John Moriarty (2015)
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Front Matter
Location 152: Our citizenry's fiscal dependence on others is found in the areas of society where governmental control is rampant: education, housing, banking, retirement, and employment.
Location 155: Generations of families are taught to believe certain myths about money, and they pass those "lessons" down to their children. We need a generation of Americans to break the cycle of financial illiteracy and gain true knowledge about everyone's human resources (time, talent, and capital). It is then that protecting personal economy is possible for those who value financial independence and control over their economic futures.
Location 186: But the thing that set the Nance family apart and put them on a different trajectory was that Mr. Nance started his own business early in life and created an environment of first-generation wealth for his family and anyone around them willing to learn.
Location 210: The vast majority of Americans have forgotten that the most important characteristics of a good financial picture are flexibility and control, because they give you the personal freedom to choose. That freedom has been lost (some would say stolen) by the government's actions over the last hundred years, especially the two big ones in 1913: Introduction of the federal income tax Creation of the Federal Reserve.
Location 218: Ultimately, the state wants you to believe that it can do better for you than you can for yourself, and the vehicle that produces this "utopia" is the redistribution of wealth through taxes and inflation.
Location 234: Ultimately, your financial power comes from taking control of your own financial picture.
Location 240: Knowledge is power, and it all starts with education. Expand your knowledge beyond what you know that most people do with their money.
Location 266: The choices for a good education are now based on geography and finances. Good public schools versus bad public schools; or pay for private education.
Location 278: Why, in twenty years of formal education, is there no real focus on providing financial literacy?
Location 294: When a for-profit company has government guarantees behind it, is it more concerned about minimizing risk or maximizing profit? If the companies make money, the shareholders and executives win. But if they lose money and fail, the taxpayer bails them out. And you know the rest of the story based on our recent housing market.
Location 303: Whether you have achieved financial success should not be determined by whether you rent or own your home. Home ownership has a number of financial and emotional advantages (from tax benefits to creating memories with your family), but your priority must be affordability.
Location 306: Depending on where the interest rate market is at that time, renting versus buying is a decision that can have a long-term impact on your financial picture.
Location 308: Structuring the terms of the loan so that they benefit you as well as the bank is all about controlling the flow of your money - which is the American dream I subscribe to based on today's economic uncertainty.
Location 321: A good bank focuses on taking less risk and building relationships with its customers so that it can understand their habits.
Location 326: The Federal Reserve has created its own role in our "fractional reserve" banking system, where in for every ten dollars deposited, only one dollar goes into reserves, while the other nine dollars can be loaned out.
Location 328: The Federal Reserve is the vehicle in our system that creates money out of thin air.
Location 337: How will the US government ever pay off this debt? My opinion is that it will inflate it away and ruin the real value of assets owned by its citizens. As the value of the dollar decreases, the debt becomes cheaper and easier to pay off with new money the government creates. Anyone holding dollars (or assets valued in dollars) will become a victim of this legal charade.
Location 348: Entrepreneurship is "the process in which one or more people undertake economic risk to create a new organization that will exploit a new technology or innovative process that generates values for others."
Location 350: Entrepreneurship is a mindset. The trick is to educate and encourage the largest number of people to feel comfortable with the notion that they can start businesses, control their destinies, and contribute to society through innovation and hard work.
Location 352: At any given time, 15 percent of the population is running its own companies. Our goal should be to make starting a business as common as getting married or parenting.
Location 368: We've been offered $17 trillion in promises, and people are poorly educated with their homes worth less.
Location 372: We need entrepreneurs to start businesses. Job creation cannot occur without them.
Location 375: What is most interesting about the American work ethic is that it is most threatened when we become too comfortable. Our economic security is best served by economic discomfort.
Location 394: Bureaucratic capitalism has come to define the mindset of middle-class Americans through the iron triangle's concept of the economic "safety net." And what was the main focus of the safety net? A comfortable retirement for the entire middle class and the hardworking, blue-collar Americans who got us through WWII and into a new era of prosperity. Unfortunately, in 2014, we know that this fairy tale does not end happily for millions of Americans who believed in the story.
