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Rules for Financial Success

For most of us, some phase of growth is the stage we’re in. Growth is the phase of accumulation, positioning, cash flow, savings, making short & long-term decisions. This is where your financial model is used the most. Each decision you make has a ripple effect in this phase, so it helps to have some rules to use as guidelines.

Ideally, achieving financial balance should be your first goal. This can be done by adhering to simple rules that ready you for growth:

  1. Annual Savings (15-20% of gross income)
  2. Short-term Liquidity (3-6 months of cash, 6-12 months of near-liquid assets)
  3. Short-term Debt (ZERO)

The Rules

RULE: Become a first class saver by saving 15%-20% of your income annually. This is one of the most important ingredients to reaching your full financial potential. If you can’t do this, then everything else has to work that much harder. It puts additional pressure on all other aspects of your financial life, including a greater likelihood of failure! What is standing in the way of your saving this amount? Write it down. Figure out how to overcome these obstacles so you can reach your full financial potential. Hint: Remember, your financial model can help you find lost opportunity. You can recapture those dollars, and add that to your savings.

RULE: You should always have at 3-6 months of cold hard cash on hand. It would even be wise to have 6-12 months of near-cash (i.e. short-term bonds) that are easily accessible as well. A cash cushion provides multiple benefits, such as giving you the ability to increase your insurance deductibles and lower your premium payments. It gives you peace of mind knowing that whatever short-term obstacle (accident, fire, job loss, illness) may pop up that you can easily handle it without having to go into debt. Plus, you have the ability to capitalize on an opportunity that may present itself, take a trip, make a substantial purchase (whether it be something you need or simply want) and more.

Cash can also make you a happier person in general. In Jonathan Clements’ book, How to Think About Money, his research found that those with cash on hand – and in the bank – were much happier than those without any or with small amounts.

HELPFUL TIP: Opt out of your 401(k) until you have built up your short-term liquidity! Take care of today first and you will be better equipped to take care of tomorrow. Statistics show that 28% of all 401ks have loans against them, and it’s because this liquidity bucket is neglected or never filled to being with.

Understanding the 401(k)

401(k) Traps:

  • 10% penalty if you withdraw before 59 ½
  • Taxed as ordinary income
  • Limited investment options
  • Must withdraw a portion at 70 ½ or suffer a penalty
  • Match can go away
  • Can create double taxation
  • Can’t use it to pay for other life events
  • Typically use more expensive mutual funds

Are all 401(k)s bad? NO! If your company has one and they provide a company match, you should at least participate to the point of the match. But not until after you have sufficient liquidity. Discuss this with your personal advisor.

RULE: Short-term debt should be zero. Period. Liabilities are what hold most people back. Short-term debt negates any future profits on your balance sheet. For example, $19,200 debt x 5% interest (lost opportunity) = $253,570 in 10 years. In 20 years, it’s upwards of $666,000.  

Two of the most common short-term expenses among our clients are automobiles and credit cards. Cars depreciate 50% after the first three years on average. Look for used cars with low mileage that you can drive for a long time. You can often find a used car that is 25% cheaper than a new car. So if you must carry auto debt, then do it smarter.

Credit card debt can wreak havoc on your financial life. Interest rates average around 15%. That’s extremely high! This is exactly why Rule 3 is so important. If you have adequate liquidity not only can you pay off your credit cards every month, but you can limit what you charge on them since you have the ability to pay for things in cash. Think of it this way – if you have credit card debt carrying 15% interest, every dollar you don’t completely pay off costs you $0.15 each year. While there are always special circumstances, a good general rule of thumb to live by is if you can’t pay for it in cash, you probably can’t afford it.

You may need to slow down short-term debt payments in order to build liquidity and get protection in place first. You may even need to restructure your debt. But it is critical that you follow this order to provide relief, reduce stress, and build the foundation for growth.

LIFE HACK: if you are saving 15-20% of your gross income then short-term debt may just become part of your lifestyle burn rate.

