Dirk Zeller

Article / Updated 08-02-2023

To reduce debt, you first must eliminate your consumer debt by paying off your credit cards. From there, your path to financial success depends on smart wealth management through a “wealth plan.” Start your path to financial freedom by eliminating any existing consumer debt with a debt payoff plan. Reduce consumer debt Consumer debt must be avoided if you want to achieve wealth, financial success, and ultimately financial freedom. Consumer debt includes credit card debt, consumer loan debt, retail store or gas credit cards, revolving accounts, and even car payments. It's any debt you would take on for consumption purposes. Any debt entered into on a non-appreciation asset should be questioned. So, what about a car loan? A car is a depreciating asset. The car loses value the minute you drive it off the lot and continues to depreciates in value over time. But the use of loans to buy cars today is commonplace. In fact, 43 percent of the adult population has a car loan to pay. In the 1960s and 1970s, it was rare for people to have car loans. If you want to join the ranks of the wealthy, avoid bad debt and consumer loan debt. Now the use of debt on appreciating assets is a valid tool to create and increase wealth. An appreciating asset could be the home you live in, an investment property you purchase, or business that you acquire. By and large, an appreciating asset with reasonable debt amounts will help you create more wealth. The desired wealth needed to achieve financial independence influences the need to use debt as a tool. The type of debt that more than 65 percent of all Americans have is consumer debt: bad debt, and much of it is credit card debt. Most people, no matter their background or knowledge, have at one time or another had problems with consumer debt. Successful people don't avoid mistakes; they make the mistake only once and learn from it. You can use some strategies to create efficiency and value in using credit cards sparingly and well. And there are ways to get out of credit card debt efficiently and permanently. Reduce credit card debt to build wealth If you presently have credit card debt, you need to work out of that situation. This non-deductible debt, in my view, is the worst form of debt. When you combine that with the high interest rate that credit cards usually charge, it really is an explosive problem. Putting the credit card down and not using it is certainly the best strategy. Maybe you have some ongoing business needs or personal needs that require a credit card. Most business service providers will take an EFT charge direct from your account. If you have a credit card with a balance that you cannot pay off, and you need the use of your credit card for some reason, here are a few steps you must take: Step 1: Resolve to pay all new charges off in full on time If you carry a loan balance on a credit card, when you charge something to that specific card, large or small, from the moment of the charge processing, you will accrue interest charges. The interest rate is obviously incredibly high. No one ever got wealthy paying 17-percent interest to someone else. The normal 25-day grace period to pay with no interest charged is gone. Because of the balance on the card, you will be paying interest from the moment you bite into that hamburger you just charged. It means that $15 lunch will cost you 17 percent more! Step 2: Establish a going-forward credit card What you need to do is pay off one card that will be used as your going-forward credit card for emergencies and necessities. Reread that sentence: The key words are emergencies and necessities, not discretionary spending. You want any balance moved to a very low-interest card or credit line. Frequently, if you have good credit, you will receive offers with a 2- to 5-percent one-time fee on the balance you are transferring. You then can receive 12 months with no interest to pay it off. It’s not no interest, because you paid the 2- to 5-percent fee upfront, but it’s a lot better than 17 percent interest ongoing month to month. The key is that you must use a credit card with zero balance as your emergency need card. And you won't ever use that emergency need card unless you have the ability to pay the full balance each month. Your goal is to only spend at all times what you can comfortably pay off each month. And if you have to transfer a balance to a spare credit card and pay the one-time fee of 2 to 5 percent, do it. Then budget out paying off that card in the timeframe of the zero-interest year. The worst thing you can do in this strategy is run up debt that you can’t pay off monthly. You will be in even more debt than before. Do the math of figuring out how much you need to pay each month to erase your debt in the specified time. Then pay that specific amount, or just a little bit more. That way you are only paying 2- to 5-percent interest on the transferred borrowed amount. Again, do not charge a thing on this card. The credit card companies apply payments to the lower interest rate balance owed first. The only thing that you will pay for is the annual fee charge if any. That will be charged at your normal interest rate charge. Get yourself out of credit card debt as quickly as possible by paying the lowest rate possible. Then never go back into credit card debt. Develop a successful debt payoff strategy There are a number of systems to help you control and get rid of credit card debt. The key is getting out of high-interest, non-deductible consumer debt. If you are in debt you must create an organized strategy to retire that debt. I have created and included a tool, shown in this figure, from our Champions of Wealth course for your use. This Debt Management tool looks at your number of credit cards. It helps you organize your debts and set a strategy to become bad-debt free. The tool provides you a place to simply organize and list all your debts completely. You will want to just brainstorm and fill out the form. List everything on the document rather than organize as you go. Don’t evaluate based on an amount or interest rate. The purpose is to just create a complete accounting in one spot of all debts you owe. The debts you have will become easier to organize a plan for once you have identified and collected them all in one document. List all bad debt first. Picking your debt payoff plan Now that you have your list of debt, you need to craft a debt payoff plan to get rid of it. It will be hard to invest and save at the level you need to without getting out of debt. There are two schools of thought in the strategy of paying off debt. One school is the financial strategy for debt reduction and one is more of an emotional strategy to pay off debt. There is not a quantifiable best option here, so choose what's best for you. The financial strategy goes back and organizes your credit card debt cost based on interest rate. You list your highest interest rate debts at the top, pay the minimum payment on all other debt, and power excess funds in paying the highest interest rate one first. That strategy makes greater financial sense, but it might not be right for you. In fact, it might not be correct for most people depending on whether you can create momentum and feel good about the progress you’re making in getting out of debt. Maybe your highest interest rate debt is also the largest amount. It takes a greater discipline to pay debt off through this method. The emotional strategy that has the highest likelihood of success is tackling the credit card or debt based on amounts. You organize your debt based on smallest amounts at the top. This way you start to see progress sooner. The strategy of ranking which to pay off is based on the principle of momentum and positive progression. This way creates emotional excitement and rewards sooner and more consistently. The goal is paying off the card and then cancelling it forever. This is especially true for store credit cards. Store credit cards carry the highest interest rates. They also have the enticing money-saving offers. We shop at Old Navy for my kids. Every time, they offer a credit card where I can save 15 percent off our total purchase. If we are spending a few hundred dollars, it’s $30 to $50 in savings. Let’s be honest, a good deal is enticing to any of us, but I always turn it down because my time of having to deal with another credit card is just not worth the one-time savings. The goal is to reduce debt, reduce expenses, and hassle. Every card you carry has an expense, usually an annual fee, and the hassle of dealing with more bills and tracking. It’s just not worth the one-time offer in savings. Laying out your GALP (Gone After the Last Payment) plan What you want to do is base your strategy on the Gone After Last Payment system, or GALP. Pull together your statements and balances and then calculate your GALP number. Take the outstanding balance and divide by the minimum payment to determine how many months it would take to pay off the credit card or debt. The goal is to pay more than the minimum so that you do it faster. You also have to recognize that if you only pay the minimum you won’t have it paid off in the GALP number because you are not factoring the interest charged each month you will pay, but you will be close. Take a look at the following table, which shows a sample debt scenario. A Sample Strategy for Debt Payoff Account Outstanding Balance Monthly Minimum Payment GALP Number GALP Ranking VISA $550 $50 11 1 MASTERCARD $720 $60 12 2 AMEX $1,400 $40 35 3 At a minimum, to hit your GALP number, you have to pay the minimum payment plus the accrued interest that the bank is charging you. Only then can you pay off and close the account out of your GALP number. Then you add the snowball concept: After you pay off a card, you then add what that payment would have been to your next debt plus the minimum payment and accrued interest. You then start paying that card down and just continue repeating the process until all debt is gone. Laying it out on paper (see the following figure) and tracking your progress is a powerful way to create excitement and momentum. It’s a way for you to save the money you need to create the wealth you desire, and fund your present and future lifestyle.

