How do you tell someone that their baby is ugly?

We run into this problem everyday. The majority of hard working people believe certain financial myths that require a conversation that is similar to telling someone their baby is ugly. The “conditioning” that has been experienced is frustrating, to say the least, but understandable…especially when you understand who has been doing the conditioning.

For example, and this goes out to all you Dave Ramsey and Suze Orman followers: why do banks offer you a lower rate on a 15 year mortgage than a 30 year mortgage?

Do you believe it is because they have your best interests at heart? If not, then why the discount? If the bank does not have your interest, the consumer, at heart then have you ever considered that maybe you should understand these reasons before you just accept what Ramsey or Orman say?

I sure wish they’d (Ramsey & Orman) take the time to understand because then maybe they wouldn’t lead so many people down a path of waste and wealth transfer. Speaking of wealth transfer, do you believe that Americans transfer more wealth than they accumulate? Come on now. Think of financing. Think of taxes. Think of, and wait for this one since NO ONE talks about it, think of….opportunity costs.

What are opportunity costs? Well, if you paid (or transfered) a dollar that you didnt’ have to, not only do you lose that dollar but you lose what that dollar could have earned for you.

The answer to the first question will be the next post. I feel very certain that you haven’t considered the reasons for the discounted rate. As a matter of fact, there has yet to be an individual that I’ve met with, and I regularly meet with everyday-Joe’s to highly successful CFPs and CPAs, who has answered this question correctly.

So bring it on people. Give it your best shot. And if you say it’s because it carries less risk for the bank…you’re wrong.

Kelly O’Connor
The Banking Guy

Why “the experts” confuse the average investor.

We have clients in our office every day who love to ask what our opinion is of the market and what are effective strategies to invest and win. Well, we have our opinions but I thought I’d refer to a few experts out there in the financial world to see what they say we should be doing. First, what’s the “attitude” of investors? Let’s see what the numbers say.

The Chicago Board Options Exchange’s Volatility Index (VIX), which tracks the volatility of the market, has dropped significantly; on November 20, 2008, the VIX was 80.86; on September 11, 2009, it was 24.15. So, it appears the market is “calming down” and the investors are too. Not so fast though. There are those who anticipate we’ll need another 12-18 months to gauge the change in the market before any true confidence can be determined.

Randy Carver, a financial advisor with Raymond James Financial, says “We believe the market will move higher over the next couple years, perhaps significantly so, but is likely to go lower before it does” (italics added by me). He sure covered his butt didn’t he?

The Senior Vice President at Raymond James Financial, Sacha Millstone, says, “If you got out of the markets, you have to honestly assess why you did that. Find an asset allocation you can stick with through hell or high water.” Alright, so she feels people were uninformed or made poor decisions if they “got out”.

Uri Landesman, Senior Vice President at ING (they’re pretty big) said this, “[I] don’t blame investors for pulling out of the market, as there was no way to know how far down the market was going.” So we shouldn’t feel bad for getting out? Do we really ever know for sure how “far down” it’s going to go? We knew there would be those who said it was okay to secure your principal and there would be those who said we were stupid. There will always be a variety of opinions (hey, at least someone will be right) but let’s assume that confidence is back, the “doom and gloom” is gone, and people are ready to “get back in”, what then do we do with our money?

 Uri Landesman (italics added by me): “…try technology bellwethers (ex: Microsoft, Intel). If you think we’re emerging from a global recession invest in the energy and materials sectors…Investors who aren’t sure about the state of the economy can try investing in the health care sector.” Well, no matter what, he’ll have some clients happy and others who “made the wrong choice”.

John Osbon (founder of Osbon Capital Management): “New waders in the market should invest in a mix of Vanguard Total World Stock Index Fund and Vanguard Total Bond Market Exchange-Traded Fund.”

Vahan Janjigian (chief investment strategist at Forbes): recommends Supervalu, Terex Corporation, and Tesoro Corporation. At least he provide some specifics but he does add the good old qualifiers of “if” and “could” when describing his reasoning.

Jeff Rubin (head of research at Birinyi Associates): “Stock selection is going to matter more instead of sector or some other type of selecting process (high dividend stocks, low P/E or what ever it is). As of now, I continue to stick to strength, such as Apple, Google, Goldman Sachs, JP Morgan Chase.” Okay, so the way of old is no longer. Got it.

Randy Carver: “We feel there is an opportunity in long tax-exempt bonds. We would avoid long taxable bonds, and we would add hard assets/commodities.”

Dave Ramsey (Fox financial expert): “Stick with your money markets for short term needs and go with a good mutual fund, like we say over and over, for your long term investments 5, 10, 20 years out.”

Sacha Millstone: “It isn’t about this or that particular investment. It is about a plan and a strategy and overall implementation.” Now I shouldn’t focus on product? These general platitudes have always confused me because my plan MUST pick particular investments and/or products in order to be implemented.

Robert Rodriguez (chief executive of First Pacific Advisors in Los Angeles): “[The economy] will be up and then down, up and then down. We will be far from normal for a very long period of time. People deploying capital will end up destroying capital.” That’s an interesting take. Now I’m really confused on what to do.

David Laibson (economist at Harvard University): “Investors expect that assets on which they personally experienced past rewards will be rewarding in the future, regardless of whether such a belief is logically justified.”

Jason Zweig (journalist for the Wall Street Journal): Responding to Laibson’s comment above said this: “[Buying] more of what has gone up, precisely because it has gone up, is to fall for the belief that stocks become safer as their prices rise. That is the same fallacy that led investors straight into disaster in 1929, 1972, 1999, 2007 and every other market bubble in history.”

