Why Is Financial Planning Important?

Recently I was asked this question, Why is financial planning important?. I am of the opinion that financial planning is critical to achieve your financial success. However, with the increase of distress of many families in the United States many are going by without a financial plan and many even question the importance of having one.

It is understandable that if you are currently in financial distress you may not see the point of financial planning. You may be living paycheck-to-paycheck, thus why bother with financial planning. It is understandable and if you are doing so, you are making a huge mistake. Let me tell you why; It doesn’t matter if you’re well off or work for every cent; knowing the importance of financial planning is critical for your future. In fact, it’s never too early or too late to prepare for it.

The problem I see today with the attitudes of the families that have been affected by the recent recession is that by not developing a plan of action, how will you get out of the current situation? In essence, they have accepted the current situation (living paycheck-to-paycheck) as the "new normal". The "new normal" becomes their current reality and accepted as the truth. These families become comfortable with this "new normal" to the point that it is the only way to live. They do not see any other way, therefore when other people like myself approach them with the idea of financial planning they look at me like I am from another planet. "What do you mean "financial planning"? I can hardly pay for my rent".

Financial planning is not for the rich. Great wealth has been built one dollar at a time. All it takes is financial planning; a financial road-map to get you out of the current storm. The fact that you may currently be in a financial distress situation does not mean that you belong there. Furthermore, the fact that you may be in a financial distress situation today does not define you. Accept responsibility for your past actions that lead you to the current situation and develop a financial road-map towards financial success and freedom.

If you are currently in financial distress, let me offer you some tips that may help you:

1. Put together a budget, the method does not matter (use a pencil and paper, excel worksheet, Quicken, etc.)

2. Do not overlook your insurance coverage in these difficult moments. This is not the time to be driving without car insurance. However, do not fall prey to predators insurance coverage. Assess the risks that are truly needed to be covered to protect the financial future of your family.

3. Develop a plan to reduce/eliminate your debt. With a national average of 14.6% effective annual interest rate of this debt is too expensive to bring to our families.

4. Track your monthly expenses. This is where many families fail. Most of the times families develop budgets but they do not track the actual expenses. A budget without a monitoring system is not adequate. Compare your actual expenses to your budget to be able to make the necessary corrections.

5. Watch for the small expenses. This is where a lot of the damage happens. We notice the big ticket items. Big corporations have been bankrupted $5 at a time. It does not take long until those trips to your Java Shop for the super-duper high calorie with whip cream on top coffee for $5 will become a hole in your finances. You do not notice it on a daily basis. However, when you track it and realize that you spent $1,250 a year in those daily trips to your Java shop, you may get an upset stomach.

* Tip: Use the $100 monthly and apply towards a high interest debt. For example, if Mary is spending $100 per month in her daily Java trips and she has a credit card debt of $10,000 with interest rate of 12% and she is currently making monthly payments of $300, it will take her 14 years to payoff that balance and she will pay approximately $4,000 in interest. If she applies the $100 per month extra towards her credit card debt, she will payoff her credit card in 30 months and her interest payment will be decreased to approximately $1,400.

* Opportunity: Did you know that if were to invest the $100 per month in a mutual fund that gives a 8% annual return for 10 years you would accumulate approximately $19,400?

“Money makes money. And the money that money makes makes more money.”
- Benjamin Franklin

6. Create an emergency fund. The amount depends on each family situation. In todays environment you should strive to have 9 months of living expenses in reserve. These funds should not be in high risk/volatile investments, consider placing this funds in a money market account/savings where you have access to them. Remember the idea is to have liquidity in the event of an emergency.

Protect Your Family with Estate Planning

What would happen if you were to die five years from now? Would you be ready for such an event? Most people are not ready to face such an end, but we can at least have our financial situation protected for our family and for our loved ones.

You can't tell if your estate plan works until after the fact. There are so many variables in life that makes estate planning complicated. Where I see many of the mistakes is when people cut corners in estate planning with their "simple/cheap" mentality. A good estate plan must articulate the personal and family goals, anticipates problems and a good maintenance plan which adapts to the changes in the family, finances, and law.

However, some people just do not want to talk about their death. Its morbid. While others just do not know how many expenses can result from a death, nor may not know the true total value of their assets. This mentality will also cause unpleasant surprises when your assets are left to the hands of the government to determine how to divide your assets.

I suggest that you form a professional team to help you properly develop your estate plan. Please keep in mind that a financial planner may know all the blocks to a estate plan, but a financial planner may not be licensed to create all of those blocks. Therefore, you may need other members in your professional team:

• Attorney - Needed for drafting legal documents
• Certified Public Accountant (CPA) - Needed for identification of assets, calculation of the adjusted basis of assets, and tax considerations.
• Licensed Insurance Specialist - Needed to verify assets are protected and that those assets are liquid at death.
• Any Trust Officers That Manage The Assets of Any Trust

Your financial planner should be the person who ties these professionals together in to the estate plan for the client.

