Sunday, May 29, 2011

Four Words That Make Life Worthwhile
Written by Jim Rohn

Over the years, as I've sought out ideas, principles and strategies to life's challenges, I've come across four simple words that can make living worthwhile.

First, life is worthwhile if you LEARN. What you don't know will hurt you. You have to have learning to exist, let alone succeed. Life is worthwhile if you learn from your own experiences-negative or positive.

We learn to do it right by first sometimes doing it wrong. We call that a positive negative. We also learn from other people's experiences, both positive and negative. I've always said that it is too bad failures don't give seminars. Obviously, we don't want to pay them, so they aren't usually touring around giving seminars. But that information would be very valuable. We would learn how someone who had it all, messed it up. Learning from other people's experiences and mistakes is valuable information because we can learn what not to do without the pain of having tried and failed ourselves.

We learn by what we see, so pay attention. We learn by what we hear, so be a good listener. Now, I do suggest that you should be a selective listener. Don't just let anybody dump into your mental factory. We learn from what we read, so learn from every source. Learn from lectures. Learn from songs. Learn from sermons. Learn from conversations with people who care. Always keep learning.

Second, life is worthwhile if you TRY. You can't just learn. Now you have to try something to see if you can do it. Try to make a difference. Try to make some progress. Try to learn a new skill. Try to learn a new sport. It doesn't mean you can do everything, but there are a lot of things you can do if you just try. Try your best. Give it every effort. Why not go all out?

Third, life is worthwhile if you STAY. You have to stay from spring until harvest. If you have signed up for the day or for the game or for the project, see it through. Sometimes calamity comes; then it is worth wrapping it up and that's the end. But just don't end in the middle. Maybe on the next project you pass, but on this one, if you signed up, see it through.

And lastly, life is worthwhile if you CARE. If you care at all, you will get some results. If you care enough, you can get incredible results. Care enough to make a difference. Care enough to turn somebody around. Care enough to start a new enterprise. Care enough to change it all. Care enough to be the highest producer. Care enough to set some records. Care enough to win.

Four powerful little words: LEARN, TRY, STAY and CARE. What difference can you make in your life today by putting these words to work?

Jim Rohn, America's Foremost Business Philosopher, reprinted with permission from Jim Rohn International © 2011. As a world-renowned author and success expert, Jim Rohn touched millions of lives during his 46-year career as a motivational speaker and messenger of positive life change. For more information on Jim and his popular personal achievement resources or to subscribe to the weekly Jim Rohn Newsletter, visit www.JimRohn.com.

Monday, May 23, 2011

A Skill That You Should Add to Your Financial Toolkit

Recently, I was in the market for a new water softener. I made a call to a local company that I got out of the telephone book and proceeded to get all of the information I would need to discuss with my wife, so that we could jointly make an informed decision. Honestly, all I really wanted to know was “How long is it going to take to install?” and “How much is it going to cost me? “ Quickly, I got the information I needed -- it would take a full day to install and it will cost me $2895.00. I was about to thank the gentleman for the information and tell him that I will get back to him as soon as I discussed it with my wife, when he made me one of those offer-you-can’t-refuse deals.

He told me that if I set up the appointment right away I wouldn’t have to pay that $2895.00 right away. He said I could finance the appliance for $75.27 per month over six years. I am usually a pretty skeptical person when somebody offers me a deal that I think is too good to be true, but I must admit, $75 a month sounded much more attractive to me than immediately dropping a cool 3 grand. Since this seemed like such a great limited time offer I asked him to hold on a minute and that I’ll be right back.

I decided to check out the numbers for myself. So, I got out my financial calculator and calculated what $75.27 per month for 6 years would cost. I figured that that was going to cost me a total of $5419.44. So, I then subtracted the initial cost of $2895.00 from the total. Based on this calculation I’d be paying $2524.44 in interest if I went along with this deal. This information didn’t make a strong enough case for me to decide whether or not it was a good deal. I remembered when I bought a home, after taking into account the interest rate, it was estimated that by the end of the term I was going to have to end up paying around double the amount of the original purchase. But in the case of my house, the interest rate was pretty low, so it worked out to be a good deal anyways. Therefore, I decided I needed to figure out the interest rate this guy was going to charge me.

So, I took the preliminary steps to let the financial calculator know that payments will be made at the beginning of the year and that there will be 12 payment periods and compounding periods per year since the payments will be on a monthly basis. Then I let the calculator know that the present value of the appliance was $2895.00, the number of payments was 72 (6 years), the amount of the payments was $75.27 and the future value of the appliance was $0 (since I was going to pay it all off). After entering the information I hit the compute button and out popped the result: 24.33%!