How do you sum up all this information? This is only the tip of what we hear everyday on the radio and TV. Some say the economy is rising, some say it’s not, some say it’s flat. We’re told to invest and “suck it up”, we’re told that if we do we’re “destroying capital”, we’re told that we shouldn’t have gotten out, and we’re told we were foolish for doing so. We’re told specific stocks, don’t focus on specific stocks, focus on sectors, don’t focus on sectors, forget stocks and go bonds…AAARRRGGHHH!

An analogy just popped into my head that seems to wrap this all up quite well It’s like standing on the tee box of a brand new golf course. There is no map of the course and no one has played it before. You’re surrounded by golf club salesmen who have played other courses but never played this one. Some of them have played for many years. Every one of them has an opinion about the wind and the obstacles ahead. Every one believes that their golf club is the right one IF all the factors come together properly (wind, swing, ball, layout of the hole, etc). So what do you do? Do you just pick the one salesman that you like the best and take a swing and hope it works? Dave Ramsey tells us that we should pick the one advisor that “makes us feel good” about our [club choice].

What about this choice? What if we worked on our swing first? Now, there’s a radical concept. Or, what if we walked the course FIRST to get an understanding of what we were hitting into? If all we did was ensure our swing was sound and then get a layout of the course, wouldn’t we be better off? Can you imagine what it would be like to NEVER care what the market is doing? Can you imagine what it would be like if you had access to capital that you could invest with a “product salesman” but they only made money IF they made you money?

I sure find it interesting…and so do my clients.

 

Kelly O’Connor – American Guaranty Financial Group

Kelly O’Connor, AKA “The Banking Guy”, is one of a few individuals in the country who is considered an expert in helping people not only understand but implement a personal banking system through the use of current financial tools.  His clients range from 19 year old “kids” to professional athletes. 

He willingly exchanges the higher compensation that comes with promoting the plans of the banks and large investment firms for the gratification that comes from helping Americans, regain their lost treasures and…

• build an unassailable foundation of money that THEY control,
• free themselves from debt,
• secure their future income,
• keep an adequate ready cash account and
• create a legacy of wisdom and wealth

 

For information on books about this topic, Kelly’s live seminars and webinars, or a face-to-face appointment please email koconnor@agfbanking.com or call 303.577.7255.

How Financial Institutions Make Money

I realized that I’ve been posting details about the Infinite Banking Concept (AKA Become Your Own Banker, Bank On Yourself {tm}, You Be The Bank, BOSS) but I’ve never illustrated exactly how banks make money.  You’d think most people would understand but the majority of those I meet with don’t.  They typically have the basics down but don’t take the whole strategy from point A to point B.

This actually takes me back to philosophy class in college.  Remember when you’d create a logical syllogism?   You’d make a few claims that work together to prove a conclusion.  Here’s an Infinite Banking Concept syllogism:

1. The banking business is very profitable.
2. Banks succeed by attracting depositors, maintaining use and control of the depositors money for the longest possible time, charge fees and interest on the funds their depositors borrow, and return the money to the depositors as slowing as possible.
3. Financial tools exist for individuals and businesses to function and succeed exactly like a bank.
4. Individuals and businesses have a choice to either deposit their money as the depositor at a bank or to deposit their money into the financial tools that allow them to act like a bank.
5. Therefore, if individuals and/or businesses funneled their money into these specified financial tools then they could profit from their own money and transactions INSTEAD of the bank.

Seems simple.  It is. That’s what we teach everyday.   That’s the Infinite Banking Concept.  Don’t think it’s legitimate?  Then why do you see banks on every corner?  How could any other business, literally, be successful like banks?  Imagine if McDonalds was on each corner of a busy intersection throughout America.  Could they really all turn a profit?  Of course not…there’s not THAT big of a need.  So how can every bank on every corner make a profit?  By functioning in the matter described above.  

Let’s go a little deeper.

Banks make money differently than you do.  They first have to attract money to build their success.  Please understand, they produce nothing.  They ship nothing.  They manufacture nothing.  They are completely dependant upon you and others to deposit money.  These deposits are the bank’s “raw materials” to operate their business plan. 

Let’s imagine that two accounts are opened at the time of your deposit: one for you and one for the bank.  The bank is required to keep a small portion of your deposit on hand but is free to use the rest as it sees fit.  The primary function of the remaining money is used to loan out to others, maybe even yourself, and earn the interest on those loans.

I like how Don Blanton, author of Circle of Wealth, explains it: 

“The homeowner, who pays the builder, who re-deposits the money back into the bank, borrows this money.  After receiving the money from the builder, the banker quickly reactivates this process.  Once a small portion of these funds has been placed in reserve (as required), the bank loans this money out again.  Let’s assume the next loan is for a debt consolidation. Now you should start to see why being the bank is so advantageous!”

He continues, “Let’s continue with the examlple.  The money for debt consolidation will eventually be returned to the bank as payments.  After keeping the required minimum, the money immediately goes right back into circulation!  This time it could be used to provide a customer with a car loan.”

“As the money is again deposited, it could be used for installment credit on a credit card issued by the bank.  Can you see the cumulative results of this process?  The bank gets one dollar to do the work of several by focusing on multiple uses of your deposits.”

We hear and see advertisements every day of financial institutions telling us to deposit our money.  They’ll even give us an iPod or a new sweet toaster oven.  The have only two hooks: easy access to money and the opportunity to compound interest.  The strategy they themselves employ and the strategy that they want us to employ are very different.  They concentrate on deposits that can generate multiple returns while you are invited to leave yours to compound and receive one benefit: interest. 

