Every second Sunday of the month at Victory Church is Family Sunday, in which my wife Debbie and I share the stage and speak on marriage, parenting, and finances.
This month we spoke of the subject of Financial Oneness in marriage. This blog posts shares some of the items we covered. We hope this is a blessing to you and your family.
“Wise people live in wealth and luxury, but stupid people spend their money as fast as they get it.” Proverbs 21:20 (GNT)
Time freedom means having the time to move deliberately through the world. It means not stressing out and running around like crazy. Having freedom of time lets you slow down and relax, and lets you appreciate life, your environment, people around you and the world in a much deeper way.
What is Time Freedom, Like, Really?
Time freedom is the freedom to decide what you want to do with your time. You know, those 24 hours in a day. Imagine they all belong to you, every day. And no one, especially not your boss, tells you how much time to devote to something. You’re the only one deciding.
For anyone who values financial security and ultimately desires financial freedom, creating at least one additional stream of income is no longer a luxury. It has become a necessity.
Diversifying your income stream is crucial to protect yourself and your family against the unavoidable ups and downs of economic and industry cycles. Because of the financial risks that come from relying on one source of income, such as a job or a business, consider creating at least one or more additional streams to generate cash flow.
Your additional income streams can be active, passive or a combination of the two. Some may pay you for doing something that you love (active), while others can provide income for you without your having to do much of anything at all (passive). You can diversify your income streams among different industries to protect you against major losses during downturns in one market and allow you to financially benefit from the upswings in another.
This truly is one of the not-so-obvious secrets of how the wealthy become — and stay — wealthy, which unfortunately isn’t taught to the masses. The good news is that it’s not magic. It’s not even complicated. Creating your next stream of income is a simple, step-by-step process, which you can arrange to start bringing you monthly income faster than you might realize is possible.
1. ESTABLISH FINANCIAL SECURITY.
Now, this idea isn’t sexy, but it’s imperative: Don’t focus your time and energy into building a second stream of income until your primary source is secure. Whether you have a day job or own your own business, focus on establishing and securing a primary monthly income that will support your expenses before you pursue other steps.
2. CLARIFY YOUR UNIQUE VALUE.
Every person on this planet has unique gifts, abilities, life experiences and value to offer — and be highly compensated for. Figure out the knowledge, experience, ability or solution you have that others will value and might pay you for. Remember, what might be common knowledge to you isn’t for other people.
You and your personality differentiate your value from that of every other person on earth. Many people will resonate with you (and your style) better than they will with someone else offering value that’s similar or even the same.
Knowledge is the one thing you can increase very quickly. As Tony Robbins wrote in Money: Master the Game, “One reason people succeed is that they have knowledge other people don’t have. You pay your lawyer or your doctor for the knowledge and skills you lack.”
Increase your knowledge in a specific area, and you’ll simultaneously increase the value that others will pay you for, either to teach them what you know or apply your knowledge on their behalf.
3. IDENTIFY YOUR MARKET
Determine whom you are best qualified to serve. Based on the value you can add for others or the problems you can help people solve, who will pay you for the value or solution you can provide?
4. BUILD YOUR COMMUNITY.
Dan Kennedy says, “The most valuable asset you have is your email list, so focus on growing it.”
I don’t like to think of my email community as merely a list of names but rather as a group of individuals, each with their own hopes and dreams.
5. ASK YOUR COMMUNITY ABOUT THEIR DESIRES.
You can either guess or assume what people desire and need, invest valuable time in creating it and then hope your guess was correct. But remember: Hope is rarely the best strategy.
6. CREATE A SOLUTION.
After your community members tell you what they need, it’s your golden opportunity to get to work and create it. This could be a physical or digital product (a book, an audio, a video, a written training program or software) or a service (dog grooming, babysitting, coaching, consulting, speaking or training).
7. PLAN THE LAUNCH.
Think about how Apple rolls out its products. The company doesn’t just throw a product on the shelf or its website. No, the company makes it into an event. Apple builds anticipation months in advance, so much so that people are willing to camp out in front of stores for weeks to be the first in line.