While we’re on the subject of debt, we need to briefly discuss mortgages. Even though a mortgage isn’t considered short-term debt, it is a guaranteed debt that almost everyone will have to experience. Your mortgage payment should not exceed 15% of your gross income. My father used to tell me to buy as much house as you can afford. Back in the day, and still, people saw their house as an investment. However, what we do know is that real estate can and does decline in value. We also know that you can’t eat your house, it doesn’t produce income, and has multiple expenses (maintenance, taxes, updates, etc.). Any equity in your home is semi-restricted and you may not be able to access it when you need it most. Therefore, your mortgage payment should be part of your lifestyle burn rate, not your savings.

What do you do if your payment exceeds this number? First, ask yourself if the payment is preventing you from saving 15-20% of your gross income. If not, then consider it part of your lifestyle and know you may have to limit yourself in other areas. If so, then you could consider refinancing, selling, or maybe you just have to stay put.

Learn how to apply these simple financial rules to a model you WILL succeed with:

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What is Evidence Based Investing?

Evidence based investing is a recent movement in the financial industry focused on what we see as real market behavior. By discerning what is real and narrowing down the evidence surrounding modern investing, we can then determine the best strategies to deploy to reduce volatility and maximize returns. While no one strategy is the best all the time, the strategies that perform consistently over long time periods have been clearly identified. JarredBunch’s Factor VI strategies consolidate and apply this knowledge to offer clients options which best meet their unique investing needs.

Active vs. Passive

The best investment strategy for you is the one you can stick with over a long period of time. Passive buy-and-hold strategies do work, but there are fundamental issues which need to be addressed:

  • Can you maintain a buy-and-hold strategy for at least 20 years? How long are you willing to hold?
  • Do you have the stomach to not make any changes during market drops of 20-50%?
  • Do I ever sell or make changes to my allocation? Why and when?
  • Do you have alternatives if the market is down when you are ready to draw on your account?
  • How do you know which assets to choose from and when to stick with them?
  • What if you need to take money out during a bear market?

Several studies, including Dalbar, show that the majority of investors may say “yes” to all of the above even when their actions say “no.” These investors routinely under-perform against the market and many end up woefully under-prepared for retirement.

You have one shot at this, so let’s get it right!

When it comes to active investing, most people think of hedge funds, stock picking, and other forms of speculation and gambling. This is NOT what we’re talking about. There is plenty of evidence showing one of the most effective forms of active investing is trend following. We use trend following in almost all of our investment strategies. We’ve compiled our evidence from studies completed during the last 100 years which have shown trend following as performing well in all markets.

What do we like best about trend following strategies?

  • Invest in what is trending up, ride the trend upward
  • Downside risk management to limit drawdowns by exiting downward trending positions
  • Take small short term losses for larger long term gains (ride the winners, sell the losers)
  • Get more consistent returns versus the market to take advantage of the power of compounding
  • Creates a smoother investment ride, a strategy you can stick with over the long-term
  • Removes emotion from the investment decisions by using a rules based strategy that is systematic

We can’t predict the future, we don’t know what the market is going to do, and performance in the past has nothing to do with performance in the future. However, we have the evidence explaining what works and what doesn’t – what people can stick with and what makes them panic.

Our goal is to provide simple, rules based strategies to provide downside risk protection, consistent returns, and peace of mind.

Rules Based Solutions

Factor VI strategies are rules-based, meaning they use specific and quantitative trend following rules. One of the most researched areas of investing, trending following (momentum) has shown time and time again to be worthwhile strategy. As long as investor behavior exists (and there is no reason to believe it will ever go away) there will be market trends and inefficiencies for trend-followers to capitalize upon. The goal is downside risk management and a smoother investment ride. Momentum allows investors to stick with a strategy rather than emotional decision making to compound their wealth.

One of the principles of trend following strategies is letting your winners ride, selling losers early and taking small losses while riding winners to larger returns. Getting out of losers early avoids large dips and big drawdowns.

Traditional investment theory says you have to capture the best days of the market to get returns of the market. What they don’t tell you is you have to capture the worst days to get those best days. The best days occur during large downturns, so you have to “just ride it out” to capture both. Trend followers work to capture up trends, avoid worst days and best days, and often end up with better returns.

The choice is yours – trust Wall Street, trust the government, trust buy and hold strategies of yesteryear. Or choose an evidence-based strategy to reach your full financial potential.

