The Paper Chase

ChasingMoneyMotivational posts are a big thing on social media.  Type in hashtags like “motivation,” “inspiration,” “hustle,” “grind,” “quoteoftheday,” and so on, and a plethora of slick memes will show up with quotes from business leaders and motivational speakers through the ages.  You will find many quotes from Jim Rohn, Robert Kiosaki and Tony Robbins, to name a few, extolling the virtues of persistence, focus, planning, how to build wealth, and the like.  Entrepreneurship has exploded as the internet has made education more accessible than it has ever been.  Technology has lowered barriers to entry for many industries in terms of knowledge as well as start-up capital.  In theory the playing field of capitalism is far more level than it has ever been before.  My inbox and social media accounts are flooded with offers to take a look at some idea to build wealth using the wonders of modern technology, usually with a rags-to-riches testimony.

Now we can “monetize” just about anything.  Industries are growing for motivational speakers, business coaches and trainers, for which clever entrepreneurs will provide instruction on how to tap into the market, for fees small and large.  Usually potential clients are lured into listening to the sales pitch with a free webinar or ebook download.  Somewhere within the material, usually at the end, there is a sales pitch – an up-sell – to turn the free information into a revenue stream through memberships, subscriptions or further coaching.  That sales pitch usually includes at least one quote from a “guru”, such as those mentioned above, to imply that the person shares that winning mentality; they have the thing that you don’t think you have.  It is a very effective tactic as it taps into the deep-seeded self-doubt many of us live with; our desire to be perceived as and feel successful; and guilt over not achieving our full potential.  When I was in network marketing we were taught to always search for the NEED and posit the product as the solution.  The need that motivates many people to pour hundreds to tens of thousands of dollars into these trainings is freedom from the imprisonment of financial struggle.

But even with the abundance of opportunity at our fingertips there is still a pervasive sense of lack in our society.  Increasing abundance of opportunity has not resulted in increasing satisfaction or happiness.  Why is that?

Ecclesiastes 5:11       

As goods increase, so do those who consume them.  And what benefit are they to the owners except to feast their eyes on them?

gold-dollar-sign-on-groundI decided to call this blog The Financial Fashionista in part because I recognized that I myself had a conflict between my desire to acquire things and my desire to establish a solid financial foundation.  I have an economics degree and experience in high and low finance. (That’s a joke.)  In my head I have a very clear understanding of how money works: the concept of compound interest, investing in the financial markets, financial products and services, saving, interest expense, depreciation, the difference between cost and value.  In college my focus was mortgage-backed securities, the same product that brought down the world financial markets. But when it comes to personal finance emotion is almost inextricably linked.  This is why most people pull their money out of the market during a correction, as happened in 2008, marriages fail, and even cause business owners to make poor management decisions.

I am now looking very closely at the ‘why’ in my spending habits and attitude toward money in general.  What lessons from my past must I un-learn?  How do I bridge the gap between my rational understanding and my emotions?  I have rooms full of “stuff” that I never have to look at or touch for the rest of my life.  The older I get the more I realize that it is all meaningless.  Whatever satisfaction I receive from purchasing a new dress or some other thing is absolutely fleeting.  And as such the process must perpetuate to reach the same high.

What motivates us to do this?  I know I’m not alone.

Ecclesiastes 4:4

And I saw that all toil and all achievement spring from one person’s envy of another. This too is meaningless, a chasing after the wind.

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Chasing after the wind.

Another thing that social media brings to the forefront is the deep desire to be simultaneously approved and envied by others.  We lament the unrealistic standards of beauty and lifestyle promoted on the medium but those who do it best gain the most followers, by which they are able to creative highly lucrative businesses.  Posts and hashtags about grinding and hustling extol the value of pushing to reach goals and measurable achievements; we respect most the people who seem to be accomplishing big goals and dreams and the wealth that comes with it.  But that value system is based on outward signs of a success that can disappear even faster than it came; not character or the virtues of community, humility, patience, temperance and generosity.  It is inherently inauthentic.  No wonder it  cannot bring forth lasting satisfaction and happiness.

Motivation in this day and age is temporary because it tends to be based on comparing ourselves to others and wanting what they have.  Inspiration is more authentic and long-lasting because it is based on the vision and purpose that is uniquely suited to the individual.  As the saying goes, “chase your passion and the money will follow.”

 

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How to Turn Your Home Into A Personal ATM

One of the goal posts for what we have accomplished in this life is the ability to enjoy a long, happy retirement.  But as the years go by and the horizon gets closer we look at what we have in cash and assets, and discover that we may not be able to retire comfortably and independently, if at all.  If you add up your annual living expenses – including personal care, mortgage, groceries, car notes and insurance, all of your fixed and variable costs – you will likely find that if you retire at 67 years old and live another 20 to 30 years beyond that, you will need over $1million in today’s money to maintain your current lifestyle throughout your retirement.

