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Money; Fact or Fiction


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Money; Fact or Fiction

  1. 1. Money 101 Your Circle of Wealth Fact not speculation Choice not chance Material discussed is meant for general illustration and /or information purposes only and it is to be construed as tax, legal or investment advise. Although the information has been gathered from sources believed reliable, please note that individual situations can vary, therefore the information should be relied upon when coordinated with individual professional advice
  2. 2. Food for thought & Money in your pocket <ul><li>What if . . . you found out that what you knew to be true about your money was not true. . . </li></ul><ul><li>When would you want to know? </li></ul><ul><li>Know all your options! </li></ul><ul><li>Knowledge is power! </li></ul>
  3. 3. Money Facts <ul><li>Minimum risk safety /security </li></ul><ul><li>Minimum tax more for me </li></ul><ul><li>you have a “silent” Partner called the tax Man </li></ul><ul><li>Competitive rate of return </li></ul><ul><li>There are 3 Family / Self Guarantees </li></ul><ul><li>Providing for your family in the event of pre-mature death </li></ul><ul><li>Providing for yourself & family should you not be able to earn your paycheck- accident-illness-injury (2 job offers) </li></ul><ul><li>Maintaining / improving your lifestyle throughout your entire life </li></ul><ul><li>. . . In other words not outliving your money </li></ul>
  4. 4. Income Replacement plan to maintain your lifestyle What if due to an injury, illness or accident you cannot work? Job A Pays $60,000 annually <ul><li>Pays </li></ul><ul><li>NO income to </li></ul><ul><li>Family </li></ul><ul><li>Business </li></ul><ul><li>Children </li></ul>Job B Pays $57,980 annually <ul><li>Pays </li></ul><ul><li>67% or $40,200 annually </li></ul><ul><li>At age 65 to you . . . </li></ul><ul><li>for yourself </li></ul><ul><ul><li>Family </li></ul></ul><ul><ul><li>Business </li></ul></ul><ul><ul><li>Children </li></ul></ul>
  5. 5. Gives you & your money . . . L U C <ul><li>Liquidity </li></ul><ul><li>* accessibility – when you want </li></ul><ul><li>Use </li></ul><ul><li>* the way you want </li></ul><ul><li>Control </li></ul><ul><li>* without any 3 rd party involved </li></ul>
  6. 6. There are 2 groups of people spenders savers The first group of people generally ends up working for the second group
  7. 7. Your . . . Circle of Wealth Has only 3 types of money accumulated lifestyle transferred
  8. 8. Transferred Money We do this unknowingly & unnecessarily <ul><li>Taxes (see tax history) 6. Insurances </li></ul><ul><li>Tax Refunds 7. Disability </li></ul><ul><li>Qualified pension 8. Financing </li></ul><ul><li>plans automobiles </li></ul><ul><li>Mortgages 9. Credit Cards </li></ul><ul><li>Financial plans 10. Investments </li></ul>
  9. 9. $10,000.00 Loan ? <ul><li>If you needed a loan for $10,000.00. </li></ul><ul><li>What 2 questions would you ask the lender? </li></ul><ul><li>What is the Interest rate? </li></ul><ul><li>How long do I have to pay it back? </li></ul><ul><li>The lender replies, </li></ul><ul><li>“ Take 10, 20 years or longer. Don’t worry about it.” </li></ul><ul><li>“ As for the interest rate, we’ll let you know when you </li></ul><ul><li>are ready to pay it back. It depends on our </li></ul><ul><li>financial situation at the time. Enjoy!” </li></ul><ul><li>Would you take this loan? </li></ul>
  10. 10. Lost Opportunity Cost - LOC <ul><li>What is Opportunity cost? </li></ul><ul><li>For every dollar you acquire, you may chose to spend it or </li></ul><ul><li>save/invest it. Saved/Invested dollars can grow over time. </li></ul><ul><li>Spent dollars are gone forever. The potential future value </li></ul><ul><li>of spent dollars is called opportunity cost. </li></ul><ul><li>Do you earn interest on an expense? </li></ul><ul><li>Is the expense (money spent) accessible? </li></ul><ul><li>What would the money spent be worth at some future date </li></ul><ul><li>if you had been able to save/invest it? </li></ul><ul><li>That is opportunity cost. (see wedding example) </li></ul>
  11. 11. Lost Opportunity Cost-LOC’s the wedding <ul><li>First you must know the mathematical rule known as . . . Rule of 72 </li></ul><ul><li>Mathematical rule- Rule of 72 . . . Approximate time for money to double </li></ul><ul><li>Divide the interest rate into 72. </li></ul><ul><li>Example . . . $100.00 @ an interest rate of 8% will grow to $199.90 in 9 years ( 72 / 8 = 9) </li></ul><ul><li>LOC example . . . Let’s use the cost of a wedding </li></ul><ul><li>Bride and groom 25 years old </li></ul><ul><li>Wedding costs $20,000.00 </li></ul><ul><li>Using and interest rate of 10% & the Rule of 72, the $20,000.00 would double every 7.2 years </li></ul><ul><li>{72 / 10 = 7.2} </li></ul><ul><li>Look at how $20,000.00 would grow over the couple’s Lifetime </li></ul>
  12. 12. Wedding Table <ul><ul><li>If the $20,000.00 could have grown to $1,280,000.00 the LOC would be the difference between the $20,000.00 spent and the $1,280,000.00 it grew to or $1,260,000.00 </li></ul></ul><ul><ul><li>The $20,000.00 would have created a substantial amount of wealth had it not been spent </li></ul></ul><ul><ul><li>1.28 million worth of wealth </li></ul></ul>85 1,280,000.00 68.2 75 $640,000.00 61 65 $320,000.00 53.8 55 $160,000.00 46.6 45 $80,000.00 39.4 35 $40,000.00 32.5 25 $20,000.00 25 Age at 7.2% Earning rate Values Age at 10%Earnig Rate
  13. 13. Question? If I would offer you now $1,000,000.00 Or a penny doubled in 30 days what would you take? <ul><li>How the idea began? </li></ul><ul><li>Most of us have heard the idea of starting with a penny, double the amount everyday, and eventually you will end up with $1,000,000+. I first heard about this in math class way back in grade school. For those that have never of it, this is how it works. </li></ul><ul><li>Day 1 - Start with $0.01 Day 2 - $0.02 (doubled) Day 3 - $0.04 (doubled) . . . Day 26 - $335,544.32 (doubled) Day 27 - $671,088.64 (doubled) Day 28 - $1,342,177.20 (doubled) </li></ul><ul><li>Day 29 - $2,684,354.40 (doubled) </li></ul><ul><li>Day 30 - $5,368,708.80 (doubled) </li></ul>If you chose a penny Doubled then you are correct.