When preparing your estate plan you should avoid the following:

* Ridiculously restrictive trusts
* Well-intentioned but unworkable asset divisions
* Do-it-yourself documents that mess things up beyond belief
* Not providing for incapacity, with the amazing statistics for Alzheimer and other dementia, incapacity should not be ignored.
* Young children without a guardian - if you develop your estate plan while your children are young, you should name a guardian for them in case both you and your spouse were to die prematurely.
* Not having the right type and amount of life insurance for survivor income, tax payments, loan repayments, etc.
* Copying the estate plan from your neighbor or relative. Each family have their unique needs and goals.
* Getting estate planning advice from the guy who serve the coffee at Starbucks. Estate planning is a serious matter. The wrong approach can be costly.

Estate planning is not easy, but it should not avoided. The cost of avoidance will be greater than the benefits gained by it. Do not take this aspect of your family lightly, and do not postpone it any longer. Estate planning is not just for the rich, it is for all of us. If you have not done your estate planning yet, I encourage to do it now.

Simple Steps in Planning for Your Retirement

Retirement planning is an important aspect of our lives. As good stewards and responsible members of a family we must include retirement within our overall family financial planning. If you are married, you naturally should do this planning together with your spouse.

One of the areas that needs to be address in any financial planning is the behavior of the family members towards money. This most be handled with care to avoid unnecessary conflicts. In the end the family goal should be towards the preservation of wealth and being good stewards of the wealth. After all, what is the point of saving and investing really hard if your partner is a secret spendthrift running up huge debts. Ultimately they’re going to drag your finances down to their level.

You need to sit down with your loved ones and talk about what you’d like retirement to hold. Perhaps your ideas about retirement differ. Your spouse may want nothing more than to give up work while you want to work until you drop because you just love it. Whatever the scenario may be, it helps talking things through.

Here’s an action plan for how to effectively join forces with your spouse to drive for that retiring wealthy finishing post:

ߜ Establish when you both want to stop work. One of you may be younger and therefore have longer to go to build up a full state pension entitlement. If there is an age gap, perhaps the older person in the marriage can carry on working for a little while to build up a big enough cash pot to allow the younger person to retire earlier than would otherwise be the case.

ߜ Decide between you how much you need. You need money to take care of life’s basics plus cover emergencies. You may have very different ideas of how much money you both need in old age.
* Warning: Don’t underestimate your financial needs. Certain outgoings cease after your retirement but you have more free time on your hands. Filling this costs money: You may want to travel several months of the year, take up golf, dine at fancy restaurants twice a month, serve on a ministry at church or planned giving to a special church project. A retirement spent watching television all day is no fun: Plan carefully so that you’ve got enough cash to enjoy yourself.

ߜ Examine how much you’re on course to receive. Do not wait until retirement to determine how much to expect over your retirement. This may not be a pleasant surprise. Now is the time to meet with your financial advisors to estimate your retirement funds and make the necessary corrections to meet your retirement goals.

ߜ Calculate how much you need to reach your joint goals. In order to buy retirement income for you both to live on – normally through an annuity – you need a big pot of cash.

* Tip: One way to protect your retirement savings and extend it through your expected life after retirement is through the purchase of an annuity. The concept behind an annuity is very simple. You hand over your savings to an insurance company and it pays you an income until your death. The amount of income you get depends on how much money you hand over and the annuity rate when you purchase the annuity.

ߜ Agree on what you’re willing to sacrifice to reach your dreams. It stands to reason that in order to build up a big enough cash pot to enjoy a comfortable retirement you have to save, invest, and work really hard. You can’t do any of this without making sacrifices whether that is curbing your spending, paying a portion of your income into a pension or simply setting time aside to monitor your savings and investments.

ߜ Determine what you want to leave behind for loved ones. If you have children it’s likely you’d like them to benefit financially on your death. If that’s the case you want to ensure you’ve enough money to take care of your combined needs in retirement and leave a tidy legacy for your children, perhaps taking out a life insurance policy to benefit them as well.

Gold is Not an Investment

Today let's talk about a subject that seems to be touchy to some people specially those that are "investing in gold". Gold is not an investment. Now before you close the window and start sending hate mail, I suggest that you read the rest of the post. The basis of my statement is founded on the definition of an investment. An "investment” is defined as the commitment of money or capital to purchase financial instruments or other assets in order to gain profitable returns in the form of interest, income or appreciation of the value of the investment. Through this transfer of capital, in the expectation of a profit, an investor gives up capital and puts it at risk. The investor receives a return in dividends or interest as compensation because capital is at risk; investors may get back less than they invested, or they may get back nothing at all.