Location 399: Since the mid-1940s, three resources have made up the iron triangle's "three-legged stool" of financial security: company pension benefits, Social Security benefits, and personal savings. Ladies and gentlemen, the three-legged stool is broken.
Location 408: As debt and consumerism drove the economy's expansion in the 1980s and '90s, Americans formed bad habits: Corporations traded defined benefit plans (pensions) for defined contribution plans (401ks). Social Security had fewer workers paying into it and more recipients being paid out to. It became unsustainable. Personal savings rates plummeted to negative numbers in the 2000s, and people relied more heavily on the stock market to achieve their goals (i.e., make up for lost time). Investors were never educated on the risks of the market, and tax-deferred retirement accounts became ticking tax time bombs.
Location 421: Relying on the government and a corporation to provide you retirement "security" can be dangerous due to the changing tides of decision makers and profit motives.
Location 448: Another way to think about this problem is through the eyes of the have-nots - people who do not make a lot of money and people who don't have enough assets to retire. Unfortunately, these groups consistently vote for whomever promises them a brighter future because no matter what, taxes and inflation are not a concern to them. So if everyone's vote is worth the same and more people are falling into the have-not category, I ask anyone reading this book who makes a good income or has built up a solid nest egg: who do these votes really benefit? Not the people who did a good job saving money and taking care of themselves. And not even those in the unfortunate circumstance of lacking the income or assets. Why not? Because they have no control or options in this situation. They are at the mercy of the state.
Location 454: If you really want to make it through retirement, not just to it, you have to look at your financial picture in a completely different way and consider strategies that focus on minimizing risks against your personal economy.
Location 458: You should get educated and ask a lot of questions.
Location 461: Don't look to the government for answers. Entitlements are a trap.
Location 463: Focus on minimizing risk in your financial picture because you are not entitled to anything. Go out and earn your accomplishments. Be realistic and start focusing your efforts toward protecting your personal economy: Save more (or create more money to save). Spend less (or figure out ways to control more of your money). Work longer (or smarter).
Location 487: Here's how I saw it: the only reason a company would overpay me from the beginning would be a plan to underpay me some time in the future. I knew that later on, I would have to fight for raises and convince the company of my value. I decided that that game could be played by someone else.
Location 491: Today, very few people go to school with an inner drive focused toward entrepreneurial opportunities. College degrees steer your learning toward getting a job, not building a life.
Location 497: Student loan debts are much higher now because the cost of education has increased dramatically. Who benefits from the higher debt? Not the student. Schools promise that a degree will be your ticket to success, but the skill sets learned in college don't prepare people for real-world experiences anymore. To be successful today requires more entrepreneurial initiative.
Location 513: I have a simple motto: It's only money. You can always make more. I have confidence in my entrepreneurial abilities and understand that money is just a tool to assist in accomplishing our purposes in life. The stuff we buy won't make us happy or give us fulfillment.
Location 596: Because the average American does not experience a simple retirement anymore. The act of getting to retirement has become more difficult, as has getting through retirement.
Location 615: So what can be done to protect your personal economy? Let's face it, the three-legged stool of retirement (the company pension, Social Security benefits, ample personal savings) is barely a memory. The idea of retirement has been manufactured to get the masses to conform.
Location 618: Why would you ever stop doing something that you are passionate about, very good at, and highly compensated for?
Location 619: Happiness should come from our actions and experiences, not getting to an arbitrary finish line defined as a certain age.
Location 621: The more control you retain over your wealth, the easier it is to make decisions in your best interest. Do you really think that the financial institutions (banks, brokerage firms, and insurance companies) can make you rich if you save through or invest in their financial vehicles?
Location 623: It is when you match the purpose of your money with the appropriate financial vehicles that you can actually protect your personal economy.
Location 648: Doing what you do best and delegating everything else to competent people is a practice that all people should master: you are essentially trading your capital for someone else's talent in order to free up your time.
Location 656: Controlling your time involves saying yes to certain things that add value and no to everything else.
