Financial Freedom Equals Time Freedom

Time freedom comes from having sufficient savings to pay for your lifestyle expenses through life expectancy. When we cut through all the investment advice that everyone is so eager to give us, the solution to financial freedom is simply to accumulate enough money to become financially free. You can do this by maximizing the efficiency, control and safety of the conversion of your earnings to savings.

Efficiency is achieved by maximizing the amount of money that can be converted to savings programs. In most cases, if you can save your surplus money in pre-tax programs you will have more money at retirement. If you distribute this money as a cash flow to pay your lifestyle expenses, your retirement income will be greater than trying to save money post tax and then distributing it for income. If you are a professional or business owner who controls his own business, it may make sense for you to consider establishing a Defined Benefit Pension program. In most situations, you will be able to contribute much more to a Defined Benefit Pension than the $53,000 currently allowable under Defined Contribution plans, such as profit sharing plans, safe harbor 401k, etc..

Control is achieved by being aware of the revenues and expenses associated with your practice or business. It is enhanced by never allowing a check or money transfer to occur without your specific approval or signature. Remember the adage, “never put someone between you and your money.”

Safety is achieved by saving surplus earning in accounts that have a low risk of losing the principal. A loss of 50% of your principal requires a subsequent gain of 100% just to get back to the original principal. Examples of savings vehicles that allow you to protect the principal are certificates of deposit, savings accounts, money market accounts, legal reserve equity indexed annuities, traditional legal reserve fixed annuities, and some types of life insurance contracts. In today’s economic environment, a competent money manager, who actively manages for risk, is advisable. For those who want guarantees built into their accumulation and distribution programs, a fixed index annuity with no caps on return should be considered.

If you can be efficient in the way you save, if you can avoid having someone steal your money, and if you can avoid losing your money to market downturns, when economic upheaval comes, you can weather the storm. If you save in a pretax environment, you are immediately able to invest considerably more money; example: in after tax savings in a 40% tax bracket, you would have to earn $166,666 to save $100,000. Wouldn’t it be better to save the whole $166,666 before tax and avoid currently paying the tax? This in turn allows you not to be forced to invest in risky investments because you are being efficient in the way you save your money. By not losing principal, you end up with more money. If you are not applying all these principles and want to know how to keep more of your money, please email me or call so that we can review how they might work for you.