Archives For Retirement

Avoid these 2 common financial mistakes to live a more stress free life.

 

These two common financial mistakes lead to a greater sense of uncertainty and a more stressful life. The Life You Can Afford to Live is designed to provide you with tools to lead the best life possible. So, naturally we wouldn’t want you to miss two of the most common mistakes that we see people make in their financial life.

 

2 Financial Mistakes

 

Most often when someone speaks with authority on a subject its because they’ve had personal experience within the subject matter. Certainly true in this instance. I am bringing you this message from a point of I’ve been there and didn’t enjoy it and didn’t even get a t-shirt. Fortunately, my experience with this was early in my business life therefore the results weren’t catastrophic. However, the stress and tension that resulted taught me valuable lessons.

 

My goal is to provide you with enough information for you to know when to ask for help. We certainly can’t get to specific in this format but you should be able to glean enough that you know whether to raise your hand or not. Our team stresses these points throughout our process so we are well equipped to answer any questions that may surface.

 

The 2 Common Financial Mistakes to Avoid

 

1. Not Creating Contractual Wealth

Contractual Wealth is when someone else has a legal obligation to you. Contractual wealth also means that you have recourse if they do not fulfill their contractual obligation. This type of wealth provides you with a higher level of certainty and predictability. Certainty and predictability provide you with a more stress-free financial life.

Before sharing examples of Contractual Wealth building tools lets look at its counterpart, Statement Wealth. Statement Wealth is the most common form of saving and investing. Likely due to ease or someone lacking in knowledge of alternate investment options. The premise of Statement Wealth is that you save or invest into vehicles in which you have little control over the outcome as well as any recourse should it not have your desired result. Common examples are 401(k)/IRA Plans, Stock Portfolios, Mutual Funds, ETF Investments and Savings Accounts.

Some examples of Contractual Wealth include:

Secured Bonds – Mortgages – Rental Real Estate – Commercial Real Estate – Annuities – Life Insurance – Reverse Mortgages – Private Lending with Collateral – Asset Care Plans – Business Ownership – Grantor Retained Annuities

 

Click here for a quick 2 minute video explanation of Statement Wealth vs Contractual Wealth

 

2.  Not Creating Tax Free Income

Mark Twain once said, “the only certain things in life are death and taxes”. So true, but one thing Twain failed to mention is that Tax Rates are always changing. You certainly can’t ever count on paying the same tax rate. In an effort to reduce or even eliminate the risk of Higher Tax Rates we want everyone to take a more intentional approach towards creating Tax Free Buckets of money. The ease and allure of Tax deferral is great and we want you to have some funds in that environment, but not solely.

 

Particularly Tax Free money helps you to manage how and where you withdraw money from during retirement. Thus, creating the aforementioned predictability and certainty that reduces stress in the Golden Years.

Some examples of Tax Free Investments include:

Real Estate – Municipal Bonds – Life Insurance – Roth IRA – Roth 401(k) – SLIRPS – Some Captive Strategies

 

Hopefully, this will give you the ability to AVOID these two common financial mistakes. I’ll close with a couple of questions.

Have you addressed these two financial mistakes in your own plans?

Would you like help in avoiding these pitfalls?

 

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The real estate market continues to stay red hot! We continue to get more and more questions about investment properties and just those looking to move their primary residence. So, I’m pleased to introduce our readers to our Guest Blogger, Larry Gavrich. Larry is an expert particularly in Golf Communities. He has written extensively on the subject so we should all benefit from his expertise. You can also re-visit my original article on Golf Real Estate for additional information.

 

 

Golf Communites

After visiting and writing about hundreds of golf communities over the last 10 years and helping dozens of couples, mostly retirees or those about to retire, identify the golf community best suited to them, it has become clear to me that some questions about golf communities are worth addressing and some best left alone.

Let’s start with those questions that are pretty much a waste of time:

 

Will the residents in the golf community like us, and will we like them?  When I am asked this question, my response is straightforward:  “Are you likable?”  If so, you will make friends, and probably quickly after you join the community’s golf club.  Keep in mind that in the typical golf community, everyone is from somewhere else.  Current residents recall their own anxieties about moving to a new place, and they will do all they can to make you comfortable.  (From a selfish standpoint, they are also happy you moved there to help stabilize the real estate in the community and pad the membership rolls of the club.)  Also, given human nature, folks who spent a few hundred thousand dollars on a home are not apt to admit readily to a stranger that they made a mistake.

