the 5 worst mistakes you make with your personal finances

The 5 Worst Mistakes You Make with Your Personal Finances

How to overcome fear, uncertainty and doubt about your present and future finances

Personal Financial Problems In America Today…

© Time & Money, LLC - 2010

• In 1980, household debt amounted to $1.6 billion

• By 2009, that amount had increased to $14 billion

• Then in 2010, despite the recession, it only dropped by $500 million to $13.5 billion

Source: Household Sector: Liabilites: Household Credit Market Debt Outstanding, Federal Reserve Bank of St. Louis, accessed August 26, 2010

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What’s your financial IQ?

© Time & Money, LLC - 2010 3

• In a recent financial IQ quiz, the average score earned by those tested was “D+”

• Areas of lowest scoring:

– Credit management

– Cash flow management

Source: Household Financial Management: The Connection between Knowledge and Behavior, Federal Reserve Bulletin, July 2003

Lack of personal savings


• In 1982, the personal savings rate was nearly 11% of disposable income

• In contrast, by 2005 personal savings dropped to 1.4% of disposable income

• Then in 2009, personal savings had inched up to only 4.3%Source: Personal Savings Up, National Savings Down, Federal Reserve Bank of Cleveland, March 19, 2010

Are you ready to retire?


• A study revealed that two out of three boomer households are financially unprepared for retirement

• The percentage of workers planning to work after they retire has increased to 72% in 2009 (up from 66% in 2007)

• The average 401(k) retirement account fell 24.3% in 2008

Sources: Not Ready to Retire?, Entrepreneur Magazine, March 2009; The 2009 Retirement Confidence Survey: Economy Drives Confidence to Record Lows; Many Looking to Work Longer,” EBRI Issue Brief, no. 328, April 2009; 401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2008, Investment Company Institute via Business Exchange, October 2009

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Mistake #1: Habitual Spending & Borrowing


• Excessive spending and borrowing leads to living paycheck to paycheck

– 61% of workers say they live paycheck to paycheck

– 20% save nothing each month

– 42% of workers believe if they had $500 more per month, they would live comfortably

– HOWEVER, 30% of those making over $100,000 say they live paycheck to paycheck

Sources: More Upper-Income Workers Living Paycheck to Paycheck, CNBC, September 16, 2009; Living paycheck to paycheck, CNN, October 8, 2008

Living in denial


• The rude reality of being so far behind on bills coupled with our inability to purchase necessities can together create denial — we continue racking up debt despite our hopeless financial predicament

• In a recent survey, 7 in 10 respondents found their investment statements incomplete or hard to understand

• Many Americans live in a constant state of financial ignorance and denialSources: 2008-2009 Winter Issue: Dealing With Debt, Consumer Action News, January 30, 2009;

Understanding Your Account Statement, investorED survey cited by The Globe and Mail, 4/16/09

Mistake #2: Incomplete Solutions


• Poor economic conditions have prompted more people to limit their use of credit — as of June 2010, Americans had cut credit card use for 21 straight months

• However, spending is only one piece of the puzzle

• Other important aspects of the financial puzzle that are tied with how we spend are:

– Debt– Savings/retirement– Taxes

Source: Credit-Card Delinquencies Slump In 2Q; Balances At 8-Year Low, The Wall Street Journal, AUGUST 25, 2010

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Throw in the towel?


• Will filing bankruptcy really solve your problem and change your behavior?

• Many Americans think this is the solution

• From 2007 to 2010, the number of personal bankruptcies more than doubled from 751,056 to over 1.5 million

Source: Bankruptcy Statistics 1980-2010, BankruptcyAction.com, August 17, 2010

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Mistake #3: Doing It Yourself


• A report recently stated that the majority of Americans today lack critical knowledge of important financial concepts such as:

– How inflation works

– Financial risk

– Investing for the futureSource: Americans’ Financial Capability, Report Prepared for the Financial Crisis Inquiry Commission, February 26, 2010

Results of our lack of knowledge


• The report further stated that one in five Americans have used alternative and costly borrowing methods (payday loans, advances on tax refunds, pawn shops, etc.) in the past five years

• Because of our lack of knowledge, too many Americans will have to work past retirement age, are overpaying taxes, paying too much interest or earning too little interest on their investments

Source: Americans’ Financial Capability, Report Prepared for the Financial Crisis Inquiry Commission, February 26, 2010

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Mistake #4: Looking For A Quick Fix


• Many Americans want to pick up a book and fix their financial problems in an instant

• In 2008, the self-help book industry made an estimated $8 billion in the U.S. alone

Source: Is Modern Self-Help Just a Massive Money-Making Scam?, PsyBlog, January 9, 2008

Paying someone else to make your problems go away


• Maybe you or someone you know has paid someone to provide debt relief?

• Those who sign on with debt relief or debt settlement companies often end up with more debt than when they started

• Desperate consumers are paying thousands of dollars with no guarantee that even one penny of their debts will ever be settled

Source: Be wary of promises from debt relief companies, MSNBC, July 8, 2010

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Mistake #5: Going With The Crowd


• A study has shown that heads of households primarily obtain their financial knowledge from experience, friends, family and media rather than from financial experts


But do all advisors have YOUR best interests in mind?


