The Defining Moment

In discovering the path to solving the problems that you will face in the future you must understand the basic ingredients of the problem.  There are three key financial fundamentals that MUST know.

Your Money Will Never Be Worth More Than It Is Today

Due to inflation, your money continues to lose its buying power every day.  At 3% inflation, the buying power of $1,000 will be $411 in 30 years from now.  Think back.  I remember gas at 18 cents a gallon…not a cup…a gallon.  In 1950, a postage stamp was three cents. A median-priced home in 1950 was $14,000 and a dental crown was $40.  Heck, an ice cream cone was five cents.  So, from here on out, it is very important to understand that the value of your money will never be worth more than it is today.

The Tax Bracket You’re In Today Will Probably Be The Lowest Tax Bracket You Will Be In For The Rest Of Your Life!

Due to uncontrollable government spending, unsustainable government debt, a declining workforce, an aging population and increasing government programs, taxes must go up.  The problem is compounded by the fact that almost 50% of today’s workforce in the United States are zero-liability federal taxpayers.  That means they pay no federal income tax.  Now add into the equation that over 47 million Americans receive some type of government assistance, and you will begin to understand why taxes must go up a lot.  Recent government budget proposals point out that revenue the government receives from income taxes will double in the next five years.

So, if money will never be worth more than it is today and the tax bracket you are currently in may be the lowest tax bracket you will be in for the rest of your life, then why does traditional thinking tell you to take as many of today’s dollars as you can, and throw them as far into the future as you can, where these dollars will have less buying power and be taxed the most?  How long do you want to continue to do this?

It is a common belief in traditional thinking that the only way to increase your chances of financial success in the future is to simply get higher rates of return over a period of time.  Although this is everyone’s goal, it is difficult to achieve.  There are two problems you must face in trying to reach these goals.  First, in trying to get a higher rate of return, who is the one at risk, you, or the person or company making the recommendation to you?  Second, at some point in time, your efforts to increase your wealth will be taxed.

Leverage

Finally, in discovering your path to solving the problems you face in the future, you must learn to create leverage in your financial world.  The definition of LEVERAGE is using the least amount of money to create the most amount of wealth.

Does putting more money into a 401(k) make the rate of return higher?  No.  Does paying off your house as fast as you can make the value of your house go up?  No.  Does paying off your car as fast as you can make the value of the care go up?  No.

So why is every financial institution telling you that these are the things you should be doing, for their benefit or yours?  There are very few things in traditional thinking that you can “drive forward” or increase value without increasing the amount of money you put into it.  Once again, leverage is using the least amount of money to create the most amount of wealth or benefit.

In an effort to find a path for solving your current and future financial problems, you will need to connect all the lessons that your will learn.

INFLATION:  Your money will never be worth more than it is today. 

TAXES:  The tax bracket you are currently in may be the lowest tax bracket you will be in   for the rest of your life.    

TRADITIONAL THINKING:  Why does traditional thinking tell you to throw as many of today’s dollars as you can as far into the future as you can where it will have less buying power and be taxed the most?

LEVERAGE:  Leverage is the ability to drive forward, increase value or create wealth using the least amount of money.

UNDERSTANDING:  The success of traditional financial products is not controlled within the products themselves. The success of a financial product will be determined on how that product reacts to the shifts and economic trends of if time.

PRODUCTS vs. PROBLEMS:  In most cases, financially, are we feeding the problem not solving the problem?

If you would like to have a conversation on how we can help you:

• Increase your monthly income.
• Improve your family benefits.  
• Eliminate market risk.
• Reduce your tax liabilities.

This educational material is provided by the Wealth & Wisdom Institute and Common Sense Economics, LLC.