How a Healthy Lifestyle Affects Your Financial Future

As financial consultants, we spend a lot of time focused on the health of your financial accounts. We take deep looks at your rates of return, cash flow, investment mix, and more to determine the ideal financial model for building your life. But we don’t often talk about your physical health, something that can have a huge impact on your financial future.

As the US has found itself in the midst of an obesity epidemic, skyrocketing health care costs, and uncertainty surrounding how to solve these issues, it is more important than ever that you take care of your physical health. Not only will this help you live longer, but maintaining a healthy lifestyle can mean a huge difference in your net worth and financial legacy.

Poor Health Can Cost You More Than $150K+ Over a Lifetime

Read that heading again. We aren’t referring solely to the costs of healthcare here. A National Bureau of Economic Research paper published in 2017 found that the average difference in net worth between a healthy 65-year-old man and an unhealthy 65-year-old man to be over $150,000. They also found that workers who led unhealthy lifestyles for more than 16 years lost approximately $4,000 in annual wages.

Think of the lost opportunity to make smarter investments! Imagine how you could grow your nest egg with the savings from fewer visits to the doctor’s office. Being more active contributes to the confidence necessary to compete for and win business opportunities that can increase your cash flow and your lifestyle. Taking time to maintain and improve your physical health can transform your present as well as your financial future. Some steps you can take to begin that transformation include.

  • Eliminate Vices for Better Cash Flow – We all fall prey to vices sometimes. If your weakness is for smoking, alcohol, fast food, or sweets, reducing or eliminating that habit can have a twofold effect on the trajectory of your life. Not only will you have cost savings from going without, but your body’s health will improve as well. That discipline can go a long way in saving you the costs of medical treatment and expensive habits.
  • Investing in Healthy Food OptionsEating healthily can be intimidating – not only is there the initial cash outlay of buying better produce and ingredients, but also the labor of shopping, preparing, and cooking the meals. However, eating healthier foods keeps you fuller longer due to better, more plentiful nutrients. There are numerous free recipe websites and how-to videos online to help you make healthy choices easier to make as well. And while it will take some time to get used to, once you’ve detoxed from processed junk foods you will feel better eating these healthy options.
  • Alternative Transport OptionsCommuting is a necessary evil in life. If you live close to your workplace, have you considered walking, jogging, or cycling to work? These options all save you money by reducing fuel and maintenance costs on your personal vehicle while pulling double-duty to help you get a little hidden exercise in your day. Sometimes this can help reduce insurance costs for your personal vehicle too, if your policy is based on an average annual mileage.

It’s not always easy to make these disciplined, healthy choices, but it’s worth it. Take some time to figure out how you can fit some healthier decisions into your daily life to help put a little juice behind your financial model.

While we aren’t certified personal trainers, we are qualified to take a look at your financial path for the future. Interested in improving your current financial situation and living the live you want today? Complete this questionnaire to get started!

Uncertain Futures and the Importance of an Abundance Mindset

Turbulent times in the world can magnify troubles and make them seem even larger than they are. Whether investment woes, unexpected bills, or uncertainty in a career, these problems can dominate your mindspace and keep you trapped in a vicious cycle of pain and fear. These problems can seem even bigger in times of rapid change and uncertainty.

We’ve written at length about abundance mindsets and how to cultivate them. It’s time to reiterate and clarify what a mindset of abundance is and isn’t. There’s a lot of misinformation available online designed to get your clicks and attention. We wrote this article to help clear up what an abundance mindset is, why it matters, and how to apply it to your life in times of uncertainty and strife.

What an Abundance Mindset Isn’t

An abundance mindset is not an expectation that things will turn out okay on their own or that prosperity will fall into your lap. It is not complacency, laziness, or blind acceptance. Too many people jumping on the bandwagon of abundance seem to believe that it means the world will provide success, regardless of effort and commitment. And that just isn’t true.

If you’ve heard the old adage “God helps those who help themselves,” you’re on a good track to understanding the mindset of abundance. An abundance mindset means knowing that there is enough out there for you to live your best life and to provide for your loved ones and your dreams. Just because abundance is available, though, it doesn’t mean it will just come to you. You have to go chase that success and work for it. It is only through hard work, discipline, and resilience that we can access the abundance the world has available. By committing to the correct, repeatable behaviors, we can tap into that flow of abundance and reach a better life. But it’s not a handout – the world requires you to work for and earn the lifestyle you are trying to achieve.

