Financial Empowerment

WHAT DOES IT MEAN TO BECOME FINANCIALLY EMPOWERED?

First and foremost, it requires that we have a much greater understanding of our financial institutions and the financial products they offer us. We also need to understand more about the economic future we are living into, and the impact of a variety of financial events that we will experience in the years ahead.

Let’s examine financial institutions and how they view you and your money. First, financial institutions want and need your money. Second, they encourage you to consistently and systematically give your money to them. Third, they would like you to leave your money with them as long as possible.

Financial institutions have devoted systems, processes and products, with these three thoughts in mind. This allows financial institutions to make the most profit from the use your money. Now, there is absolutely nothing wrong with financial institutions thinking this way, and there is nothing wrong with them making a profit. In fact, we want them to be profitable and to make money using our money, so they can deliver on the promises they have made to us, such as paying interest on savings accounts, paying an insurance claim when we crash our car or a death benefit when someone dies. We really do want our financial institutions to be financially strong, secure and profitable, but we should also want to have our money working as hard and efficiently for us as possible no matter where we have chosen to put it.

People who are financially empowered, have learned to use financial institutions and their products in ways that utilize every dollar in such a way as to create multiple benefits, and provide the maximum amount of money, for their use and enjoyment.

Financially empowered individuals understand something called, the “Velocity of Money”. The velocity of money is not actually about the speed of money, but more about the flow of money through your financial world. The vast majority of us receive money in exchange for our work. Our hope is that ultimately, we will have enough money at work that we won’t have to work. Unfortunately, there are quite a large number of wealth eroding wealth transfers that occur in our lives everyday that severely limit our ability to build wealth. In fact, everyday, most of us, unknowingly and unnecessarily transfer a significant amount of wealth away from us.

Financially empowered individuals and families, have learned how to identify the many wealth transfers in their lives, so they reduce or eliminate them altogether. Empowered individuals, have also learned how to flow money from one financial process to another, in such a way, so as to create multiple benefits and provide the maximum amount of money, for their use and enjoyment as mentioned earlier.

By combining “The Velocity of Money” strategies and by reducing or eliminating “Wealth Transfers”, we can build wealth faster, with less risk of financial loss.

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Creating Financial Certainty in Uncertain Times

To become financially empowered, you must also have a more complete understanding of the economic future we are living into. One of the most significant areas of concern, will be “Demographics”. What are “Demographics” you ask? It is the study of population statistics. And why should we be concerned about “Population Statistics?” Well, let’s start by examining some population numbers, as they relate to us here in the United States.

First, there are currently about 38 million retirees in this country. It is the largest number we have ever had. Quite frankly, they are not dying fast enough (please don’t anyone take offense). Following right behind them are approximately 81 million (give or take a couple million) baby boomers. As of January 1st 2011 they are turning age 65 at the rate of 8,000-10,000 a day, and will continue to do so for the next 18-20 years. By all reports the baby boomers are going to live a long time, well into their eighties! It is entirely possible, that we may have 50-70 million retirees over the next 20 years. We all know that the Social Security system is in trouble, but do you realize that the government health care program for retirees called Medicare is nearly FIVE times larger than social security!

There are a number of questions a financially empowered person should be asking themselves about the impact of demographics, such as: will such a large number of new retirees cause my future Social Security benefits be lower? If so, how much lower? What about my Medicare benefits, will the Government be able to provide promised benefits them for all the retirees? And if so, how will the Government pay for all these benefits in the future? Will they have to raise taxes? By how much? If they raise taxes, will there still be ways to legally reduce the number and amount of taxes we pay?

Demographics will potentially impact us in another way. In 1980, approximately 40% of the workers in America were covered by company provided pensions, today that number is around 15%, and many of those pension funds are significantly underfunded, and may not be able to meet their retirement obligations! Since the early 1980’s, the majority of American workers, have been encouraged to use 401K’s and similar plans for their retirement savings accounts. Prior to this, back in the 1970’s, individual retirement accounts or IRA’s, were the supplemental retirement account of choice. Over the last 30 years or so, the underlying investment for IRA’s and 401K’s, has been the Stock Market in the form of mutual fund shares. It was during this period that we shifted from “saving” for retirement, to “investing” for retirement. Unfortunately, most of us did not really understand the significance of this shift!

By placing our future retirement money in the Stock Market, we took on all the risks inherent in the Stock Market, risks we had not previously encountered as we “saved” for retirement. Over time, we have been led to believe that downturns in the Market are normal and to be expected. We have been assured that the Market will always come back.

A financially empowered individual might look at the Stock Market a little differently by asking these questions: will it come back in time for my retirement? What if it drops significantly during my retirement? Could I run out of money? Whether I am younger and my retirement is still a long way off, or I am older and my retirement is approaching, what will the demographic impact of 81 million baby boomers withdrawing their money from the Stock Market be? Will it cause the Market to go down, and if so, why and for how long? By the way, it will most likely cause the Market to go down, and it may cause the market to retreat for the next 10-15 years.

We provide our clients the financially empowering information they need, so they can ask the right questions, so they can make informed educated decisions, about their financial future. We also help them establish strategies that utilize financial institutions and their financial products, to develop a financial plan that works under all circumstances, and creates the highest level of financial certainty! To learn more about the how the Alliancegroup can help you become financially empowered, go to our Upcoming Events Page and register for our next webinar or.