Article / Updated 12-21-2022

Creating categories for your goals and establishing timeframes to achieve them sharpens your focus and increases your intensity, which can reduce the time required to achieve your goals. It also allows you to quickly and easily see whether your time investment to the various areas of your life as well as the size and difficulty of your goals are appropriately balanced. The objective isn’t to spread an equal number and depth of goals among the six categories; the aim is to identify whether one or two of the categories is light compared to the others and to determine whether you need to pay more attention to those areas of your life to develop them. In the end, the purpose is to create a well-rounded system of goals that addresses your whole person and that you’ll have the motivation to actually work toward. Categorize your goals After you assign a timeframe to each of your 50 goals, your next step is to assign a category to each one. Typically, your goals fall into one of six categories: C = Career goals H = Health goals F = Family goals M = Money/financial goals S = Spiritual goals P = Personal goals When determining which category each goal falls under, you’ll find that some goals fall naturally in one specific category. A goal to get be promoted to supervisor at work, for example, is an easy C. Other goals, however, aren’t so easy to peg. Going back to school to earn an MBA may be a C for career, but it also may be a P for personal. Place the goal in whichever category you most closely associate with it, or feel free to place some goals in multiple categories. Draft a list of the 50 goals you want to achieve in the next ten years. Then go back through your list of 50 goals and write the appropriate category letter next to each one. After you label each goal with a category, count the total number of goals you have for each category and record those numbers in the following chart. Then assess the spread of your goals across those categories to see whether they’re well balanced. Are you light on health goals? Should you pay more attention to your spiritual life? Assign a timeframe to each goal You can have anything you want; you just can’t have it all at once and all right now. Just because you establish a goal to lose 20 pounds doesn’t mean you’ll wake up tomorrow with 20 pounds missing from your body. Realizing your goal involves a process that requires specific activity and time. Remember that your fabulous 50 list names goals that you want to accomplish within the next 10 years. That said, you may want to see some of them come to fruition much earlier. Some may be immediate — just a year away. Others may require you to first achieve some intermediate goals. For instance, say your goal is to double your income within three years. You know you’re unlikely to receive anywhere close to a 100-percent raise at your current job, so you start exploring other options: a new job that pays more and has a fast-track career path, a second job, freelance or contract projects that you can do on your off-hours, or a real-estate investment that brings in rental income. Go back through your list of 50 goals and write a 1, 3, 5, or 10 next to each goal to indicate whether you want to achieve that goal within 1, 3, 5, or 10 years. When you start thinking about the time you need to attain your goals, make sure you’re being reasonable. Whether or not the timeframe for your goals is reasonable depends entirely on your situation. To help you stay on track, follow these steps: Consider the timeframe you’d ideally like to accomplish this goal. Would you be happy if you accomplished it one year or even three years later than your ideal, or are you intent on accomplishing it by a certain time? Assess the complexity of the goal. Determine what new knowledge or other resources you may need to accomplish the goal. Consider what timeframe someone else needed to accomplish a similar goal. After you label each goal with a timeframe, tally up the number of goals you have for each time slot and record those totals in the following table. Then assess the spread of your goals across those timeframes to see whether they’re well balanced. Especially when finances are involved, keep in mind that you should enjoy the process of working toward your goals. Although planning for the future is important, you’re guaranteed only the present. You don’t want to rob yourself of all enjoyment now. Better to live a balanced life while you implement your plan and adjust it as needed when circumstances throw you for a loop.

Cheat Sheet / Updated 03-25-2022

Whether you want to know how to succeed in life or how to succeed in business, you need to create habits for success. Success, or excellence, is always created by establishing positive, repetitive habits. Unfortunately, almost anything we do repeatedly can lose its luster, passion, and energy. Without doing something repeatedly, you won’t establish it as a habit. When you focus on repeating the actions that lead to success, you create habits. So, repeating and success are like peas and carrots: They go together.

Cheat Sheet / Updated 03-09-2022

The real estate business is a dynamic market. And to be a successful real estate agent, it helps to have a few key skills at the ready. Being prepared to use your time wisely, creating an online presence, converting online lookers into clients, and prospecting for business are important tools that every successful agent should possess.

