Being in control of your finances is a combination of understanding where you stand financially, spending less than you earn, and having confidence in your ability to make financial decisions. According to the Federal Reserve, forty percent of individuals in the United States do not have $400 set aside for an emergency, and twenty-five percent of people have nothing saved for retirement.
Whether you were taught how to manage your finances in school or not, we have broken down several vital truths that you need to know to take control of your financial future today. To get into the nitty-gritty details, we teamed up with William Bitters, who is the President of the United Financial Information Services (UFIS) and has been working in the financial industry for over 40 years.
Know Where Your Money Is Going
Many of us have a few common money leaks, and before you know it, a massive chunk of money has gone down the drain. William Bitters explains that most people will leak 50% of their wealth unknowingly and unnecessarily over their lifetimes. So before adding more water to your leaky bucket, here’s a word to the wise: stop the leaks first!
Some of the ways that people spend their money are gratuitous digital subscriptions; unlimited memberships deal with a shelf life (like using coupons just because they are going to expire soon!), shipping fees, and more. Being able to identify where your money is going is a significant first step in allowing you to take control of your financial future.
The Buy, Hold, And Pray Strategy
There are many reasons why Americans have become reluctant shoppers, such as stagnant incomes and rising debt loads, but one of the underappreciate challenges is a distinct change is spending psychology. For this reason, most investors use the buy, hold, and pray strategy, which rarely, if ever, moves to cash.
Buy and hold is a passive investment strategy in which an investor buys stocks and holds them for an extended period regardless of fluctuations in the market. An investor who uses a buy-and-hold approach actively selects investments but has no concern for short-term price movements and technical indicators.
William Bitters explains that this is a strategy that has never worked and never will, and that true diversification on Wall Street is fiction and a lie. Their same old products are all correlated, and can all crash simultaneously, as proven in 2001-2008 during the worst market crash in U.S. history. Do you think that is the best place for your hard-earned savings?
Understanding The Marketplace
As an investor, it is essential to know that markets typically go through a minimum of one significant pullback every year, and sometimes one to two massive pullbacks every decade. William Bitters explains that becoming familiar with the market and its tendency to fluctuate is vital in making smart and strategic investment decisions for your financial future.
Additionally, William Bitters explains that there will be at least 7 to 10 recessions over the next 50 years. Another thing to consider is that every recession is different, and while we might be prepared for a repeat of the last 2008 recession, we will likely be caught off-guard with new circumstances.
William Bitters explains that it is essential to note that most of the wealth and continued savings in the United States are held in 401ks, IRAs, SEPs, 403bs, and brokerage accounts. 99% of these funds are invested directly or indirectly on Wall Street and exposed to U.S. and international stocks, bonds, mutual funds, etc.
Most qualified plans (401ks, IRAs, SEPs, 402b’s) force you to invest on Wall Street while simultaneously exposing you to tremendous future tax risks and charging you exorbitant wealth-eroding fees. Additionally, many of these fees are undisclosed. Forbes reports that the average mutual fund manager charges 4.1% in fees, which are not required to be disclosed.
This means that you will see your statements net of these fees. These are the same mutual funds held inside and outside of qualified plans. Qualified plans are “qualified” by Uncle Sam and the IRS. Who do you think they benefit?
They force you to postpone both the tax and the tax calculations until you withdraw your money in the future. William Bitters poses the question: if you were a farmer, would you instead pay tax on the seeds, or on the harvest?
Another truth that William Bitters exposes is that if your plan doesn’t reduce or eliminate your exposures to market risks, tax risks, fee risks, and longevity risks (you or your spouse outliving your money), then you will fail financially. A big part of this is being informed about your options, and unfortunately, most schools do not teach these practical tips.
William Bitters explains that most of what is taught about investing in school is just theoretical and that there are very few wealthy professors. William Bitters explains that in 2013, every tax bracket in the U.S. increased by 3-5%.
This didn’t even begin to pay for the wars in Iraq and Afghanistan, nor the bailouts, nor the TARPs, nor the trillions of dollars in unfunded liabilities for Social Security, Medicare, and the national debt. Tax brackets are at a historic low, and most people lose their most significant tax deductions in retirement by paying off their homes and because their kids move out. Do you think you’ll be in a lower tax bracket when you retire? Most of the wealth in the U.S. make 95% of the money. The other 95% struggle to make the remaining 5%.
Trusting An Industry Professional
If you’re looking for someone to help you strategize your financial goals and work with your best interest at heart, contact William Bitters. His clients, who range from high-net-worth physicians to small business owners, value and utilize his vast knowledge of estate preservation strategies and retirement income planning strategies.
If asked, Bill’s clients would say they enjoy working with him because he responds to their questions quickly and keeps complex issues simple. His clients know he will be there for them and always look out for their best interest.
If you are interested in even more business-related articles and information from us here at Bit Rebels, then we have a lot to choose from.