WealthCoaches.com http://wealthcoaches.com Helping you achieve wealth in your life. Wed, 16 Jan 2008 23:20:23 +0000 http://wordpress.org/?v=2.3.1 en Sustainable wealth http://wealthcoaches.com/2007/10/sustainable-wealth/ http://wealthcoaches.com/2007/10/sustainable-wealth/#comments Wed, 10 Oct 2007 20:19:08 +0000 Rich Begley http://wealthcoaches.com/2007/10/sustainable-wealth/ I borrowed this information from Wikipedia.  It shows what we are really looking for over the long haul - check it out: 
“According to the author of Wealth Odyssey, Larry R. Frank Sr, wealth is what sustains you when you are not working. It is net worth, not income, which is important when you retire or are unable to work (premature loss of income due to injury or illness is actually a risk management issue).

The key question is how long would a certain wealth last? Ongoing withdrawal research has sustainable withdrawal rates anywhere between approximately 3 percent and 8 percent, depending on the research’s assumptions. Time, how long wealth might last, then becomes a function of how many times does the percentage withdrawal rate go into all the assets.

Example: withdrawing 3 percent a year into 100 percent equals 33.3 years; 4 percent equals 25 years; 8 percent equals 12.5 years, etc. This ignores any growth, which presumably would be used to offset the effects of inflation. Growth greater than the withdrawal rate would extend the time assets may last, while negative growth would reduce the time assets may last. Clearly a lower withdrawal rate is more conservative. Knowing this helps you determine how much wealth you need also.

Example: you know you will need $40,000 a year and use a 4 percent withdrawal rate, then you need to use 5 percent and therefore need $800,000, etc. This simple “wealth rule” helps you estimate both the time and the amount.”

Clearly we should not ignore growth - it makes the calculation a bit more complicated, however this is a great way of calculating what is wealth for you.  You may be closer that you think. Or at best you have a concrete number to shoot for.  R Begley
 

]]> http://wealthcoaches.com/2007/10/sustainable-wealth/feed/ The Gospel of Wealth, Revisited http://wealthcoaches.com/2007/10/the-gospel-of-wealth-revisited/ http://wealthcoaches.com/2007/10/the-gospel-of-wealth-revisited/#comments Fri, 05 Oct 2007 16:31:52 +0000 Bill Richardson four hour wook weekgospel of wealthkarmakarmic capitatlist http://wealthcoaches.com/2007/10/the-gospel-of-wealth-revisited/ Tim Ferris, author of “The Four Hour Work Week” poses the question on his blog today:

 ”Should I wait until I get rich to give back”?

 This continues the discussion we were having early last month regarding the “Gospel of Wealth” - the idea that as we become wealthy, we need to give back in order to “appease” the “wealth gods”, or achieve good karma.

As usual, Tim’s got an interesting perspective on the topic.  Read his post, then tell us what you think of his perspective.

]]> http://wealthcoaches.com/2007/10/the-gospel-of-wealth-revisited/feed/ Wealth Drain #2 Not paying attention to your FICO score http://wealthcoaches.com/2007/10/wealth-drain-2-not-paying-attention-to-your-fico-score/ http://wealthcoaches.com/2007/10/wealth-drain-2-not-paying-attention-to-your-fico-score/#comments Mon, 01 Oct 2007 17:39:58 +0000 Rich Begley http://wealthcoaches.com/2007/10/wealth-drain-2-not-paying-attention-to-your-fico-score/ Your FICO score is what lenders use these days to determine the risk of loaning you money.  Gone are the days when you had to go belly to belly with a banker and explain yourself… the lending descision has been preceipated down to one number between 350 and 850 that will determine whether you can get a loan and the interest rate associated with that loan.  (great FICO is 760 or higher) You MUST know your score before borrowing for any major purpose.  Why?  because if you don’t you could be taken advantage of and with a good score you can negotiate the best deal in good faith.  Just go to www.myfico.com - there is a plethora of information regarding the algorithm they use and what makes up the score and to improve your score. 

Bottom line.  Pay your bills on time, never use more than 30% of the balance on any one card.  Better still, cut them up but don’t close the account.  Pay attention to your FICO score; check your credit report and FICO score at least once a year for inaccuracies. 

Note:  WaMu Bank the largest savings and loan in the country offers credit cards with a built in FICO score from Trans Union - comes for free with the card… very handy.