Truly, how many people do you know that have actually gotten ahead financially because of what their money did for them at a bank as opposed to how many banks have gotten ahead financially because of what your simple deposits have done for them? 

What if you could redirect your “deposits” into an entity that you own and control and could therefore function just like a bank does?  Wouldn’t it only make sense that you’d benefit financially in the exact same way as banks do?

Don’t use the bank, be the “Bank” and do what the wealthy have done for ages.

Blessings,

Kelly O’Connor

Kelly O’Connor, AKA “The Banking Guy”, is one of a few individuals in the country who is considered an expert in helping people not only understand but implement a personal banking system through the use of current financial tools. His clients range from 19 year old “kids” to professional athletes.

He willingly exchanges the higher compensation that comes with promoting the plans of the banks and large investment firms for the gratification that comes from helping Americans, regain their lost treasures and…

• build an unassailable foundation of money that THEY control,
• free themselves from debt,
• secure their future income,
• keep an adequate ready cash account and
• create a legacy of wisdom and wealth

For information on books about this topic, Kelly’s live seminars and webinars, or a face-to-face appointment please email kelly@americanguarantyfinancial.com or call 303.577.7255.

Infinite Banking Concept? HUH? What the heck is that?

As I continue to regularly scope the internet for answers to the question – What is the Infinite Banking Concept? – I continue to discover websites that are written like a long essay. I decided to create a List.

So here it is: 37 things to define Infinite Banking.

1. Something you absolutely MUST learn about – that’s #1.

2. A paradigm shift in how you think of banking.

3. Exactly what banks do…but you’ll do it instead for your own profit, not the banks.

4. It is NOT some latest-and-greatest new thing…it’s been around before the IRS.

5. Teaches you the reality that wealth is created through FINANCING much easier than it is thru investing.

6. Makes you realize that you actually do finance everything

You either pay interest to someone else (i.e. a bank)

Or you lose the ability to earn interest forever on the money you use to pay cash for items.

7. Complies with Warren Buffet’s #1 rule of investing: NEVER LOSE MONEY!

8. Complies with Warren Buffet’s 2nd rule of investing: DON’T FORGET #1

9. Completely, yes completely, protects you from the greatest thief in the world…the IRS!

10. It’s also completely, yes completely, safe from litigation, lawsuits, and judgments. How do you think O.J. Simpson continued to golf and live a life after he was found financially liable? Yep, a smart individual had him utilize this tool.

11. Forces you to learn something new… “The dumbest people I know are those who know it all” – Malcolm Forbes

12. Utilizes in YOUR favor the most powerful, time tested business in the world. Banking!

13. Maximizes the 8th Wonder of the World (at least according to Einstein)…compounding interest upon interest.

14. Something wealthy families have done for centuries. Don’t believe me – read the book The Pirates of Manhattan

15. A Dividend Paying Whole Life Insurance contract is the vehicle and your behavior in how you finance items is the engine…just like an IRA is an investment vehicle and what you invest in (i.e. mutual funds) is the engine.

16. INSURANCE MYTH: pay the least amount of money for the most amount of coverage.

17. INSURANCE FACT: you should in fact fund the most amount of cash value for the least amount of insurance. Don’t believe it? Read my article “#1 Insurance Myth and 13 Reasons Not To Believe It”.

18. Yep, it’s the use of a life insurance contract and you’re the owner – Policy Holder.

19. A Mutual Insurance Company is used. Why? Because the Dividend with a mutual company is considered a return of premium and therefore not taxed (IRS Code #7702).

20. A rider called Paid-Up Additions is used to maximize the cash value. No, Dave Ramsey, 93% of the premium is not eaten up in fees when this Rider is used.

21. In fact, you have access to your cash within 5 days!

22. Again, it’s just like a bank…you can’t pull out of it what you don’t put in it.

23. Insurance agents often think I’m crazy because I don’t get paid on the Paid-Up Additions and most of the money goes to this Rider so that you have access to your cash. Some advisors say I do this in order to make large commissions…totally false. I make much smaller commissions on these deals since I don’t get paid for the majority of the transaction (i.e. Paid-Up Additions Rider).

So why do I do it, because after all, I’m a salesman? Well, I believe you’ll tell everyone you know and then I’ll make plenty of money because I’m changing people’s lives. Very simple.

24. As the Policy Holder, you have complete access to the cash value…anytime, whenever you need it or want it…just a phone call away to get your funds overnighted.

25. Funds within a Dividend Paying Whole Life Insurance policy are principally secured and engineered to get better.

26. Policy receives a guaranteed rate-of-return with dividend compounding interest. And again, NO, Dave Ramsey, these don’t average 2.6%.

27. How would you feel about a bank that still accrued interest on your account value even if you withdrew the money? Well, that happens with this tool.

28. So, you have complete use and control, in a tax-favored environment, with no risk of principal, with predictable results, and it continues to compound even if you withdraw funds.

29. The benefits all tie up quite well together.

30. You use the Infinite Banking to replace what you would otherwise finance through a bank and instead finance it through yourself. When it’s all said and done, you withdraw funds to buy a car, the account continues to earn interest at its original balance, you decide to treat yourself as a consumer and PAY YOURSELF BACK – just like a bank would have required; however, YOU receive the principal back and the interest you decide to charge yourself.