Why an Abundance Mindset is So Important

The opposite of an abundance mindset is one of scarcity. A scarcity mindset says that you have to jealously protect what you have in that moment because it is yours and the world may come take it away. It says that this current salary, investment, job, or lifestyle is the best and only one available and I cannot move away from it. It’s a fear-motivated way of thinking that can derail even the strongest financial model.

If you operate from a place of abundance, you know that there are always alternative solutions and methods available to hit your goals and achieve the life you want. Whereas a scarcity mindset says “don’t look for a better investment mix, a 4% return is steady and good,” an abundance mindset knows that exploring a different mix can help you hack your future and achieve a greater, sustainable growth. Abundance knows that the opportunity for greatness is out there, so long as you do the work and research to earn it.

How To Commit to a Mindset of Abundance

To build an abundance mindset, you need to change your relationship with money. Many people suffering from a scarcity mindset have an overly emotional relationship to their money. You need to accept that money is a tool, a means to an end, and a way to help you achieve your best life. Don’t play fast and loose with your decision-making, but be patient and determined. Move with confidence and do the day-in and day-out work needed to commit to a financial lifestyle today that enables the lifestyle  you want to live in the future.

It’s an ever-changing journey, but building a lifestyle committed to abundance can create great change for you and your loved ones. We can help you build the right financial model to get there.

Are you interested in radically improving your financial mindset and building a brigh financial future? Complete this questionnaire today and start working with our world-class team of advisors.

Unique Challenges in Wealth-Building for Physicians

Doctors are frequent subjects for television, books, and other forms of cultural reflection. They’ve been glamorized and satirized and held in great esteem. They’re trusted advisors and spokespeople for improving health. Along with all of this acclaim comes one of the highest salaries in America- averaging just under $300,000 in 2017.

There’s more to a physician’s life than respect and a paycheck, though.

High patient loads. Long hours. Paperwork. Lengthy reimbursement processes. Conference attendance. High debt levels from medical school. A physician’s work can be incredibly stressful for their body, mind, and bank account balance. Doctors face many of the same challenges as your average professional, as well as some unique hurdles to building a wealthy, healthy life and financial future.

Student Debt

The debt carried by Americans in the form of student loans is becoming a national crisis. While the average college graduate has $37,000 in loans, a new physician averages $190,000 in debt, according to the American Medical Association in 2017. These huge amounts can make payment plans and managing income seem insurmountable. Depending on a physician’s specialty, they can expect that average salary to be far lower. Couple high payments with associated necessities (such as malpractice insurance) and doctors face some very big obstacles. As in all cases, though, the right financial model can help you build positive momentum and push past those high debt loads. It just takes the right planning and commitment.

Disability Risks

Physicians depends on their bodies and their minds to secure their livelihoods. Should you become injured and unable to work for a time, it can be devastating to your practice and your income. Add that to high debt loads and required monthly payments and it can spell disaster for your personal finance. Doctors should carefully explore disability insurance options to make sure that their entire life value is covered in case of an extreme injury. As always, weigh your options and pay special attention to the elimination period (the span of time you must wait before receiving payments from the policy.)

Stress and Burnout

It’s not just the risk of being injured on the job that physicians have to contend with. Healthcare workers are under incredible stress due to the nature of their work. It is often filled with the highest highs and lowest lows of patients’ lives. That stress can cause severe burnout for those workers who struggle with the demands of the job and the impacts on their everyday life. Rates of depression, burnout, and other psychological issues are prevalent in healthcare professionals, making the right mindset even more important and difficult to attain. Practicing self-care, seeking balance, and focusing on gratitude and abundance mindsets can help, particularly when pushing against these huge peaks of stress and demands on your time and attention.

Luckily, you don’t have to be alone in managing the financial side of things. JarredBunch is ready to be your partner in alleviating the financial stresses of this life. Our experience in building effective, proven financial models and guiding our clients towards financial independence and prosperity can help ease your mind and keep you focused on the work only you can do for your patients, your loved ones, and yourself.

Complete this questionnaire to get the conversation started – we’re ready to help you.