Location 662: Your talent is your habits, skills, and unique abilities.
Location 664: Wouldn't your life be so much simpler if you could wake up every morning and focus on what you do best?
Location 672: A true entrepreneur is someone who wants to educate others with a vision for adding value in some area of life that brings enjoyment to clients.
Location 681: For your uniqueness to emerge or become external and powerful, you must delegate to superb support persons all activities except those that call for your unique ability. This process of delegation could take several years, but it is in your best interest to do it because you'll need all the time available to focus on your unique ability.
Location 690: Once you determine what your two or three unique abilities or talents are in the context of business then your next step is to surround yourself with capable people.
Location 694: Talent is a special human trait that needs to be nurtured and supported. Constant education that enhances someone's growth keeps talents progressing. Using your talents keeps you sharp and effective. Seeing results causes confidence to build, and one can believe that he or she is truly unique and making a difference in daily life.
Location 698: Life is changing at a rapid pace, so when it comes to your financial picture, surrounding yourself with a team of professionals who have expertise in all areas of money is essential.
Location 701: With the proper use of your time and a focus on your talent adding value to your career, creating capital should be the result for many.
Location 722: How much of these resources do you need and want so that you can enjoy your life? That question has gone unanswered for millions of Americans. They find themselves paralyzed by their limiting beliefs.
Location 734: Our society has been heading toward this financial abyss ever since the 1960s thanks to "The Great Society" movement and the push toward a consumption-based economy. Once the middle class started believing that the federal government, corporations, and unions were going to take care of its future needs, millions of Americans began to prioritize spending over saving.
Location 748: To get started on the journey toward protecting your personal economy, first be sure you can cover your month-to-month expenses. These are usually your financial needs. Paying the bills every month is not very exciting, but if you don't, things can be turned off or taken away.
Location 753: You need to create good saving and spending habits, which can begin simply with a process to set aside a certain percentage of your income every month first; no matter what.
Location 777: Instead, financial life is more like a series of sprints or a relay race. You do everything you can to get to your next finish line, rest a little, and then get back into the starting block.
Location 795: In today's economy, increasing interest rates can increase volatility with both stock and bond holdings.
Location 804: We should consider changing not only which types of assets we invest in but also their purpose. Why save money just to let it sit in an account forever? The purpose of saving money is to use it!
Location 816: Internal return is what your asset generates through its performance (both income and appreciation over time). In most cases, this is calculated as the return on investment (ROI). Most retail, market-driven vehicles (stocks, mutual funds, and exchange-traded funds [ETFs]) use this return to measure their performance.
Location 822: But internal return is normally out of your control because you have no way to know how much appreciation you'll earn from the market.
Location 824: External return is rarely considered, but entrepreneurs and institutions take advantage of this factor all the time. Think of it as return on cash flow.
Location 833: External return is subjective because everyone's financial picture is different.
Location 838: You first need to realize that cash flow is everything. Managing your budget to keep spending on a realistic path while simultaneously building savings is extremely difficult.
Location 841: Next, you should implement financial strategies that get money flowing into your control without completely depleting your savings or access to capital. Paying off credit card debt, student loans, and your home is a very beneficial financial strategy, but if you leave yourself with zero savings to accomplish these goals, you could wind up vulnerable should an unexpected event occur with your job, health, or family that affects you financially.
Location 876: This is one big reason I am a proponent of certain types of alternative assets for these types of big-ticket items. If structured properly, certain assets can produce both internal and external returns while you use the money.
Location 937: Expand your knowledge beyond what most people do with their money. Create certainty with a mindset that fits your needs and wants.
Location 948: However, don't focus your energy on the things that you cannot control (the government, the Federal Reserve, interest rates, stock market performance, your health, and so on) that impact your personal economy. Instead, turn to the areas that you do control: The flow of your money How your savings and investments are taxed Determining the purpose of your money Identifying the major risks that threaten your personal economy.
Location 984: When we communicate our purpose or cause first, we communicate in a way that drives decision-making and behavior.
