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Thinking Like a Millionaire: Part 2

2/24/2016

Welcome Back to the Second Part of Our Series “Thinking Like a Millionaire”.

Today we delve further into the mind of an investor and learn how the investor thinks differently about money than most people do. As most people feel money is a dispensable item and are too easy to give it away for things they want or value. While an investor uses the same money as a tool.

For example,

A normal consumer uses money to purchase a vehicle. Some even believe that it’s an investment. However, a car is not an investment because you will never be able to use it to make the money back that you spent. You will never be able to resell it for more than you paid and most likely will get next to nothing when you finally do resell it.

Even worse, is when people see a car as an investment. They take out a loan on it, and make a promise to give away their future wealth for a vehicle that will never pay for itself let alone the interest their going to pay on it. (Click here to learn how to avoid Shark Loans)

A consumer views a vehicle as an asset and investment.

In the same vein but with an investor,

A normal investor purchases a vehicle with cash. They consider the gas mileage, reliability, reviews, and resale value of the car to ensure if it’s the best deal for their money and ultimately meets their needs. On top of that, they usually never purchase from a NEW car dealer and instead get it from a certified-used dealer, craigslist with proper inspections, or my personal favorite EBay.

In comparison to a consumer, an investor views a vehicle as an expense and liability that can eat money quickly and leave you in financial stress if it isn’t properly purchased.

Therefore it’s time to get started and think about money like an investor.

Because when you think of money as tool, you begin to understand how to use it to better position yourself in life. If you don’t, even when you make more money as a consumer, you ultimately just spend more money as a consumer. You don’t really change your habits, you simply have more and you spend more like a bigger house, better car, or the NEW ITEM YOU JUST NEED NOW.

Instead of consuming with your money, here are some common investments that are offered by the government that are available to you right now. That most don’t even know.

Government Offerings

U.S. Government Bills or Notes

Also known as Treasuries, they are government notes that are backed by the U.S. government. And there are two types, Treasury Bills which are short term-loans that mature in less than a year. While Treasury Notes are longer term and mature after a year and can go up to 10 years. In simple terms, you are giving a loan to the government and they pay interest to you on the loan.

Pros:

·         Safe – Unless the U.S. Government defaults and goes bankrupt (Not very probable)
·         Commission Free – unlike a lot of investment vehicles they can be purchased directly, without the need of a broker
·         Tax Exempt – treasuries are exempt from state and local taxes which can help the savvy investor save a lot of money in the long-run

Cons:

·         Better Interest Elsewhere – Good returns, but if you shop around, you may find higher yielding investments that are just as safe such as CD’s, Money Market Funds, and bonds.

·         Hefty Penalties for Cashing out Early - If you need your money before the security matures, you may not get back all of your original investment.

I-Bonds

I-Bonds are a Government Backed Bond that gives you protection from inflation by changing the interest rate on the bond semi-annually. They began offering this as many people who buy bonds don’t want to have to keep up with the macroeconomics of the US Economy.

Pros:

·         Backed by U.S. Government - makes it one of the safest bets on Earth

·         Inflation Protection - Protects your investment against inflation risk by adjusting the payout interest

·         Manageable Denomination – you can buy I-Bonds ranging from $50 to $10,000.

·         Tax Exempt/Tax Deferrable – are exempt/deferrable from state and local taxes which can help the savvy investor save a lot of money in the long-run.

Cons:

·         Penalty for Cashing-Out Early - must hold for at least 12 months before redeeming, but if you redeem it before five years, you have to pay a 3 month Returns Penalty.

Municipal Bonds

Municipal bonds are similar to federal bonds but are issued by state and local governments. They use the money you give them to fund the building of schools, highways, and other projects for the city and state. Used mostly by high-income investors to reduce their tax liability.

Pros:

·         Safe – almost as safe as U.S. Government backed securities
·         Tax Exempt/Tax Deferrable – are exempt/deferrable from federal taxes and sometimes state and local taxes which can help the savvy investor save a lot of money in the long-run.

Cons:

·         Low Interest Rate – because the taxes are low on municipal bonds, they have much lower interest rates. Which might not make sense unless you’re in a high tax bracket and looking to avoid taxes
·         Commission–Based - you may have to pay a commission to buy municipal bonds
·         Hefty Penalties for Cashing out Early - If you need your money before the security matures, you may not get back all of your original investment.

If your interested in more, please check out the entire series.

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Million Dollar Thinking: Part 1

2/18/2016

6 Comments

Do you think like a Millionaire?

Well welcome back to “Your Life as a Business”. Where we introduce the First Part of a 5 Part Series on how to make your money work for you and to your first Million.

Today we will change your viewpoint of money. Showing you the different ways to make it work for you. By simply summarizing the positives and negatives of each. First off, let’s go over the two worldviews of money and how they differ from each other.

The first one is the one most people know because they enact it every day, the Consumer. The consumer views money as a dispensable item that comes and goes, but ultimately is made to be spent. The consumer sees the value of a dollar as a means to get things they want, but not for its other values such as tool to protect yourself and your family or a means to build wealth. Instead, they use it to consume things. The pros of being a consumer is to get what you want when you want it and experience the things you always wanted. However, many times the consumer buys things they can’t afford, are constantly broke, and spend money faster than they can make it. When seeing money as dispensable, it’s easy to fall into the mindset of easy comes and easy go.