Cheat Sheet / Updated 03-03-2022

Making the most of your time at work means learning to make productive decisions quickly and asking effective time-saving questions at meetings. Save time on the road by keeping a list of your important travel details with you so you can get to them easily. Before you call it a day at work, take a few steps to prepare for tomorrow so you can start your day off on the right foot.

Article / Updated 08-26-2021

After service and value, communication is where you truly build the customer relationship. Up until that customer service is fully rendered, a customer assumes that you are providing the service because you want to gain compensation. All the calls, texts, e-mails result in your service being delivered in exchange for funds. But after the exchange of service for funds, all service and value you deliver from that point onward shows that you care about your customers. That’s a powerful difference. Businesses operate in a competitive environment, and that's true whether you are a professional, operate a restaurant, have a sales-based distribution business, manage a local dry cleaner, or own a large conglomerate. You have key competitors that are attempting to take your customers and clients away from you. To think, “Oh, that will never happen” is to be naive. The quality of service you deliver and the depth of the relationship that you have with your customers will determine your success, profitability, and longevity in business. There are plenty of competitors that do an outstanding job in the moment that service is delivered to the customer. The key habit is to come up with after services — what you do after service is rendered. What do you do after customers have picked up their dry cleaning for the month? After they've bought hedge clippers at the hardware store? After they've bought a home from you and won’t buy for another one for five to ten more years? Solve problems and create value The value of any product or service can be summed up in this equation: Value = Benefits – Cost We as consumers feel like we received value from a service provider or business if the value exceeded the benefits we received, subtracted from the costs we paid. For example, let's say you are having a wonderful meal at a restaurant. The food was delicious and ample in quantity. The waiter was prompt and attentive to your needs. The ambience was comfortable and enjoyable. Who you spent the evening with can also influence your perception of value. The received benefits of enjoyment, fun, well-being, satisfaction, wonderful tastes, and pleasant experiences are all there. If all those benefits you felt about the restaurant exceeded what you spent, you will likely be back and even tell your friends about what a good time and wonderful meal you had there. That’s the power of Value = Benefits – Cost. In business, we deliver value to customers, but we also solve problems. The best products and services are designed to solve problems for people and other companies. Why do you go to the doctor? It’s to respond to a present health problem you are experiencing or to head off, through preventative medicine, a problem in the future. We might also learn how to enhance the quality and longevity of our life. Doctors ask a lot of questions because they want to solve problems for their patients. That’s a good model in business as well. As a business owner or employee, you should be asking your best customers these questions: What are the key challenges you are experiencing right now? How might we be of service to help you solve them? If we could improve our products or services for you, how could we do that? What are you not getting from us you wish you could? What other companies like ours are you receiving service from? What are you receiving from them? Why did you select them to receive _____? These types of questions give you insight into your customers and will help you improve service and solve more of their problems. This strategy of solving problems increases your value with each person, client, and company you do business with. Under-promise and over-deliver We have all heard this advice: “Do what you say you will do.” In the business world of today, I think that is expected at the bare minimum. And that bare minimum standard will not prevent your clients and customers from going to your competitors in the future. In business, we all need a way to “plus” our clients. A plussing strategy is a unique way that we can add value, which means under-promise and over-deliver. Doubletree Hotels has a unique plussing strategy. When you check into a one of their hotels anywhere in the world, you receive a warm, freshly baked chocolate chip cookie. They have a warming drawer built into the front desk in every hotel. It’s their way to add value, make you feel welcome, and place you in a delightful chocolate-chip-sugar coma all at the same time. What’s your plussing strategy in your business? Connect in business integrity Business is about, first and foremost, trust — the trust between company and customer. Customers need to be able to trust that the company will perform as promised. Employees of the company must believe that the company will fulfill promises made by the company to the customer. What I'm talking about is essentially integrity among all parties in this relationship. People in leadership breed a culture and environment of trust. That foundation of trust creates a thriving business that benefits both customers and employees. Employees have a key responsibility to their employer's of integrity. For example, significant productivity is often lost through employees being on their phone at work. Checking Facebook and Instagram accounts and answering texts outside of break time show a lack of integrity on the part of the employee. The arriving late, leaving early, or extending your lunch break is stealing from your employer. These habits are pervasive in the office environment of today. We need to put our phones down, leave them in our purse, desk drawer, or car. The businesses we work for will be significantly enhanced by this simple practice. Establish long-term service relationships The true value of a customer doesn't come from a one-time transactional sale. You want your business to become an indispensable part of their life so that you gain the honored and hallowed position of serving them for years, decades, or generations. I have some clients that I have been serving for close to 20 years. I consider it an honor to have established our relationship and helped them grow their business for almost two decades. Let me share a few tips to help: Communicate frequently with value. Set up a video blog, e-mail newsletter, Facebook group, or some method to communicate regularly with your customers and clients. The communication should be valuable to them. If you are a doctor, focus on health, new medical discoveries, reminders of new immunizations available, eating and exercise tips, and so on. Communicate personally by sending texts, making calls, or writing personal notes to key customers or clients. The mass communication of value through e-mail, social media, or blogs is wonderful, but if you want to deepen personal relationships, it must be personal. All relationships are deepened through one-on-one connection. Most of us get busy and fail to make time. The habit of personal communication creates success, and it takes less time than you think. Set a reasonable standard so that you can establish the habit. Start with making one personal call per day, each workday, to a key client. Resolve to not leave for home until that’s completed. In a year, you will have 240 conversations with key clients. Can you think of a better way to establish long-term relationships with them? Recognize milestone moments. Milestone moments can recognize how long you've worked with a client or customer. Or you could commemorate personal events like weddings, anniversaries, births, promotions, or birthdays. When you recognize milestone moments, you deepen the customer relationship. Select one or two types of milestone moments that you will recognize in your best customers.