Gold does not qualify as an investment since it does not generate income by itself when we put our money and capital at risk to acquire it. Gold has no real intrinsic value, its value is the one assigned to it. I understand there is a market for gold, just like there is a market for real estate and stocks. Gold is raw material, it does not produce income, no dividends, no cash flow. Gold is a chunk of metal while a stock is ownership in a income generating company. The performance of a company can be tracked and projected, you cannot do so with gold. The price of gold is speculative. Commodities are regulated by offer and demand, the challenge for gold is that we do not know how much gold really exist therefore the price assigned is speculative, thus it is not an investment.

The problem I see is when people are putting assets at risk in the gold rush of 2010 thinking that they are investing. Investments are made by evaluating underlying value. Speculative bets are made by looking at the price of something and simply hoping the price goes up. Investing is about value; gambling is about price. In reality they are speculating. They are betting on how high the price of gold will go. There is no financial analysis to project the future income that gold will generate for you.

However, I do consider gold to be an important component of a financial portfolio. It can be used as hedge against inflation and a monetary collateral to sustain the value of currency. If you want hold some gold for diversification. In the unlikely event that paper currency becomes worthless some day gold and possibly silver would resume a role as a medium of exchange. Gold is money. Unlike investments, gold does not generate wealth, gold preserves wealth.

Right now, too many people are jumping on the gold bandwagon and really not asking why the price of gold is increasing. Gold’s main use has almost always been as money. However, gold’s secondary uses are growing in importance. Due to its physical characteristics, it’s a high-tech metal. So in todays technology driven society we are looking at gold beyond it main role of currency (gold is the most resistant to chemical reaction, the most ductile and the most malleable of all the elements, and it’s an exceptional electrical conductor), which in turn has increased its demand. Conclusion, increased demand drives the price of the commodity up. However, that does not change the fact that gold is raw material and by itself does not generate income. There is no certainty of the amount of gold reserves, which makes it hard (if not impossible) to determine how to properly price the commodity. Contrary to other commodities that gets consumed, gold does not get consumed therefore the more we extract the less valuable it becomes.

I would like to add a note here about real estate investing. Yes real estate is an investment. Real estate is worth what you can make from it, period. Rent it out and it brings income, live in it and it enables you to earn a living, grow food on it. The real estate debacle does not change the fact that it is an investment. The real estate bubble was caused by market distortions caused by idiots over the last ten years. But, the fact remains real estate is an investment and gold is not. Also, physical gold bullion locked in a vault, are not being invested; they are simply being stored. Therefore, while it is being stored they don’t earn interest or dividends, thus not an investment.

The reason of this posting is a warning to all of you that are considering "investing in gold". "Investing in gold" is a very dangerous game right now. Whenever the price of something rises as much, and as quickly, as gold has, we need to stop and consider the end game. As I drive through the streets of Florida, I notice the increase of guys standing on the streets waving “We Buy Gold” signs. They looked exactly like the guys I used to see all over Florida with the signs announcing open houses and selling real estate as a sure bet. The danger is how gold is being presented to the public as a sure bet investment. Due to the current conditions of the various financial markets locally and internationally, investors are looking where to place their liquidity to generate income. The problem is that there are a great amount of scammers wanting to take advantage of this opportunity to gain access to the available liquidity. Now please understand that I am not saying that you should not own gold, or that gold is a scam. What I am saying is that the people buying gold have no true way to value it, and therefore are speculating, not investing.

Finally, keep in mind that there are huge institutional players in the gold market right now. When they decide that the run is over, there won’t be time for you to run to your safe in the basement, pack up all your gold coins and bars, run to the local pawn shop and get rid of it. I do not know where the price of gold is going, but for me it doesn’t matter.

THE VICTOR

Today I want to share with you a poem that I enjoy reading, specially when I feel down. Many times we need to be reminded that through difficult times what gets us through those challenges is within us. How do we handle those challenges? What is our state of mind?

Right now we are all going through one of the most difficult times in recent history. What should we do about it? Blame the president? Blame congress? Blame our neighbor? or do we put our creative engines to work to get this country back on its track?

This is not the first time this country has faced difficult times, recessions, civil war, etc. I am certain it won't be the last time either. Our success is determined in what we think about. Do we sit on the floor and cry over spilled milk? Do we stop planning for the future? As far as I know, there is not enough crying, complaining, blaming we can do to fix our past mistakes.

Share your views on how to help this country to get back on his track. If you were given the power to develop a plan of action for this country what would you do about it? How would you fix our current situation?

The Victor

If you think you are beaten, you are,

If you think you dare not, you don’t

If you like to win, but you think you can’t,

It is almost certain you won’t.

If you think you’ll lose, you’re lost

For out of the world we find,

Success begins with a fellow’s will—

It’s all in the state of mind.

If you think you are outclassed, you are,

You’ve got to think high to rise,

You’ve got to be sure of yourself before

You can ever win a prize.