I promptly took the salesperson off hold and asked, “So, you are charging 24.33% interest for financing?” The salesperson was pretty dumbfounded that I was able to calculate the interest rate as fast as I did and from the information that he gave me. I then said I’d call him back if I decided to go with them. In this case, I was prepared to make the payment up front, but I was almost swayed into making the wrong decision based on my initial emotional response. Even if I didn’t plan to make the full payment up front, by knowing the high costs associated with financing through this company, I would have taken a different route at getting the money – like applying for a lower cost loan somewhere else.

Remember that anything that sounds too good to be true, usually is. That is why it is important to keep your emotions in check and get all of the information before making a financial decision. Knowledge of how to properly use a financial calculator can be one more tool that you can add your toolkit that can give you the added confidence to know that you were not cheated and that you made the right financial decision. It worked for me!

How are you adding to your financial toolkit?

I'm so excited to share this information with you. If you have enjoyed the information or feel that it would benefit someone else, please share it. If you have any questions or comments, please feel free to contact me.

Monday, May 16, 2011

The Compound Effect: Success, Old School
Written by Darren Hardy

The most challenging aspect of The Compound Effect is that we have to keep working away for a while, consistently and efficiently, before we can begin to see the payoff. Our grandparents knew this. They didn’t spend their evenings glued to the TV watching infomercials about how to have thin thighs in thirty days or a real estate kingdom in six months. I bet your grandparents worked six days a week, from sunup to sundown, using skills they learned in their youth and repeated throughout their entire life. They knew the secret was hard work, discipline and good habits.

It’s interesting that wealth tends to skip a generation. Overwhelming abundance often leads to a lackadaisical mentality, which brings about a sedentary lifestyle. Children of the wealthy are especially susceptible. They weren’t the ones who developed the discipline and character to create the wealth in the first place. So it makes sense that they may not have the same sense of value for wealth or understand what’s necessary to keep it. We frequently see this entitlement mentality in children of royalty, movie stars, and corporate executives—and to a lesser degree, in children and adults everywhere.

Having experienced extended periods of prosperity, health, and wealth, we become complacent. We stop doing what we did to get us there. We become like the frog in the boiling water that doesn’t jump to his freedom because the warming is so incremental and insidious that he doesn’t notice he’s getting cooked!

If we want to succeed, we need to recover our grandparents’ work ethic.

It’s time to restore our character, if not for the sake of saving America, at least for your own greater success and achievement. Don’t buy into the genie in a lamp idea. You can sit on your couch waiting to attract checks in your mailbox, rub crystals together, walk on fire, channel that 2,000-year-old guru, or chant affirmations if you want to, but much of that is hocus-pocus commercialism manipulating you by appealing to your weaknesses. Real and lasting success requires work—and lots of it!

I have a quick, real-time story to illustrate this nothing-fails-like success concept: A great new restaurant opened up close to my home on the beach in San Diego. In the beginning, the place was always immaculate, the hostess had a big, welcoming smile for everyone, the service was impeccable (the manager came over and assured it), and the food was sensational. Soon, people started lining up to eat there and would often wait more than an hour to be seated.

Then, unfortunately, the restaurant’s staff began to take its success for granted. The hostess became snooty, the service staff disheveled and curt, and the food quality hit-or-miss. The place was out of business within eighteen months. They failed because of their success. Or rather, because they stopped doing what made them successful to begin with. Their success clouded their perspective and they slacked off.

Microwave Mentality

Understanding The Compound Effect will rid you of “insta-results” expectation—the belief success should be as fast as your fast food, your one-hour glasses, your thirty-minute photo processing, your overnight mail, your microwave eggs, your instant hot water and text messaging. Enough. OK?

Promise yourself that you’re going to let go once and for all of your lottery-winner expectations because, let’s face it, you only hear stories about the one winner, not the millions of losers. That person you see jumping up and down in front of the Vegas slot machine or at the Santa Anita horse track doesn’t reveal the hundreds of times that same person lost. If we go back to our mathematical chance of a positive result, again, we have a rounding error of zero—as in, you have about zero chance of winning. Harvard psychologist Daniel Gilbert, author of Stumbling on Happiness, says that if we gave lottery losers each thirty seconds on TV to announce not, “I won!” but “I lost,” it would take almost nine years to get through the losers of a single drawing!

When you understand how The Compound Effect works, you won’t pine for quick fixes or silver bullets. Don’t try to fool yourself into believing that a mega-successful athlete didn’t live through regular bone-crushing drills and thousands of hours of practice. He got up early to practice—and kept practicing long after all others had stopped. He faced the sheer agony and frustration of the failure, loneliness, hard work, and disappointment it took to become No. 1.