Location 1008: I consider the Federal Reserve the government's henchman: if it can't get what it needs through taxes, the Fed will just print the rest.
Location 1019: The Fed creates bubbles in the economy and makes excuses when things go bad. Who ends up getting hurt? Not the rich.
Location 1029: Advisors don't control the performance of those investments. You only make money when those accounts go up. But the advisor makes money in any market environment: up, down, or flat. So, unless you're getting value in some other area, you may end up disappointed.
Location 1055: Abundance is a mindset. Notice how you think, communicate, and behave around people who you believe are truly wealthy. It will tell you a lot.
Location 1057: The truth is that my wealthiest clients don't necessarily have millions of dollars. Their wealth resides in several areas of their lives that create balance: Happiness and comfort around living in the moment Enjoying their big-ticket items (second home, travel, hobbies) Good health for themselves (and their parents) A multigenerational family presence (parents, kids, and grandchildren with strong bonds that create powerful memories) Giving back to society, paying it forward (fundraising for charities and foundations).
Location 1066: What really matters are the fundamentals of your money habits - saving more than you spend (preserving cash flow) and controlling your money's flow. You'll have the peace of mind that your personal economy is protected.
Location 1069: Paying interest to financial institutions (banks, mortgage companies, credit card companies) and allowing the government to imprison you with taxes and inflation are not in your best interest.
Location 1072: Those who figure out how to leverage their time to improve their talent so that they can create capital are special, I call them entrepreneurs.
Location 1116: Manage your cash flow so that you always live below your means.
Location 1117: You just need to structure your budget so that you are always saving 15 to 20 percent of your annual income.
Location 1119: If 100 percent of your income is from salary or wages then you should be sure to "pay yourself first." This means setting aside 15 to 20 percent of every check while the rest goes to your month-to-month expenses.
Location 1128: Building a rainy-day fund is for making sure you have what you need every month to keep the lights on, not for keeping up with the Joneses.
Location 1135: Here are a few key action items for protecting your personal economy:
- Focus on minimizing risk with what you've saved. Your main risks are market volatility, inflation, taxes, and longevity.
- Understand how alternative asset classes can help you take control of your financial picture.
- Design your cash flow system to give yourself more control. Balance this design with potential opportunity costs in mind.
Location 1143: Remember that the government wants to control your money so it can use it; its tools are taxes and inflation.
Location 1151: There is a huge difference between "the rich" and everyone else. But listen very closely to this: the difference has nothing to do with money! It has everything to do with their access to information, confidence in their own abilities, and the resources they utilize when taking action.
Location 1174: Family offices are private wealth management advisory firms that serve ultra-high net worth investors. Family offices are different from traditional wealth management shops in that they offer a total outsourced solution to managing the financial and investment side of an affluent individual or family. For example, many family offices offer budgeting, insurance, charitable giving, family-owned businesses, wealth transfer and tax services.
Location 1187: There are two main types of financial elite:
- Wealth preservers, on average they are more affluent, but their assets are not as liquid. They focus on maintaining their wealth.
- Wealth creators - these people are not as affluent as wealth preservers, but their monies are more liquid. They want to increase their fortunes, and investing plays a crucial role in this process.
Location 1201: An important element to the super-rich's wealth is they tend to have equity stakes in enterprises that, they conclude, are likely to make them wealthier. The multiplier effect of these equity stakes is what generates the significantly above-average returns you hear or read about in the news. They believe being your own boss gives you a greater chance for wealth versus working for someone else. The desire to pursue the fields and initiatives that have the highest potential for outsized returns, now and in the future, is a main force behind their entrepreneurial nature.
Location 1216: They know failure is inevitable, but learning from each experience and using those lessons to get an advantage the next time around actually energize them to achieve more "the next time around." This level of perseverance is not witnessed in the average American's daily life and causes most people to "get in their own way" and not achieve the level of success desired.
Location 1222: The super-rich are exceptionally capable of focusing themselves and delegating to others in a way that leaves little room for derailment or doubt.
