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The Best Investment You Can Make Now

finance_mazeStocks are up significantly from their low in March of this year. Of course, they still haven’t clawed their way back to the level we saw in 2007. However, you have to ask yourself if stocks are the best place to put your money right now.

Treasuries – bonds issued by our government – have also had quite a run as investors have fled to safety. If interest rates go down, the value of the underlying note goes up. Interest rates are incredibly low right now. How much lower can they go? Read more

How to Weather Financial Climate Change

weather_a_stormBigg success is life on your own terms. There are five elements of bigg success – money, time, growth, work and play. Today we’ll focus on money.

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We hear a lot about climate change and its implications. It occurred to us that financial markets change much like the weather.

So here are 4 tips for weathering financial climate change:

Asset prices heat up and cool down

Stock prices skyrocket. Then they fall.

Real estate prices rise. Then the bubble bursts.

Nothing goes up linearly. Yet most of our projections do. Plan for all weather – diversify.

You won’t create much wealth without taking some risk. But you can manage that risk by investing across asset classes (e.g. stocks, bonds) and within asset classes (large cap, mid-cap and small cap stocks).

Price movements can be extreme

Experts are predicting more volatility in the years ahead. We don’t mind it when prices are rising quickly. But we have to be prepared for the other side as well.

Very, very few people successfully time the market period after period. So it’s important to move your money to less risky assets as you near the date when you’ll need it. If you’ll need it in less than ten years, you may want to look at shifting money to something less risky.

As we always say, talk with your financial planner about your specific situation to determine your best move.

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Watch your emissions

By emissions, we mean money out the door. In our businesses and in our personal lives, it’s much easier to spend less than to make more.

When you’re getting ready to spend it, think about how many hours you have to work to earn the money in the first place. If you really want an accurate picture, do this on an after-tax basis.

Make the green house effect work for you

When you’re buying a house, ask some important questions. Do you really need that extra room? How often will you use it?

You may decide to buy a smaller house and invest the “green” to further diversify your portfolio and increase your returns.

Also, invest your “green” in energy efficiency. Improving the efficiency of your home pays you back month after month by lowering your utility bills. You can’t say that about most outlays.

Take these four tips and go green to build a sustainable future for yourself. That’s bigg success!

How are you weathering financial climate change?
Share that with us by leaving a comment, e-mailing us at bigginfo@biggsuccess.com or leaving a voice mail at 888.455.BIGG (2444).

Thank you much for visiting us today. Next time, we’ll discuss a positively fantastic way to improve your bottom line. Please join us. Until then, here’s to your bigg success!

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A Better Way to Pay Off Your Mortgage Early

home_mortgageOver the years, a number of ways have been touted to pay off a mortgage early. Recently, we’ve seen a number of solicitations for a new way to do it.

The basic idea is to take out a Home Equity Line of Credit (HELOC) with your chosen bank. You use this account like your primary checking account. You will pay all of your bills out of this account and deposit all of your income into it. Any left over money goes to pay off your mortgage.

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The benefit is appealing – you may pay off your 30-year mortgage in as little as 10 years. Of course, if you have any other debt (e.g. credit card debt or car loan), it’s almost certain you should pay that off first.

We’re talking in generalities here; you and your financial planner can determine your best financial move based on your specific situation.

The pluses

We liked that the program we looked at included a great visual that showed you the exact month and year your mortgage would be paid off if you stuck with it. We also liked that you could easily see your money coming in and going out.

Using intuition

The example showed a rate of 6% on the first mortgage and an 8.6% rate on the HELOC. Intuitively, it didn’t make sense to us to borrow at 8.6% to pay down a 6% loan.

So we decided to do some calculations to see if our intuition was right.

New vs. old

We decided to compare this new way of paying down a mortgage to the oldest of the old ways – including an additional amount with each regularly-scheduled payment.

The example we looked at was for a couple who made $5,000 a month and had bills totaling $4,000 each month. They held a $200,000 mortgage, with a 30-year term, and an annual interest cost of 6%.

The main driver – with the old way or the new way – was the $1,000 in discretionary money each month. The new program also accessed the HELOC in the first or second month, but once again that money is being paid back at 8.6% instead of 6%.

Apples to oranges

We found that the new program lived up to its promise – you will pay less in interest over a 30-year period. The problem is that it’s an apples-to-oranges comparison.

Their basic assumption is that you will use ALL of the $1,000 in discretionary money each month to pay down your mortgage if you are on their program. If not, you won’t use ANY of it – that is, you won’t pay down your mortgage OR invest it.

Apples to apples

So we decided to do our own comparison. We used the simple, old, do-it-yourself extra mortgage payments method – we added the $1,000 of discretionary income to our monthly mortgage payment.

The result?

We paid off all of our debt (which consisted of only a first mortgage) eleven months faster than they paid off theirs (which included the first mortgage and the HELOC)!

We found some of the assumptions about the timing of income and expenses questionable. With a more conservative approach, we would actually pay off all of our debt fourteen months faster using our old-fashioned strategy.

As for total interest savings, we would save between $10,989 and $24,210, depending on the timing of income and expenses discussed in the previous paragraph. This takes into account the cost of their software as well as a small annual fee on the HELOC.

Conclusions

In a strictly financial sense, the old-fashioned way is your best bet. However, it’s important to also consider the human side.

That’s where programs like this come into play – some people would be more likely to pay off a mortgage early because they could track their progress so easily.

Of course, you could set up one account yourself. With basic spreadsheet skills, you could set up a chart (or talk a friend into doing it for you) to show the effect of additional mortgage payments.

The bottom line – the old way is the better way if you’re looking to save the most money. But if you’re a little light on financial discipline, programs like this may be helpful.

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Next time, we’ll discuss a resource that great athletes wouldn’t do without … and neither should you. Until then, here’s to your bigg success!

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Success in Your Own Business Requires a Good Pit Crew

By Bigg Success Staff
05-22-08

Bigg Success in Business

pit_crew 

Every driver in the Indy 500 realizes the importance of a great pit crew. A pit crew can mean the difference between victory and defeat. As the owner of your own business, you also need a good pit crew. You’re the driver, but your crew gives you the edge you need.

Your professional advisors are:

Your accountant
Your accountant will help you determine the best entity for your business, along with your attorney, for tax purposes. They will also help you set up your books so you know how you’re performing. They can help you determine your best tax strategies. They can refer you to other advisors and capital providers.

Your attorney
Your attorney will recommend the best entity in which to hold your business to minimize your liability and accomplish your goals. They will also help you understand the formalities that need to be maintained to protect your personal liabilities. They will advise you on your business dealings and help you when the unexpected situation arises. They can also refer you to other advisors and capital providers.

Your insurance broker

Your insurance broker will help you maintain adequate coverage for your assets and will also help you manage your risk. They will recommend the types of coverage you need as well as the level of coverage you should maintain. They will help you understand where your unexpected losses might occur and help you develop programs to reduce the risk of loss.

Your financial planner

Your financial planner will help you plan for your retirement. They will help you determine which plan is right for you, your company, and your employees. They will help you set up and maintain this plan. They can also help you determine the best allocation for the assets in your portfolio so you achieve the greatest return given the risk you’re willing to accept.

Your coaches

Your coaches will prod you on when you’re up and lend support when you’re down. They will give you someone to be accountable to so you accomplish what you set out to do. They will give you an outsider’s perspective – an objective look – at this business to which you’re so close. They will help you get to the next level of success.   

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