I want you to know in your bones that your only path to success is through a continuum of mundane, unsexy, unexciting, and sometimes difficult daily disciplines compounded over time. Know, too, that the results, the life, and the lifestyle of your dreams can be yours when you put The Compound Effect to work for you. If you use the principles outlined in The Compound Effect, you will create your fairy tale ending!

This article is excerpted from SUCCESS Magazine publisher Darren Hardy’s book, The Compound Effect.

Content republished with permission from Darren Hardy, Publisher of SUCCESS Magazine. For more great insights, tips and strategies on success and achievement go to http://DarrenHardy.SUCCESS.com. More about Darren Hardy can be found at: http://DarrenHardy.SUCCESS.com/About.

Monday, May 9, 2011

Are You Getting “Roped” into an ROP Term Life Insurance Policy?

The traditional life insurance industry’s bread-and-butter product that they would just assume sell to everyone would be some form of cash value life insurance – that is any life insurance policy that has a savings account associated with it (i.e. Whole Life, Universal Life, Variable Universal Life, Flexible Premium Variable Universal, etc.). The traditional life insurance industry’s least favorite form of life insurance to sell is called term insurance – mainly because term is much cheaper than cash value, thus making the agent’s commission much lower.

So, as a compromise between the higher priced cash value life insurance and the lower priced term life insurance, the traditional life insurance industry has recently introduced a new type of term insurance called Return Of Premium (ROP) term life insurance. With ROP term life, at the end of the guaranteed term period, the carrier will refund or return all of the premiums that have been paid. This can be a very enticing benefit because, even though living through a policy should be considered a good thing, often people feel cheated that they paid into the policy for years, but they didn't profit financially from it. In essence, people hate losing money: loss aversion means that although you might like to gain a dollar, you hate losing a dollar a lot more. Fact is only about 7 percent of policyholders die before the end of their policy's term and customers know there's a high chance that buying a term life insurance policy is just throwing money away.

With this relatively new product, the traditional life insurance industry is really catering to the emotional side of the general public. But, before anyone gets too excited about this product I feel the need to remind you that with any important decision that deals with spending a lot of money, not only do you need to look at the emotional side, but you also need to look at the financial side. This way you can be sure that you are making the most informed decision and most importantly, so that you can sleep well at night.

You can see in previous articles where I have compared cash value life insurance with term life insurance – giving both the emotional and financial side of the decision making process:
Since ROP term life insurance is advertised as a better product than regular term insurance I’d like to give you a comparison of the two products using a story about two men named Jim and Bob. Both Jim and Bob are 35 years old, have the same financial resources as well as the same insurance rating of standard non-tobacco. Also, both men decide to get a 30 year level term with a face amount of $250,000. The only difference is that Jim decides to get an ROP term life policy and Bob decides to get a normal term life policy.

Let’s see how Jim does with his ROP term life policy. An average annual premium for an ROP term life with the above credentials would cost around $1000 a year or $83.33 per month. If Jim were to die during this 30 year term, his beneficiaries would get the $250,000 death benefit. However, if the Jim were to outlive the 30 year term, he would receive all of the premiums that he paid into the policy over the 30 years or $30,000. Not too bad!

Bob, on the other hand gets a regular term life policy. Typically ROP term life insurance policies cost on average twice as much as the regular term life insurance policies. So, Bob’s policy would cost around $500 a year or $41.67 per month. If Bob were to die during this 30 year term, his beneficiaries would get the $250,000 death benefit. However, in this case, if Bob were to outlive the 30 year term, he would receive nothing! He would have paid $15,000 over the course of 30 years and he wouldn’t have anything to show for it! This would be a total loss wouldn’t it be?

Well, we said we were going to compare apples to apples, so both men were able to afford the same amount of money. So, let’s just assume that Bob, with the regular term life insurance, spent the same $1000 per year as Jim did with the ROP term life insurance -- only he invested the difference.

Here are some of Bob’s possible results if he would have invested the difference ($500 a year for 30 years) himself:
  • Working at an average 6% rate of return he would have $41,900.84 or $11,90.84 more than with ROP
  • Working at an average 8% rate of return he would have $61,172.93 or $31,172.93 more than with ROP
  • Working at an average 10% rate of return he would have $90,471.71 or $60,471.71 more than with ROP
  • Working at an average 12% rate of return he would have $135,146.30 or $105,146.30 more than with ROP
On an emotional level, I can see how this ROP term life insurance is sold. I mean, with a normal 30 year level term life insurance, if you outlive the policy, you get nothing in return. It’s a sort of use-it-or-lose-it type deal. But with the ROP term, you get all of the premiums you paid into it back if you out live their policy. Also, because of limited time or the like, many insurance buyers won't even bother to run the numbers. However, that return of premiums is really just a 0% return on investment. In essence, the insurer keeps whatever interest or investment returns the money made over the 30 years that it was lent. So the insurer got a free loan.