 

Will we be bored if the community is at some distance from an urban area?  Many golf communities, especially those with bargain real estate, can be as much as an hour or more from an urban area that offers entertainment, restaurant and other services.  If you have ongoing medical service needs, the advice here is to look at communities closer to a city with a major hospital.  For others, the boredom question is easily answered with a multi-day visit to a community you are targeting.  Most offer “discovery packages,” low-priced stays that include lodging, maybe a few meals, a round or two of golf and access to the community’s other amenities.  You will learn over the course of a few days if activities “on campus” are enough to sustain you and if the distance to the nearest city is tolerable.  (Note:  I am happy to assist those interested in arranging a discovery package.)

 

Many customers ask me about the financial stability of a community.  Most communities will open their books to serious prospects; and if they don’t, my advice is to move on to another community that has nothing to hide.  If a community you are targeting is owned by its residents, ask specifically about the financial “reserves” available for both the homeowner’s association and the golf club.  These are the monies available in case of unexpected expenses, such as hurricane damage, a lost lawsuit (if insurance doesn’t cover it all), etc.  In most communities, reserves are in the hundreds of thousands of dollars range.  If the community is still owned by a developer, read the covenants to determine when the developer turns the community over to its residents and who will own the golf club at that time.  (Note:  In most states, developers are required to turn the community over to residents when property sales reach a certain point, typically around 75%.)

 

Of course, golfers will want to know the extent of the golf costs, both the initiation fee and ongoing monthly dues.  Most initiation fees these days are of the “non-equity” variety, which means you will not get any of it back when you resign your club membership.  I counsel my customers to focus more on the monthly dues than on the initiation fee.  Imagine you have set a budget of $400,000 for your golf home and $10,000 for initiation fees for the club.  Let’s say you fall in love with a community but the initiation fees are $25,000, and yet you identify a home you really like priced at $375,000.  Since your happiness will very much be tied to your social life in and around the club, consider the higher initiation fee as part of the cost of your home, rather than two separate items.  In total, you will still come in under budget.

 

I have visited and researched golf communities in which there are no initiation fees and no dues; golf membership is part of the homeowner association membership dues.  In general, semi-private golf clubs — those with memberships but that permit outsiders to pay green fees to play — have modest initiation fees (a couple thousand dollars) and monthly dues (between $200 and $400).  Fully private clubs tend to charge the highest initiation fees, and dues can approach and pass $1,000 per month, especially if multiple-courses are part of the club.  But, then again, I have visited fine private golf community clubs with initiation fees under $5,000 and dues under $500.

 

There is a lot to consider when searching for a golf community home.  If you would like assistance in sorting out country club and golf community options, please contact me at editor@homeonthecourse to arrange a no-obligation phone discussion.

 

 

Larry Gavrich is the founder and editor of Home On The Course, LLC, whose mission is to assist those looking to relocate to a home in the Southeast US near excellent golf.  In the last 10 years, he has visited and reviewed nearly 200 golf communities.  A licensed real estate agent, he has helped dozens of couples find golf communities that match their requirements and interests.  His blog site, GolfCommunityReviews.com, features more than 1,500 articles and reviews written by Mr. Gavrich. 

Congratulations to Robert Kiyosaki on reaching the 20th anniversary of his revolutionary book Rich Dad Poor Dad. Certainly myself and all of our clients have benefited from the wisdom within this book!

 

Kiyosaki Congratulations Opening Image

 

If you haven’t had the chance to read the book; Clearly I would recommend this as a first step in your Financial Education. If you aren’t a reader, Robert and The Rich Dad Companies have created numerous avenues for you to learn. You may want to purchase some of the videos or even a Board Game, Cash Flow and Cash Flow for Kids as other ways to learn from his valuable insight.

You can follow this link to a Blog Series that I wrote years ago highlighting some of what I learned from the original Rich Dad Poor Dad book. Visit YouTube to watch my personal Thank You message to Robert and Kim for this book and congratulating them on their years of success.

If you are looking for someone to work directly with on coaching you through some of these concepts in Real Estate Investing and/or Personal Financial Planning feel free to reach out to me directly, connect through social media channels in the sidebar, or visit Drive Planning On-Line.