Top 16 Investing and Savings Myths

All the statements listed below are common financial myths.  Accepting any of them as fact could lead to costly financial missteps…

See how many of these common beliefs you already recognize as flawed and which ones you have yet to unmask.

Unmasked Myths

As you may discover, what we’ve been taught by mainstream money experts and well-intentioned friends and family isn’t always accurate.

The Myths:

  1. Over time, the stock market has consistently proven the best and most reliable investment vehicle for the vast majority of Americans
  2. Investors need to accept risk and volatility in order to generate meaningful profits
  3. Home ownership and appreciation is a reliable vehicle for protecting and growing your wealth
  4. 401(k)s make effective investment vehicles, if only because your employer matches your own contributions
  5. Your 401(k) plan administrator must be a licensed, professionally trained and carefully screened financial expert
  6. The fees you pay for your IRA, 401(k) and other retirement funds have only a trivial impact on your ultimate returns
  7. You will not require as much income when you retire as you need now, especially since you’ll qualify for a lower tax bracket
  8. It is never possible to know with any certainty the value of your retirement account at intervals down the road, because market fluctuations are unpredictable
  9. Wise retirement planners recommend you aim to make your retirement income last to age of the average American life expectancy, currently 77.9 years
  10. Always defer taxes as far into the future as possible, especially when you wish to accumulate a larger retirement nest egg
  11. People of modest income can’t possibly set aside $1 million or more for their retirement
  12. Before you can begin saving for the future, first you have to dig your way out of debt
  13. Paying cash is the ideal method of purchasing big-ticket items, such as cars and vacations
  14. Effective savings and investing strategies are too complex for amateurs.  Only professionally trained money managers consistently succeed
  15. If you follow the advice of mainstream financial experts and don’t stray, your nest egg will be safe and grow large over time
  16. To receive quality, personalized attention from highly trained financial representatives, you have to already be wealthy, or close to it

Announcing the winners of the “what inspires you to save” contest!

Last week we held a contest about what inspires or motivates you to save money.  The response was overwhelming and with many so inspiring and heartfelt entries,  it was very difficult for our team to pick the six winners…

Contest Winner

After much deliberation, five members of the Bank On Yourself team each picked their favorite entry – each of these winners will receive their choice of a $25 dining gift certificate or a personally autographed copy of my best-selling book, Bank On Yourself, for themselves or to give as a gift to someone they care about.

And together, the team picked their favorite entry and that person won a $100 American Express Gift Certificate.  (All winners will soon be receiving an email letting them know how to claim their prizes.)

Contest Winner

Read on to be inspired by the winning entries…

[Read more…] “Announcing the winners of the “what inspires you to save” contest!”

Should you be worried about the Dow’s plunge?

We're doing it again!

If, like most Americans, you have a substantial portion of your nest-egg in stocks and mutual funds, I urge you to take a few minutes to read this right now…

We're doing it again!

The U.S. stock market has lost considerable ground and volatility has returned with a vengeance.  The situation is precarious in both Japan and the Middle East.

But the recent stock market plunge was virtually assured before the earthquake and tsunami hit Japan.

Here’s why…

We’re doing it again: Buying stocks after big gains in the markets.

In 2008, 2009 and most of 2010, mutual fund investors in almost every month took more money out of stock mutual funds than they added. Then, in January, someone hit a switch.

Investors decided that it was time to get back into the stock market. Keep in mind this decision came after an almost 100 percent gain from the market bottom in 2008. So in December we pulled $10.6 billion out of equity mutual funds, and in January we poured an estimated $30 billion into the market.

Do you see the problem here?”1

The problem, as this article from The New York Times blog titled, “Are We Buying High All Over Again?” points out, is that investors are repeating past bad behavior.  Just as they have done throughout history, and just as they will continue to do for the rest of time.

[Read more…] “Should you be worried about the Dow’s plunge?”

How Good of An Investor Are You Really? Ask Your Doctor!

Executive Summary: The life-long costs of neglecting your health can be staggering.  Expenses include out-of-pocket medical bills as well as losses of productivity and quality of life.  Too many people watch their investments more closely than they do their health. Illness brought on by lifestyle choices, such as smoking, overeating, lack of exercise and stress, accounts for as much as 70% of nationwide health care spending.

