Stop Planning for Future Retirement , Live Today in StyleWritten by Ida Byrd-Hill
For past 85 years, financial services industry – banks, financial planning, insurance and stock brokerages have experienced double digit growth by cajoling frightening individuals by prospects of poverty and lack during retirement. Everything from radio, televisions commercials and print ads projected bleak prospects for retirement if individuals did not save and invest. Individuals born between 1912 to 1945, currently ages 60 to 93, responded to this marketing strategy as they experienced pain of Great Depression. The Great Depression caused largest economic slump in industrialized nations ever. The Great Depression began in 1929 when stock market collapsed. Stock market values dropped eighty percent. Not only did individual investors lose big, so did banks. Many banks had a large chunk of stock in their asset portfolios. So much so that 11,000 banks out of 25,000 collapsed in U.S. alone. Individuals lost on three fronts. They lost money in stock market, in bank and their jobs. The burgeoning manufacturing industry saw a 54% drop in output causing 25 to 30% of workforce, approximately 12-15 million people, to go on layoff. With so many people out of work, breadlines and soup kitchens became common place. People had no money to feed, clothe or house themselves. Unfortunately, government did not have resources to help them either. The impression of Great Depression has been firmly imprinted on minds of individuals, ages 60 to 93, born 1912 to 1946. Most have vowed to themselves they would never again suffer lack they suffered during Great Depression. Hence, these individuals are frugal; budget conscious savers who disdain credit and speculative investments. They sought safety of guaranteed investments and security of insurance companies who weathered Great Depression. With evolution of Federal Deposit Insurance Company (FDIC), they spread their money across several banks. Although they have money in banks and stock brokerages, they do not really trust banks or stock brokerages. They trust FDIC and SIPC (Security Investor Protection Corporation). The financial industry evolved around financial behaviors of these Depression Era individuals. These individuals amassed greatest amount of wealth in history of United States. Because they were solely afraid of suffering another Great Depression. The financial behavior of Depression Era individuals is exactly contrarian to those born 1946 to 1964. These individuals are called Baby Boomers. These individuals never saw lack. Their mothers, once house wives, worked in manufacturing industry during World War II. When their husbands returned from war, many women continued to be employed outside of home. Her employment brought new affluence to home. It also brought her into forefront of financial decision making. Women, now, influence 80% of financial decisions. After World War II, The US government created an economic boom bringing new jobs and more income that US economy has ever seen. Baby Boomers have always seen good economic times. They have never experienced financial lack, financial lost or suffering.
| | Lower Mortgage Payments can Increase WealthWritten by Ida Byrd-Hill
Creating and maintaining wealth is a very difficult task. Ask any millionaire!!! The delicate balance of living a dream lifestyle and holding expenses tight creates this difficulty. As a financial advisor, I have assisted people accumulate monies to live their dream life while discovering ways to reduce their necessary expenses.Everyone would agree mortgages are necessary expenses. Probably biggest expense most of us have. Mortgages present opportunity to secure income tax deductions while utilizing house to live. What if you could reduce your mortgage interest rate to 3% and be required to pay interest only for 5 years? Would you refinance your current house? Purchase another? While refinancing a client’s mortgage, I discovered such a mortgage. The client will save lots of money next few years. Here is his scenario: Client #1$500,000 Loan Amount Past30 Year Fixed @6.00%=P&I$2,997.75/ month 5th year loan balance$ 456,989.77 Equity (assuming no appreciation)$ 43,010.23 Current LIBOR ARM@3.00%=Interest only$1,250.00/ month Applied additional $1747.75 / month to principal for 5 years 5th year loan balance$ 362,370.82 Equity (assuming no appreciation)$ 137,629.18
|