And in case you didn’t notice, this ROP term is not for free. The policyholder, on average, will have to pay double the cost of a regular term policy. You really get hit twice on the cost -- not only are the premiums much higher, but the loss of any interest to the policy holder can be a tricky hidden cost as well. Also, you can see that, even if the invested difference was making only a conservative 6% return, Bob would have still beaten Jim. So, this shows that you don’t have to be a Warren Buffett to come out on top with the regular term policy. By investing the difference, you could end up having more money at the end of the term period than you would get as a refund from the ROP life insurance

Another thing that is pretty interesting with the ROP term policy -- if you cancel the policy you get next to nothing in return. On a 30-year policy typically, if you walk away from your return of premium policy after, say, 10 years, you only get back 9% of the cumulative premiums you paid in. After 20 years, you'll receive 35% and not until you hit 30 years will you get your full investment. If you get out early, you really lose!

Another nice-to-know is that with the ROP, you either get the premiums returned if you outlive the policy or your beneficiaries get the death benefit – not both! With the regular term, if you were investing the difference, they would be separate entities. If you outlive the policy, you get to keep your investment. If you are to die during the term, your beneficiaries get both the death benefit as well as the investment.

You can borrow against the “ROP” policy, because it builds up “Cash Value.” However, when you do that, two bad things happen:

1. You must pay interest on what you borrow.
2. Whatever you borrow gets subtracted from the original Death Benefit or Face Amount.

Furthermore, “ROP” does not qualify to be an IRA. When you invest the difference yourself, you can choose a portfolio of mutual funds and “tag” it an IRA. And, if it’s a Roth IRA, your investment will grow tax-free, and at age 59 ½, you can start withdrawing, tax-free.

The way the ROP policies are marketed, they sound like free insurance because if you do die you get a payout and if you don't you get your money back. But as I’ve shown above, if you look carefully at the numbers this "free lunch" will cost you. Buying Term and investing the difference is still and will probably always be the way to go. Do not fall prey to the Insurance Industry’s latest gimmicks. Remember, when things sound too good to be true, they usually are. Get into the habit of taking some time to weigh both the emotional side with the financial side when making important money decisions.

I'm so excited to share this information with you. If you have enjoyed the information or feel that it would benefit someone else, please share it. If you have any questions or comments, please feel free to contact me.

Monday, May 2, 2011

Be Responsible For Your Own Financial Security
Written by Denis Waitley

There is no job security. You can’t rely on staying with the same company through retirement. Pension plans, when available, are woefully inadequate. Social security benefits won't come close to covering your living expenses in retirement.

The only way to reach financial security is to plan for it now, regardless of your age. You have to define financial security in your own terms. Have you defined the amount of assets that you need for financial independence?

Financial security is that amount of assets that will give you a specific income, after taxes, to live like you want to, without having to depend on day-to-day employment.

What is that amount for you? I believe it is more than you think. And, I feel that if you define it, you can reach it. Do you have a financial plan and the assistance of a financial planner? You need both.

Action Idea: Wealth is not only based on income, but also on expenditures. Are you spending or investing? Are your purchases goal-achieving or tension-relieving? How do you use credit cards? Use your credit cards for services or purchases that retain their value or that build your business. Don't use credit cards for vacations and personal entertainment, unless you plan to pay the entire balance in one or two months. Try to pay all your balances in full monthly. In this way, you avoid the ridiculously high interest payments. Realize that paying minimum balances, at high interest rates, means that you are paying two or three times what the original purchase was worth.

Most importantly, save at least 6 to 10 percent of your take-home pay each month, by writing a check into a savings account or mutual fund for that amount, as if it were a utility bill or house payment. The secret of most self-made multi-millionaires is compound interest. If parents saved one dollar each day for their newborn infant, by going without a cup of Starbuck's coffee, or a Big Mac, or a soft drink for that day, by the time the child reached age forty, he or she would have a million dollars cash. No lottery windfall. No brilliant investment strategy. Just compound interest, which Baron von Rothchild labeled, "The Eighth Wonder of the World."

To Defining and Achieving Your Financial Independence!

Reproduced with permission from the Denis Waitley Newsletter.
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