The Money Game

1. Everyone’s money habits are different – know your own!  In college, it’s too easy to go with the flow and spend money like everyone else.  The reality is, not everyone has the same resources to spend freely, dine out, take vacations, and dress in the latest fashions.  Understand your own money habits, income, and expenses and live accordingly.
2. College can be free!  Don’t overlook free money resources.  Sites like brokescholar.com and fastweb.com are great places to start your scholarship searches.  Considering you’ll be paying for school for the next 20 years with loans, why not get some paid for up front with free money? $8 billion goes unclaimed every year.
3. Learn to balance your checkbook!  Above all else, know what’s coming in and what’s going out.  With resources like mint.com and yodlee.com, you can keep real-time tabs on your account with text alerts and emails.  Every overdraft fee is money you could’ve spent (or invested) elsewhere.
4. If you can eat it, drink it, or wear it, it doesn’t go on your credit card!  Too many college students get caught in the credit card trap early on by spending money on consumables.  If you don’t have the cash for food, drink, and clothing – don’t buy it.
5. Plan your student loan needs ahead of time!  Student loans were designed to be used for tuition, room & board, books and fees.  Today they’re used for Spring Breaks, TV’s, shopping sprees, etc.  If you know what you need at the beginning, you’ll be much less likely to go for that “emergency” student loan mid-semester.
6. At some point you have to live like a college kid!  Here’s the 3-word key to financial success in college: Cheap is Chic.  No one expects you to drive the nicest car, have the nicest clothes, or dine in the fanciest restaurants.  You’re in college.  Learn, study, and appreciate frugality – it will pay dividends when you graduate.  Plus, it’s way more fun to live like a college kid in college than when you’re a professional.
7. Read a financial book every semester!  They don’t have to be long and have titles like Econ 201.  Read books like: The Richest Man in Babylon, Rich Dad, Poor Dad, Financial Peace, or The Millionaire Next Door.
8. Take a set amount with you for “social” outings!  When it’s gone, it’s gone.  Leave the plastic at home.  (see tip #4)
9. Create a habit of saving money!  It’s much easier to save 10% of your income when you’re making $7 an hour, versus a 5-figure salary.  Start the habit while you’re in college and your wealth will begin to exponentially increase over time.  Open a money market account with emigrantdirect.com, ingdirect.com, or smartypig.com and earn the highest savings account interest rates.
10. Spend time focusing on your finances!  By mastering the fundamentals of money early on, you’ll enjoy more satisfaction in your career and your life in general.

 

The creator of the mutual fund as we know it today, Sir John Templeton passed away this year.  He introduced the first mutual fund in 1954 when most people’s ideas around investing didn’t go much past Wall Street.  Money magazine once called him “arguably the greatest global stock picker of the century”.

He obtained the “Sir” when he was knighted by Queen Elizabeth for his philanthropic deeds. 

I wonder what Sir John would think of the current economy?  My guess is he’d be buying!

To your prosperity!!
AC

If Meredith Viera says it’s true, it must be true.  Check out the clip below to see what the bigshots on the Today Show are saying about Des Moines.

Everyone Likes Each Other In Des Moines

I know I like everyone in Des Moines.  How about you?

In the past few days, I’ve had a chance to sit down with several individuals all in need of some financial advice.  Most of them were middle to upper level managers with very solid companies who, for one reason or another, chose to eliminate the positions my clients were in.

The eliminations (or layoffs, or riftings, or whatever the catch-words are these days) have put several people in a very difficult predicament.  The underlying challenge all of them face is the fact that they’ve grown accustomed to a certain lifestyle and it requires the income they make on a monthly basis.  When the income stops, the lifestyle continues until they realize they are no longer able to afford it.

Here is the best definition of wealth I’ve ever heard:  Wealth is determined by how long you can live your current lifestyle if your present income streams stopped immediately.  Now the obvious difference between someone who’s rich and someone who’s wealthy is…

A rich person can afford a luxurious lifestyle, but if the income stops, they’re hosed.  (See recent stories of Lindsay Lohan, and her borrowing of spending cash from friends…)

A wealthy person can afford the lifestyle they’ve always enjoyed, and if their working income stops, they can continue living the lifestyle indefinitely.

My own personal definition of wealth also includes good health, a loving family, and the ability to enjoy life’s little imperfections.

To your prosperity and increased wealth…

I’ve had so many people ask me what I thought about the bail-out and what it would do to our industry and economy, I thought I’d comment on it here on the ole blogosphere. 