You can’t “fix” your credit if it accurate.  Only time will do that.  Bad credit stays on your report for 7 years from the date of last activity (payment) - but the months will fly by if you pay on time and your credit will slowly improve…so never pay that creditor a token amount… you will have reset the clock for another 7 years.  Negotate a settlement and ask for a deletion letter.  R Begley 

]]> http://wealthcoaches.com/2007/10/wealth-drain-2-not-paying-attention-to-your-fico-score/feed/ It’s the Economy Virginia Part 2 http://wealthcoaches.com/2007/09/its-the-economy-virginia-part-2/ http://wealthcoaches.com/2007/09/its-the-economy-virginia-part-2/#comments Wed, 19 Sep 2007 17:15:06 +0000 Rich Begley http://wealthcoaches.com/2007/09/its-the-economy-virginia-part-2/ Before we get to part 2, I wanted to briefly comment on the Fed’s actions yesterday.  The move to lower the discount and the fed funds rates by  one half percent (or 50 basis points) can be compared to shock treatment for the market.  The stock market zoomed over 300 points.  This is to be expected, however, it will probably be a short term rally.  What got the economy into trouble in the first place was leaving interest rates too low for too long.  Helicopter Ben must be quite worried about a recession for this move.  But it is like giving crack to a crack head and expecting him to now quit.   He will feel better for a while but the problem still lingers.   

If food, gold and oil continue rising in price the Fed will really be screwed - it will have to start raising rates to starve off the inflation it created.  Rate cuts have quite the lag effect.  Short term it’s euphoria but it will take a while to see if the move was correct.  The bond market will let you know.

The inflation numbers came out today and inflation was negative (do these people eat and drive!?)  Do they really think we are this stupid to believe that last month prices across the board went down?  They are making funny with the numbers again.

On with the economy article…

6.   Asset bubbles a bursting – the place where many Americans hold their wealth: their home… not certain to always rise in value and actually may lose value.  Ouch especially for retiring baby boomers.

7.  US dollar is plunging in value against all major currencies.  Can the Government reel in spending?  Will the Fed protect the dollar?  High inflation brings despair to a country.  If you believe the government’s inflation figures I have an old beautiful bridge spanning  over the Hudson River I would like to sell you.  And it may get worse than the 1970’s with our do nothing politicians - inflation is an insidious tax perpetrated on a populace by an overspending government.  The Fed causes inflation by printing too much money – then they say they will fight it by raising rates – who are they kidding?

8.  About 50 trillion (no one really knows) of derivative paper.  Exotic investments used to spread risk around.  Interest rate hedges.  What happens when the smarty pants mangers guess wrong about rates and their high flying investments turn sour? 

9.  High energy and food prices worldwide.  Oil at $80 a barrel and using corn (a food) as a fuel (ethanol) for cars and not people.  The backbone of the world economy is the US consumer.  When there is no more consumable income for the US consumer who is forced to pull back who is going to pick up the slack and buy all those Chinese trinkets?

10.  Retiring Baby Boomers.  Demographic time bomb where there will be less workers supporting the social programs for the retiring baby boomers as there are workers producing in the economy.  Think sky high taxes, baby boomers and pissed off younger workers clashing for dominance. 

There is more but I’ll give it a rest…. Not pretty eh?

How to protect yourself?  Own physical gold and silver – not mining stocks or gold certificates.  They Hard Stuff in your hand.  Get a bigger safety deposit box or a safe in your house.   Have at least 5% of your wealth stored here.  Metals have for centuries represented real wealth.  Get out of debt and save. 

Your house is not an investment.  It’s just where you live.  Expect home prices to be flat for a few years.  Diversify away from the US dollar.  An out of control government with massive unfunded liabilities including Medicare and Social Security and the funded ones like foreign wars against nobody and feeding the Military Industrial Complex, etc has backed itself into a corner.  No politician has the balls to do what is needed to do.  Instead they just add more debt with pet projects and distract us with “issues” (like flag burning, gay marriage, making laws for victimless crimes etc) that have little consequence for most folks.  If you acted the same way as the US government with your finances, not only would you be bankrupt, but you would probably be put in jail for cooking the books.  No more funny (fiat) money.  Let’s get real. R Begley