By Pamela Yellen and Dean Rotbart

In mid-December 2008, a skeletal Steve Jobs, CEO of Apple Inc., canceled his scheduled presentation at the annual Macworld conference, triggering investor fears that the company’s visionary co-founder was seriously ill.  A month later, Jobs announced his first health-related leave of absence.  He began a second leave this past January.

During the 30-day period when concerns about Jobs originally surfaced, the shares of Apple stock dropped 14%, or $12 billion in market value.Healthcare Costs

The shareholders of Apple weren’t worried about the potential hospital bills and other medical costs that Jobs would incur.  Comparatively speaking, those expenses would be a drop in the bucket.

But Apple shareholders – confronted with the loss of Jobs’s services, perhaps for good – instantly realized the true cost of sickness must also be measured in loss of productivity, leadership and innovation, among other attributes a key executive brings to his or her company.

For tens of millions of Americans who are otherwise mindful of how and where they stake their money and retirement savings – including many successful Bank on Yourself participants – the importance of investing wisely in their physical health is a lesson they have yet to master.

That’s a huge fiscal mistake

[Read more…] “How Good of An Investor Are You Really? Ask Your Doctor!”

7 Ways You Can Build Your Wealth Through Better Health

By Pamela Yellen and Dean Rotbart

Lose weight, buy a new car.  Spend a half hour exercising at least three days a week, take a luxury cruise.  Reduce your stress at work and at home, remodel your kitchen.  Quit smoking, sock away a couple hundred thousand dollars for retirement.

How sweet life would be – and what a great motivation to stay or get healthy – if we all received  such direct benefits from investing more effectively in our health.

out for a walk

The truth is, while there isn’t a cruise awaiting us at the end of every jog, the lifetime returns that better health deliver are real, sizeable and far more reliable than any money you risk on the stock market or other trendy investments.

out for a walk

A good, strong heart may be priceless to you and your loved ones.  But there is also a financial benefit that you can count in terms of a longer and more productive work life, and fewer doctor, medicine and hospital bills.  What you don’t spend or lose tending to your sick self can really be better used for life’s many pleasures – including building a secure retirement nest egg.

There are library shelves full of advice on how to get healthier.  Here are seven of our favorite tips that don’t require a Herculean effort or cost a fortune.  But each will immediately set you on a better path to wellness:

1. Get more sleep. Not a bad way to kick off your new healthy lifestyle.  Most of us short-change our sack time to crowd in more and more activities and chores.  The price we pay?  High blood pressure, type 2 diabetes and impaired concentration.  Try for at least 7 or 8 hours each night.

2. Got milk? If not, get some.  More precisely, get some extra vitamin D, ideally 800 to 1,000 international units (IU) daily.  A single glass of milk will deliver about 125 IU.  You might also try cheeses, yogurt, salmon, almonds and fortified orange juice.  A lack of vitamin D is linked to osteoporosis, depression and chronic fatigue, among other common symptoms.

3. Chill out. People who live stressful lives suffer more heart attacks and strokes.  Beating stress needn’t be painful.  Go for short walks.  Take mini-vacations by listening to your favorite music on a break.  Take up yoga. Throw darts.

4. Get a pet. The Centers for Disease Control and Prevention reports that pets can lower both your cholesterol and triglyceride levels.  Petting your dog or brushing your cat has a calming effect on both of you.  Moreover, pets increase the likelihood that you’ll get outdoors more and socialize with other pet owners – both activities that the CDC says are good for your health.

Eat less salt
Eat less salt

5. Lose the Salt Shaker. None of us need extra salt in our diets.  We’re already showered with the sodium crystals contained in the packaged and restaurant foods we consume.  Experiment with the many varieties of salt-substitutes if you otherwise find your meals too bland.  The Center for Science in the Public Interest reports that high-salt diets cause 150,000 premature deaths in the U.S. each year.