Location 1253: The average American believes that the deck is stacked and that there is very little chance of improving his or her financial standing. I want you to see beyond that limiting belief.
Location 1259: Here are a few myths or misperceptions that the status quo team has promoted about how we should make financial and money-related decisions:
Location 1261: Financial security comes from working for a big company, saving in a 401k for retirement, and relying on the government to provide stability through entitlement programs. Stocks, bonds, and cash are the main asset classes that provide a highly diversified portfolio. You should focus on investment vehicles with the lowest expenses and immediate liquidity. Long-term investing is best done with traditional asset classes and a buy-and-hold strategy. If you want higher returns, you have to take more investment risks (the risk/return paradigm). FDIC protection makes banks your safest place to store money. You will likely be in a lower tax bracket at retirement so tax defer as much of your savings as possible. The definition of inflation is the rise in prices measured by the Consumer Price Index (CPI), and interest rates are tied to inflation rates.
Location 1272: These are just a few examples of common American beliefs about money that keep us from achieving our financial needs and wants.
Location 1308: So if alternative asset classes (which are basically anything that isn't stocks, bonds, or cash) are desired by endowments and the financial elite, why don't more individual investors have them in their portfolios?
Location 1321: What is neuro-linguistic programming? NLP is a process of modeling our unique conscious and unconscious patterns to constantly move us toward higher potential. NLP is not a thing; it is a science that enlightens us about which actions work and how to repeat them to achieve continuing success.
Location 1349: The best way to benefit from NLP is to "model" someone who is really good at not only understanding the science but also at implementing the strategies to produce results.
Location 1407: People's current "states" influence how they receive information and experiences. Work on putting people in a positive or receptive state when you influence them.
Location 1414: Pre-framing is simply telling people what you are going to tell them before you tell them. Explain your expectations and desired results. The rest is up to them, but now they know what is going on.
Location 1421: For example, you could say, "Mr. and Mrs. Jones, today I would like to start off our presentation by explaining how we are different from other financial firms so you can determine if our process and philosophy can add value in your financial situation. I'd like to address any questions that you have afterward, and no matter what transpires in our conversation today, there is no expectation that you commit to working with us before you leave. _Is this acceptable to you?_"
Location 1435: The key is to "personalize" the business relationship so that you can earn the trust of your clients.
Location 1445: The financial professional needs to master the BENDWIMP (Beliefs, Evaluate, Needs, Desires/Goals, Wounds/Fears, Interests, Proud Of) method of probing for information through the use of thought-provoking, open-ended questions.
Location 1482: There is no reason that your financial picture should be overseen by anyone who doesn't view the next thirty years as a new frontier in finance and money-related decisions. Why? Because things have changed dramatically over the past three decades.
Location 1500: We recommend that you: Insist on transparent conversation with your financial advisor. Implement customized, one-size-fits-one strategies. Integrate as many resources as possible to simply your financial life.
Location 1513: Trust has two crucial components: the character of the people you interact with concerning your money and their competency to measure and monitor your financial picture based on current economic conditions.
Location 1520: This is what education-based advising is all about - a process and philosophy that guide you toward utilization strategies and protecting the purpose of your money.
Location 1644: All that matters is that the financial vehicle(s) implemented is appropriate for your current financial picture and that you are satisfied with how your advisor is interacting with you to earn his or her compensation.
Location 1649: "Hope" is not an investment strategy, yet it is a core component of the buy-and-hold mentality that has influenced most people in the past three decades.
Location 1663: Every dollar of taxes you save is one more dollar you can save or spend in the future.
1. Safety: Learn strategies that can help you protect your principal or the income it generates.
2. Liquidity: We provide guidance about how to get access to your money when you need it.
3. Growth: We help you strategize and determine your money's growth "profile" through either income (interest, dividends, and yield) sources or appreciation (an increase in security price to be reinvested or sold in the future for a gain).
Location 1685: Here are some questions to consider:
- When was the last time your investment advisor asked to see your income tax return?
- Are your tax professionals proactive with income tax strategies, or do they just react to the information you provide them every year?
