Circle of Wealth- Becoming Your Own Banker

Wealth :Wealth Keys to Creating, Maintaining, and Transferring


Wealth :Wealth Life Style Wealth: Food Entertainment Vacations Utilities Maintenance Accumulated Wealth: Savings Investments Stocks Real Estate 401(k)/IRA Annuities Cash Value L.I. Transferred Wealth: Debt Interest Taxes Opportunity Costs Transferred Wealth is…. Money either unknowingly or unnecessarily leaving your circle of wealth. Opportunity Cost is….. The lost opportunity to earn a rate of return on those funds, forever, used to pay cash for a purchase.


Slide 3 :What area do most advisors spend the majority of time in their planning?


Slide 4 :Accumulated Wealth: In order for any planner to entice you to move your money to them what will they most likely concentrate on? Rate of Return!


Slide 5 :Most investors are hesitant to change their lifestyle too drastically and so “Lifestyle Wealth” is not typically discussed in great detail.


Slide 6 :Did you know…… “Transferred Wealth” is by far the principal reason why people fail to create and maintain wealth? The cost of Debt, Interest, Taxes, and Opportunity Cost, in the average family, far outweigh the growth of their accumulated assets rate of return. In other words the rate of return required to keep up with what is being lost or transferred is nearly impossible to achieve. In addition the “accumulated assets” would have to be invested at greater….. RISK!!


Slide 7 :Bringing transferred wealth back to your circle of wealth has a much greater affect on your net worth than rate of return. Saving a portion if not all of the thousands and thousands of dollars being lost or transferred either unknowingly or unnecessarily will have a much greater impact on your wealth. Let’s look at a real life example……


Slide 8 :The family car…. Would you agree that there are really only two ways to purchase a car….. Cash Finance We’ll assume that leasing is worse than financing……


Slide 9 :Let’s look at 1 car purchase Lets purchase a $30,000 car…… Lets assume that the car will be worth $15,000 in 5 years So what happens to our NET WORTH when we pay cash? $30,000 car 5 years Car Value: $15,000 Adjustment to our Net Worth: -$15,000 What happens to our NET WORTH when we finance? $30,000 car Financing @ 8% Payments = $608 Total Cost: $36,500 5 years Car Value: $15,000 Adjustment to our Net Worth: -$21,500


Slide 10 :What if? What if there were another way? What if I could show you a way to recoup the total cost of the car purchased and the interest too?


Slide 11 :What about Becoming Your Own Banker? Net Worth: -$15,000 Net Worth: -$21,500 Cash: Finance: This time YOU ARE the bank: You want to charge yourself at least the Going rate….preferably more…. You will pay yourself just like the bank…. Total Payments = $36,500 (same as financing) Plus the Car Value = $15,000 Net Worth: $51,500 You have a choice…… Lose -$15,000 Lose -$21,500 Have $51,500 Option 1 Option 2 Option 3


Slide 12 :Assumptions: Purchase 11 cars from age 21 – 65 Purchase Price: $15,000 No Inflation No Trade-In Interest Rate (for financing): 8% Savings Rate: 5% The “Jessica” Plan


Slide 13 :We are NOT calculating “Opportunity Cost” on this money…..which would equate to a large amount of money lost! Results Payments are $366 48 Months 11 cars 15,000 each


Slide 14 :By Being Her Own Banker….. …..at age 65….. Jessica will have in her account….. $701,302 TAX FREE!!! Now this is what we call “SAVING TRANSFERRED WEALTH!”


Slide 15 :Her Choices…. 1. Lose -$165,000 by paying cash (without calculating opportunity cost…) 2. Lose -$193,350 by financing 3. Have over $700,000 tax free! All by doing exactly what she most likely will be doing anyway….. buying cars the rest of her life!


On a scale from 1-10 :On a scale from 1-10 If I could show you how to recoup the cost of every purchase Pay yourself the interest normally paid to the banks Increase your net worth dramatically over the years All on a tax advantaged basis Where would you rank my services?


Our next meeting…. :Our next meeting…. We will discuss the data your input on the data gathering I’ll give you or email you. Talk further about our concepts, answer questions Give you an educational assignment Plan a time for our next meeting