The other worldview is the Investor. The investor views money as a tool. They don’t see it as a dispensable item to buy things they don’t need, but as a way to make things happen. Such as make more money or as a weapon and shield against the world to protect yourself, your family, and your interests. With this way of thinking, people use money not as a way to consume the “next best thing” but instead think strategically how they can better their lives with money rather than have it control them.

Therefore it’s time to get started in “Your Life as a Business’ and start thinking about money like an investor.

When thinking of money as tool, you have to imagine the different things you can do with money. Its many facets and uses. Of the many things you can do, here are the most common that most people never know about even though they are available to them every day.

Bank Offerings

Checking accounts

Everyone knows what a checking account is. It’s a transactional account where most of the money that graces its presence it’s swiftly spent to bills, consumables, or any other immediate expenses.

Pros:

1.       Liquid - They are extremely liquid as you can have available to you immediately through ATMs, checks, and debits cards.

2.       Services - Usually are a staple of big banks and come with branches so you can avoid pesky transaction fees from ATMs

3.       FDIC Insured - They are also insured by the Federal Deposit Insurance Corp so if the bank fails, the government is supposed to step in and pay you out your funds

Cons:

1.       No Interest Paid - Because of the liquidity of your funds in a checking account and the benefits you receive such as access to branches, they use you’re your interest to provide those services

2.       High Required Minimum Balances – Many banks require minimum balances or they will charge you fees

3.       Nickel and Dime Fees – Many banks make their money by finding ways to make your money theirs. This is why they will nickel and dime you in any way possible with transaction fees, penalties, and services. (Remember – Banks need your Money to Function and they Must Be Reminded of that Fact)

Savings accounts

Savings accounts are a more illiquid form of checking accounts and that was why they gave higher interest rates as there were less services and benefits associated with it. That is why most have only a certain amount of transactions you can have per month or they will charge you a fee. However with the advent of online banking. They can be just as liquid as a checking account. As you can easily move your funds from your savings to your to you checking with just a few swipes.

Pros:

1.       Higher Interest than a Checking Account –less services and benefits equals more interest paid out

2.       Low Required Minimum Balances – don’t need as big of a required balance, but negates the purpose of a savings account, which is to make interest on Big Money

3.       FDIC Insured - They are also insured by the Federal Deposit Insurance Corp so if the bank fails, the government is supposed to step in and pay you out your funds

Cons:

1.       Next to No Interest Paid – With the destruction of the financial system came the lowest interest rates the world has ever seen. This has created a new benchmark for savings accounts, which is next to nothing.

2.       Restricted Transactions – Can only use it for a few transactions a month before they start charging fees to keep you from using it like a checking account

3.       Illiquid/No Services – no debit cards, checks, or other ways to spend money out of the account

Online-Only Bank Offerings

High-yield bank accounts
High-yield bank accounts are the same as checking and savings accounts but give much better interest rates by eliminating all the frills of a normal bank such as ATMs, branches, and staff. This keeps overhead low so they can pay more out to their customers.

Pros

Better Rates – can be comparable in interest payments to illiquid assets such as CDs

2.       FDIC Insured - They are also insured by the Federal Deposit Insurance Corp so if the bank fails, the government is supposed to step in and pay you out your funds

Cons

1.     No Frills Banking – can be hard to get to your cash fast with no ATMs, debit/checking services, or branches

2.     Money Coordination – can be troublesome when you need to transfer money back and forth from the online bank account to a normal account

3.     Teaser Rates – Beware of limited-time teaser rates that they get you to sign up for that reduce in half after only 6 months.

Money market deposit accounts

One of the most restricted accounts is the Money Market Deposit Account. They are usually offered by banks, but require a minimum balance and only permit a few transactions per month before they start charging fees.

Pros

Liquid Account - Money market deposit accounts are very liquid. Most allow for easy access through checks, transfers, and even ATMs.
Higher Interest than Other Accounts –More restrictions and higher minimum balances equate to higher interest rates
FDIC Insured - They are also insured by the Federal Deposit Insurance Corp so if the bank fails, the government is supposed to step in and pay you out your funds

Cons

Pay for Liquidity – the more liquid the account the less interest that is usually paid out
The Restrictions – play by the rules and you will be fine, but if you allow your account to fall below the minimum required balance or use too many transactions, then you will given a fine.

Both Branch/Online Banks

Certificates of Deposit (CDs)
Certificate of Deposits are illiquid deposits in a bank or brokerage. They work by you promising to deposit your money and promise not to touch it for the time until it matures. Where you get it back in full with interest. If you take it out early, you have to pay a penalty that usually offsets any gains you have made so you don’t touch it.

Pros

1. FDIC Insured - They are also insured by the Federal Deposit Insurance Corp so if the bank fails, the government is supposed to step in and pay you out your funds

Highest Interest Rates – Usually give the highest return depending on how long it is to maturity

Cons

Illiquid - Your money is off-limits until the CD matures. If you must, you can redeem the CD early, but you'll pay a penalty.

There you have it for this first part in the series of thinking like a millionaire.

Please check back each week as we unravel the investor's mind.

6 Comments

LT Copy is BACK!!!

2/17/2016

5 Comments

Welcome Back to the LT Copywriting Blog

I apologize for the long hiatus, but I needed it to build the next round of content to include even Video and Audio!

Where we will focus more on:

·         How to Become a Meta-Learner

·         How to Build Your Life as a Business

·         And the copywriting and marketing tips you have come to love

Please enjoy these series as they develop and help you become more than you are.

Thank you,

L. Thomas

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Thinking Like a Millionaire: Part 2

Million Dollar Thinking: Part 1

LT Copy is BACK!!!

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