Dave Ramsey- Fact or Fiction # financialboundaries #debt #saving #investing

Below is a link to an article that you have to read:

https://mail-attachment.googleusercontent.com/attachment/u/0/?ui=2&ik=5c99aa1462&view=att&th=14127124cb98e6df&attid=0.1&disp=inline&realattid=f_hlnr1bfb0&safe=1&zw&saduie=AG9B_P_oG_AjL_PVpdZUhiyHxcr2&sadet=1379433594396&sads=SZ5Ip8IDdvJABcL6PI1G139ogpw

It is a controversial piece that shows a side of Dave Ramsey that I have, quite honestly, never seen. I'm still trying to sift through how I feel about some of his comments and where his words may have been coming from. My initial reaction was he seems arrogant and cocky. I guess having 7 million plus listening to your advice will do that to your head! At some point, have you ever sat back and wondered why so many people listen to his advice? Have you ever wondered, does this really work? What is the "healthy" way to balance this advice?

My challenge to you is to read the article above and allow your mind to go to those types of questions. So many people in today's society don't put enough thought into what they are doing with their money. They have a thirty minute discussion with either themselves or their significant other once a month and that's about it. Most people focus on how much they save AFTER they pay all of the bills and their lifestyle $ amount. Be real with yourself, if you wait to save your money until you finish spending what you want to spend for life style you will always be left with little to nothing at the end of the day.

I don't want to become a part of the Dave Ramsey argument but I do want to raise some questions and observations.

Dave will recommend his listeners to:

-Save $1,000
-Pay off all debt but the mortgage
-Then invest

Types of debt we can accumulate throughout life in order are: car loan, student loan, mortgage, business loan, personal loan, home equity line of credit... Somewhere mixed in their you could acquire another student loan for your child/children to pay off or to hand off to them to pay off.

What the above strategy fails to realize, in my opinion, is that we will be paying off debt our entire lives.

If we wait to invest until the debt are paid off we will be left with a savings of $1,000 plus the .01% return on our money in the savings account/money market account and nothing to live off of in retirement. Throw out your dreams of a beach house, lake house, or out house for that matter because you never had the opportunity to save up enough  while you were paying down debts at such an accelerated rate.

Like everything in life, there is a balance that is needed. You have to eat a balanced diet and have boundaries on how much of certain foods that you eat..... You have to exercise your body in a balanced method and have boundaries on that or you can injure yourself or look top heavy like many guys at the beach.... You have to have a balanced Work- Life balance and have boundaries on that or you will have either no friends or no work, depending on which way you swing.

It is the same with your finances. You can't focus on just paying off debt without saving and you can't focus on just saving and accumulating debt. There has to be a balance to the debt-savings ratio to have the result of you coming out "healthy" in the end. On top of JUST saving, you have to have your money somewhere that is outpacing inflation! You will not outpace inflation with your money sitting in your savings account. The inability to outpace inflation is going to leave your pot of money with deflated purchasing power if you don't invest it in something that gets a modest 3% return or more, depending on where you have it invested you have to account for taxes on your gains.

The graph on page 5 of the article shows the lack of certainty in the market and the concept of counting on a 12% return that Dave Ramsey tells his listeners is realistic. There are other things for you as an investor to invest in other than Mutual Funds and equities that give a more linear and constant return in the positive. Until you have "play money" I would suggest those types of investments to build your balance sheet's foundation with- something guaranteed.

Financial Planner's advice can be a very valuable asset to you and your future, as well as, some of Dave Ramsey's advice. Explore all of the options and don't be ignorant to possible solutions. Everyone is different so your solution is going to be different than your parent's solution, your neighbors solution, and Dave Ramsey's solution.

Find someone you can trust and put in the effort to taking care of your future investigating all of the avenues for success! Every decision you make has a ripple effect on your balance sheet. There is always an opportunity cost.

If you want to hear how we work at Peachtree Planning give me a call @ 404-260-1629 or e mail me @ David.Wallach@PeachtreePlanning.com

A More Efficient 529 Plan Alternative

https://plus.google.com/108058230137951774420/posts/dSgq3n9T7Pj

Hello World,

The above link is to some additional information on this subject.

The main stream knowledge for college savings is start a 529 for your child. Like I mentioned in my previous blog on the efficiency of 401k's, savings is savings. Savings will always be a helpful thing for what you are trying to do in the future. What is just as important though is where you are saving to get the MOST out of your money. In a perfect world I would want my money in an account that didn't get taxed, had no risk, has unlimited growth potential, had no limits on how much I could fund the account, had no restriction on when I could take money out of the account.

So when it comes to building a portfolio I try to remind my clients that this would be optimal for me and I ask them what their "perfect world" would be.

When you compare the 529 plan to the "perfect world" the question has to be asked, is there something better? The money in a 529 plan can only be used for college, universities, and graduate schools in the United States. If you don't use this money for education there is a taxation and 10% penalty withheld from the earnings. This DOES NOT build a flexible portfolio balance for you and your family. One thing we can always count on is that life will throw us curve-balls and the unexpected will happen. If you are one of the lucky ones where nothing unexpected has happened to you yet, God bless you and you enjoy that while you can! On top of the 529 being in-flexible it is also subject to market risk. Why would you subject something as important as your child's education to market risk? The market has been proven to have steady gains over a 40 year time horizon but most people don't pay for their 40 year old kids to go to college. They pay for their 17-24 year olds to go to college. This leaves a lot of room for error and leaves the door open for your kids to possibly carry some student loan debt.... The knee jerk response to student loan debt is "well, if they have to pay some money for college then I'm fine with that". Let's be real with ourselves about that comment. That is a cop out instead of saying I was too lazy to look for a more efficient alternative.

