Here are short summaries of three of the most interesting and thought-provoking items that have crossed my desk this week. Enjoy… and tell us what you think!
Would you be prepared if you suffered a 30% pay cut?
A shocking new report reveals that the average person’s pay levels off when they’re in their 40’s. After that, about all you’ll be likely to count on will be cost-of-living adjustments to keep pace with inflation.
That will come as a real surprise to many people who assume their pay will continue to rise as they get older.
And if you lose your job while in your 50’s, you’re likely to remain jobless longer than when you were younger, according to the report.
Read this sobering and well documented article from the Wall Street Journal.1
What’s your best self-defense? When planning for retirement, assume the only salary increases you’ll get will be cost-of-living adjustments. And identify a worse-case scenario – such as a 20% pay cut during your final ten years in the workforce – and try living on that income and putting the rest into savings.
A surprising reason why consumer spending is so slow these days
A paper by a Federal Reserve Bank of San Francisco researcher reveals that the recession has so far cut spending by $7,300 per person from what it was during the housing boom.2
That equals about $175 per month less being spent by each person, on average.
What’s most fascinating is the question the paper’s author, senior economist Kevin Lansing, posed…
People are wondering why consumer spending is so slow these days. What they should be asking is: Why was it so strong in previous years? You’re comparing it to an artificial economy that was driven by debt.”
Looking back, how do you feel about all that money we Americans were spending when we were treating our homes as ATM’s? Did you avoid falling into that trap? If not, did the stuff you bought give you lasting satisfaction? If you could turn back the clock, would you do anything differently?
Tell us in the comments box below…
When refinancing your home doesn’t make sense
While treating our homes like they’re ATM’s was dangerous to our financial health, a new trend has emerged that is equally dangerous.
Anxious to shed debt and prepare for retirement, people are now opting for larger monthly mortgage payments and shorter-term loans.
In the first quarter of 2011, an astonishing three out of four homeowners who refinanced their mortgages paid additional money at closing in order to reduce their balance.3
To me, this is a classic – and potentially very dangerous – example of following the conventional wisdom. Didn’t we learn anything from the real estate crash and crisis?
None of the payments of principal you make into your home make money for you. The equity in your home earns a zero rate of return, and it’s also not liquid.
What if you need or want access to some or all of that money now locked up in your home, but you can’t sell or refinance it or you’d have to take a big loss to do it?
Life has a way of throwing us curve balls when we least expect it.
Think about this for a moment: What if you had enough saved up that you could pay off part or all of your mortgage if and when you choose to?
Isn’t the real key to financial security and reducing money stress about having options and choices?
This won’t happen if you’re saving and investing using the “hope and pray” method most Americans do in the Wall Street Casino. That’s a sure-fire recipe for financial insecurity.
But it can and does happen for savvy Americans who use the Bank On Yourself system of building wealth safely and predictably.
I’ve always been open about how I walk my talk and use the Bank On Yourself method. I even post copies of my own policy statements on this website.
Rather than pay down our mortgage faster, my husband and I have always taken out 30-year fixed-rate mortgages. The lower payment allows us to save more money in our Bank On Yourself plans, and, as a result, today – if we choose to – we could write a check to the bank and own our home free and clear.
But we’d much rather have that money in our Bank On Yourself plans where it is working much harder for us. Plus, we can get access to that money any time we want or need it by answering just two questions:
How much do you want… and where do you want it sent?”
This won’t happen overnight, but almost anyone can do what we did.
The Bank On Yourself system gives you many additional advantages, including:
- You can borrow your equity in your policies and they will continue earning interest and dividends as though you’d never touched the money (NOTE: Only a few companies offer this feature)
- You set your own repayment schedule, and if you have to reduce or skip some payments, no one will hound you or put a black mark on your credit report
- You don’t have to sell or liquidate your investments to get access to capital
- While you do pay interest on your loans, the interest ultimately benefits you, as explained in detail on pages 100-103 of my best-selling book
- You control the money in your plan – there are no government restrictions or penalties on when or how much money you can withdraw or borrow from your plan
- You can take a predictable, guaranteed income in retirement from your plan, with little or no taxes due, under current tax law
- This is an asset class that has increased in value every single year for more than 160 years
- You would need to get a 7-8% return in a taxable account, like a 401(k) or IRA, in order to equal the return of a properly structured Bank On Yourself plan. But you don’t have the risk or volatility of stocks, real estate and other traditional investments to get that!
So what are you waiting for?
If you haven’t requested a free Bank On Yourself Analysis, please do it today. It will show you how you could reach your financial goals and dreams in the shortest time possible… and turn your back on the stomach-churning ups and downs of Wall Street and other investments.
If you’re wondering where you’ll find the money to fund your plan, take heart. There are at least eight common ways to free up funds. When you request your Analysis, you’ll also get a referral to a Bank On Yourself Professional. These specialists (only 200 in the country qualify) are masters at helping people restructure their finances to free up seed money to fund a plan, so don’t count yourself out! Request your Analysis today.
How does $7,300 translate into $175 per month. Which number is wrong?
The numbers are explained very clearly in the Bloomberg article (reference 2).