31. Why pay interest to yourself? Do I really need to ask that again? Isn’t it obvious if you’re trying to accumulate wealth? “There are two kinds of people in this world: those who pay interest and those who receive interest.” ~ Darrell C. Simms

32. The average household pays 35% of net income to interest expense and saves between 1% to 3% of net income. Why are we so concerned about the APR on that 3% (if we’re lucky)? The Infinite Banking Concept has the potential to recapture a much larger piece if not all of the 35% that’s going OUT. How would that affect your monthly take home pay?

33. So here’s your homework assignment: go back at least five years and calculate all that you have spent in principle, interest, costs, and fees to borrow someone else’s money. Total it. Then double it. That’s the difference…you paid it out and it was gone forever. If you paid it to yourself then it’s back IN your system.

$50,000 car with $12,000 in interest over time – $62,000 total outflow.

$50,000 to pay for car (still earns interest though, remember?) and you decide to pay yourself $12,000 in interest over time – $62,000 back in.

The difference = $124,000 for one car you financed.

Yes, the insurance company charges you some interest for the use of it but your account growth typically wipes that out; therefore, you get back the interest that YOU paid yourself.

34. Imagine if over time you redirected ALL of your financing needs…it’s staggering.

35. People have a bigger need for financing in their lifetime than they do death protection…that’s why I haven’t even mentioned it. Yet, you still have a death benefit as an added bonus.

36. It’s the best thing you can do for a child or grandchild.

37. And finally, it’s what we do for a living and have become the foremost experts for the wealthy, the business owner, and everyone else in between. I’m The Banking Guy and I do this for a living…until there are no clients left!

Look out world, here we come.

Blessings,

Kelly O’

Kelly O’Connor is one of a few individuals in the state of Colorado who is considered an expert in helping people not only understand but implement a personal banking system through the tool of insurance. His clients range from 19 year old “kids” to professional athletes. For information on books about this topic, Kelly’s live seminars and webinars, or a face-to-face appointment please email kelly@americanguarantyfinancial.com or call 303.577.7255

Cash Value life insurance is a horrible investment; however…

We’ve all heard it: Cash Value life insurance is a horrible investment.

Are you ready for this?  All those gurus and experts ARE RIGHT!

The problem, there’s a “however” that needs to be added to that claim.

It should read like this: Cash Value life insurance is a horrible investment; however, if it’s not used or designed for death protection and instead is designed to maximize the MEC (Modified Endowment Contract) line, then there’s no better place to park money.

What?

Let’s take a look at what was possible prior to 1986 when the government realized that the wealthy individuals had a tool that was too good of a tax shelter…got to love the government.  Prior to 1986 NO ONE talked bad about life insurance.  Why?  Because you could put as much as you wanted, no limits, into a policy and the insurance company would underwrite you for a small amount.

For example: someone with a million dollars could put it into an insurance policy and the insurance company would underwrite them for maybe $100,000 in death benefit.  Why would the individual do this?  For many reasons: All the money in the policy was safe from lawsuits, litigation, and even IRS liens.  The money was totally liquid and they had available what they put in.  Let me say that again: this money was completely liquid and could be used at anytime with NO qualification necessary and NO IRS involvement. The money also had guaranteed growth.

Real life example: the Denver Business Journal in November of 1999 produced what they called “The Century Book”.  This special edition provided a 100 year history of Denver and highlighted something or someone for each year of the century.  When you come to the year 1929 the event covered was of course the Great Crash.  Also within that article was the story of one of Denver’s most wealthy individuals and at the time Denver’s best market player, Claude Boettcher.  The article says this:

“When he returned (he was traveling in the Soviet Union when the market crashed), he fired the messenger who brought him news of his financial ruin.  He had the courage to wait for stocks to drop more before he borrowed $2 million for his insurance policy and bought stocks and banks – the reason he is still known to history.”

How much death benefit do you think $2,000,000 in cash value would have to have?  Back then, very little.  Notice, when the market crashed he didn’t lose his cash value.  It’s guaranteed. It can’t be lost.  If this tool was not in his portfolio then Claude would have been just another story of riches to rags.  But still to this day his wealth lives on here in Denver.  Now if he was Denver’s best market player why in the world did he have so much in cash value life insurance?  He was obviously one smart man.

In 1986, the government decided that it was not fair that the wealthy had such a great tax shelter tool and decided to create what is called the Modified Endowment Contract.  Basically, this rule added the risk to the insurance company by creating a minimum death benefit for the premium being paid to fund the policy.  If a policy owner goes over this MEC line then the majority of all tax advantages are wiped out.  The policy becomes a qualified plan with the IRS all over it…forever.  This new MEC rule limits what I can do with my own money…thanks Big Brother.

Let’s get back to the original MYTH.  Virtually all gurus and experts say that Cash Value life insurance is a bad investment.  Let’s first prove they’re right before we illustrate the proper use of the MEC line.

If I had a healthy, 30 year old client who was willing to fund a policy for $25,000 per year, how much insurance do you think that would buy?  Probably around $2,500,000 in death benefit.  Why would this be a bad choice?  For the exact reason Dave Ramsey and Suze Orman say:  your cash value sucks.  Now Dave says you have no cash value for three years…even with this type of policy he’s wrong; however, it would take 12 years of paying $25,000 each year before you’d have available in cash value what you put in.  Not a good option.  If you needed $2.5 million in death protection then buy term and invest the rest.

Here’s the “however”.  However, if the policy is NOT designed to maximize the death benefit and “dance” on the MEC line then what do we have?