Most Americans are looking for ways to supplement their income to try to make up for the shortfall.  We max out our contributions to retirement plans at work.  We hold 401K’s, IRA’s, money markets and other investments, hoping that the market will keep going up (which it won’t) and we don’t lose significant value in our accounts; the closer you are to retirement the less time you will have to make up for any losses.  You may even try to adjust your lifestyle downward to conserve cash to save and invest but would you be able to make enough of an adjustment to make a real difference?  Many approaching retirement age have to be concerned about which direction the market is headed in the next few years.  In the stock market the investor has no control.

Mutual funds have for decades been heralded as the best way to benefit from the financial markets without a lot of knowledge about investing and without taking on too much risk.  This investment vehicle is touted as the best way to earn double-digit returns on your money, but OVER THE LONG TERM.  If you look at CD rates at bankrate.com you will see that the highest-yielding CD will return 2.3% compounded over a 5-year period.  As for money markets, for a deposit of $5,000 one bank will pay a grand total of 1.11% interest for the first year only; then the rate drops to 0.61%.  Meanwhile, what are banks doing with your money?  They’re lending it back to you and your neighbors at higher interest rates; they’re investing it in multiple ways, including lending to other banks overnight, to earn a higher rate of interest than they’re paying you, and profiting massively from the difference.

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Did you know that you have the power to do the same thing?  It’s called Private Lending, and you can use the equity in your property to do it.  Private lending a vital lifeline for real estate investors. And as a private lender you can participate in real estate investing without “getting your hands dirty” while earning a much higher rate of return than you ever will with banks or likely will in the stock market.

Since the market crash of 2008 real estate has picked up speed, and certain markets, like Philadelphia,  are moving at a feverish pace.  If you are in that region I am sure you have noticed and even been inconvenienced by the deluge of construction going on in and around the city.  Somebody is getting very rich!  Do you ever wonder how they do it?  Do you ever wonder how YOU could get in on the action, without having “important’ friends and millions in the bank?

As a homeowner you are potentially sitting in a bank of your very own.  If you have significant equity built up from years of paying down your mortgage you can access it through a home equity line of credit (HELOC).  You use the proceeds to help real estate investors like fix-and-flippers, for example, fund deals while you earn returns in your sleep, often well into the double digits!  It is perfectly legal and perfectly legitimate.  Moreover, you will be paid back your investment plus interest in four to six months. It is as simple as agreeing on a contract that explicitly lays out the terms on each side.  You hold either the first or second mortgage, and if for any reason the deal goes south the house is your collateral – just like a bank.  Private investing can provide virtually limitless financial growth, as you are able to compound your returns by continually lending.  Did you ever dream you’d grow up to own your own bank??

Sextant Financial Solutions, LLC (www.sextantfinancials.com) is a company positioned to take advantage of investment opportunities in some of the hottest areas of Greater Philadelphia, including Delaware County and Philadelphia County West and Southwest.  If you would like to learn more about ways to earn significant returns using your home’s equity or cash sitting in low interest-earning instruments such as a 401K, IRA and CD’s call 484-461-0114 or send an e-mail to sextantfinancials@yahoo.com.

The “Millennial Investor” Is A Thing…

Thirty trillion dollars. “Trillion.” With a “t.” That is the estimated amount that so-called millennials will inherit from their baby-boomer parents over the next few decades.  It is the largest transfer of wealth, possibly in human history.  By the way, who are these people?  Seriously.  The fact is most people are entirely unprepared financially for retirement!  Clearly these are not the kids of the millions of baby boomers who will be reliant upon social security to make ends meet.  But I digress.Wealth managers today focus a lot of energy targeting the baby boomers themselves, especially to help them protect whatever wealth they have amassed, to sustain their lifestyle after retirement.  It is a very large market.  But apparently the wealth that is going to be transferred to millennials will be an even larger market, and investment advisors are beginning to position themselves to capture the opportunity.  In the clip below, one such advisor talks about a program his firm offers called Backpacks to Briefcases.  It pairs millennial clients with their contemporaries in the wealth management game, whom they may better be able to relate.

Financial literacy is woefully lacking in our education system, even among the well-off, so this is a great idea.  The fortunate ones who will be coming into enormous sums of money will need the training that many of their parents didn’t receive in order that they may make wise decisions about managing, spending and donating their windfall.

Preparing Millennials for a $30 Trillion Wealth Transfer

You don’t have to inherit a large fortune for sound money management to be relevant to you.  Any amount of money you have earned or inherited should be handled properly.  True, we are more likely to blow through money that we have been given rather than money that we have earned on our own.  But no matter the circumstance, sound financial practices matter.  For example: a guy in his mid-20’s inherits the proceeds of a large life insurance policy, pension and 401K upon his mother’s passing, totaling several hundred thousand dollars.  He uses his windfall to live the large – traveling, partying, and everything else.  Fast forward five years, the money is gone and he’s worse off than he was before.  True story. There is an expression one of my friend taught me: “It’s not what you make (have), it’s what you keep.”