Article / Updated 08-07-2019

If you want to make friends and have healthy, successful relationships, you first need to develop characteristics that are welcoming. Begin with a welcoming smile, make a great first impression, and engage in good conversation with effective communication. Creating successful relationships through community We all desire to be connected. We want a sense of belonging to a like-minded group of people, which adds purpose to our life and creates the opportunity to serve others. That’s why religious, fraternal, business, and social-cause organizations exist. A social media platform can bridge the gap between personal face-to-face interactions. It can continue the relationship or dialogue between personal connection opportunities. It can keep you connected with an old friend from high school that you had a previous face-to-face relationship. But in the realm of establishing and growing a new relationship, there are limitations to social media's ability to personally connect and create friendships. A disturbing trend is the loss of personal connection between the service provider and customer or client in today’s social-media-based society. The wonderful technological world we live in has led to a loss in true social connectivity. Now, social media companies like Facebook, Instagram, and Twitter would likely disagree with my assessment. I'm sure they have exhaustive research to support how their platform increased personal connection. For example, the average number of Facebook friends per user is 338. I would venture to say that out of that 388, you've seen less than 20 percent of them in the last few months. The personal connection has been through electronic likes, emojis, and tweets. Relationship tip #1: Smile The best way to be welcoming is to smile. A warm, friendly smile can thaw out even the chilliest conditions. Be genuinely curious about people, their interests, and life experiences. The hardest thing in conversation for some people is to stay curious about whomever they are talking with. Frowning makes this even more difficult. Most of the time, they are thinking about what to say, or they're waiting for a pause in the conversation to express their views. If you're frowning, you cannot be a good listener. Don’t just listen for the break in conversation. Earnestly listen to the speaker at the moment and smile encouragingly. Relationship tip #2: Make a great first impression Leading with a smile is a wonderful habit to establish. In addition, leading conversations by addressing someone by name lowers potential barriers. The sweetest sound to any person is their own name. It is truly the most important sound in any language. Being well dressed and well-groomed plays a big role in making a great first impression. The old adage, dress for success, is still an important habit for anyone who wants to be upwardly mobile or who wants to establish some level of credibility and authority. Now we can think that people should not be judged by their appearance, but for their character and deeds. While that might be true in a utopian world (or if you are a contestant in the blind auditions of The Voice), but that's not how things work in the real world. As the son of an English teacher, who was a combination of Ms. Manners, Mother Teresa, and Sister Mary Punctuation, the way you speak and use proper language can lead to a lasting first impression both positively and negatively. Abe Lincoln had a unique way to express this thought, “Better to remain silent and be thought a fool than to speak and remove all doubt.” The place of proper grammar in verbal communication is missing today. My mother always said, “You can gain a clear indication of intellect, education, and upbringing by proper use of grammar.” Even to this day, it pains me to watch interviews with athletes after the game. My amateur analysis is that 80 percent talk about how “good” they played, hit, performed, or whatever. My mother’s voice is ringing in my head: “You can’t do things ‘good’; you can only do them well.” Thanks Mom! If you really want to avoid a poor impression, then cut out the flowery metaphors. And what I mean is cursing and course language. Over the last few decades, the discourse in our society has devolved to be more crass and uncouth. The use of swearing is commonplace, but it’s wrong. We have politicians, business leaders, news commentators, and my personal least favorite, professional speakers and authors, publicly dropping F-bombs. I think some do it because they think it is hip or cool, or it makes their point more dramatic. I personally couldn’t disagree more. When you use course and crude language, you have instantly lost a percentage of the people you are trying to connect with and influence. There are hundreds of thousands of other words that can be selected in the English language to get your points across and make a quality first impression. There is little need for such crude and boorish language and behavior. If a word isn't appropriate in a PG-rated movie, don't use it when you're trying to make a good impression. Relationship tip #3: Engage in good conversation The essence of good conversation is to talk about things that are interesting to the other people you are conversing with. When we talk in turns about other people’s interests, we draw them into the conversation. After a while, they start to think that you are a wonderful conversationalist. Finally, to engage in high quality conversations, make the other person feel important. Use active listening skills: Engage in direct eye contact: This shows people that they are important, that you care about what they are saying. Avoid distractions: Avoid the temptation to look at your phone, your watch, or other people in the room. These actions can make the speaker feel less important and destroy the conversation. Open body positioning: Your body can signal boredom or a stand-offish position. Avoid crossing your arms, and use open-handed arm gestures. Engage in feedback: Ask questions or use confirming comments like “I hear you” or “Tell me more.” Demonstrate you are listening: Smile in reaction to the other person. Nodding your head in agreement is also an effective tool. Being well-read is another way to engage in good conversation. Be a student of what’s happening in the world today. Inject ideas or current events from multiple sources into any conversation. One of the keys to effective listening is to encourage others to talk. The best way to accomplish that is to ask questions. Most people believe that whoever is speaking is controlling the conversation. The opposite is actually true. Whoever asks the questions is actually the guider or controller of the conversation.