Life’s battles don’t always go

To the stronger or faster man,

But soon or late the man who wins

Is the man WHO THINKS HE CAN!

~ C. W. Longenecker ~

Secrets Of Success

In order to be successful in your life you must have sound roots. Also, you must discover any unhealthy and dysfunctional "roots". Consider this as excavating a bad root of a tree. It frequently takes a lot of time and sweat, and you might have to go through some "filth" to get there. There are likewise times when this occurs really quickly and impromptu - effortlessly, almost-due to a fresh view, or a sudden epiphany, which lights up a previously obscured area (or root), so you directly might see and alter it. However long this procedure takes, once you've wiped out the bad roots (the defective belief), you must then substitute them with empowering notions! Doing so will enable you to be successful in your life.

The first harming belief is focused on performing or how well you're doing. The fundamental message is, "I'm not doing good enough," or sorrier yet, "I'm a loser." If you feel like everything you do isn't quite "adept enough" or if you prohibit yourself to feel good about yourself unless you're doing perfectly (which we all recognize isn't possible), then you might have fallen prey to this notion.

Another basic area of belief disfunction is acceptance. The substance is "they don't admire me" or "they're going to leave me." If you're preoccupied by the thought that you must get others to accept you, like you, or approve of you, then you might be under the trance of this belief. This is generally referred to as the co-dependent notion. If you find yourself perpetually people-pleasing, caretaking others, and/or delivering them, there's a firm possibility you have this belief.

The third basic belief that can sabotage you is the belief about change. This belief will attempt to convince you that you can't change-that this is the way you've forever been, or that you'll never be able to manage it (whatever "it" is...success, relationships, wellness, etc.). If you trust you're unable to change and who you are now is who you've forever been, and this is likewise who you'll forever be, and you'll never be able to be any different, then this notion has you in its clutches.

Many individuals battle with the belief that they'll never be able to turn successful. This notion sends messages like, you'll just bomb, so why try, or you can't manage that. Then, they ask themselves, "Why undergo all the grief?", and they often promptly quit or don't even attempt to be more successful. The bottom-line: These individuals just don't think they merit success.

Invest daily in overcoming any of these notions and Give yourself permission to be successful. To discover the root of success we recently issued our ebook "The Root of Success". We encourage all of those interested in learning more on how to achieve success to get their copies.

Ten Ways To Improve Time Management

"Time management is not a peripheral activity or skill. It is the core skill upon which everything else in life depends." - Brian Tracy

Struggling with time management? You don’t have to. Do you often do you find yourself running out of time? For many people, it seems that there is just never sufficient time in the day to get everything done and therefore time usually seems "running away" from them.

Time management is a skill that many of us learn by necessity. However, the problem is that whenever we learn a new skill by necessity the chances are that bad habits creep in and, although we know that time management is useful in general, we do not use it to its full potential. Once we understand to maximize the benefits of time management we gain better control of our daily activities and our stress level is reduced.

Here are ten ways for you to improve your time management skills:

1. Write down your tasks instead of relying on memory alone.

2. Avoid mixing your big/urgent projects and small/easy tasks in the same list. It is human tendency to go after the easy tasks and ignore what requires more from us.

3. Avoid writing to do lists with large amounts of tasks. It is discouraging when you look at your list and you have 53 items on the list. Realize that you can't do EVERYTHING, instead focus on a few key things that will give you the most value.

4. Maximize the use of your first few hours of the day. It is proven that we are more productive during the first few hours of the day, as the day passes by our energy and focus level fades. Therefore, instead of starting your day answering emails and other trivial tasks, attack your most important tasks in the early hours when you are at your best.

5. Avoid multitasking and focus your energy on a single project at a time. You'll accomplish much more done.

6. Use specific times for processing your voice mails and emails. You will be more efficient when you schedule predefined times for processing your stuff (like email, notes, etc.) rather than just doing it whenever new stuff arrives. Consider setting between 2 and 4 processing times per day (based on your specific needs). This breakdown of processing time works well for most people; it allows you to dedicate uninterrupted time to your tasks and be responsive to your customers.

7. Consider creating a Master Project List where you can write down and prioritize all the projects that you're working on (independently of the tasks). Your master project list will give you a visual of the various projects and its respective deadlines.

8. Remember that being "busy" is not the same as being productive. Focus on projects and activities that will move your closer to your goals. Every task you perform should be directed towards the achievement of the established goals.

9. Remember the two worst enemies of productivity are Interruptions and Distractions. These are the two major time wasters in our modern society. Learn to handle them effectively and then work proactively to reduce them. Avoid the "uninvited visitor" who creeps into your office to gossip and share with you information that wont help you achieve your goals.

10. Avoid unnecessary meetings. Meetings are often a waste of time in our businesses. Meetings should be treated like all of the other tasks, they should have a purpose towards the achievement of your goals. With an estimated 11 million formal meetings per day in the United States, corporate America has been held hostage by 3 billion meetings per year. No wonder our productivity levels have reduced.