First the cons — from my non-verified sources, Hank Paulson was one of the main players at Goldman Sachs that orchestrated this prestigious investment bank to a 30 to 1 leveraged position.  Now, the same Hank Paulson is orchestrating the bail-out for his buddies.  Not only that, he’s requesting no government oversight for the money, and that executive compensation is a lynch-pin in the program.  (Meaning they won’t force these overpaid CEO’s to lower their own compensation, which was part of the greed that manifested this situation.) 

When this goes through (notice I said when, not if), tax payers will be on the hook for the egregious over-leveraging and risky positions created by some of the wealthiest companies and individuals in history.  So for those of you that didn’t want big government, you just got it forced down your throat. 

The dollar will weaken and be worth far less than what it was a day, a week, a month, and a year ago.  This means not only will you pay more in taxes, you’ll be able to buy less with the over-taxed amount you receive.

Now the pros — The economy should stabilize somewhat.  At this point it’s all speculation as we’ve never, never experienced this kind of challenge in our economy.  (I said never twice just for emphasis.)  The issue that this prevents is a total melt-down of our economic engine.  The gears of that engine — investments, real estate, new business growth — would all grind to a halt until the nation (read those who lend money) felt like we were in a stronger position and their investments were a more sure thing.  The fact that Warren Buffett pumped $5 Bills into Goldman should tell us something — I’ve read his biographies, this guy doesn’t put money into something unless it’s on absolute fire-sale or it’s a sure thing.

Your house shouldn’t lose as much value this year as it was supposed to.  Notice I didn’t say your value will go up.  It just shouldn’t lose as much.  We’re still in a weird market for real estate and I don’t think we’ll see the market back to robust until at least 2011.  What that means for those of you with cash is there will be a ton of bargains in your backyard and the smart ones will lie in the weeds and ultimately snap them up.

Your retirement accounts shouldn’t lose the value compared to what would happen if the bail-out didn’t happen.  This was probably one of the biggest fears of the Fed — if the stock market lost 1,000 or 2,000 points you’d see hundreds of millions of dollars in retirement money evaporate.  Companies that relied on the liquidity of their stock selling would not have the funds for growth, expansion, raises, etc.  Instead, they would most likely cut their fixed expenses (i.e. your job).  Unemployment would soar, and the economy would most surely drop into this recession we’re allegedly not in.

My take – we’re in this mess because a whole lot of people got really greedy.  Including the consumer.  We’ve experienced quarter after quarter of GDP growth and almost all of it was based on new acquisition of debt.  We’re overleveraged on Wall Street, we’re overleveraged in Washington, and we’re overleveraged at home.  The theory of efficient markets is correct — this market will correct itself.  And in my semi-professional opinion, this economy has to shrink back to normal, before we can again grow to super-size proportions.  We got too big, too fast by spending money that wasn’t our own.  And now, we’re going to pay even more for the simple things.

People are still going to lose their homes.  It happens when your expenses exceed your income and you have nothing to fall back on.  And instead of making it the government’s fault, or the lenders’ fault, as Americans WE HAVE TO TAKE PERSONAL RESPONSIBILITY FOR EDUCATING OURSELVES ABOUT MONEY. 

It’s not a message that will win an election, but it’s what I believe.

To your prosperity,
Adam

I had a moral dilemma the other day.  And it bothered me so much that I lost sleep over it for two days until I realized what I needed to do was give my honest opinion to help this person out of their situation. 

My moral dilemma involved me either doing a refinance for someone and helping them wrap up some debt OR telling that person what they really needed to hear which was, “you need to downsize”.  And the challenge with saying that is it’s not what a person wants to hear.  So, as a result, I risk being seen as someone who can’t get the job done.  And that was the internal struggle for me… because while I’m a person who routinely “gets the job done”, I don’t want to be the guy that gets the job done only to have the person lose their home, declare bankruptcy, file divorce, or any other of a litany of things that can happen when a poor financial decision is made.

What consumers need right now is someone who is telling them what they need to hear, not what they want to hear.  And unfortunately, there are a lot of folks out there in positions of authority in the financial world doling out terrible advice for the sake of closing sales.  I get it — it’s a tough market and if you can close something, do it.  But, what are you risking for someone else by making the sale?

Two examples: A couple wanting to buy a home needs to verify assets and they ask about using a whole life insurance policy.  “We’ve been paying $200 a month for the past 6 months so there should be some cash value to it.”  The cash surrender value is zero.  And that would’ve been $1200 in a bank account compared to the very little that was actually there.  So my question, Mr. Insurance Guy is: What qualified these young kids to buy a whole life insurance policy before they ever had an emergency fund started?  Why didn’t you encourage them to fund a ROTH IRA instead of pad your own wallet?

