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More myth-busting

“Be miserable. Or motivate yourself. Whatever has to be done, it’s always your choice.”
- Wayne Dyer

It’s a slow week around here, after the holidays…but I wanted to get this out to you for your consideration this season.

You see, there’s a lot of talk in the news right now about the “estate tax”. In fact, though some observers believed that it would be done away with entirely, it turns out that this is still in doubt.

(Here’s an article from two weeks ago about this confusing process from the WSJ:
http://online.wsj.com/article/SB126090367887892391.html Not much has changed since then.)

But what’s very interesting to me is how many questions I’ve received from clients and friends asking my perspective. After all, I deal with estate plans on a regular basis.

Well, for the sake of clarity, I’d like to establish this truth: Estate planning is MUCH more than avoiding the estate tax.

In my opinion, this is why so many regular families get taken by surprise when they least expect it–after all, their estate wouldn’t be subject to the estate tax.

But then they get socked with all kinds of other fees, maybe even placed in probate and their wishes aren’t honored by the courts.

All because they never went through the process with someone like us.

Now, most of our clients know this already, which is why this email is perfect to send to your friends and extended family. It’ll be a true gift–peace of mind!

So, in that vein, I’m continuing my series from a couple weeks ago and doing some “myth busting”.

“Straight Talk” Personal Strategy
Part 2: Common Myths About Estate Planning

A few weeks ago, I wrote about these common myths–still held by the majority of Americans.

In fact, as of this writing, it’s a fact that almost 60% of Americans don’t have a basic will, and that’s a big problem.

Much of the reason for this is because of misconceptions about estate planning, and I dealt with two already:

Myth 1. Only rich people prepare estate plans.

Myth 2. Everything goes to your spouse, if something happens.

Well, I’ve got three more for you to chew on, and dispense with.

Myth 3. After I create my will or living trust, there’s nothing else to think about.

Well, if you follow this line of thinking, it could lead to a lot of problems. For instance, once you set up a trust, you need to re-title the assets you want to transfer to the trust. Otherwise, the trust doesn’t help a thing.

On top of that, families need to periodically update their will or trust to reflect major life events, such as a divorce or the birth of a child. You’ll also want to revisit your estate plan if you move to another state.

In fact, it’s a good idea to meet with us every 3 or 4 years to make sure your plan is fully up-to-date. (Which, incidentally, we provide free to certain clients. Ask us about that.)

Myth 4. If I have a will, my estate automatically won’t go through probate.

Well, again–that’s not the case. In fact, ALL wills are subject to “probate”. This is a process in which a court determines whether the document is actually valid and ensures that relatives and creditors are notified. This process can take several months and drain thousands of dollars from your estate.

So here’s one way to avoid that entirely–create that living trust. Essentially, a living trust is a legal document you create which holds property (such as brokerage accounts and real estate). When you die or are incapacitated, the property is smoothly transferred to your beneficiaries. This transfer occurs outside of the probate process, which saves a TON of hassle.

Not everyone needs one of these documents, but it’s something which you can’t paint over with a broad brush. Which is why it’s important to walk with a competent guide on these matters.

By the way, if you own property in more than one state, a living trust is a no-brainer. Going through probate in multiple states is a nightmare.

Another advantage to a living trust is privacy. A will is a public document, and anyone can come to the probate hearing to see if any fights break out. Living trusts aren’t published in any courthouse, so people can’t gain easy access to them. That’s quite nice.

Myth 5. I could be held responsible for a deceased parent’s debts.

No, you’re not responsible for credit card debts from your parents.

In general, children aren’t responsible for a deceased parent’s debts, and in some cases spouses are often exempt as well. Again…you can’t paint it with a broad brush. But as a general rule, the estate is responsible for paying debts. If there isn’t enough in the estate to cover the amount owed, the debts usually go unpaid.

Most of all, we’re here to help.
 
 

The best kind of gifts (not what you think!)

“If you haven’t any charity in your heart, you have the worst kind of heart trouble.”
- Bob Hope
 
 
Well, my family is deep into the holiday season. No matter your religious persuasion, it’s pretty difficult to avoid the non-stop merchant clamor to “buy stuff” in order to properly celebrate what started as a spiritual season.