In my opinion, time management is important for our personal life and career success. It teaches us how to manage our time effectively and make the most of it. When properly used it helps us in achieving a balanced life. Of course, the importance we give to time management depends on the value we place on our time. When we appreciate the importance of time, learn how to manage it, maximise it and actually apply those skills, we can genuinely say our time has been well spent. How much do you value your days, hours and minutes?

Scary Statistics

Based on a recently released study by Transamerica Center for Retirement, more than 21 million of Americans rely on their social security for their retirement. With all of the recent conversations in Washington about the health of the Social Security Administration, it is imperative that workers fully understand their benefits and what impact any changes the government makes would have on their retirement. Placing their trust in the hands of the government to fully or partly cover for their retirement could bring an unpleasant surprise in their elder years.

Other facts released as part of the survey:

* 55% were female
* 52% were in the age group of the baby boomers
* 65% have household income of less than $75,000

Health Insurance Tax Credit

The Treasury Department proposed regulations August 12th for a Premium Tax Credit for buying health insurance. This tax credit would give millions of middle-class Americans tax benefits intended to assist them with the acquisition of health insurance as part of the Affordable Insurance Exchanges that states will set up around the country. According to the Congressional Budget Office, when the Affordable Care Act is fully phased in, individuals receiving Premium Tax Credits would get an average subsidy of more than $5,000 a year.

The tax credit would be generally available to families with incomes between 100 percent and 400 percent of the federal poverty level. That would be between $22,350 and $89,400 for a family of four in 2011. Older Americans who face higher premiums from health insurers would be able to receive larger tax credits. Under the proposed regulations, covered individuals must be legally present in the United States and not incarcerated. They also must not be eligible for other qualifying coverage, such as Medicare, Medicaid, or affordable employer-sponsored coverage. Also, the premium tax credit is refundable so taxpayers who have little or no income tax liability can still benefit. The credit also can be paid in advance to a taxpayer’s insurance company to help cover the cost of premiums.

Tax credits are available to qualified individuals offered, but not enrolled in, employer-sponsored insurance if (a) it is “unaffordable” (meaning that the self-only premium exceeds 9.5 percent of household income); or (b) it does not provide a minimum value (meaning it fails to cover 60 percent of total allowed costs). The Treasury Department anticipates that future regulations will define minimum value in a way that preserves the existing system of employer-sponsored coverage, but that does not permit employers to avoid the statutory responsibility standards.

Why Prepare a Personal Cash Flow Statement?

Controlling your financial affairs requires a budget or cash flow statement. Budgeting and tracking your expenses gives you a strong sense of where your money goes and can help you reach your financial goals, whether they are saving for a down payment on a house, starting a college or university fund for your
children, buying a new car, paying off the credit cards or planning for retirement. A cash flow statement provides you with the following benefits:

1. Know where you stand - A cash flow statement allows you to know exactly how much money you have. The statement shows you how your funds are allocated, how they are working for you, what your plans are for them, and how far along you
are toward reaching your goals.

2. Communication - A budget is a communication tool with other family members to discuss the priorities for where your money should be spent.

3. Control - A budget is the key to enabling you to take charge of your finances. With a budget, you have the tools to decide exactly what is going to happen to your hard-earned money—and when.

4. Identify opportunities - Knowing the exact state of your personal monetary affairs, and being in control of them, allows you to take advantage of opportunities that you might otherwise miss.

5. Extra money - A budget may produce extra money for you to do with as you wish. Hidden fees and lost interest paid to outsiders may be eliminated. Unnecessary expenditures, once identified, can be stripped out. Savings, even small ones, can be invested and made to work for you.

6. Other benefits:

• Indicate your ability to save and invest
• Let you analyze your standard of living
• Indicate if you’re living within or beyond your means
• Highlight any problem areas

How To Address The Concern of Outliving Your Retirement Savings

One of the worst nightmares for an investor is to outlive his/her retirement savings. However, there is a solution to this concern through the purchase of a longevity insurance product. A "Longevity Insurance" provides guaranteed income typically starting after you turn 85, in exchange for an initial investment made some 20 years earlier. Payouts are fixed and cover you and your spouse for as long as you live. With some variations of this product, you can also opt for a death benefit, which guarantees that your account will hold a certain value that can be paid out to your heirs if you die before the payout age.

One of the main concerns of many individuals approaching the retirement age is the valuation of their current retirement savings and how to catch up. One solution is to increase the risk to and exposed your retirement account to equities in order to bring enough growth in the portfolios. However, this can come at a costly price. One solution to consider is a longevity insurance product. These longevity insurance products are effective in combination with an investment strategy. With a guaranteed income starting at a predetermined point in time, you'll basically take the biggest unknown out of your retirement-planning strategy; "how long your money should last?". You could be more aggressive with your investments and fine-tune the size of your withdrawals without the fear of running out of money.

