
and frowns at the television audience to emphasize the point.
5 United States Constitution, 16th Amendment.
Ms.
Fuzzy received a call from someone who bought life insurance, the
"wrong kind," according to Ms. Fuzzy. Her conclusion went something like
this, “Get rid of that and the guy that sold it to you.” (You’re
stupid.) “He is a salesman” (You’re really stupid.) “A S-A-L-E-S-M-A-N,
that's all!” (You have moved from the stupid class to the idiots class.)
Great reasoning, Ms. Fuzzy! Nice comparison, filled with knowledge and
facts. One question for you Ms. Fuzzy: Is it salesmen that you hate?
Probably just about everything Ms. Fuzzy owns, she purchased from a
S-A-L-E-S-M-A-N. Does that make her stupid?
To
come to her conclusions for this caller, Ms. Fuzzy used no math, no
facts, no research, and no independent studies. There was no discussion
about income, cost, age, family status, amount of insurance, the
person’s personal debt, their tax bracket, the love of his family, or
quality of the company. NOTHING, NOTHING, NOTHING to justify her
"conclusion," just Ms. Fuzzy’s opinion. How one can have such a strong
opinion, without knowing all the facts about the caller, in my OPINION,
is stupidity at its finest. But the public sucks it up. The failure to
think a layer deeper about financial concepts is causing the transfer of
thousands of dollars of your wealth.
Over
the past twenty-five years, so-called modern day financial planning has
had mixed reviews. Let’s face it, people became and continued to become
millionaires long before financial planning became vogue. The thought
of making millions by buying the right investments is right up there
percentage wise with winning the lotto. Is there any correlation between
financial planning over the last 25 years and the monetary predicament
John Q. Public is in today? As Americans moved to investing in the
markets, there also appeared larger sums of personal debt. Although the
two are separate, it is all within the same time frame. What happened?
Personal debt and bankruptcies and foreclosures are at an all time high
and growing. Is it that personal income has not been able to keep pace
with inflation and taxation? Possibly, increases in taxation have grown
far greater than incomes. What happened? You would think that with all
this professional financial help out there, the magazines, financial TV
shows, investment brokers, and financial consultants (planners) that
these problems wouldn’t exist. Or have they created more problems than
not in the last 25 years?
In
order to improve your life you had to learn to change. You learn to eat
differently to control your cholesterol. You learn to workout to stay
in shape. You even learn to improve your golf game by taking lessons.
All of these lessons require you to make changes in the way you used to
do things. If you have a bad golf swing, buying a new driver won’t
improve your game (trust me on that one). Yet golf club manufacturers
will always tell you different. Now what changes have you made
financially? Banks and investment companies continue to insist that
changing products, not your thinking, is your only solution to your
financial problems.
Tax Cuts And The Rich
Another
common misconception is that tax cuts are for the rich. This is nothing
more than political "get-me-re-elected" talk. It is obvious that the
rich make up such a small portion of the tax paying population, the
politicians view this as a small group of voters. There are more poor,
middle class, and upper middle class voters then there are rich voters.
So don’t be surprised when a politician favors the area where there are
more voters. The tactic is as old as dirt. Divide and conquer, blame
someone else for your problems, so you will vote for them. These are not
poor or middle class people running for office. Remember, these people
will spend millions to get elected to a position that pays a couple of
hundred thousand dollars a year. Makes sense, right?
I
would like to compare our system of paying taxes to ten people going
out to dinner. The common belief is the rich get more back than us
ordinary tax payers and that is not fair. The reality is, the rich pay
more so they should get more back. If ten people went out to dinner,
and when the bill came we used the rules of the tax code to pay this
bill, it would look something like this: The bill for dinner for ten
came to $100.00; Persons #1 through #4 would pay nothing; Person#5 would
pay $1.00; Person #6 would pay $3.00; Person #7 would pay $7.00; Person
#8 would pay $12.00; Person #9 would pay $18.00, and; Person #10 (the
richest person) would pay $59.00. If the restaurant owner decided to
give the group a 20% discount, the dinner for 10 is only $80.00. How
should they divide up the $20.00 savings? Remember, the first 4 paid
nothing to begin with, so the savings should be divided between the
remaining six. Twenty dollars divided by six equals $3.33 each. If you
subtracted that amount from those six people's share, then persons #5
and #6 would be paid to eat their meals. This doesn’t seem fair, so the
equitable answer is to reduce each person’s bill by the same percentage.
The results look like this: Persons #1 through #5 would pay nothing;
Person #6 would pay $2.00; Person #7 would pay $5.00; Person #8 would
pay $9.00; Person #9 would pay $12.00; Person #10 (the richest person)
would pay $52.00 instead of $59.00. Now everyone starts comparing and
complaining. Person #6 complains because he only got $1.00 back and
Person #10 got $7.00 back. "Why should he get $7.00 back when I only got
$2.00?" shouted person #7. “Why should the wealthy get all the breaks?”
Person #1 through #4 yelled “We didn’t get anything back. This system
exploits the poor!” Then the nine people surrounded Person #10 and beat
him up. That seemed to satisfy them. The next time they went out to
dinner, Person #10 did not show up, so they sat down and ate without
him. When they were finished the bill came and they discovered they were
$52.00 short.