Same example: this client is willing to fund a policy for $25,000 per year but we use it to purchase the LEAST amount of death benefit in order to have the most cash value available.  The death benefit is only $900,000 and he has over $17,000 available DAY ONE.  When he makes his year three payment of $25,000 his cash value grows by $29,000…already getting back more than he put in.  At the end of year four when year five’s premium is paid, his total cash value exceeds what he has paid into the policy…NOT twelve years.  Let me ask you this: if you save for five years to buy a car by using a money market at your bank (which is what Dave Ramsey recommends), how much would have in the account?  What you put in right?  Plus a very small amount of interest; however, the IRS takes their share of that every year.  If Dave Ramsey recommends this type of account for purchasing items how is a policy designed in this matter a bad thing?  Keep in mind, the IRS doesn’t get their share.  Shoot, you even have a growing death benefit just in case…at year five the death benefit is over $1.3 million. 

Insurance people think we’re the stupidest insurance agents around.  Why?  Because we don’t get paid on the cash portion of the policy.  The commissions would be incredible if we did the first example but we aren’t here to sell expensive death benefit policies we’re here to teach individuals how to bank.  Our commissions are significantly reduced.  Why would an insurance agent turn someone down this path when they can attempt to sell a huge policy and make a ton of money?  We don’t consider ourselves insurance agents, we’re bankers.

So why would we want to fund a policy like this? My next post will be how to USE these funds to redirect debt or purchase vehicles, equipment, etc.  Over time, if you implement this concept, you will NEVER pay another dollar in interest to another entity, you will NEVER need to finance with a bank, and you will NEVER lose a dime.

Cash Value life insurance is a horrible investment; however, if it’s not used or designed for death protection and instead is designed to maximize the MEC (Modified Endowment Contract) line, then there’s no better place to park money.  You get back everything you put in, there is no risk of principle loss, there’s a guaranteed return plus a tax-free dividend, compounding growth, gains tax-deferred but can be used later in life tax-free, no government involvement (they already ruled on all this), creates an immediate tax-free estate, and most importantly, it’s liquid and you have complete use and control of the money (read that one again – what other tool, other than a bank account, can you claim this).

You can have everything you need and anything you want. Don’t use the bank, be the “Bank”. Do what the wealthy have done for ages.

 

Blessings,

 

Kelly O’Connor

The Banking Guy

 

Kelly O’Connor, AKA “The Banking Guy”, is one of a few individuals in the country who is considered an expert in helping people not only understand but implement a personal banking system through the use of current financial tools.  His clients range from 19 year old “kids” to professional athletes. 

He willingly exchanges the higher compensation that comes with promoting the plans of the banks and large investment firms for the gratification that comes from helping Americans, regain their lost treasures and…

• build an unassailable foundation of money that THEY control,
• free themselves from debt,
• secure their future income,
• keep an adequate ready cash account and
• create a legacy of wisdom and wealth

 

For information on books about this topic, Kelly’s live seminars and webinars, or a face-to-face appointment please email kelly@americanguarantyfinancial.com or call 303.577.7255.

Dave Ramsey is CLUELESS!

Let me be a little more specific.  I do have to tip my hat to Mr. Ramsey for all that he has done to help people get out of debt.  His work has freed thousands of individuals and couples from the crippling effects of debt…that horrible thing we do that requires us to pay someone or something back WITH interest.

 HOWEVER, what he recommends when the focus shifts from debt reduction to capital accumulation is just plain STUPID.  I so wish Dave would just stick to what he knows best…getting out of debt.

 Let’s first take a look at what he says.  Here’s one straight from his website: “If you follow my plan, you will begin investing well. Then, when you are 57 years old and the kids are grown and gone, the house is paid for, and you have $700,000 in mutual funds,…”

 So what’s the big deal?  If you look at the criteria you’ll laugh out loud.  This example was a 30 year old who would invest $93 per month for 27 years into a good growth mutual fund.  The basis (the total amount contributed) would be $30,132…that must be some kind of return he’s calculating.  As of matter of fact, 

• He assumes a 17.75% annual return EVERY year. 
• Whenever he’s calculating future account balances he always uses a return between 15-18%…totally ridiculous. 
• He does this all the time by the way.
• Recently on Fox & Friends (Fox’s morning news program) he was asked a question and responded in the same manner he always does:  “stick with your money markets for short term needs and go with a good mutual fund, like we say over and over, for your long term investments 5, 10, 20 years out.” 
• He teaches his students to NOT invest with a mutual fund that is younger than five years – “you need a good track record.”  

I decided to look at 2008’s mutual funds with a return over 12%.  I thought I’d be nice and only cover the first half of the year.  Here are the results: 

• Of the Top 10 only eight had a return over 12%
• Five of the eight were younger than three years therefore would not have been selected. One of the five was brand new and had no data at all – certainly not recommended by Dave.
• Of the three remaining, all of them had a negative five year average. All were no-loads but averaged 1.75% in fees. 
• All remaining three had a huge spike that lasted less than 60 days. 

So, five of the eight, with the returns Dave says is possible each and EVERY year, were too young.  Three of them averaged negative returns over the previous five year history.  And, they had a very short stretch of success.  Remember, he never recommends to sell so all those gains would have been lost in the second half of the year…all of them are down over 40% as of now.  As a side note, these returns didn’t include what was lost to fees and taxation.

But, the main point,

• There are thousands of mutual funds (there are more MFs than stocks)
• Do you really believe you could have timed it perfectly (again only a 45 to 60 day window)?
• Do you think you would have been so lucky to narrow it down to the ONLY three which actually hit the returns he talks about? 