Recently Mr. Peng Chen, Morningstar’s president of the investment management division, reported the following:

1. many investors do not estimate how long they will live and end up shorthanded on retirement funds.

2. people who are overly optimistic about how long they will live may have a too-frugal existence in retirement.

3. roughly half of retirees live longer than their life expectancy.

4. financial markets are far more volatile than many financial planners account for, and

5. retiree’s exposure to stocks and bonds can put their retirement savings at risk.

One alternative is to combine a traditional product like a mutual fund in combination with a longevity insurance product. As an investor you should consider when saving for your retirement the following:

1. age

2. financial market risk tolerance

3. retirement expenses

4. longevity, and

5. bequest goals

If you're someone who is concerned with the possibilities of outliving your savings, you may want to consider longevity insurance. However, this must be done with careful analysis of the risks. I strongly suggest that you meet with your financial advisors before you make a decision to purchase this type of product. Finally, consider the following final notes:

1. longevity insurance products are not for everyone and should be carefully reviewed before you sign any documents to ensure that they meet your specific needs, and

2. when choosing this type of insurance product, you're buying income that that will start in for 20 years or more. Therefore, make sure that company being considered has a good reputation and solid financials. You can check a company's credit rating with services like Standard & Poor's and A.M. Best.

Warning: Check Your Beneficiary Designations

Here is something that many people do not think about; including poorly trained financial advisors. With federal tax exemption at $5 million, many are not be thinking about their estate planning at the moment. Big mistake!

How many of you have looked at your beneficiary designations in the last 3 years for your:

* bank accounts,
* brokerage firm accounts,
* retirement accounts,
* company benefit plans,
* life insurance policies,
* annuities and
* 529 college accounts.

I am almost certain that most of the people reading this will have to honestly say they have not. If you haven't submitted your designate beneficiaries forms, do it NOW!. If your forms are outdated, update them NOW!. This is something serious and should be something that is discussed with your financial planner as part of your annual financial checkup. However it is commonly overlooked.

It is sad to see families losing to their entitled benefits due to forms with outdated addresses, beneficiaries, etc and creating unnecessary headaches for the families. It is sad to see the horror stories of many of these families. Just imagine your ex-spouse being the one receiving your company pension funds proceeds. Here is a warning to you; The U.S. Supreme Court ruled that the beneficiary designations trumped state law that would have automatically disinherited the ex. So she got the money, and the kids got the bills for an unsuccessful legal fight.

In another case, The US Supreme Court ruled in favor of an ex-spouse collecting $400,000 from a savings and investment plan from her former husband. What makes this case interesting is that as part of the divorce decree (signed seven years prior to his death) stipulated that the ex-wife "waived any interest in the plan". The man failed to update the beneficiary forms to make the necessary updates and transfer the beneficiary rights to his daughter which was his wish. The plan document stipulated that beneficiaries could only be changed by submitting the form. Once again the U.S. Supreme Court ruled that the outdated beneficiary designation trumped the divorce agreement.

Conclusion, do not depend on your will to override outdated beneficiary designations. If you want your life insurance proceeds to go to your church after your death, you must update your beneficiary designation forms. As a general rule, whoever is named on the most recent beneficiary form (which may not be nearly recent enough) will get the money automatically if you die -- regardless of what your will might say.

Estate Planning With A Christian Base

Most people avoid the subject of estate planning due to their fear to death. However, Christians avoid the subject due to taboos/misunderstandings that still exists about the subject on money and accumulation of wealth in the Christian community. However, as followers of Jesus Christ, we need a different view and understanding about estate planning with a Christian base. As Christians we must view estate planning as an important act of our stewardship.

References to estate planning are found throughout the bible, starting from Genesis 15 when Abraham expresses to God his concern over his lack of an heir. Wanting to take matters on his own hand, he goes outside God’s plan and conceives an heir with his wife’s servant, Hagar (Genesis 16). Later we see how Abraham creates a plan that is pleasing to the Lord, and it is recorded in Genesis 25:5-6 as the first recognizable estate plan—after giving gifts to each of his other children, Abraham then gives the remainder of his possessions to Isaac. In the Gospel of John we are provided Jesus’ estate plan. While hanging on the cross, Jesus hands over the care of his mother to a trusted friend.

As Christians we are taught from the beginning that God owns everything, and this includes everything titled in our name. Throughout the Bible we are called stewards (managers) of the assets the Lord has given us. From the beginning of Bible we are called to oversee those assets for and on His behalf. Therefore, the preparation of an estate plan actually serves as the distribution clause for the assets He has entrusted to us. Estate planning should be part of Christian stewardship program. The Lord expects us to manage the assets God gives to us for management with the conviction that they belong to Him. Therefore, this requires not only the proper management of the assets during our life; it also requires that those assets are properly passed to the next generation to continue expanding his plan and kingdom.