How Do the Wealthiest Invest?

In our series on growing your wealth we’ve discussed healthy behaviors for priming your finances for growth, how to write a personal investing statements, and how to avoid unhealthy ways of thinking about investments. These are all essential for growing your finances in a way that serves your life. It is equally important that we have positive role models to study and look up to.

Unfortunately we can’t all be the Oracle of Omaha, but we can learn from behaviors of some of the wealthiest investors in the US. A recent study completed by U.S. Trust of nearly 700 high net worth investors (investable assets exceeding $3 million) found the following:

Wealthy Investing Behaviors

  1. Wealthy investors maintain a fairly high amount of account liquidity. More than half of the surveyed investors keep their liquidity high so that can take full advantage of an opportunity when it becomes available. This is not out of fear or caution, but a strategic decision to keep reserves ready to move quickly. How many channels of your portfolio could be easily liquidated and put to use?
  2. Large cash positions are a common portfolio feature. To further demonstrate the importance of multiple liquidity access points, 60% of surveyed investors have at least 10% of their portfolio in cash. This isn’t a conservative move, but a decisive and strategic commitment to be ready for the future. What percentage of your personal finance is held in cold hard cash?
  3. Long-term goals are more important than short-term growth. Wealthy investors are willing to forego short-term, rapid gains in favor of risk mitigation and steady growth over time. They know that the long-term is what will sustain them over time, and they focus their discipline accordingly.
  4. Mitigating tax burdens is a priority. More than half of those surveyed emphasized the importance of minimized the impact of taxes on their investments. This rated above pursuing higher returns. Wealthy investors are largely focused on their net pay, rather than the gross before taxes. Managing this burden is key for success. Do you know the tax rate for all of your assets?
  5. Tangible assets are important. Almost half of the surveyed individuals have invested in some sort of tangible asset, such as real estate. These can produce passive income and grow in value over time, offering growth and a revenue stream. Do you have secondary income sources?
  6. Credit can be used for good. Nearly 65% of surveyed investors agree that credit can be used to build wealth strategically. While their knowledge is powerful, it is important to note the risk associated here. Consider using credit cards for spending you already planned on doing (so long as you pay them off weekly) or increase your payments on low interest mortgages or student loans to save on interest. This will free up more long-term cash to invest.
  7. Consider the impact of your investments. Beyond your own finances, your investments can affect society and the world. Many mutual funds and ETFs present opportunities to invest your money in companies based on their social values and impacts on society or the Earth as a whole. Many wealthy investors perceive socially responsible companies as being less risky to invest in. What social values and impacts do you want to support through your investments?

Ready to join the ranks of wealthy investors? Begin your journey with our curriculum to grow your investing knowledge and skill set. Or contact us directly to schedule a consultation. We’re excited to help you on this journey to change your life.

The Right Mindset for Growth

There are simple rules to follow to prime your financial engine for more effective growth. Following these can be difficult for some, but these general rules all offer benefits. It is not enough to only prime your finances for growth though – you must also prepare and adapt your mindset and view of the world to weather the uncertainty of the market.

These are some common mental pitfalls that can torpedo your investment strategy and impede your financial wellness:

Nine Negative Investing Behaviors

  • Loss Aversion: We feel loss more deeply than the happiness that comes from gains. Avoiding loss can cause you to hold on too long to a failing investment, have unrealistic expectations of low-risk investment returns, and make poor stock selections based on these expectations. It hurts, but you have to know this: some volatility and loss is to be expected in any financial model.
  • Narrow Framing: When you make decisions without considering all possible implications. Narrow framing leads to market bubbles and bad investments based on hype and chasing growth that has already occurred. This can have impacts far beyond individual investors, as in the dot-com and housing bubbles of the 2000s.
  • Mental Accounting: Not tracking your finances on paper can lead to varying levels of due diligence and planning. Arbitrary categorization can work against your goals, like impulse-spending your tax refund or bonus.
  • Diversification: Diversification should be used as a whole across your portfolios, and be evaluated based on overall risk, rather than industry sector. Many investors chase risky profits across many industries and consider themselves “diversified.”
  • Herding: It’s easy to follow the crowd and this can play off our tendency toward confirmation bias. There’s comfort here, but remember how many people lost their shirts in following the crowd on recent bubble bursts.
  • Regret Aversion: We experience much more mental pain when we commit an error than when we miss on an opportunity due to inaction. This causes investors to sell too early to lock in on profits, missing out on larger gains later. Some may hold their positions too long, hoping for an upswing to erase their standing losses that grow each day.
  • Media Response: Don’t be too eager to buy into what talking heads are selling you – confirmation bias can be deceiving. Failing to examine potential negative impacts or researching alternative information sources can lead to narrow thinking and narrow investing that can net big losses.  
  • Overconfidence: Nobody can constantly beat the market. Even investing “gurus” take consistent losses in their financial models. If you don’t plan to roll with the punches and absorb volatility, your financial model will quickly be broken and you could wind up broke.
  • Anchoring: Our previous experiences inform our outlook, worldview, and plans for tackling the future. Even if they don’t apply. These informational anchors can hold you down if you fail to recognize them for what they are and move beyond this frame of reference.