And yes, I’m a business owner–I have nothing against people spending money as a way to communicate their love. It’s just…a tad ironic, isn’t it?

Anyway, we’re all moving pretty slowly this week…and chances are good you’ve wrapped up your holiday shopping. I’ve put together a little note which may actually be somewhat controversial about holiday shopping.

At the least, it might give you some comfort about those last-minute gift cards. Enjoy!
 
“Straight Talk” Personal Strategy
Did You Just Destroy Wealth With That iPod?

Many people spend more during the holiday season than they can afford. Among other things, sometimes guilt or shame can drive a lot of big-ticket gifts–though not always, of course. But the satisfaction can be both short-lived and shortsighted.

Well, in a new book, Wharton School professor Joel Waldfogel’s book, “Scroogenomics: Why You Shouldn’t Buy Presents for the Holidays.” says that people are the most efficient when spending their own money, producing at least a dollar in satisfaction for every dollar they spend. But spending money on those we don’t know well results in what Waldfogel calls a “deadweight loss” of value–about 20%.

You are guarding against deadweight loss when the recipient can exchange the gift or return it for cash. With Christmas & holiday spending in the United States at $100 billion, this loss results in “an orgy of wealth destruction” to the tune of about $20 billion. Ouch.

Waldfogel’s study found that givers with infrequent contact were those most likely to give less appreciated gifts. This group includes aunts, uncles and grandparents who live in another town. According to economists, people are better off when they make their own choices. For this obvious reason, Waldfogel suggests giving money or gift cards instead.

To the criticism that he had taken the joy out of Christmas, he responds that after watching desperate last-minute shoppers, he thinks the joy was taken out of Christmas long before his critique.

Of course railing against the commercialism and waste of the holidays is pretty common these days. So, let’s further breakdown what happens during this gift-giving season…

Some gift giving is driven by social expectation and becomes a test of the relationship. For example, for couples who are dating seriously, the message is much more important than the medium. Give a book the other person despises, and you have revealed how little you pay attention to your loved one’s opinions. But a pair of gloves, with a heartfelt note saying, “These will keep your hands warm when I’m not there to hold them” would show your affectionate side. Or perhaps the receiver doesn’t like romantic mush, and you are expected to know better.

Parents can help extended family members select gifts for their children by providing specific wish lists to ensure that what they buy will truly be appreciated. If you aren’t confident, include a gift receipt. You are guarding against deadweight loss when the recipient can exchange the gift or return it for cash.

And in families where children don’t have any spending money, cash may be the best possible gift. Handling cash with all the complexity of choice is an experience that offers irreplaceable life lessons.

Try asking people, “What present changed the course of your life the most?” to see how much influence you can have. A pair of binoculars sparks a love of ornithology. A telescope fuels a fascination with astrophysics. A microscope leads to a biology career. An electronic toy prompts your daughter to join a robotics competition.

Not all presents need to be academic. A graphics tablet can lead to a design career. A guitar can inspire your son to form a new band. Or a video camera can lead to a later career choice in filmmaking.

Finally, some parents who are still unemployed will disappoint their children if they are hoping for expensive gifts this year. I’ve known a few families who had to tell their children that celebrating a traditional American credit card holiday would jeopardize the family’s financial security. Many parents are experiencing the first economic setback in their adult lives. Being financially cautious doesn’t mean you love your children any less. And if you can be positive and reassuring, you needn’t try to shelter you children from household economics.

The greatest joy of the holiday season is not bought in a store and does not increase your credit card debt. There is a better way to celebrate that builds long-lasting family ties.

Make a list of all the things you have gotten right in past holidays and make them annual family traditions. Add a few new ideas every year. The best holiday traditions don’t cost a lot of money, and they aren’t wrapped and put under a tree.
 