It is possible that you do not realize it, but the lack of an estate plan is against our stewardship role that our Lord has called upon us. Make sure that your estate plan is prepared in accordance with Christian principles. Finally make sure that your estate planning advisor is properly trained and prepared to advise you and execute your instructions after you are called to join our Lord.

Warning Against Financial Investment Scams

Today I want to address those of us that have chosen the advisory profession as well as those who seek professional advise. The current environment has created the perfect scenario for scammers to attack a fragile niche; the retirement market. With 10,000 baby boomers turning 65 every day it is an attractive niche for them to target. According to a recent study by Metlife, elder fraud is a problem of approximately $3 billion per year. These scam artists prepare their sleek marketing materials and spoon feed these information to the untrained financial advisors, who then presents this information to their clients causing not only damages to thousands of families, it also destroys professional careers.

Due to the decline in asset values that many of the baby boomers have suffered in their retirement accounts in the past few years, they have an urgent need to catch up in their financial plans. This is understandable and provides the opportunity for predators. Also, poorly trained financial advisors feeling the need to bring new products/alternatives to their client fall victims of these well trained predators.

The problem we are encountering is that many of these non-traditional investments are unregistered products. They come in different shapes and forms, however the main goal is to create the illusion of legitimacy. Some examples of these unregistered products are:

1. unregistered limited partnerships
2. hedge funds
3. oil & gas deals
4. real estate products

Some times above products are legitimate and well founded. However, the investment decisions should always be made on a sound analysis of the investment potential. As financial advisors, extensive due diligence must be performed to ensure that the products being presented meet the risk assessment and financial plan of the clients. Financial advisors must not think that they are "too smart to fall for anything like that". Financial advisors must exercise a healthy level of skepticism. If the financial advisor starts from the premise that these guys are legitimate, it takes almost no effort for them to confirm the "legitimacy" of the products being presented. Financial advisors must start from what I call a healthy level of skepticism; start from the basis that this could be a scam, then perform due diligence and leave no rock unturned and if after looking under all the rocks the financial advisor cannot find evidence of fraud, then and only then we can feel that the deal is OK and could be presented to the appropriate clients. Furthermore, it is important that you as the client of the financial advisor be comfortable with the understanding of the products by your financial advisors. Is He/She well prepared on the subject matter? Does the company that they represent have a solid background? Has your financial advisor performed sufficient due diligence on the opportunity/product before being presented to you? Is your financial advisor keeping up with the required training? With clients still wincing from the declines of 2008, faith and trust is running low. While there are benefits to alternative investment programs, they should only be implemented after performing diligence to ensure the trust of our clients bestowed in us continues to be well deserved.

The Importance of LTC Insurance as Part of Your Wealth Development Program

Many of us take for granted the good health we are currently enjoying, that is truly a blessing. Thank you to advancements made in the medical industry we are living longer. However, as we age our health continues to deteriorate. It is a fact of nature. Therefore, as we continue to age we all should plan for our senior years and the proper care during those years so we continue to enjoy life. What is certain is that our aging population, at some point, will require long-term care. Let me demonstrate a realistic scenario in our lives:

John and Jane Smith have addressed their retirement planning for the most well. Even with the recent economic situation they have a well established nest egg for their upcoming planned retirement. John is 62 and a retired accountant for the last two years, who enjoys playing golf; eventhough recently his health has not allowed him to enjoy the last couple of rounds. Jane is 58 accounting manager at a distinguished manufacturing company. She is getting ready for her planned retirement within the next 24 months. Financially speaking, John and Jane have been doing well. However, last week John was diagnosed with Parkinson’s disease. This news has Jane worrying about the care John will need and the strain this will place on their retirement savings and her current earnings.

The above scenario is a best case scenario, John and Jane have retirement savings they have developed over the years and Jane is still gainfully employed. People like John will often require home-care or 24-hour nursing care provided by a long-term care facility. The cost for long-term care is expensive and financially draining to a family. Without government assistance, many are questioning what other options are available. Long term care insurance helps provide funds for looking after a family member who is not unwell in the regular sense of the word but is still unable to go about a daily existence without help. This can include an individual requiring help walking to Alzheimer and Parkinson.

If John had LTC Insurance coverage, his policy might cover his residency in a nursing home or in a retirement home. He might also have access to any of the following: home care, adult care, respite care, and hospice care. Additionally, under his LTCI, John may be covered, for activities of daily living and stand-by assistance. All of these, can be very costly and can quickly deplete through a person’s and/or family’s savings.

The scenario above is a common one. During our financial planning one of the most common overlooked areas is long-term care. Why?

1. Denial - many people are confident they won’t get any illness or disability even if they become older.

2. Fear - people don’t want to think and become stressed with the problems that aging and long term care could bring. Also, they also avoid becoming a burden to their loved ones and families so they choose to handle this problem alone and never ask help from anyone.