These negative behaviors can cause you to abandon key points of your financial model and sound investment strategy. Remember, it’s all about time in the market, not timing the market. If you want to grow your wealth you need to face some intellectual discomfort to recognize and overcome these negative behavioral impulses in yourself.

Your Investment Policy Statement

A powerful way to overcome these negative tendencies in yourself is to draft a personal Investment Policy Statement. Much like a personal manifesto or a company’s mission statement, this is meant to help you unify behind a vision guiding your investment strategy toward your financial goals. Some areas to consider including are:

  • Purpose: What is your purpose and goal for your IPS?
  • Values: What values guide your life and decisions? How do you want your investment decisions to support these?
  • Objectives: What do you want to achieve through your investments? What timeline, risk tolerance, and performance objectives figure into those goals?
  • Duties: What role does everyone on your investment team play? What is your involvement? What expectations do you have for yourself and the rest of your team?
  • Portfolio selection: What investments (based on your previous statements) will comprise your portfolio? Laying out a complete picture here can be a powerful evaluative tool.
  • Performance: How do you select your investments and what standards must they meet in order to remain as a holding or purchase goal? Base these decisions on your statements and objective facts.
  • Costs: Any costs associated with managing your portfolio should be 100% transparent.
  • Review: How often will your portfolio and IPS be reviewed? We recommend at least annually. Make sure that as your life changes you update your strategies to fit your future needs.

With the right mindset and a clear investment policy guiding your financial model, you can hack your future and grow your wealth more effectively. These are real steps towards true financial freedom, of being able to rely on your own wealth for your future. Want to figure out the path forward together? Contact us to schedule a consultation.

The Four Challenges to Building Wealth: Velocity of Money

As we continue our series exploring challenges to building wealth, we need to introduce the concept of velocity of money. In personal finance, the velocity of money refers to using your funds to build wealth more quickly by getting your money to do more than one thing at a time.

This is a well-kept secret of the financial industry and one that can transform your relationship to your personal finance.

How Can I Use My Money Now?

Accepting the status quo is not going to help grow your money and efficiently organize your personal finances. You’ve got to ask yourself “how can I use my money now to make things better down the line?”

Much of our culture and advertising is devoted to making you chase the “next great thing,” the next bit of instant-gratification, and that next hit of dopamine. While pervasive, it’s not a sustainable model for your life.

Choosing to embrace the following behaviors now while delaying those small bits of gratification will make your future life much more enjoyable:

  • Pay down debts
  • Build an emergency fund
  • Invest in your future
  • Invest in yourself
  • Save for retirement

Those choices may not offer the immediate reward promised by so much of our flawed, impulsive human nature and the marketing campaigns designed to take advantage of it. But in the long run, those small changes now will have a big impact on your life.

The Magic of Compounding

The reason why your choices today have a magnified impact on the future is because of two things: Lost Opportunity Cost and Compounding.

A dollar invested today has the opportunity to compound over and over through the years, building its overall value. You shouldn’t underestimate the awesome power of compound interest; If you’ve ever struggled with high interest credit card debt, you know how the momentum of compounding can build.

Turning this principle into a positive is why we stress the idea of “time in the market” rather than “timing the market.” Building your wealth is a process, and compounding can work for you if you consistently make intelligent choices over time.