• Reports show that most people get financial advice from many different types of professionals:

– Real estate agents– Mortgage brokers– Sellers of financial products

• High sales quotas tend to cause providers to promote products that can exploit a consumer’s tendency to behave irrationally

Source: How About a Stimulus for Financial Advice?, The New York Times, January 17, 2009

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Five Ways To Combat Your Financial Mistakes And Change Your Future

1. Decide to change your financial cycle for good

2. Realize this process may take time

3. Fix the whole problem

4. Create a solution that fits your unique needs

5. Find the best financial program and coach for you

Step #1: Decide To Change For Good


• Recognize that money matters are emotional

• Resist going with the status quo or choosing to do nothing at all

• Resolve that this time will be different — take action now!

Source: Why Habits Are Hard to Change (And Printers Hard to Buy), Psychology Today, March 18, 2010

Difficult decisions require self-efficacy


• Self-efficacy — the belief that you can make a change and overcome obstacles — is one of the best indicators of successful change

• What is the source of your motivation to succeed?

• What will give you the confidence that you will need to see you through?Source: Why Habits Are Hard to Change (And Printers Hard to Buy), Psychology Today, March 18, 2010

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Step #2: Take The Time To Do It Right


• You can’t always go on a “crash budget” to solve your financial troubles

• A daily action like eating fruit at lunch or running for fifteen minutes takes an average of sixty-six days to become a solid habit

• Spending and saving are daily habits that take time to change and develop

Source: Stop Expecting to Change Your Habit in 21 Days, Psychology Today, October 21, 2009

You can learn from your mistakes


• 73% of people with the highest scores on a recent cash-flow and credit management survey reported having learned better habits from personal experience


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Step #3: Fix The Whole Problem


• See your finances as one large picture, not as individual pieces of a puzzle:

– Debt

– Spending

– Savings/retirement

– Taxes

• Understand that everything a person needs to know to be successful financially is contained within these four areas

How to put the puzzle back together


• Regain control of these four areas

• Understand that they are interrelated

• Cause these areas to work together in harmony

Step #4: Tailor A Solution For You


• You might consider financial programs containing books, workbooks, CDs, DVDs, and seminars with live speakers which can reach out to various types of learners:

– those who learn from reading

– those who learn from watching

– those who learn from listening to speakers and asking questionsSource: Some Thoughts on Personal Finance

Coaching, The Simple Dollar, November 14, 2008

Coaching can be an effective tool


• Many simply thrive on having someone motivate them to make better choices, such as dietitians and personal trainers

• In a recent study, households that had participated in just one personalized financial counseling session…

– Were less likely to be late with payments

– Had higher credit scores– Had better credit management

Sources: Some Thoughts on Personal Finance Coaching, The Simple Dollar, November 14, 2008; Household Financial Management: The Connection between Knowledge and Behavior, Federal Reserve Bulletin, July 2003

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Step #5: Find The Optimal Program And Coach For YOU


Look for a financial program that…

1. Has the tools and techniques to help you to permanently change your behavior for the better

2. Has a time-tested, well-proven program for success

3. Uses a holistic solution

4. Treats the root of the problem, not just the symptoms

The right tools


• To leapfrog you over any learning roadblocks, consider a program with varied tools such as:

– Books and guides

– Software

– Audio CDs

– Planners and organizers

– Diaries and tracking tools

Well-balanced approach


• Make sure the program you select addresses all aspects of finance:

– How to spend money

– How to save money

– How to pay off debt

– How to not overpay taxes

• And most importantly, how to do all these in the right order


Our purpose is to educate, inspire, and motivate people to make significant changes in their lives through the application of ten proven financial principles — the Money Mastery® principles!

Our Mission


• Has the tools and techniques to permanently change your behavior

• Uses a holistic solution• Has robust program material

and plenty of support tools• Treats the root of the

problem, not symptoms• Has a time-tested, well-

proven program for success• Is developed and led by true

professionals

Benefits of our Financial Program


Testimonials“The Money Mastery program works! We pay our bills on time, contribute to our 401(k)s, have money in savings, did not borrow money to send our child to college, and all without declaring bankruptcy!”

— Mike M., Utah

“A few months ago, we had 14 revolving accounts and owed real estate taxes. Today, we have just four open accounts. Our debt is $65,000 less than before and $4,000 per month goes toward debt!”

— Gary & Carol O., Oregon

“We had no savings, no retirement, and were living check-to-check. In one year, we’ve started a 401(k), a money market account, a mutual fund, a regular savings account, and have paid off three cars and two furniture loans. Thank you!”

— Ken & Barbara R., New York


Our OfferPersonalize your Financial Master Plan!

Your 30-minute Master Planning Session with a Financial Literacy Coach will uncover hidden daily practices that prevent financial freedom. Tailored to your unique situation, this personal analysis will detail simple lifestyle changes you can make today for fiscal-fitness!

For only $379:• Discover your signature money “busters”• Debrief your personal “financial IQ” assessment• Learn the surprising 10 principles to financial

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CALL NOW

(888) 292-1099Or visit

www.MoneyMastery.net

Are you ready to get started?

Knowing is half the battle!

When reviewing your current situation with a Personal

Master Plan consultant, you will find yourself in the RIGHT

place to begin doing something about it… NOW!


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