3. Unaware of the true cost of LTC - many people do not understand how expensive long term care is these days and in the future.

4. Misinformed - Most Americans also think that Medicaid and Medicare will take care of the bills the time when they get in a nursing home; Medicaid and Medicare help only the low income and require those with extra assets to spend it down before they qualify for benefits in many cases causing unnecessary tax burden to the family.

Here are seven reasons why you should include LTC Insurance as part of your wealth protection program:

1. Numerous options - one advantage of long-term care insurance is that it covers a wide variety of options which can range from daycare for adults, care and taking care of for short periods, care in the hospital or retirement home, provide facilities care for Alzheimer's, home care etc .

2. Immediate help - Help is available from the first day of need itself. Depending on the policy benefit, a care giver can live in the house of the person requiring help. It'll also pay for a specialist, housekeeper, companion, caregiver and non-public nurse to go to the person needing help or stay for a few hours or days too.

3. Family savings remain secure - there isn't any need to touch family savings if a family member needs long term help. The Insurance will help cover most expenses if not all. Without insurance, the cost of providing long term care or perhaps care to a relation on a weekly basis can be terribly dear.

4. Tax repayments and inflation adjustment - Depending on the policy details, premium for long term care insurance are counted for all sorts of tax deductions. The advantages from the insurance aren't counted as earnings either. Also, an inflation adjustment actually helps increase the value of your premium.

5. Security - The sense of security is far greater in case of the insured person requiring help.

6. Daily allowance - a specific daily allowance can be opted for instead of bigger payments at longer intervals. However, this must be balanced with the premiums because the bigger the quantity of daily allowance you choose, the higher will be the premium payment.

7. Estate planning - By purchasing a policy, you not only accrue funds that would later cover long-term care costs but also preserve a portion of your money that can be put towards the cost of taxes payable on death, building an inheritance for your children and wealth preservation.

Before you choose a long term Care policy review what flexibility options are offered. LTC insurance offers many options from managed living, adult day care center, care home or home as a setting for the care that could need to be provided. Long-term care is a complex and misunderstood area of financial planning where it is easy to make costly mistakes. Deciding on an LTC insurance policy can be frustrating and confusing when handled alone. Therefore, it is important that your professional advisor be well versed in this area to properly advise you in the policy that is best for you.

How Do You Define Wealth?

When I talk to business owners and families, one to the most interesting experiences for me is when I ask them "How do you define wealth?". What comes to your mind? The answer to this simple question varies from “Wealth is an illusion", "Wealth is the root of all evil", "Wealth is hard to achieve" to "Wealth is fun and achievable". The answer is conditioned on our beliefs and experiences.

One that tends to strike me the most is the misunderstanding that "money is the root of all evil". Many people, including Christians, believe that bible says that money is the root of all evil. However, this is perhaps the most misquoted verse of the bible ever. The Bible actually says, “The love (or worship) of money is the root of all evil.” (1 Timothy, 6:10). Huge difference!

The way you answer this simple question is paramount to your goal of achieving wealth in your life. Many times you hear people saying that they want to become wealthy, but they define wealth as something that is bad/evil/painful. Others define wealth as being rich, were the focus is the amount of money that is accumulated without regards to other aspects of life or methods used to achieve it.

What are your beliefs about wealth? What about wealthy people? Are they just like you and I? Or, is wealth reserved for other "Special people"? For example, did you receive messages growing up, like many of us during our childhood, that rich people were those “other people” and not like us or our friends. Or did you have wealthy friends and family in your life? T. Harv Eker in his book "Secrets of the Millionaire Mind" he points out, we are all living out our parents wealth blueprint or script, until we have actively done something to change it. We inherit from our parents their good qualities as well as the bad. Many will acquire their “laissez faire” attitude about credit cards and their philosophy of “spend now, worry later”.

Until you decide to take charge of your finances and challenge your beliefs about money and wealth, you will simply be carrying on what you learned growing up. You will be living your parent’s wealth script, which may not be a good idea. The sad thing is, they were doing the same thing their parents did and so on and your future generations will be doing the same thing.

Early money experiences set the stage for your current beliefs about the subject of wealth and how it relates to you. If you want to achieve wealth, you have to begin creating positive associations around the idea. You need to begin seeing yourself as “one of those wealthy people” BEFORE you can become one. The secrets of achieving anything in life is:

1. Be - See yourself being that person.

2. Do - Do the things that person would do.

3. Have - As you get comfortable being the wealthy person and doing what wealthy people do, then you will have wealth.

However, most people get it backwards. They think after I have money, then I’ll do good things and I’ll be the kind of person I want to be. It does not work that way. Remember, first be, then do, you will then have.

Share with me, your views on wealth. How would you answer this question?