]]> http://wealthcoaches.com/2007/09/its-the-economy-virginia-part-2/feed/ It’s the economy Virginia …with the day of reckoning dawning. Part 1 http://wealthcoaches.com/2007/09/it%e2%80%99s-the-economy-virginia-%e2%80%a6with-the-day-of-reckoning-dawning-part-1/ http://wealthcoaches.com/2007/09/it%e2%80%99s-the-economy-virginia-%e2%80%a6with-the-day-of-reckoning-dawning-part-1/#comments Tue, 18 Sep 2007 18:18:35 +0000 Rich Begley http://wealthcoaches.com/2007/09/it%e2%80%99s-the-economy-virginia-%e2%80%a6with-the-day-of-reckoning-dawning-part-1/ On the one hand I hope I’m wrong.  On the other hand (there are 5 fingers – old joke sorry) I’m afraid it’s going to happen.  I have a degree in economics.  One of my hobbies is reading economic theory – (not very useful at cocktail parties unless I want to talk to the dog LOL) I fear we are headed for an economic disaster that has not been seen in many years and not just the USA – it’s global.  No matter what magic the central banks attempt at some point will not help – the wheels have been set in motion and a hard rain is going to fall.  This is a massive subject and I can only gloss over my reasoning.  I’ll go into more depth in further posts…

A recession is defined as zero or lower economic growth on a yearly basis.  A Depression is a 10% slump however it really refers to the despair the population must endure.  A recession is actually a natural part of the boom and bust nature of the business cycle.  In good times, money is flowing; folks invest more and build their businesses.  Naturally there becomes excess in the system because everyone wants to get involved in the good times but when the cycle turns the weaker players go bust or get bought.  This is grossly simplified but pretty standard for profit oriented businesses.  Many things in nature have cycles – and seasons.  Winter (recession with little growth) happens.

Think of housing.  When house prices were going up everyone and his brother was getting into the house flipping business and trying to make a killing.  When there became an excess of housing on the market - the flippers had a difficult time flipping, the business became more difficult in certain markets, and the amateurs soon disappeared.   This is normal and occurs simultaneously in all industries with different cycles… Now along comes the government (specifically that private bank - not federal and certainly no reserves) known as the Federal Reserve and they are going to smooth out the business cycle so we never have to have a recession again!  Sounds terrific right.  With their meddling they have only prolonged the inevitable cycle and when old man winter does return – think the “D” word.  Here are 10 reasons for concern:

1.  Subprime mortgage lending in the US – the ATM Americans called “refinance the house” that was once used for consumption of granite counter tops, lovely vacations and automobiles has dried up and (hopefully) gone the way of the dodo.  As of September, 2007 only one third of the subprime loans have reset.  We have only seen the tip of this iceberg.  Expect average US home prices to drop considerably (30-50%) over the next 5 years.  Unless your credit is perfect and can meet stringent standards, don’t expect to get a mortgage or possibly even refinance. 

2.  Indebtedness in US, Britain, Australia etc. – British per capita debt is actually higher than the US (source Taipan Financial News) there was an old fashioned bank run recently at 2nd tier UK bank called Northern Rock – folks standing in line to get their money out of the bank – this bank made lots and lots of subprime loans…

3.  About a trillion dollars of bad debt in China not surfacing now but wait…  till after the summer 2008 Olympics and the building boom experiences a hangover and slows down coupled with the debt exposure. – subprime is a drop in the bucket compared to this one.

4.  Bond market blow up – this is another biggie.  As I write today the Fed meets and is expected to lower the federal funds and maybe the discount  rates.  If it does, it is thumbing its nose at international investors by giving them less of a return and helping the domestic consumer – great but there are other players.  This could cause international buyers of US bonds (50%) of buyers to stay away and not buy or worse yet, sell their bonds on the open market.  The Fed would be forced to raise interest rates to protect the dollar.  Any recovery for the US economy would be squashed by the high interest rates.  The Fed is truly screwed.  Damned if they lower rates, damned if they raise and scorned as weak if they do nothing.

5.  US debt owed by foreign individuals and governments – some hostile.  See above.  China holds the 2nd most amount of our US debt (behind Japan).  In case anyone forgot, this is a Communist country.  They could invoke what is called the economic nuclear bomb by getting rid of its US dollars.  If the US government wants to borrow any more money (for foreign wars for example?) interest rates will have to be raised killing the goose that laid the economic golden egg. (The American Consumer) … tune in tomorrow for part 2 R Begley