 

Easy ways to ensure your family never achieves freedom

“Carpe diem! Rejoice while you are alive; enjoy the day; live life to the fullest; make the most of what you have. It is later than you think.”
- Horace

We’re getting more and more “good” news about the economy. Last week, the report on November consumer spending showed that as a country we’re starting to feel a bit more free (it was up). That’s a great thing–there are plenty of ripples to this good news which families will begin to feel. Some economists say that we’re already in “recovery”.

But no matter how much things turn around in the national picture, regular families can continue to wallow in debt and struggle–and sometimes it’s their fault.

Now, the last thing I want to do is shame my clients and friends about the kind of behavior which leads to this situation…so, instead, I’d like to address it in my Personal Strategy Note for the week. That way, you can hold it up as a “mirror” to your own family’s financial habits and make the changes necessary to avoid this kind of situation.

As always, making change away from these habits can be difficult–but we’re here to HELP, not make you feel badly about it. So call or email us, and let us know what we can do to walk more closely alongside you in the road to financial recovery…

“Straight Talk” Personal Strategy
How The Poor Stay That Way

In my line of work, I get to conduct a real-time analysis of what creates wealth in the lives of regular families…and what drives it away.

Last week, I blogged about some of the commonalities found in the financially secure … so I thought it might be useful to now focus on what I see in those who can’t ever seem to crack those ranks.

In my experience, the financially-strapped typically…

* Spend money on things they don’t need: I’m sure we’ve all got one of those friends who just loves to spend money, and buy things just to say they have them. The newest iPhone just came out? They buy it even though they already have an older version. A new TV came out with a higher refresh rate than their current one? They buy one so they can say they have the newest and latest technology.

* Don’t know where their money is going: Far too often people who are broke find themselves short because they’ve never tracked their monthly cash flow and their small expenses are adding up to consume everything they bring in. They really need to track their expenses for a month or two so that they can set up a plan.

* Like to blame their problems on outside forces: People don’t like to see themselves as the source of their problems. While people certainly have problems that aren’t caused by something they’ve done, far too often they will also try to shift blame when they should be looking at themselves. They blame their friends, family and the government. They believe that “the little guy just can’t get ahead”.

* They would rather have others think they are wealthy, than actually be wealthy: People who are always broke like to be seen as wealthy and successful, even if looking that way to others means that they’re actually forfeiting the possibility of being wealthy in reality.

* They don’t plan ahead: Money is short because they haven’t set up a family budget and a saving and spending plan. If you set up a monthly cash flow forecast, and know exactly what you’re going to spend in what categories -they’ll do much better. If you fail to plan you can plan to fail.

* They use credit habitually for “lifestyle” purchases: Delayed gratification isn’t something that they’ve heard of, and if they want something, they just put it on credit. After all – it’s at a 0% interest rate for the first 3 months! One purchase leads to another, and before they know it, they’ve got thousands in credit card debt!

* Always pay more than they have to: Often people who are broke have gotten there because they don’t know how to shop for a deal, negotiate or ask for a discount. You can get a discount on just about anything – from electronics to health care. Never pay more than you have to!

* Fall prey to lifestyle inflation and “keeping up with the Joneses”: Often people with higher incomes have problems with staying ahead in their budget as well because they fall prey to lifestyle inflation. Instead of banking and saving raises, they raise their standard of living – buying a bigger, better house, a new car and a new wardrobe. They feel like they have to keep up appearances with everyone in their neighborhood.

* They rely on others to fix their problems: We’ve probably all known someone who is always going to their parents, family or friends to bail them out. They create a pile of debt, and then rely on the kindness of others to get them out of their bind.

* They forfeit future gains for fun today: These people often have a hard time visualizing how saving and hard work will pay off down the road, and instead live for the fun and pleasures of today. They don’t realize how saving for tomorrow can improve their quality of life today!

Obviously, I’d like to help you move past these behaviors. You may not carry every one of these traits, but just one or two can get you into hot water.

If you feel that you’re slipping into any of these traps, please do let us know…we’re here to help!

Be glad you don’t live in Norway

“The past does not define you, the present does.”
- Jillian Michaels

It sometimes seems to me like this country is torn up with envy.

(By the way, I hope you had a great weekend. Mine was nice and slow at home with the family–enjoying the holidays together. Is it just me, or can the “holiday” season be not quite a holiday?)