6. Wash Your Hands More Often. Handshakes, stair banisters, elevator buttons, door handles and a million-and-one other objects that we come in contact with routinely are breeding grounds for germs and the infectious diseases they can bring.  Carry a pocket-size container of hand sanitizer for those times when soap and water are unavailable.

7. Stop Speculating on Wall Street. Okay, so this is blatantly self-serving.  But entrusting your life’s treasure to the ups-and-downs and further-downs of the stock market really can shorten your life – or at the very least, squash your enjoyment of it.  Just ask anyone of the tens of millions of Americans who saw 40% to 50% of their wealth evaporate in a flash during the stock and real estate crashes of 2008 (not to mention the crash of 2000) how many years of aggravation those disasters cost them!

The cure: Substitute a Bank on Yourself plan for your mutual funds or stock portfolio and sleep better at night, afford a new pet, take a sunny vacation (and soak in some natural vitamin D), eat quality packaged foods and at restaurants that don’t need to salt their food to make it taste great, buy hand sanitizer by the case, and wave goodbye forever to your investment stress.

Improve your financial picture.

To find out how much your financial picture could improve if you added Bank On Yourself to your financial plan, request a free Analysis. If you’re wondering where you’ll find the funds to start your plan, the Bank On Yourself Professionals are masters at helping people restructure their finances and free up seed money to fund a plan that will help you reach as many of your goals as possible in the shortest time possible.

Physician heals his financial ills with Bank On Yourself

After losing half of his retirement savings not once, but TWICE, during the past decade, Dr. Bryan Kuns decided, “there has to be a better way.”

Dr. Bryan Kuns
Dr. Bryan Kuns
Dr. Bryan Kuns
Dr. Bryan Kuns

A family and occupational medicine practitioner for 25 years, the doctor realized that, at age 50, he and his wife might only have one more chance to get it right.  “I need some more guarantees than taking a chance and gambling again with my retirement,” Bryan realized.

A little over one year ago, he heard about Bank On Yourself.  Intrigued, he began reading everything he could get his hands on about the concept.  Then he requested a referral to a Bank On Yourself Professional and a Free Analysis.

It’s an answered prayer.  I’m sleeping a lot better at night, now.  The guarantees that this program has are what I was looking for.” –Dr. Bryan Kuns

Bryan offered to share his story with you.  Whether you already use Bank On Yourself, or you’ve been considering adding it to your financial plan, you’ll learn something of value from this interview.  You can listen to the interview by pressing the play button below, or you can download the entire interview as an Mp3 and listen on your own player or iPod…

You can also download a transcript of the interview here.

In this interview, you’ll discover…

Retiring Boomers’ Savings Fall Far Short

“The 401k generation is beginning to retire, and it isn’t a pretty sight.”

That’s the conclusion of a recent Wall Street Journal study.1 But the most shocking revelation is just how big the gap is between how much retirement income people will need to maintain their standard of living… and how much they’ve actually saved:

Many have less than one-quarter of what they’ll need

And how are they dealing with this challenge?

Facing shortfalls, many are postponing retirement, moving to cheaper housing, buying less-expensive food, cutting back on travel, taking bigger risks with their investments and making other sacrifices they never imagined.” 1

Sad Baby Boomer

Like Carol Dailey, who is continuing to work at age 71 because her 401(k) took a hit in the 2008 market crash.  She also cut back spending for entertainment and food, and is substituting boxed wine for the ones she used to enjoy from her favorite vineyards.

Sad Baby Boomer

Her financial representatives is planning to help her be able to retire by shifting her assets into riskier investments that can “return 10% a year.”

Hmmm… I wonder if that’s the same financial representatives who advised her on where to invest her money prior to the 2008 market plunge?

If people could take more risk, and do it successfully, why haven’t they been doing that all along?

Isn’t that the classic definition of insanity?

How much more evidence do we need to know that 401(k)’s and “doing all the right things we were told to do financially” aren’t working?