If that’s not gambling I don’t know what is.  Playing with mutual funds is NO different than playing blackjack in Vegas.  It’s NOT investing it’s speculating.  Now look, I understand that there are people out there who can accomplish what Dave recommends but Dave does NOT deal with nor speak to those individuals who treat their money management / trading as a full-time job.  He specifically recommends this strategy and “attainable” results for your average Joe – “like we say over and over”. 

Just recently Dave Ramsey held what he called Town Hall For Hope.  It was a great idea to market his get-out-of-debt business…which, by the way, is excellent.  He has great insight with this particular niche of financial assistance. 

When it gets to investing he’s simply laughable.  In all seriousness it’s very frustrating because he’s just plain wrong and leads many down a path that is just not attainable (unless you are extremely talented at trading which most are not). Here’s a question that was asked of him during the Town Hall For Hope: 

Q: Dave, I have been through Financial Peace University and found some of the rates of return (10–13%) you suggest for “growth mutual funds” to be unattainable in today’s marketplace. Have you revised your suggested rates of return, and where could I find those rates?

A: Those rates are what the stock market has averaged over the past 70 years. Some years it has averaged more and some less. The market may gain 15% one year, then 10% the next, then 3%, then 20%. The gain has varied year to year, but it has averaged 12%. Sometimes it may lose money, but the average is still 12%. Even in these down times, I would still project the same overall growth, based on the past. Remember, the market eventually recovered after the Great Depression, a president resigning, an energy crisis and cowards flying planes into buildings. We’ll survive this as well.

Let’s look at this answer he gave.  First of all, 12%?  There is not one respected financial entity that claims the average is 12%.  According to www.soundmoneymatters.com anyone claiming the average to be 8% is “lying to you.”  The saying is so often repeated that even newcomers know it – “over time, the average stock market return is 8-12% annually”. Dave seems to suggest that if you’re investing in the stock market you will earn 12% if you can just stay in the market long enough (so why does he calculate a 15-18% return when he’s using actual numbers?). The problem with a statement like that is incompleteness of thought and downright deceptiveness.

This statement purports the idea that if you can only buy a few (or maybe only one) stocks you are going to achieve that famous 12%. That is some really good news! Oh, by the way, which stock was that?

It’s sad but true that there are people who really believe in this mythical 8-12% stock market average return by just simply buying a stock or mutual fund and sitting there doing nothing. The flaw in the entire discussion is that the performance of “the market” doesn’t matter; what matters is the performance of the investments in your stock portfolio.  If you make a 100% return on your portfolio, you had a great year regardless of the S&P 500. If the Dow made 2% and you beat it with 2.5%, did the net result in your portfolio really give you something to brag about?

You would think then that he would be a fan of a product that actually does perform based upon “the market”, like a Fixed Indexed Annuity.  They can be linked to the S&P 500 and go up when it goes up.  One thing they don’t do is go down when the S&P goes down…SECURING YOUR PRINCIPLE. 

But Dave says they are a joke for two reasons: 1. There are fees if you pull your money out within a 10 year period and 2. They are a product of an insurance company. 

Okay wait, if I were to follow his advice I wouldn’t care about the 10 year term because I’m never supposed to touch this money anyway – “you don’t sell. You think long-term and just ride it out.”  As far as the second reason, I believe he’s just plain naïve here.  Look back over time and show me how many investment firms, Wall Street brokers, banks, etc have gone out of business compared to insurance companies.  Maybe, just maybe, they have something figured out.

I’m not recommending Fixed Indexed Annuities here I’m simply pointing out his inconsistencies.

Finally, I think its fine that he attempts to teach an idea to people.  The problem I have is that outside of his advice there’s only heresy and scammers who are focused on commissions.  Again, very naïve and utterly false. 

Do you remember that show where Ben Stiller picks up a hitchhiker who has a great business idea?  Instead of the “8 Minute Abs” video he wanted to produce the “6 Minute Abs” video.  I think I may take a similar angle and start promoting that the average Joe getting out of debt and beginning to accumulate can toss away the recommendations of old with 12-18% returns and do my recommendation of 30-40%.  That’s it!  From now on I’m going to tell my clients to only invest their money in those “funds” and “the market” that returns them 30-40% so they can have plenty when they retire.  Then, I won’t ever recommend any specific “fund” or “market” so that I don’t look like a fool. 

Look out world, here I come.

Blessings,

Kelly O’

Kelly O’Connor is one of a few individuals in the state of Colorado who is considered an expert in helping people not only understand but implement a personal banking system through the tool of insurance.  His clients range from 19 year old “kids” to professional athletes.  For information on books about this topic, Kelly’s live seminars and webinars, or a face-to-face appointment please email kelly@americanguarantyfinancial.com or call 303.577.7255

The BEST way to purchase cars

Profit from your car purchases?

What does it cost to buy a car?

If you answered “Add up the monthly payments…” you’d be right when the car is financed through your local bank or auto lender. If you bought a car every four years and financed $24,000.00 of each car’s price at 6.75% (approx) and you did that ten times over forty years your total cost would be about $272,000.00…and your net worth would equal the used car value of the last car you bought – maybe $6,000.00.

Hmmm! Straight downhill. -$271,976.00…that doesn’t look good. How about this alternative. Instead of borrowing the money to buy the cars, put the same monthly payments into savings. In four years you will have more than the $24,000.00 needed to purchase your car with the cash. You’d have to delay the purchase for four years to accumulate the first $24,000.00 but surely this would save a great deal of money and improve your net worth wouldn’t it?

Indeed!. The total 40 year cost would still be just over $240,000.00. If you could maintain a 3% savings rate of return over 40 years. Your savings would accumulate to $65,841. You would of course, keep the $6,000.00 used car.