Article / Updated 07-17-2019

The American dream is to retire financially well off when we are still physically able to enjoy the freedom, which means being able to travel, relax, and enjoy our golden years. The age and amount needed to accomplish that goal is a personal decision, but you definitely need a well-crafted plan. The typical length of retirement 30 years ago was less than half the number of years it is today. It’s common for people to live into their 80s and 90s, which requires much larger savings and more years in retirement than before. First, if you haven't already done so, use a retirement savings calculator to define your wealth number. Then read on to discover how you can achieve that number. Whether you are an employee or business owner, crafting and executing a wealth plan or wealth strategy that incorporates both savings and spending is a must. Selecting the right retirement accounts and amounts can enable you to spend your golden years with peace of mind and freedom. Simple steps to retirement if you are an employee Whatever your company is offering for retirement savings accounts, take full advantage of them now. Most companies, large and small, offer some type of 401k or retirement vehicle for their staff. The typical pension benefits of the 50s, 60s, and 70s are long gone in most companies. That doesn’t mean you can ignore what your company does offer. If your company provides a matching feature in the 401k based on what you contribute, you must fund your 401k to that specific level or beyond. When your employer is providing some type of a 401k match, you are turning down a 100-percent return on your money if you fail to take advantage. This 100-percent return is above whatever investment gain you generate. Where else are you going to generate a guaranteed 100-percent return on your investment with zero risk? Review your Social Security benefit statement annually The Social Security you earn through your contributions needs to be monitored. You don’t have investment choices to make, but you do need to make sure you are receiving the Social Security income credit you paid in. Social Security is designed to replace about 40 percent of your income in retirement. You will need to save for the remainder in other accounts that you set up and control. The vast majority of people don’t plan or check on what could be 40 percent of their retirement income. Review your statement for income projections and qualification credits. You will need a minimum of 40 credits to be eligible for Social Security benefits. Your Social Security payments will be based on 35 years of earnings. The lower years of earnings, if you work more than 35 years, will start to drop off in the Social Security calculations. Those years when you were 16 years old working at McDonald’s will be replaced by your higher earning years in your late 50s and early 60s, which will dramatically increase your monthly benefit. Review your benefit amounts for early retirement at 62, full retirement at 67, and delayed benefits at 70 years of age. You will receive an 8 percent increased benefit per year from full retirement age until 70 years of age. This is a large bonus if you can wait until 70 to start receiving benefits. There is no point in waiting longer than 70 to take your benefits. Your benefits will not increase past age 70 even if you are currently working at that age. A married couple, whether both of them work or only one of them works, can each receive Social Security benefits. The stay-at-home spouse will receive a Social Security benefit that's half of the working spouse’s benefit. Few people know this fact and haven’t factored it into their wealth and retirement plans. It’s important to save a portion of your Social Security benefits when you are both receiving benefits. There will be a time in the future when one of you passes away before the other and your benefits will be reduced. It’s not that Social Security will reduce your monthly check, but you will only receive one check, rather than two, losing the lower of the two monthly benefit checks through death. To lessen that financial loss, save 10 to 15 percent of your gross Social Security checks each month. This will help the surviving spouse not have to deal with both grief and financial hardship at the same time. Set aside a percentage of your raises As you become more valuable to the marketplace and your company, you will likely see an increase in pay. You could be recruited by a competitor for more income. Don’t spend all of your increased income and raises on consumption. We all certainly deserve some of the reward of being more valuable to the marketplace. The key is to put some of that increase aside to create wealth. If you can discipline yourself to put 20 to 30 percent of that increased earnings into savings and investments, you will quickly change your net worth through sacrifices that are unfelt by your current budget. If employees did that one thing over a 30-plus year working life, that one thing would dramatically change their retirement years down the road. It’s a painless way to increase your wealth quickly, and you can do it through increasing your contribution to the company 401k. Most employees do not max out their company 401k benefit at $18,500 per year. I would put any raises in a 401k plan to prevent myself from spending them. You can also save outside of the 401k in after-tax options like a Roth IRA or buying an investment property. Invest in discounted company stock (but be careful) There are companies that offer employees discounted company stock as a benefit. That stock investment can be inside or outside the company retirement plan. As an employee benefit, it can provide you with a way to buy a good asset at a lower price. Where trouble can come knocking at your door is putting too many eggs in one basket. If a high concentration of your retirement funds is invested in the company stock and the company has a rough patch financially, you could be laid off and your stock could be devalued as well. Most financial experts suggest that 10 percent is the maximum of your total assets that should be invested in your company stock. That seems a little low, especially if you are working for a company that is currently flying high. If you worked for Google, Amazon, Netflix, or Facebook over the last ten years and had only 10 percent of your retirement funds or after-tax money invested in those stocks, you would have missed out on a fortune. Because you are participating in employee stock, which I would encourage if the discount is 10 percent or more, it’s incumbent on you to keep your ear to the ground at the office. You should know for your ownership and your career if the company is struggling. You should also read all the company communication to stock owners. Compare what you know on the inside to public statements and public comments. Is the communication inside the same as the communication outside? If it’s incongruent, it’s time to cut back your exposure to protect you and your family from the downside risk. Simple steps as a business owner or entrepreneur There are really countless options and strategies as a business owner to guarantee your retirement success. There are numerous retirement account options that you control the decisions on as an owner. As a business owner, the foundation is a good flow chart of your wealth plan with accounts and amounts clearly identified. Your wealth plan flow chart moves you from hope, theory, or desire, to execution. I have included a few flow charts in this book that I have used personally and taught to countless small-business owners who are now wealthy. You can see them in the following figures. The differences between the models has to do with where you are going to pay taxes and fund retirement savings. Are you going do it at the corporate level or at the personal level? In some instances, your model might encompass doing that at both levels, and that's when wealth can really be exploded. As a business owner, it’s easy to feel you are doing well because you see the gross revenue of the company. The employees only see their net check. A company owner can easily overspend when gross revenues are climbing. In reviewing these charts, you might feel there are too many accounts to manage. Wealth Plan #2 has at least four accounts at the personal level: Tax savings Personal savings College savings Retirement savings I have all those accounts and also a few more for investment savings and all the rental properties. I can attest that managing all those accounts requires work, time, and accounting. I also have discovered, for me, that the more accurate and compartmentalized I operate, the more money I can save through control and budgeting. As a business owner, comingling accounts is a bad strategy that can hide problems with the company or financial challenges personally. It can also conceal a lack of discipline. The “secret sauce” for small-business owners As a small-business owner, I have had every type of retirement account known to man. I have had 401ks, Sep IRAs, Keough, Money Purchase Pension Plans, Defined Benefit Plans, and Roth IRAs. There is not one that is the best over all the others. You and your accountant need to figure out — based on your age, income goals, and size of company — what options are best for you. All of the ones I mentioned have pluses and minuses, so a true professional is needed. But the real “secret sauce” is beyond just the accounts you use. It isn’t the type of account; it isn’t a type of investment class (stocks, bonds, commodities, or real estate). The secret sauce for a business owner, especially a small-business owner, is setting up your retirement accounts to be self-directed. A self-directed retirement account allows more latitude to decide what you invest in. It’s different than when you have a standard, boilerplate plan that feeds funds to Wells Fargo, Morgan Stanley, Edward Jones, or any of the large financial advisor institutions. They generally don’t allow you to self-direct your assets into real estate, businesses, hard money lending, and so on.