The reality is, very few professionals are telling it like it is and I think we need to be willing to lose a sale or two and watch out for our clients.  After all, we should all have a fiduciary duty to someone other than ourselves.

Have you ever left a meeting with someone and felt really really good about your own situation in life?  I’m not writing about one in particular with this post, but over the past couple of weeks, I’ve had MULTIPLE instances where I leave feeling a huge sense of relief at what I’m going home to.

So, after having these experiences, my subconscious has been stirring about what exactly keeps people in a perpetual state of “stuckness”.  I’ve gone through the conversations I’ve had with these folks over and over in my mind and there’s a couple of things that constantly rise to the surface. 

The first is a series of really bad choices that ultimately led them to the place they currently are.  The choices are usually not thought out, unplanned, completely random happenings that lead to a very negative outcome for the person.

The second, and probably worse thing that happens to people in these situations is a feeling of, “this always happens to me” OR “I can’t do anything about it now”.  It’s as if their minds shut down completely and it’s easier to ignore the situation instead of doing something about it.

So, What’s Keepin’ The Man Down?  My theory is that somewhere in everyone’s past there was a moment where they either decided they were in complete control over their destiny, or they weren’t.  And that decision is like putting a thousand pound weight on your dreams and telling them to fly.  Or better yet, it’s like how circuses train elephants.  They anchor an elephant to the ground with an 8 foot stake hammered into the earth until the elephant no longer tries to escape.  Then, even a 6 inch stake will keep an elephant in place.

Peter Senge wrote about this stake that we all have in his book The Fifth Discipline.  The stake in question is your perceived reality.  And Senge says that it’s easy to achieve what you want to achieve.  You simply have to adjust your perceived reality.  Move the stake. 

So, to the people that are stuck, those that have made poor choices and believe they have to live with them, I suggest you do one thing — change your perceived reality.

It’s not that you don’t make enough money to start a business, it’s a matter of finding the resources, or decreasing your debt, or building it on the side.  It’s not that you don’t have the education to get a better job, it’s a matter of changing your focus to finding someone that can help you get a better job.  It’s not that you attract the wrong men or women into your life, it’s that you haven’t decided exactly what you want in a man or woman and once you do, they will appear before you.

What’s keepin’ the man down?  It’s you.  It’s what you are allowing your mind to tell yourself.  Your mind is a wonderful servant, but a terrible master.

To Be prosperous, you must THINK prosperous!

When I started Four Legacies Mortgage with the key people in place I had high hopes for all of us.  I knew that what we were building was going to be special, and different, and totally unique in our marketplace.  I had no idea that some of my team members would take the company to even greater heights. 

So, in this post, I’m going to feature our very own Wealth Creation Specialist, Mr. Tyler Osby.  Tyler has been writing a blog (www.wealthwithmortgage.com) for several months now and probably has more content than most professional authors 3 times his age.  Not only does he have content, he has GREAT content.  Not only does he have GREAT content, it’s FREE!!!! 

Now, I’m not talking about recipe of the month, or joke of the day — Tyler has some of the best information on the internet if you’re looking to get a great loan that fits your particular situation.  He writes about what the industry is doing.  He writes about the Des Moines real estate market.  He writes about the Fed Chairman Ben Bernanke.  (Actually, we all think he’s a bit obsessive about Ben Bernanke.  Just don’t say anything to him about the personal shrine he’s built in his office.  Still a sore subject…)

The point is, it’s GREAT FREE information that could help you save money in one of the largest transactions of your life.  May I beat a dead horse?  Thanks.  If your current “advisors” aren’t giving you this level of free information, it’s time to start packing up your things and heading elsewhere.  We have partnered with some of the best advisors in different industries who do things the way we do.  For crying out loud, check out Art Dinkin’s  A Moment on Money.  If this isn’t great content, I’m Matthew Lesko!  (He’s just one of our partners… there’s plenty more!) (I meant Art Dinkin, not Matthew Lesko…. I digress.)

There is so much available to you now, spend an extra minute or two and learn what you can from those that are spoon feeding it to the public.  Not only is it free and incredibly well-written, there are experts who are putting hours and hours into making sure their clients (and you!) are well-informed.

To Abundance!!
Adam

There’s a game that we all play with money.  It happens every day whether you’re conscious of it or not.  And, every day while you’re playing, you are either winning the game or losing the game.  The only difference between those that are winning and those that are losing is the fact that one group knows the rules by which the game is played and the other does not.  Which group would you rather be a part of?

 

I thought so. 