The
people who pay the highest taxes get the most benefit from a tax
deduction. It's common sense math. If you tax them too much and attack
them for being wealthy, they may decide not to show up at the table
anymore. For everyone involved that would create an unintended
consequence. Everyone would have to pay more.
I
found the following sage advice in a local newspaper: Even though the
company matches only part of the 401(k) contribution, it is to your
benefit to put the most away in your 401(k) plan as you can, since
401(k) plans are an excellent way to save for retirement. The author of
the article went on to profess that often many investors contribute only
up to the company match within their 401(k) plan, and do not take
advantage of their 401(k) plan if the company does not match, and he
states that this is a mistake. He finalizes this train of thought by
stating that with a 401(k) plan, an investor receives a double tax
benefit. Not only is someone not taxed on contributions into a 401(k)
plan, but all the income continues to grow on a tax deferred basis.
Half The Story
These
are the types of planning strategies we are presented with all the
time. It is “surface thinking” at its simplest. I kept looking for the
rest of the article that would tell the whole story and the truth. This
was another example of someone deciding that the public didn’t need to
know the “rest of the story.” They decided that it was not important to
discuss the taxation issues of these strategies with the public.
The
article should have concluded as follows: Although accumulating money
for retirement should be everyone’s goal, there are things that should
be taken into consideration. A qualified plan simply defers the tax, as
well as the tax table, to a later date. The assumption that you will
retire to a lower tax bracket than the tax bracket you were in when you
deposited the money is flawed. Studying the country’s demographics,
debt, and the history of the federal marginal tax bracket could lead you
to the conclusion that it is very possible that you may retire to a
higher tax bracket. If that is so, then the strategy of using a 401(k)
as your main retirement savings vehicle may be a losing one. You are at
the mercy of the Federal Government. When was the last time the
government allowed you, as this planner cited, a double tax benefit
without their ability to recoup those taxes, if not more, at a later
date?
This
article left a lot of questions unanswered. Failure to mention the
effects of taxation on this 401(k) money could be considered an omission
of the facts. Unintended consequences could result if you feel that
taxes will go up in the future. I’m not saying all retirement plans are
bad. I feel that when loading up or overloading qualified retirement
plans and exposing yourself to future taxation, whatever level that may
be, you should think at least twice about it. Once again, whose future
are you financing, yours or the government’s?
Fee-Only Advisors And Conflicts Of Interest
I
found more “wise” financial advice in a local periodical indicating
that because of the pace of change in the market environment in tax laws
and other areas, it is getting more difficult for the average person to
manage their portfolio. Therefore, the idea of dealing with a
professional makes sense. The author promoted the use of a fee-only
advisor as opposed to a salesperson, since a true fee-only financial advisor will not have the conflict of interest inherent with
commissioned salespeople. As I mentioned previously, the investment
industry has fought this battle for a long time. All too often planners
want to put the client in the middle regarding the fee based or
commission question.
There Is A Cost When Dealing With Garbage, There Is A Fee For Picking It Up
The
assumption that planners who charge their clients a fee to talk to them
are the only planners who are professional and truly care about their
clients, smells. I have had the opportunity to read and listen to such
pompous ramblings. Along with losing investment picks, half-truth
solutions and opinionists’ “wanna-be” facts, they have the gall to
charge client fees. Make no mistake, a fee is no different than a
commission. Fee-based planners would like us to assume that they are not
motivated by money. Fees, commissions, and management and expense
charges are all transfers of one’s personal wealth. More often than not,
if I decide to wrestle with a skunk, I know I can win but I’ll end up
smelling funny. Remember, there are many professionals that charge fees.
There are fees, sales charges, commissions and loads associated with
every product a financial professional, whether fee-based or
commissioned, promotes. How about some “no load, no fee” information?
Overpayment
It
always amazes me how people react to money. I recently observed people
lined up at a gas station to buy gas that was a nickel cheaper than the
station just across the street. They would wait ten minutes in line for
this savings. Even if they had a 17 gallon gas tank they would save 85
cents. If these people filled their tank once a week, they would only
realize a savings of $3.40 per month. When they finish pumping their
gas, most of them hop back in their cars and are off to work where they
allow the government to deduct $50.00 more than they will owe for taxes
from their paychecks each week. On a monthly basis, this comes to an
overpayment of about $200 per month. For some reason, this has become
perfectly acceptable.
Not
only do these people wait in line for 10 to 15 minutes for gas, they
also wait up to 12 months for the refund of the overpayment of their
taxes. Now I’m not saying that you should not find good prices on things
you buy, just don’t confuse a tax refund with a winning strategy. It is
not a windfall. You overpaid for something and fought to get it back,
only to find out it belonged to you in the first place. The government
got to use your money all year for free. When was the last time you got
to use someone else’s money at no charge?
Just Thinking
There
are all observations and opinions, but most misguided wisdom runs in a
different direction than logic. The purpose here was to try to make you
think. Most people have thoughts, but have lost the ability to think.
They have taken 20 second sound bites about finances and become
convinced that’s all they need to know. All too often someone else is
determining what you need to know. Why? If you had all the information
you needed to make better financial decisions you may not need some of
these professionals and in turn they would lose money.
Copyrighted Wealth & Wisdom Institute 2012
Copyrighted Wealth & Wisdom Institute 2012
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