Article / Updated 07-17-2019

Knowing your financial wealth number, your net worth goal, or your specific financial goal creates the measuring stick you need to become wealthy or financially independent. These goals must be known by all people that desire wealth and financial independence. Being financially wealthy is the outward result of an inner focus and clarity of purpose to draw you toward wealth. The journey starts in your mind and concludes in your bank accounts or asset accounts. Obviously, the journey doesn’t stop there, but the realization of arrival, the “I have enough” moment, is there in your number, along with feelings of freedom and well-being. How do you define financial wealth or financial independence? Someone who has accumulated an asset base that allows them to live off that asset base for life. The definition implies a passive income earning position. It implies that no work, or no additional income, is required to maintain a specific lifestyle. When you strip all the flowery language away, it really boils down to a number. We are going to start with that premise. The question is, what’s your number? There are a number of strategies you can employ to arrive at your number. Each of these that we explore has merit and value. The true question is, which of these speaks and motivates you? Earning replacement income The first method is to focus on the replacement of income. The goal would be to acquire enough income-producing assets to replace all, or a part, of your current earnings. What is the amount of money you need to acquire to replace your present-day income, plus a factor for inflation. The goal is to buy enough bonds, annuities, pension payments, dividend stocks, real estate, and mortgage notes that create a cash flow to cover your expenses. This is certainly a viable way to create a number that you craft a plan too. This plan creates a replaced income without reducing your asset base. It allows you to spend your income freely, knowing you have future safety as well. Setting a gross asset number Another way to develop a wealth strategy is to calculate a gross asset number. What overall net worth number do you need where the income plus drawing on the asset will create years of income to fund your lifestyle? It gives you a very specific target, which allows you to plan as well as check your progress too. It becomes a simple math equation of lifestyle and length of life. You then apply a standard 4-percent rule to your net amount. The 4-percent rule has been around for years as a benchmark for retirees. This rule describes how much a retiree can withdraw each year in retirement while also retaining enough of an asset base in their account to last 30-plus years. So, if you have $1,000,000, you can draw out $40,000 per year and likely never run out of money. This rule is just a guide, so if your asset base drops due to a stock market crash, you might have to adjust. Beware of being general, arbitrary, or having round ballpark numbers. My belief is that specificity creates attraction. The law of attraction states that you will be attracted to what you are looking for and what you desire. If you are specific, the power of the pull will be greater. As you march along to your specific goal, your intention, energy, and excitement will increase because you can clearly see the progress. The law of attraction is a powerful tool to the achievement of wealth. Getting help from other sources A good financial planner can really be invaluable in defining the number and factoring for inflation. If you want to go it alone in your calculation, Kiplinger has an easy-to-use retirement savings calculator. It will take you about ten minutes to work through it. It factors in the variables of time, returns, inflation, and years in retirement. You can include Social Security in the calculations or not. The objective is to give you a target. That target is reasonably accurate in what you need plus what you need to save on a regular basis for how many years you need before retirement. When you use the retirement savings calculator, be sure to adjust the timing, rates of return, and length of retirement. All those factors can influence significantly the nest egg number. You should play with the numbers. Create some variation so that you understand how different economic conditions might affect your results, or higher savings rates will affect the outcome, and so forth. Deciding what you need Take a look at the following image, in which the Retirement Savings Calculator is used. For some, a 1.5-million dollar nest egg goal seems big. For others, it might seem small. The $159,000 annual income goal in the figure is two and a half times the median income the United States currently. That’s not in the 1-percent income level, but it's certainly an upper-middle-class lifestyle in terms of annual income. The real question is, what do you need? The $76,020 in Social Security income might also seem like a lot, but it’s only 47 percent of the overall income. The Social Security Administration quotes that Social Security is designed to replace about 40 percent of a person’s income in retirement. In this example, the savings still needs to be at $1,543 per month toward retirement. According to Vanguard, about 12 percent of 401k plan participants contribute the maximum amount to their 401k plan each year. The present maximum level is $18,500 per year if you are under 50 years of age. If you are over 50, you are allowed another $6,000 for a total of $24,500. Interestingly, the $1,543 a month, would be achieved just by maxing out your 401k plan each year. Most people want financial wealth or financial independence but have never even taken the 10 minutes to define what that number is. You can’t hit a target that you have not defined or aimed for. The path is in the math You have to do the math so that you can work effectively to craft your plan and set the strategy. Let’s look at a few more basic math calculations to check how you are doing. The goal is to give you a perspective of exactly where you need to be long term, as well as compare it to where you are right now. If you used the Kiplinger tool discussed in the preceding sections, you understand clearly where you need to be. A good financial plan is not really glamorous. It’s not exciting. What creates excitement is having the plan and starting the process to achieving it. A good plan works because it is just common sense combined with simple savings disciplines. It has savings targets and savings goals. For example, consider forced savings out of your paycheck. You decide to deduct $200 per paycheck and place the money in a savings account or a 401k. The complex stuff makes for great conversations at cocktail parties. But the strategies of paying off non-deductible debt, forced savings, solid real estate cash flow investing, and compound interest