 

So, let’s start with the simplest concept: you lose the game when you’re spending more than you’re making.  It’s not rocket science, but it does involve math.  If you’re a chronic over-spender the easiest way to keep track of what’s going out is to keep a spending journal every day for a month.  It doesn’t matter if it’s a 79 cent pack of gum or a 79 dollar pair of jeans.  If you spend money, write it down.  At the end of the month, add up your spending and prepare to be astonished.

 

The Rockefeller family, one of the wealthiest families in the United States has a tradition passed down from father to son.  The kids all receive a weekly allowance, but in order to receive their allowance the following week, they have to provide a ledger documenting every cent they spent, saved, invested, and donated.  If literally one penny is missing from the total, the child does not receive their allowance the following week.  This is the equivalent of balancing your checkbook to the penny every single time you want to get paid.  Do you do that?

 

Ok, so spend less than you make.  Simple enough.  Now, what you do with that money is the second step to winning the game.  It’s far too easy to spend the money that sits in your checking account.  So, setup your accounts so that a percentage of your paycheck is direct deposited into a savings or money market account.  This is what will become your save/save account.  It’s called a save/save account because the purpose is to save/save not save/spend.  Here’s the goal: have enough in your save/save account so that if you have an emergency, there’s enough there to cover it.  (And I’m not talking an emergency pizza, emergency keg, or emergency trip to Cancun !)  The bottom line is, if you don’t have the money in your save/save account when your brakes go out (and they will!) you’ll whip out the credit card and begin the debt spiral. 

 

While we’re on the topic of debt, let’s cover the biggies – credit cards and student loans.  While I understand they are a necessary evil to get through college, I’m also not naive to the fact that people treat them both as free money.  Let’s get this perfectly clear – they’re not.  In fact, one of the biggest expenses you’ll have in your life is the interest expense on the debt you accumulate. 

 

There are two things you can do right away to make sure the credit card debt-load you carry is not out of control.  First, remember this: if you can eat it, drink it, or wear it – it doesn’t go on your credit card.  Second, you can call the 800 number on the back of your card and ask someone in the retention department to give you a lower interest rate, or you’ll do a balance transfer. 70% of the time, your rate will drop by 4 or 5 percentage points just by asking.  While you’re at it, save yourself $45-75 per year and have them cancel your mileage or bonus points program.  

 

Student Loans are changing on a day-to-day basis.  If you haven’t consolidated your federal or private student loans, you’ll want to after July 1.  With recent changes in the student loan industry, more companies that once offered consolidation loans are ending those programs.  The Federal Direct Loan Program is stepping up to the plate and offering what is predicted to be the lowest consolidation rates in history.  Again, wait until after July 1, 2008 to consolidate and save massive amounts of interest!

 

The last piece of advice to winning the game we all play with money is the toughest of all to get, but the most worthwhile in the long run.  At some point in your life, you have to live like a poor college kid.  You’ll either do it when you’re in college, or you’ll do it when you’re a professional.  Take it from someone who lived to regret it – I ate enough Totino’s pizzas and Top Ramen right after college to feed several small villages.  And during that time I realized, if you do for two years what no one else WILL do, then you’ll be able to do for the rest of your life what most people CAN’T do. 

 

Play the game to win!

There are more than a few times a year that I love living in Des Moines.  Winter is not one of them… however, most of us native Iowans love our state because of certain other things — like, the State Fair, RAGBRAI, and mullets.

Now, Forbes magazine has given us a new reason to love this little business mecca we all know and love.  Des Moines was recently listed as #4 in the Top 10 Places for Business and Careers, right behind Raleigh, Boise, and Fort Collins (also known as Ft. Fun!).  What an honor this is — but why did Forbes have to go and advertise how cool we are?  Now everyone will be packing up their beach wear and bringing them to good ole’ Des Moines.  You know how to spot the foreigners, though, don’t you?  They cringe at Deep Fat Fried Twinkies.

Here’s the actual list (and a comment from Forbes):

Also, the Forbes ranking may have you rethinking Iowa as just “the corn state”. Des Moines, ranked fourth, with its sports arena, art center and heated 3 mile skywalk, now boasts an unemployment rate of 3.4% and business costs that are 10% below the national average.

2008 Top Ten Places For Business and Careers

1. Raleigh, North Carolina (#1, 2007)

2. Boise, Idaho (#3, 2007)

3. Fort Collins, Colorado (#28, 2007)

4. Des Moines, Iowa (#4, 2007)

5. Lexington, Kentucky (#30, 2007)

6. Atlanta, Georgia (#25, 2007)

7. Richmond, Virginia (#14, 2007)

8. Olympia, Washington (#10, 2007)

9. Spokane, Washington (#20, 2007)

10. Knoxville, Tennessee (#5, 2007)