With this economy still not yet recovering, there are still plenty of families that are doing just fine–even thriving. But it’s not considered very kind to demonstrate one’s prosperity in this environment, which is perfectly understandable.

But, whatever your specific situation, I suggest that you make a clear and sustained effort to keep your eyes off the situation of those around you–and continue to focus on what YOU can do to grow your family’s wealth and joy. Really, it’s the only thing which you can actually control.

Envy truly sucks the joy out of your life…but it could be much worse than it is in this country. We could live in Norway.

A few weeks ago marked the annual release of EVERYBODY’S tax records to the general public in Norway–giving any interested party a precise picture of their neighbor’s annual income and wealth.

(Story here: http://finance.yahoo.com/news/Lutefisk-and-loot-Tax-records-apf-2955581855.html?x=0&.v=1&.pf=taxes&mod=pf-taxes )

How do you think that would be for feeding envy, huh?

Well, I prefer to MODEL what really wealthy people are doing…which is why I’m passing along this Strategy Note about how to create true wealth breakthrough.

Let me know your thoughts!

“Straight Talk” Personal Strategy
The Billionaire’s Strategy For Success

John Paul Getty became the richest man in the world during his time by practicing a few basic principles of risk-taking and reward throughout his life. I’ve gathered them for you-regardless of if you run your own business, they apply.

How To Assess A Decision
Whenever John Paul Getty was considering a business decision, he would ask, “What’s the worst possible thing that could happen in this situation?” Then, when he was clear about the worst possible outcome, he focused all his attention on making sure that it didn’t happen. You should apply this technique to every risk situation or investment you ever make.

The Billionaire’s Strategy for Success
Remember Murphy’s Law: “Whatever can go wrong will go wrong.” There are several secondary laws to Murphy’s Law, such as “Whatever can go wrong will go wrong at the worst possible time” and “Of all the things that can go wrong, the most expensive thing will go wrong at the worst possible time.”

Another sub-law is “Everything takes longer than your best calculation.” Whenever I get together with business owner friends, many of them ask me how I think about this issue. When that happens, I suggest that they take their very best estimate of break-even for any business venture and then triple it to arrive at a more realistic number. I’ve found that whenever I encourage a friend about this, they are amazed to find that, in spite of their best initial calculations, it indeed takes about three times longer than they thought it would to start making money.

Always Add A Fudge Factor
Another sub-law is “Everything costs more than you can possibly anticipate in advance.” In minimizing risk in any venture, always add a “fudge factor” to account for the degree of uncertainty. Whenever I do a business plan, I always add 20 percent to the total of all costs that I can identify, to come up with the probable cost. Anything less than this, whether in business or your personal life, is likely to be an exercise in self-delusion and open you up for some unhappy surprises. Once you have identified the worst possible things that could go wrong, make a list of everything that you could do to offset these negative factors. Engage in what is called “crisis anticipation.” Look down the road, into the future, and imagine every possible crisis that could arise as the result of changing external circumstances.

Do The Things You Fear
One of the very best ways to develop your ability to take intelligent risks is to consciously and deliberately do the things you fear, one step at a time.

A very good way to overcome the fear of risk taking is to set clear, written, measurable goals for yourself, and then to review those goals regularly. When you have clear goals and plans, and you continually work on them and evaluate your progress each day, you will see what you’re doing right and how you could improve your performance. You’ll feel more competent and capable and better about yourself. You’ll become more thoughtful and reflective and willing to take on even greater challenges. You’ll feel like the “master of your fate and the captain of your soul.” And your likelihood of success will become greater and greater.

Action Exercises
Now, here are three steps you can take immediately to put these ideas into action.

First, take any worry situation in your life today and ask, “What is the worst possible thing that could happen?” Then go to work to make sure it doesn’t occur.

Second, look into the future in your life and determine the worst things that could happen. Engage in “crisis anticipation” regularly and continually be taking steps to guard against them.

Third, work from clear, written goals and detailed plans. Review them regularly. Consider alternatives and always look for ways to increase the likelihood of your success.

I hope this helps!

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