- How should you structure your mortgage in retirement? Should you just pay it off? Is your investment portfolio designed for accumulation or utilization?
- Has anyone looked at your options for Social Security benefits or Medicare coverage and helped you decide which decisions you should make in your personal economy?
- What options do you have to help protect your assets from medical issues or long-term care needs?
- Are all of your accounts properly titled and have the right beneficiaries for an efficient transfer of your estate?
Location 1698: Proactive strategies that simplify your financial life are essential.
Location 1716: The more money the Federal Reserve prints, the less "stuff" you can buy with a dollar.
Location 1717: If the stuff you buy is getting more expensive, you need to make sure your money is working for you to offset that change in your purchasing power.
Location 1722: Remember that you are only required to pay taxes on your money once! Implement strategies that tax diversify your assets so you can take control of your financial picture.
Location 1731: Please don't wait for someone else to figure these things out for you. The time is now because we do not know what tomorrow has in store for any of us.
Location 1738: As a licensed securities representative of an independent broker-dealer, I am restricted by regulatory bodies (such as FINRA and the SEC) to discuss asset classes such as private equity, hedge funds, real assets, currencies, managed futures, non-traded real estate investment trusts (REIT), business development companies (BDC), master limited partnerships (MLP) or unit investment trusts (UIT) without a prospectus and proper disclosures.
Location 1788: Financing is a process, not a product. Financing involves the creation of, the maintenance of, and the use of a pool of money: all three simultaneously. When the system combines reduced income tax liability with a financing engine, it allows you better control over your capital.
Location 1803: Individuals, families, and small business owners use their money for the two main purposes we discussed in chapter 4: month-to-month expenses are the needs, while the big-ticket items represent the wants. I have yet to meet a client who is satisfied to just meet needs and pay bills. The reason behind all of a saver's good money habits is to achieve the wants of life while simultaneously meeting his or her needs.
Location 1808: The way your money will be taxed at withdrawal is something you should be aware of before you need or want access to your stored money.
Location 1820: Back in the 1940s and 1950s, more than 60 percent of the total growth created by the S&P 500 Index was made up of dividends. So a traditional portfolio met this goal automatically. These days, dividends yield the S&P 500 Index comprise about 20-30 percent because there is a greater focus on appreciation with stock investing today.
Location 1844: Also, the public was (and still is) misled in understanding the true definition of inflation - which is the devaluation of our currency. Confusion led people to believe interest rate movements are a cause of inflation versus a signal to the market as how to properly allocate capital. The impact of taxes on someone's financial picture wasn't a concern because the majority of Americans believed they would be in a lower tax bracket in retirement and thus began the process of tax-deferring as much of their monthly savings as possible!
Location 1864: How does an individual, family or an entrepreneur plan for the unexpected when they are provided with limited knowledge and resources on these important areas of money and finance?
Location 1971: Cash flow is the lifeblood of a household but very few Americans pay close attention to their saving/spending habits.
Location 2072: While you may create some tax benefits early in your retirement, the tax monster growing inside of your tax deferred accounts must be dealt with at some point.
Location 2108: Insurance companies are in the business of risk mitigation and the good ones are very successful at figuring out ways to help their clients transfer their biggest risks to the insurance company for a cost. When it comes to retirement and income tax strategies, insurance companies have various annuity and life insurance contracts available to the public that allow the longevity risk to be transferred to their balance sheet.
Location 2127: When you are attempting to find a financial advisor or firm to build a trusting, long term relationship, I encourage you to seek out someone or some place that creates value through their purpose, process, and philosophy; not based on the financial vehicles they can access.
Location 2160: Investing in a small business is really about having confidence in your abilities, knowledge, and creativity to add value in people's lives. Being able to make changes that protect your customers, your employees, and your family is essential in today's economic climate.
Location 2178: You cannot control what happens with this economy, but you can control how you respond to economic changes to minimize the impact on your company and its future.
Location 2183: You are only required to pay taxes on your money once so why not implement strategies that help you accomplish that goal?