  14. 14. Velocity of Money <ul><li>The multiple uses of $1.00 of each dollar </li></ul><ul><li>The ability to use the same dollar over & over again </li></ul><ul><li>Would you rather have 3 X 3 or 3 + 3? Is 9 more than 6? </li></ul><ul><li>Banks, investments & insurance companies not only use this </li></ul><ul><li>strategy every day but would not grow & prosper without this critical </li></ul><ul><li>element & “movement” money. So how does it work? </li></ul><ul><li>John takes out a mortgage with the bank & starts to pay back $1,000.00 </li></ul><ul><li>monthly for his home. Tom wants an auto loan. The banks takes John’s </li></ul><ul><li>mortgage payments & loans them out to Tom. The bank now takes John & Tom’s </li></ul><ul><li>monthly payments & loans them out to you through one of their many alluring credit card programs. The bank now takes John’s home payment, Tom’s auto payment, your credit card payment & loans it out to. . . Now multiply this strategy times </li></ul><ul><li>1,000’s. </li></ul><ul><li>What a business! </li></ul>
  15. 15. Safe & Secure or Risk & Speculation Building on a “Cornerstone” <ul><li>Deposit $10,000.00 for 10 years </li></ul><ul><li>Hypothetical rate of return </li></ul>$16,289.00 5.00% $15,503.00 6.50% $15,513.00 5.00% $14,557.00 7.00% $14,775.00 5.00% $13,605.00 7.25% $14,071.00 5.00% $12,685.00 11.00% $13,401.00 5.00% $11,428.00 -10.00% $12,763.00 5.00% $12,698.00 -4.00% $12,155.00 5.00% $13,247.00 8.00% $11,576.00 5.00% $12,247.00 7.50% $11,025.00 5.00% $11,393.00 8.50% $10,500.00 5.00% $10,500.00 5.00%
  16. 16. History of Federal Individual Tax Rates Top tax rate
  17. 17. Transferred Money what if you could . . . This savings represents a 19.00% increase on savings Guaranteed without market risk That goes into your annual savings $57,000.00 Annual Expenses $180.00 Interest on Savings 6.00% ROR on Savings $3,000.00 Annual savings $60,000.00 Annual Income $570 19.00% of 3,000 is 19.00% $570.00 1.00% Proof Which can be proved by the fact that: Return equivalent on $3,000 invested Saves in Dollars Reducing Expenses by this percent
  18. 18. Summary <ul><li>What if . . . </li></ul><ul><li>3 characteristics of every dollar save/invested </li></ul><ul><li>Job “A” or “B” ? </li></ul><ul><li>3 guarantees – family & self </li></ul><ul><li>LUC – Liquidity * Use * Control </li></ul><ul><li>2 kinds of people – spend 1 st or save 1 st . . . Who wins? </li></ul><ul><li>3 kinds of money – lifestyle * accumulated * transferred </li></ul><ul><li>$10,000.00 loan </li></ul><ul><li>LOC – Lost Opportunity Cost . . . Wedding or not? </li></ul><ul><li>Velocity of Money or the Multiple Uses of a Dollar </li></ul><ul><li>Safety & Security vs. Risk & Speculation – Building on a “Cornerstone” </li></ul><ul><li>Tax history – IRS “Partner” for life </li></ul><ul><li>Transferred money – what if you could recoup just 1% </li></ul><ul><li>You have a choice today . . . </li></ul><ul><li>Be proactive or be passive </li></ul><ul><li>It is your time, your money, your future . . . What is your plan? </li></ul>
  19. 19. The Cost of Procrastination Can Be Very High Time Really is “Money” <ul><li>An insurance agent receive a phone call from and excited woman> </li></ul><ul><li>“ I want to insure my house, “she said. “Can I do it by phone?” </li></ul><ul><li>He replied, “No, I’m sorry. I must see it first to be sure to set up the proper plan and the right coverage.” </li></ul><ul><li>The woman replied, “Okay, but you better get here right away!” exclaimed the woman, </li></ul><ul><li>“ Because it is on fire!” </li></ul>
  20. 20. Take the Time Make the Time Want Change? Improvement? Want a sigh of relief Peace of mind/ opportunities Time is ticking away!! I didn’t know I wish I’d Known It’s time to know
  21. 21. Thank you for your Time Looking forward to working with you soon <ul><li>Douglas R. Ness </li></ul><ul><li>The Advisory Group </li></ul><ul><li>8113 Avalon Dr. </li></ul><ul><li>Weymouth, MA 02188 </li></ul><ul><li>Direct phone # 781-803-3093 </li></ul><ul><li>Cell phone # 781-844-8952 </li></ul><ul><li>Email </li></ul>