don’t make for great conversation at cocktail parties, but they can eventually pay for great cocktail parties! What is your current savings goal monthly? How does that relate to your needed goal of monthly savings you calculated? If it’s short, how much short is it? What steps in your family budget are you going to take to increase your savings? What extra work, overtime, or side jobs can you do to increase your monthly savings rate? What is a reasonable timeframe to achieve the increase in savings? You might not be able to do it now due to other debt you are paying off. That won’t sink your ship if you can eventually improve your position. What is a reasonable timeframe to close any gaps that exist? You don’t have to make up the shortage this month, or even this year. If you, through a deliberate plan, close that gap in the next few years by even placing 100 percent of the raises or periodic side job earnings into savings, the fact that it took you a few years to reach your savings goal will likely be a non-event 30 years down the road in retirement. The power of compound interest The eighth wonder of the world is compound interest. “He who understands it, earns it. He who doesn’t, pays it,” stated Albert Einstein. Compound interest is one of your best friends in crafting a wealth plan. Compound interest is like a snowball that is traveling down a hill. It continues to pick up more snow, growing in size as it travels. That is the principle as well as the outcome of compound interest. Compound interest does all this work of growth automatically. It does it while you sleep. As long as your investment is paying you a return in interest, dividend, or rent, you reinvest those gains. The longer the timeframe, the wealthier you become. Time is actually your ally with compound interest. If you start to save $5,000 a year at age 20, by age 60, in 40 years, you would have 2.4 million dollars. You would have saved a total of $200,000 in that 40 years. At 80 years old you would have 16.7 million by saving only $300,000 of income over 60 years. Look at the difference between ages 60 and 80. In 20 years, with only $100,000 added through savings, you went from 2.4 million to 16.7 million. It's astounding! Net worth targets There are a number of factors that influence your wealth and net worth. Net worth is defined by taking your assets and subtracting your liabilities to create a net asset number, or net worth number. If you sold everything you owned, paid off all your debts, and had money left over, that would be your net worth. Your net worth is one measure of how you are doing in your quest for financial independence and wealth. The net worth number can be influenced by a number of factors. Your income is certainly a factor, as well as your age. As you age, because you have been working more years, your net worth should be increasing. You also have more assets. You have cars, boats, furniture, and real estate. The home you own is likely one of the biggest influences on your net worth, but be careful. A home you own, rather than an apartment you rent, can help you increase net worth through the home’s appreciation, as well as paying down the mortgage debt each month. Thomas Stanley wrote the landmark book, The Millionaire Next Door, one of the classic wealth books of our day. He describes a formula for checking your net worth based on your earnings and age. If you earn more, you should theoretically have a higher net worth. This formula gives you a simple way to check the math. Net worth target wealth formula to success: Age × Annual household income / 10 = net worth at age The following table gives you an example of how this formula works: Age x Annual Income / 10 = Net Worth 35 x $250,000 / 10 = $875,000 35 x $100,000 / 10 = $350,000 36 x $50,000 / 10 = $175,000 As you can see in this example, the age is the same but the income is different. Someone who has a higher earning power should have far more in net worth than someone in a more normal earning level. That is often not the case because the higher earner might be income wealthy but not really wealthy. If you are ahead of this formula, don’t get complacent or comfortable. If you are behind, don’t panic. You can make simple changes to catch up. This formula provides a gauge on how you are doing with your personal expenses, savings, and net worth. The largest portion of most people’s net worth in their 30s and 40s is likely the home they own. That is to be expected. When you reach your 50s and 60s, if that is still the case, you need to step up your savings, and fast. Home ownership and net worth A home that you own is a foundational building block to wealth. Unfortunately, too much of our net worth is attached to homeownership. We all saw the effect of the recent recession and housing crisis that hit in 2008. The net worth of so many people was devastated. We can get too attached to a home, and then we risk becoming house-rich and asset-poor. If your home presently is a significant portion of your net worth, that is fine for today. When that is not fine is ten-plus years from now. Your goal should be to change the influence of your home from a significant portion of your net worth to a small portion of your net worth. From being 60 to 80 percent of your net worth to over time being less than 20 percent of your net worth. I can hear it now: “But Dirk, my home is worth 400,000 dollars. That means I need a net worth of 2 million dollars.” That’s right! It all boils down to one simple reason: You can’t spend your home. Your home doesn’t create income. It’s not an asset in classical terms. It doesn’t create income or return. Yes, it can appreciate in value and likely will. But you can’t spend that increase unless you mortgage it or sell it. You are not creating more assets from your home like you would stocks, bonds, mutual funds, or rental real estate assets. You will likely achieve appreciation in value of your home. The only way you can spend or live off that appreciation is to sell your home and downsize to a smaller home or lower standard of living. The truth is, few people do that in life. They might when their health requires it, but then they have expenses in an assisted-living facility. Now there are folks who might sell the older home they raised their family in because it’s too large for them or the maintenance is too much. What happens most frequently is that they buy a smaller, newer home with more quality and amenities. They say, “I deserve a nicer home with new hardwood floors and custom cabinets. I want to be able to live on a golf course and have a three-car garage where I can park a golf cart.” That gap between their larger, older home and the new home is not as significant financially as they first imagined. So, your home is part of your net worth, but it should not be a large factor in your asset base or nest egg calculations.