A very flexible SOLUTION to the above is Whole Life Insurance with a Mutual Company(visuals linked at the top of the blog.) i.e. Guardian Life Insurance

Whole Life insurance can be thought of  in two parts: the death benefit, and the cash value within the policy. When planning to use the insurance to fund life events the important piece to pay attention to is the cash value within the policy. Guardian Life has a guaranteed growth within the policy of 4% and that growth is TAX FREE. The lowest dividend payout has actually been 2.5% ABOVE that guaranteed 4%. What does this mean to you? This means that you have the potential to earn 6.5% on your money tax free within you life insurance policy.

If you start this and build it CORRECTLY then you can set yourself up to pull from this cash value income tax free and pay for your kids college. Another beautiful thing about Guardian Whole Life Insurance is that it can be used for anything in your life and can be accessed at any time, unlike the 529 plan.

So just to recap about Whole Life Insurance(with Guardian):
-Your money grows tax free
-If built correctly you can access your money income tax free
-Your money is attached to a death benefit which insures your family more money to pay of debt, pay for college, etc..
-The death benefit is Tax FREE
-Your money grows at a guaranteed 4% and has netted 2.5% higher payouts since 1979
-Your money has more liquidity
-Detached from market risk and solidified a return

With this alternative you would have set yourself up to accomplish sending your kids to college or whatever your goal might be. It is a WAY more efficient strategy than a 529 plan for all of the listed reasons above. As an added bonus, you are insuring that your family is covered should the death of the policy owner occur allowing family enough time to gather themselves and keep moving forward.

david.wallach@peachtreeplanning.com

Why take the risk on something that demands flexibility and certainty at the same time?

Are 529 plans the best place to invest for your kids or grand kids #college? What if your kids end up not going to #college? Is it worth saving annually to an account that gets moderate returns at best? If your kids or grand kids don't go to #college then all of the money you saved gets penalized upon withdrawal. There has to be a better way to invest your money that does not hand cuff you to penalties and taxes. #College education is not something to leave up to chance for your kids so why would you have it attached to market risk and volatility? Tomorrow I will post a comparison of 529 plans to another investment. Decide for yourself what is more efficient, certain,  and flexible.

Also, read the attached article. Why take the risk on something that demands flexibility and certainty at the same time?

https://www.dropbox.com/s/8lrlgtdrt3vxquz/WSJ%20Journal%20Article-%20College.pdf

There is something better and you can be apart of that solution

This post is in response to my last blog. That is how I want to start my blog. By having one post that raises some questions and the following blog that answers some of those questions.

I hope that you have either started or added to your life's vision by writing down your goals, dreams, and desires. That will continue to be the guiding force throughout any type of financial planning for your life. When the word financial planning is said taxes always need to be brought into the discussion, as well. They serve a purpose but are always a downer when taken from your pay check. If you wrote down a list as I suggested or maybe even just thought about it, you saw the problem. Taxes are most likely going to go up in the near future. They will go up and so will interest rates. A Putting your savings into a 401k is not in it's entirety a bad thing at this point in history. It could very well be a bad thing depending on your short to mid term goals but there are two reasons why I think 401k savings is not all that bad. It's not bad if your employer gives a favorable match. I would not advise anyone to put into their 401k anymore than the match but if your goals allow you to lock up your money to get that match then do it. The second reason 401k savings is not all that bad is, you are saving money. So many American families don't save enough money. We are a consumer driven society that does not stop to think about the future and everything that is encompassed in that future. 

I believe there are better vehicles to put your savings. Instead of putting your savings for retirement in a tax deferred account I would suggest a pre taxed account with the future of taxes in America. Taxes are a huge "leak in the bucket" that get over looked! When in reality, taxes are the #1 wealth accumulation inhibitor. 

There is a case that I am working on at the moment where my client is losing over 1.5 million of his dollars to taxes. My joint partner and I have created a strategy to put over half of that money back into my clients pocket and lifestyle.

So many Americans think of retirement as an idea instead of an attainable reality. It is an attainable reality but it takes effort and strategy. My colleagues and I live in a world where SO many individuals and families never visit. When they sit down with us we try to open their eyes to the whole picture. My belief is that people in America keep their head down when it comes to their finances and try to survive the day to day while putting whatever savings they can into the most convenient savings vehicle they can. We all move so fast in America and don't want to get thrown off of our course. That course, in my belief, is surviving the day to day and hoping that there will be something down the road for retirement. 

My challenge to anyone who reads this blog is to sit down and really think about the decisions you are making. Every decision has an opportunity cost. If you don't know what opportunity cost is Google it. Opportunity cost is involved in every decision that you make in life whether that decision is to walk the dog in the morning or hiding your money under your mattress. 

I want to open your minds to financial facts and financial fiction because it will elevate your thinking to more of a beneficial level. Don't assume anything to be true until you investigate it and do all of the research until every stone is overturned and examined. Put some effort into this area of your life, your money, which in so many cases drives your very existence. Majority of Americans work a nine to five job to make money to spend, save, and/or give away. Don't let your toiling at work be in vain. Be apart of the solution and create a strategy with someone who has your best interest at heart. Someone who is going to ask you questions to create a plan specific to you.

How do you feel about taxes?

Our current top tax bracket is just shy of 40%. Is it more likely that taxes will increase or decrease in the future? Make a list of reasons for each. Seriously, make a list and compare. Is your 401(k) plan the best vehicle for your retirement savings? What else is out there? Is there something better? We need to find out about how you want to live and what's important to you before you can truly answer that question. Make a list of goals for your life and leave nothing out. That's step one. Until that is crystallized you have no reason to plan.