Boy! $65,841 is a lot better, but you still lose access to most of the money you save and the auto dealer keeps your $240,000.

What if you had a way to finance the cars yourself just as the bank does – and capture both the principal and interest that you used to buy the cars – just as the bank does?

As in the savings example, you would accumulate the first $24,000.00 in your “bank” to buy the first car. You would then repay yourself just as you repaid the bank – but, with one very significant difference. You would get to keep the entire principal and interest you pay into your own account (not the bank’s account) and your money – all the money you borrow and all the money you repay to yourself – is working all the time…just like the bank’s money. The result; you add over +$158,000 to your net worth and you still keep the $6,000.00 car. Compared to bank financing that’s a gain in net worth of $430,789.

Car buying can be fun when YOU are the “bank”. It doesn’t stop there either. You can be the “bank” and recapture much – if not all – of the money you spend on your life and lifestyle.

You can have everything you need and anything you want…don’t use the bank…Be The “Bank”…do what the wealthy have done for ages…it’s easy…you can do it…we can show you how.

 

Blessings,

 

Kelly O’Connor

 

 

 

 

Kelly O’Connor is one of a few individual’s in the state of Colorado who is considered an expert in helping people not only understand but implement a personal banking system through the tool of insurance.  His clients range from 19 year old “kids” to professional athletes.  For information on books about this topic, Kelly’s live seminars and webinars, or a face-to-face appointment please email kelly@americanguarantyfinancial.com or call 720.226.6840.

 

What would all the "experts" say if…

…Congress made the following changes to the Roth IRA in order to promote savings and financial security for the individual? 

1.  They removed the income restrictions making it possible for ALL citizens to invest in the Roth…from the hourly employee to multi-million dollar athletes.

2.  They also decided to remove the limits on the amount one could invest; therefore, the hourly employee could deposit as much as he/she could as well as the millionaire.  Post-tax dollars of course (no change there).

3.  In order to help people stay out of debt (let’s face it, there are way too many bankruptcies and foreclosures) they removed the age restrictions and allow for the new Roth IRA to be completely liquid.  No more waiting till you’re 59 1/2 and no more Required Minimum Distributions (RMDs) when you’re 70 1/2.  You can withdraw or borrow from this account AT ANY TIME.

4.  What if they added an extra bonus to really promote this new Roth by adding a rule that if one does borrow from their account the full balance still earns interest.  For example: you have a balance $100,000 and borrow $20,000 to buy a car.  The account would not compound interest at $80,000 but continue to grow at the full $100,000.  Therefore never giving up the opportunity to earn interest on your money.

5.  Realizing that one individual may be significantly more successful than others in their immediate family, Congress decides to allow an individual to start a new Roth IRA for his/her family members…again, without limits on the dollar amount. 

6.  What if they included a guaranty that the new Roth IRA could NEVER lose principle.  Meaning, the account balance would NEVER go down…EVER!

Honestly, what do you think Suze Orman, Dave Ramsey, and all the other “experts” would be saying about these new changes?  They already recommend the Roth IRA, even with all the limitations.  They already advise to put as much as the law allows into these tools.  If these changes were to be made these people would be all over it.  Imagine, now they could acquire the well-to-do and the extremely wealthy as clients.  It’s crazy to envision what the hype would be like for this new Roth IRA…they’d be drooling and advising EVERYONE to do it as soon as they could.

Here’s the kicker…IT ALREADY EXISTS!  If it already exists, then why aren’t they drooling over the chance?  The answer:

BECAUSE THEY DON’T GET PAID TO PUT YOUR MONEY IN THE TOOL THAT ALREADY OFFERS THIS SUPER, STERIOD LACED ROTH IRA?

It’s not a joke people.  Wallstreet, brokers, financial planners, they all make money by managing your money.  If they don’t have the money under their control then they don’t make their annual fees.  How many of you, who have lost a ton this past year, received a call from your financial guy telling you to put all your funds into cash?  My guess is ZERO…unless maybe your financial planner is a family member.

How about this one:  I worked with a client who last summer (July ‘08) had three accounts totaling approx. $960,000.  Going through his account statements he was being charged roughly 1.75% in fees.  When his accounts dropped to $600,000 he was still being charged 1.75%.  He decided to take the advice of this planner which was what – “Stay in. Don’t secure your losses. It’s going to come back.”  Now that his accounts are worth roughly $300,000 guess what he’s still being charged…yep, that 1.75%.  This gentleman is 67 years old and had planned – and had enough by the way – to retire at age 70.  “But you’ll average 8% if you stay in.”  Come on.  Get real.  What if, you’re close to retirement when something like this happens?  Does that “8%” mean anything?  Absolutely not…IT’S ALL ABOUT PRINCIPLE SECURITY!

So, in three years, just to get back to his previous balance, this guy will need a 47% return EACH year.  Good luck.

YOU DO NOT need to put your trust in someone else, you do not need to play the game and hope you get the return, you do not need to watch the market everyday to attempt to time the perfect investment.  The tool exists, all you need is the knowledge of exactly how to make it work.  The wealthy have been doing this for over 200 years.  It’s time the average consumer does it as well.  Let’s all get ahead.

Kelly O’Connor

 

Kelly O’Connor, AKA “The Banking Guy”, is one of a few individuals in the state of Colorado who is considered an expert in helping people not only understand but implement a personal banking system through the tool of insurance.  His clients range from 19 year old “kids” to professional athletes.  For information on books about this topic, Kelly’s live seminars and webinars, or a face-to-face appointment please email kelly@americanguarantyfinancial.com or call 720.226.6840.