Article / Updated 07-17-2019

Your task is to come up with at least 50 goals that you want to accomplish within the next 10 years. As you brainstorm your list of life goals, keep a few points in mind to make your goal-setting effective: Make sure your goals line up with your wants. Don’t evaluate goals based on what you think you need, deserve, or can realistically achieve. Focus on what you want. With your goal set, don’t allow your mind out of the want and desire zone. Frequently, we can slip into the “how” zone. How am I going to achieve it? “Wow, that seems too far out. How can I do that?” At this stage, it’s only the what you want that’s important, so don’t allow your mind to wander. Your success is determined by what you want and the passion of why you want it. Think big. “Go big or go home.” Many shy away from setting big goals for a range of reasons, from fear of disappointment to concern that they may not have the drive to pursue them. While in the future you might cross the goal off as unimportant, in this early stage of goal setting, focus on what and the big whats. There really are no unrealistic goals — ever. The timeline to achievement might be longer than you expected, but if your desire, passion, persistence, and determination are high, there is never an unrealistic goal. If you approach your dreams conservatively — going after what you think is reasonable or realistic — your odds of getting beyond that are slim to none. But if you let your imagination go and pursue the big dream, the odds of reaching that level of joy and fulfillment are in your favor. Big goals and big dreams cause you to stretch, strain, and go for what you really want in life. They connect with the best use of your time and energy. They draw you to remove the things in your life that don’t serve you well. Pick a time somewhere in the future and work backward from there. For any goal that stretches further than ten years, break it down into smaller goals with shorter timeframes to increase your focus, intensity, and commitment. Set measurable goals. When you establish a measurable, quantifiable goal, you know you can’t fudge on whether you achieved it or not. You either hit the target or you don’t. You also know where you stand at any given time. Goal measurement naturally falls into two categories: Number-based goals: Measuring your progress toward a goal is pretty easy when the goal is number based. You know when you’ve acquired a million dollars or lost 30 pounds, for example. The bank statement or scale are pretty simple to read. As you craft financial and other goals that are associated with numbers, be specific. Do you want to earn a certain annual salary? To put away a certain amount of money each year? To run a certain number of miles by September? Non-number-based goals: To measure a non-number-based goal, focus on how you’ll know when you’ve accomplished it. For example, will some organization’s seal of approval establish you as a world-renowned archeologist? Will being elected president of the chamber of commerce constitute being a business leader in the community? Will having your children expressing greater thanks for your efforts as a parent equate to being a better dad or mom? When you take the time to write down your goals, you clarify them and sharpen your vision for attaining them. You are telling your brain that this isn’t a dream to be ignored as a hope-to, wish-to, or would-like-to. It’s really something for which you’re willing to invest time, effort, energy, and emotion. As you identify and record 50 goals that you’d like to achieve in the next 10 years, contemplate the following five core questions to guide your goal setting. What do you want to have? The question of what you want to have focuses on material acquisitions. What possessions do you yearn for? A swimming pool? A sailboat? Do you fantasize about owning a sports car? Do you dream of a formal rose garden landscaped into your backyard? Someone to cook and clean for you? Your own private jet? Winter vacations in the Caribbean? If your home environment is a priority, imagine the place you want to live. An expansive ranch overlooking the Pacific Ocean? A Fifth Avenue penthouse? An off-the-grid abode that runs on solar and wind power? A villa in Tuscany? Although possessions are important to consider, they’re typically a means to an end: They enable you to create the lifestyle that you want to have. We all work to fund a specific lifestyle that we aspire to or currently have now. What do you want to see? When you ask yourself what you want to see, think experiential acquisition. Travel is likely to be a key focus. I’m certain you can easily come up with at least ten places you want to see. Have some world wonders fascinated you? The Pyramids of Egypt? The Great Wall of China? I travel internationally a few times a year on business, and it only fuels my desire to see more parts of the world and expand my awareness of how other people live. I've found that exposure to different cultures and places in the world has a secondary benefit. Through world exposure, we can develop our gratitude and patriotism. It allows us to recognize how fortunate we are to live where we live. How blessed we are to have the lifestyle we have today. In the United States, even if you are on one of the lower rungs of wealth and earnings, you are rich compared to others in the world. What do you want to do? Most likely, many of your goals are connected with the question of what you want to do at some point in your life. Whereas the possessions that you want to acquire help create your lifestyle, the action-oriented question you consider here focuses more on bigger events and feats outside the daily realm. Because this category is vast, I have my clients consider three main aspects of this question: Activities: You may want to include some once-in-a-lifetime experiences, such as snorkeling with sea turtles or hiking Mt. Kilimanjaro. What about a goal of regular exercise four times per week? Or maybe you want to see Lady Gaga in concert. Skills: For example, have you always wanted to speak Spanish or Mandarin Chinese? Do you wish you could play the piano or electric guitar? Have you put off a new experience — snow-skiing, surfing, fly fishing — because you thought it was too late to learn? Whether these skills can enhance your career or financial state or are simply actions that bring personal pleasure, cast a wide net and list the ones that intrigue you most. Career: How do you want to seek fulfillment through your career? Be honest with yourself and sort out how you’d like to measure that success. Do you yearn to be recognized as the top authority in your field? To win an international award? To write an influential book? What do you want to give? Andrew Carnegie, the great steel entrepreneur, met his goal to amass a fortune in the first half of his life. His goal for the second half was to give it all away. Many of the public libraries in the United States, Canada, and the United Kingdom exist today because of his philanthropy. An important way to balance all the want, see, and do items on your Fabulous 50 list is to include give goals as well. What are you willing or interested in giving back? How do you want to share your good fortune with others? Which causes are near and dear to you? I personally have developed more philanthropy goals as I have aged. Perhaps that’s due to a higher awareness of the many blessings in my life. Or maybe it’s being more aware of the needs others have around me, or it could be due to having achieved more. My belief is this greater awareness is normal for a successful person. If you aren’t feeling very philanthropic, that doesn’t make you a bad person. It just means there are other goal categories that are more important to you in achieving first. A giving focus, as well as giving goals, can broaden your perspective and well-being. Who do you want to become? To a degree, what you want to have, see, do, and give determine the person you want to become. But you should still envision and write down how you see yourself developing while you achieve these goals. The real value of goals isn’t what you achieve; it’s in the accumulation of knowledge, skills, discipline, and experience you gain through learning, changing, improving, and investing yourself as you work toward your goals. Often, those newly discovered or carefully developed traits are the only lasting acquisitions that stand the test of time. Don’t get me wrong. I’m not suggesting that you become someone other than who you are; rather, I’m encouraging you to earnestly and honestly evaluate the characteristics and disciplines best suited for your ambitions. To identify the areas you should focus on, take a look at all the goals you’ve written down so far. (If you haven’t yet read the preceding sections, complete them before moving on here.) Then ask yourself the following questions when considering your goals as a whole: What personal characteristics do you need to change or improve? Do you need assertiveness training to deal more effectively with your boss or coworkers? Do you need to work on interpersonal skills? Does your anger get in the way of your success because you get frustrated so easily? What disciplines do you need to work harder at practicing consistently? Are you able to delay gratification and do what you need to when it needs to be done? Are you able to save regular amounts from your current paycheck, or are you waiting to make more money before you start the savings process? What if that extra money never shows up? If you’re struggling to identify areas where you need to work on personal development, take a look at people who have achieved what you want; then evaluate your characteristics and disciplines as compared to theirs.