When to Refinance Loans

If you’ve taken out loans, you’ve likely received countless direct mail advertisements for refinancing programs. While these seem like a great way to lower your payments, you must be cautious when evaluating them. Many come with early repayment penalties and fine print rules that heavily favor the program and lender rather than you.

If you have a loan you’re looking to refinance- such as your mortgage- look first for ways to remove your private mortgage insurance (PMI) after you’ve built 20% equity or more in the home. You can also look into ways to change your repayment term so that you can pay loans off sooner and save yourself thousands of dollars in interest. Any time a loan term can be updated in your favor it’s worth exploring new options. Just be sure to evaluate the entirety of your new solution and not just the face value of the monthly payment.

Make Your Money Work Harder

The real way to build wealth and increase the velocity of your money?

You have to be as demanding of your money as you are of yourself.

Are your investment and savings strategies underperforming? Update them. Is accelerating interest of outstanding debts hurting your overall quality of life? Rebalance your strategy to pay off debts sooner or explore refinancing options to ease some of the burden. Personal finance is complex, but solving issues can be as simple as acknowledging a problem exists and then finding a workable solution to that problem. We’ll discuss visibility and organization in our final post in this series, but know this: accepting lackluster performance will lead to a stressful and lackluster financial life.

Ready to learn how we can help you increase your money’s velocity to build wealth quicker and more effectively? Complete this questionnaire to see which Jarred Bunch Consulting service is right for you.

The Four Challenges to Building Wealth

If you’ve set up automated deposits, selected an investment mix, and have a general awareness of your overall financial status, you’re doing well. This is especially true when you consider the huge number of Americans who have under $500 in savings and don’t track their spending.

Unfortunately, there’s a lot more to growing your wealth than setting up these healthy behaviors. In fact, there are four distinct challenges to building your wealth and overall financial wellness. We’ll take deep dives into each of these factors in the coming weeks to help arm you against these threats to your wealth building strategies. Today we’re offering up a preview of the posts to follow as part of our four part educational series. We’re hoping you tune in and learn along with us each week.

The very real threats staring down your personal wealth include:

Lost Opportunity Cost

You might think that if you spend one dollar, you’ve effectively lost one dollar, right? Sadly, it’s not that simple. If a situation arises that requires you spend money you would normally save or invest, you’ve lost more than just that amount of money- you’ve given up what that dollar could do for you in the future.

Whether this spending comes from unexpected bills (like medical expenses or emergency car repairs) or from impulse spending (we all remember Cyber Monday), the outcome is the same: you’ve traded the future growth potential of that dollar for the use of it right now. In our deep dive, we’ll look further into how to measure lost opportunity cost, the role of volatility in assessing it, and how to use these measurements to make decisions about your finances and life.

Rules of Financial Institutions

When is the last time you read your bank or credit union’s service agreement? Do you know the steps to take if you want to close your current checking account and open one elsewhere? There’s a reason why the fine print is small and difficult to discern; hidden within service agreements and fine print are many policies that make your money work harder for the institution than it does for you. It can be difficult to disconnect from your current bank’s ecosystem. They want to ensure that while your savings account earns 0.01% interest annually they can loan your funds to a credit card user and charge them 27% APR.

In our examination of financial institutions’ rules, we’ll reveal how they make it difficult to use your money, how to find a more beneficial partner, and ways you can use banks’ approach to finance to guide your own wealth management strategies.

The Velocity of Money

Velocity is the speed of something in a given direction. While “the velocity of money” is typically used by economists studying the GNPs of different countries, it also applies to your personal finance. In this setting, it means how you get your money to do more than one thing for yourself at the same time. Whether this means opening a higher-yield savings account to hold your quarterly payments for freelancer income taxes or refinancing your mortgage to remove a PMI and expedite your amortization rate, figuring out a way to make your finances work harder and faster is key to your financial health.

In our dedicated blog post we’ll further explore the velocity of money, its potential impact on your financial wellness, and ways you can adopt financial institutions’ strategies to make your money work harder.