[Read more…] “Retiring Boomers’ Savings Fall Far Short”

Mission Not Impossible: You Can Teach Teens Financial Responsibility

Executive Summary: While teens can be hard to reach, the teenage years are the perfect time to teach kids the saving, spending, earning and investing habits they’ll require to enjoy a lifetime free of financial strain and worry.

teenager withdrawing money

These days, money in and money out is mostly electronic, meaning the speed at which our children must make the right or wrong financial decisions has accelerated.  Launch your teens’ money management education by explaining to them why most adults fail.

teenager withdrawing money

Let children know that the solution can be found in the proven strategies of fiscal self-reliance that are embodied in the Bank on Yourself system and help your teens create their own vision of a secure and rewarding financial future.

There are plenty of practical steps you can take to make the entire subject matter more interesting to teens. By Pamela Yellen and Dean Rotbart

Russ Bragg has a higher financial IQ than most parents. He started out as a credit analyst for an international bank and began offering comprehensive financial planning services in 2000.  He is an expert at helping clients define and then achieve financial independence.

Teenager saving

For Bragg, you might imagine, educating his teenage son and daughter about proper money management would be a no-brainer.

Teenager saving

If, on the other hand, you have teens of your own, you already know better

Enticed by credit card solicitations with low interest rate come-ons, Bragg’s independent-minded son was in credit counseling by the time he was 18.  Bragg’s daughter, on the other hand, while still a student, applied for and received a prestige credit line that even some of Bragg’s agency clients are unable to qualify for.

“Same mother, same father, same food, same air” and two very different outcomes, observes Bragg wryly of his children’s money management styles.

Many otherwise more-than-adequate moms and dads – those who’ve mastered subject matter as sensitive as teenage smoking, drinking, and drugs – have found their skill sets sorely lacking when it comes to the topic of money.

Welcome to Survivor: Teen Money…

A sprawling multi-year marathon and obstacle course that pits a tribe of well-intentioned parents, grandparents and other adults against the strong-willed, often perplexing sensibilities of the untamed adolescent mind. The challenge? One of modern family life’s most difficult: teaching teens to handle money responsibly.

I remember writing once that as a society we are more comfortable talking about sex and those other issues than we are about money”

[Read more…] “Mission Not Impossible: You Can Teach Teens Financial Responsibility”

Success Tips from Sir Richard Branson

Last week I was fortunate to spend some time with mega-successful entrepreneur Sir Richard Branson and 100 other top entrepreneurs.

Pamela Yellen & Sir Richard Branson
Pamela Yellen & Sir Richard Branson

Branson conceived the Virgin Group in 1970 and it has gone on to grow very successful businesses (Virgin Mobile & Virgin Airlines to name a few) in numerous sectors.1

We had a chance to ask Sir Richard questions and here are five Success Tips he shared:

Success Tip #1…

Your business life starts at home – pick a good partner and respect them for who they are.

Success Tip #2…

The biggest challenge business owners run up against is being risk averse.  At some point, you have to just say, “Screw it, let’s do it!”

Success Tip #3…

It’s important to keep fit – you’ve only got one body.  Try to find fun ways to do it.

Success Tip #4…

Praise your team/employees – never criticize them.  Treat them right and they’ll do anything for you.

Success Tip #5…

Don’t take yourself too seriously!

I found it fascinating that when one of us asked a question of Sir Richard, he would often respond by asking a question back; he seemed genuinely interested in us as individuals and it tied right into Success Tip #4.  Sir Richard simply makes you feel that you matter.  And he always looks for the best in people.

Sounds like a blueprint for a life well-lived!

Food for thought…

Number of times the DOW has crossed 11,000 – up or down – since first breaking it on May 3, 1999: 65!2  For the record, Bank On Yourself plans have NEVER gone backwards – they only have one direction: UP!
If you haven’t already started to Bank On Yourself, please take the first step today by requesting your FREE Analysis and discover how you can take back control of your financial future!

2. “How to Play a Market Rally”, The Wall Street Journal, November 15, 2010 (The DOW has since crossed 11,000 at least two more times)

Six scary facts affecting your finances

A number of items have come across my desk recently that should spook the living daylights out of you…

Scary Fact #1: 40 percent of all workers plan to delay retirement

61% blamed the decline in their 401(k) for this.  And a majority said they’re prepared to spend less in retirement according to a new survey by Towers Watson.

Scary Fact #2: Nation’s retirement shortfall exceeds $4.6 trillion!