 

 

 

Isn't it wiser to buy term insurance…

…and invest in mutual funds than it is to put so much money into whole life insurance?

No!

First off, it is foolish on the face of it that you can create an unassailable financial foundation by putting your money at risk in mutual funds.  Why? Here’s a list of 13 reasons:

1.  One has only to look back over the history of mutual fund performance to recognize that to be an untruth.

2.  We’re not talking about the ‘hypothetical’ performance of any one or all mutual funds. 

3.  The suggestion that mutual funds have delivered a ten or twelve percent return over the last so many years does not prove anything. 

4.  The fact that over that same period of time individual investor performance after taxes, fees, commissions, inflation, and the demands from life’s surprisingly unsurprising surprises is about one percent seems much more relevant.

5.  We are not suggesting that there’s something wrong with investing of any kind or specifically investing in mutual funds. 

6.  Mutual funds may have a place in your personal economy. 

7.  To suggest that they can replace the real money that you need in the foundation of your personal economy is foolish. 

8.  That would be akin to suggesting that the first place you should begin an investment program is at the black jack and craps tables in Las Vegas.

9.  Moreover, in my 12 plus years of experience, I have never met a single person that followed that model and built an unassailable financial foundation,

10. much less achieved wealth.

11. On the other hand, I’ve met dozens – if not hundreds – who have found financial ruin at the end of that path.

12. The obvious problem with this strategy is that it doesn’t build a foundation of secure money that you control.

13. Instead, buying term insurance and investing in mutual funds puts your foundation money at risk and leaves your family security at the mercy of a tight budget both in the event of economic downturns and physical disaster. What are you going to pay first, your term insurance premium or the electric bill? This is why 98.5% of all term policies lapse.

The idea that you can buy term life insurance and invest in mutual funds to secure your future and that of your family was a terrible idea when it was introduced to Americans by a high school coach with a part time insurance sales job in 1977, and it’s a bad idea today.

It guarantees only that it guarantees nothing.

You can have everything you need and anything you want. Don’t use the bank. Be The “Bank”. Do what the wealthy have done for ages…it’s easy…you can do it…we can show you how.

Blessings,

 

Kelly O’Connor

The Banking Guy

 

 

 

Kelly O’Connor, AKA “The Banking Guy”, is one of a few individual’s in the state of Colorado who is considered an expert in helping people not only understand but implement a personal banking system through the tool of insurance.  His clients range from 19 year old “kids” to professional athletes.  For information on books about this topic, Kelly’s live seminars and webinars, or a face-to-face appointment please email kelly@americanguarantyfinancial.com or call 720.226.6840.

 

 

 

11 Reasons Why You Haven’t Heard Of This (Infinte Banking Concept) Before

I remember when I asked this very question and now I hear it everyday.  To my astonishment, the model of Infinite Banking has been the model preferred by successful savers and investors for hundreds of years.

 

More to the point, it is the model that successful Americans followed for the past two centuries while building the most powerful economy in history (Read the book Pirates of Manhattan).

 

If we glance back over the past 40 years, this tried, tested, and proven model has been smeared by misinformation from the huge banking and investment industries and their advertising efforts to convince us that we should put our money in their pocket.  Here are 11 reasons why you haven’t heard of this before.

• Americans have been duped into thinking that this historically proven model, which by the way is even more prudent in today’s environment, is somehow no longer valid.

• We have been continuingly marketed to, and quite successfully, to get us into believing that giving control of our money to others is wiser than maintaining control ourselves. 

• Shoot, even the government has done its part in having us put our money & retirement plans into their hands.

• We have been convinced that saving money, by that I mean getting a guaranteed rate-of-return and knowing that we’ll have more money at the end of the year than we had at the beginning, is somehow naïve, unsophisticated, and foolish.

 

NONSENSE!  BALDERDASH!  BALONEY!  FLIMFLAM!  HOGWASH!  HOOEY!  POPPYCOCK!  RUBBISH!…and all those other great thesaurus words!

 

• Large financial institutions, unions, government agencies, manufacturers, retailers – the large banking and investment industries – aim to get control of your money through personal loans, mortgages, credit cards, savings, taxes, assessments, dues, investments, “sales”, and any other mechanism they can devise to move your money into their accounts. 

• They make bad decisions feel good.

• There are thousands of companies that have discovered that your money is the pavement for their road to wealth. 

• They are, of course, unwilling to tell you that twelve-months-same-as-cash is not really the same, or that the hypothetical return on a mutual fund really is hypothetical,

• or that the average “rate-of-return” they advertise excludes years of poor performance,

• or that the small tax or dues increase becomes burdensome in a few years.

• In short, you haven’t heard a lot about the Infinite Banking Concept because it can make you wealthy – ON YOUR OWN – without putting your money in the pockets of others.

You can have everything you need and anything you want. Don’t use the bank. Be the “bank”. Do what the wealthy have done for ages…it’s easy…you can do it…we can show you how.

 

Blessings,

 

Kelly O’Connor

The Banking Guy

 

 

 

Kelly O’Connor, AKA “The Banking Guy”, is one of a few individual’s in the state of Colorado who is considered an expert in helping people not only understand but implement a personal banking system through the tool of insurance.  His clients range from 19 year old “kids” to professional athletes.  For information on books about this topic, Kelly’s live seminars and webinars, or a face-to-face appointment please email kelly@americanguarantyfinancial.com or call 720.226.6840.