Financial Organization and Coordination

You can’t build what you don’t know. It’s not enough to be aware of your finances – you have to aggressively coordinate and organize your money so that it moves and grows in a productive manner. This topic is one of the largest stumbling blocks for the general public – our financial systems mean ignorance is bliss for many. But taking time to organize your money and enact a strong plan will empower you and remove a lot of the stress associated with personal finance.

We’ll look into ways to organize your funds, why you should treat your household’s finances like a business, and how to get over the initial fear and pain that comes from discovering where your money may have gone wrong.

Wrap Up

The short story? These are in no way simple challenges to tackle. But taking the steps to empower yourself through this learning will put you on the path to building your wealth and improving your overall financial wellness.

Ready to tackle these challenges together? Complete this questionnaire to help us better understand what value we can bring to your life. It’s time to start making your money work for you.

Five Ways to Build Your Healthy Financial Mindset

Your bank account, investing strategy, and credit score aren’t the most important parts of your financial life. Your net worth or rate of return aren’t even the most pivotal. The most important part of your financial life is your mindset.

Without the right way of thinking and feeling about your financial well-being, those other metrics of success amount to nothing. A healthy mindset leads to healthy behaviors and a productive relationship with your money. Without this foundational approach to managing your financial life, all the positive planning and execution on the world won’t improve your overall life. Having the right money mindset means:

1. Developing an Abundance Mindset

Much of the world operates in a mindset of scarcity. The debt crises, global conflict, and fear-based media all operate from a scarcity mindset. They believe that opportunity is limited and that your good fortune is under threat. A mindset of abundance accepts these risks, but knows that there are more opportunities waiting if you plan and act effectively. Adopting an abundance mindset means being thankful for the good things in life and knowing there is more good waiting for those who plan and act correctly to reach their goals.

A good way to grow your abundance mindset is to challenge encroaching, negative thoughts that may arise when you are stressed by re-framing them as positive opportunities rather than threats.

2. Anticipating Your Nature

Part of a healthy financial mindset involves knowing yourself and being honest about who you are. We are all impulsive, emotional, messy human beings. Developing overly tight budgets that don’t allow for your occasional impulse can torpedo all of your efforts towards financial self-improvement. Feeling deprived can make you lash out and resent your own efforts in impulsive ways that lead to overcharges and other negative outcomes.

Know what your impulsive vices are and plan to reduce those in healthy ways while still giving yourself the occasional reward. Whether that means an impulsive purchase of an ebook on sale or treating yourself to a movie theater trip once a month, you have to allow yourself to enjoy life while working towards financial wellness.

3. Rolling with the Punches

The trajectory of success is never a straight line and neither is your financial trend line. Changing  behaviors, investing, and trying to better your financial status all come with associated risks. Can you handle negative returns on higher risk investments? Can you run your finances like a business and accept that your funds will be working for you in several different places? Accepting the constant presence of change and uncertainty and remaining self-assured that your strategy WILL work for you is essential for your mindset.

Automated investment and savings strategies can help make this easier for you by keeping it out of sight and out of mind. Market downturns and hiccups happen, but the trick is trusting in your strong strategy to weather the market volatility that can harm your investments.

4. Staying Motivated

Staying the course and maintaining your focus on the positive outcomes you’re working toward is easy early on in your financial journey. Can you maintain that focus in year? Five years? Figuring out what steps you have to take to keep yourself motivated and working toward financial prosperity is key for your journey. It’s a moving target and requires radical honesty with yourself, but maintaining that motivation is essential. Some people use vision boards or other simple reminders of what they’re working towards.

Some people track behavior streaks on a calendar or in a mobile app. What works best for you won’t hold true for everyone else; you just have to figure out how to keep yourself motivated in a natural and effective way.

5. Expressing Gratitude

Being thankful for what you currently have and for the future you are building will help immensely. Too many people spend their lives pessimistic and jaded, resenting their current status without taking real action to improve their standing. It goes beyond appreciating what you have. True gratitude means celebrating others’ good fortunes and contributing to a better world through your self improvement. Your most valuable asset is you, and you should be thankful for the commitment you are making to yourself and your life as you begin this journey towards a better financial life.

Taking these steps will help put you on the right path towards cultivating a healthy financial mindset. Want to learn more about effective money management principles and see how we improve our client’s lives? Contact us to discuss how we can help you on your financial journey.