A recent study revealed Boomers and Generation X’ers are coming up frighteningly short on their retirement savings.

And when nursing home and home health care costs are added in, that shortfall doubles, according to a study released this month by the Employee Benefit Research Institute (EBRI).

Nearly half of both Baby Boomers and Gen X’ers won’t have enough funds to cover living expenses, according to an EBRI report released earlier this year.

Scary Fact #3: New 401(k) disclosure rules don’t put a lid on fees

New regulations announced this month by the Department of Labor will require better disclosure of all the hidden fees you’ve been paying in your 401(k), starting in January, 2012.

scary bat

But, for all the noise on Capitol Hill about this horrifying issue, NO regulations have been proposed or even discussed to reduce the confiscatory fees you pay!

scary bat

Even a one percent higher fee can cost an employee $64,000 or more in realized savings by age 65, according to the DOL’s own estimates.

The 401(k) situation is so bad that you will probably need to get an average annual return of 8% to 10% – just to break even!

Not convinced?  Check out the shocking exposé Pulitzer Prize-nominated journalist Dean Rotbart and I recently co-wrote on this.

Scary Fact #4: Hope is not a strategy

We’re headed for a retirement train wreck, and it’s going to get really ugly over the next 15 years”
– Rob Arnott, a widely respected market strategist

In a well-researched article in this month’s Fundamentals Index Newsletter, the authors point out that the return assumptions built into pension and retirement plans today assume that “everything will go right.”  They’ve relied on unrealistic assumptions.  The authors also go on to demonstrate why returns are likely to be much lower in the future.

We’re relying on hope.  But hope is not a strategy; hope will not fund secure retirements.  We’re planning for the best and denying that worse can happen.  It makes far more sense to hope for the best, with plans for realistic outcomes – and contingency plans for worse ones.”1

Scary Fact #5: 40 percent of retirees were forced out of work early

Remember the scene from the 1983 movie classic, “The Big Chill,” where the character played by Jeff Goldblum asks…

Have you ever gone a week without a rationalization?”

Well, many boomers today are trying to rationalize away the fact that they won’t be able to retire when and how they had planned by trying to convince themselves that retirement is overrated.  They now talk about continuing to work in some capacity as long as they can.

While there’s no question that this can give you more of a sense of purpose and fulfillment and keep you from dying of boredom, the reality is that many people are being forced to retire earlier than they can afford to.  Job layoffs and health issues are the primary reasons for this.

I love what I do, and I hope to be doing it for a long time.  But shouldn’t the decision to retire – or not – be a matter of choice, not necessity?

The reality is that you may not have a choice.  Nearly four in ten retirees say they were forced out of work earlier than they’d planned because of layoffs, poor health or the need to take care of a loved one, according to EBRI.

Scary Fact #6: All Bank On Yourself policy owners received a guaranteed increase and a dividend – again

I was just checking to see if you were paying attention! That’s not a scary fact (unless you’ve been procrastinating on starting to Bank On Yourself).

Halloween CashWhole life insurance is an asset class that has increased in value during every stock market decline and every period of economic boom and bust for more than a century.

A dividend-paying whole life policy grows by a guaranteed and pre-set amount every year.  In addition, the growth is exponential, meaning it gets better every single year with no luck, skill, or guesswork required to make that happen.

This gives you some protection against inflation and provides peak growth when you need it most (retirement).

A Bank On Yourself-type policy includes an option that turbo-charges the growth of your cash value in the policy.

You can know (rather than hope) the minimum guaranteed income you can take from the policy in retirement.

And, you can access the money in retirement with little or no tax consequences, under current tax law.

You can also have access to capital when you want it and for whatever you want.  No nosey credit apps or pledging your first born.

So, if you haven’t added Bank On Yourself to your financial plan yet, doesn’t it make sense to request a free Analysis and find out what your bottom-line numbers and results could be?

There’s no obligation, it’s not scary, and no one’s going to twist your arm!  If you haven’t already started to Bank On Yourself, please take the first step today and take back control of your financial future!

1. “Hope is Not a Strategy,” Fundamentals Index Newsletter, October 2010 Issue