8. FIND A MENTOR.
The best way to cut your learning curve and achieve a specific result is to find people who’ve already achieved what you want and then model their behavior. Rather than try to figure it all out on your own, find someone who has already achieved what you want, determine how this person did it, model this behavior and make it your own.
While you might seek a relationship with a face-to-face human mentor, you could also hire a coach, read a book or articles by an expert or do web research. After some consideration, you may decide to make this your first step.
Schedule time to begin implementing these steps, one at a time, and within months you can be enjoying the benefits, the perks and the financial security and freedom that comes from having multiple streams of income.
NOT EVERYONE NEEDS LIFE INSURANCE. FIND OUT WHETHER YOU DO OR NOT.
Life insurance has long been a part of estate planning in the United States. Although life insurance does not need to be a part of every person’s estate plan, it can be useful, especially for parents of young children and those who support a spouse or a disabled adult or child.
In addition to helping to support dependents, life insurance can help provide immediate cash at death. Insurance proceeds are a handy source of cash to pay the deceased’s debts, funeral expenses, and income or estate taxes.
People who have no minor children or financially strapped dependents may not need life insurance. Below you’ll find questions to ask yourself to help evaluate your life insurance needs. If you decide to purchase insurance, you should know exactly why you are buying it and choose the best type of policy for your needs. And, of course, you should buy no more than you need.
Long-Term Needs
To determine whether it makes sense for you to buy insurance to provide financial help for family members over the long term, consider these questions:
How many people depend on your earning capacity? If the answer is “none,” you probably don’t need life insurance.
How much money would your dependents need for living expenses? One way to determine this amount is to look at the earned income that you bring to your dependents on a regular basis. From that amount, subtract the worth of property they would inherit from you and any amounts that will be available from public sources or private insurance plans that already provide coverage. Social Security survivors and dependents benefits will probably be available, and you may also be covered by union or management pensions, or a group life insurance plan. Also subtract any other likely sources of income, such as the help reasonably affluent grandparents would provide for your children in case of disaster.
How long would it take for your dependents to be come self-sufficient? If your children are almost out of college, they may not need much additional income. If they’re younger, remember that dependent spouses caring for young children can usually return to work at some point, and some kids may get at least partial scholarships.
Once you perform this exercise, you may find that your dependents may need little additional income from life insurance. But if you have young children, you may find that it makes sense to buy an affordable amount of life insurance.
Short-Term Needs
Now, assess whether you need life insurance for short-term needs:
What assets will be available to take care of your dependents’ immediate financial needs? You might leave some money in joint or pay-on-death bank accounts.
After you die, how long will it be before your property is turned over to your inheritors? If most of your property will avoid probate, there’s usually little need for insurance for short-term expenses, unless you have no bank accounts, securities, or other cash assets. By contrast, if the bulk of your property is transferred by will and therefore will be tied up in probate for months, your family and other inheritors may need the ready cash insurance can provide. While a probate court will usually promptly authorize a family allowance or otherwise allow a spouse or other inheritor access to estate funds, it can still be nice to have insurance proceeds available.
Will your estate owe substantial debts and taxes after your death? Lawyers and financial advisors call cash and assets that can quickly be converted to cash “liquid.” If your estate has almost all “non-liquid” assets (real estate, collectibles, a share in a small business, jewelry), there may be a significant financial loss if these assets must be sold quickly to raise cash to pay bills, as opposed to what they could be sold for later if there had been enough liquid money from insurance or other sources to meet all pressing bills. Obviously, if your estate has significant funds in bank accounts or marketable securities, you won’t need insurance for this purpose. Fortunately, federal estate taxes aren’t due until nine months after death, so cash to pay them doesn’t have to be raised immediately.
Avoid Probate and Estate Taxes on Life Insurance
Avoiding probate. The proceeds of a life insurance policy are not subject to probate unless you name your estate as the beneficiary of the policy. If anyone else, including a trust, is the beneficiary of the policy, the proceeds are not included in the probate estate and can be quickly transferred to survivors with little red tape, cost, or delay. Except when your estate will have no ready cash to pay anticipated debts and taxes, there is no sound reason for naming your estate, rather than a person, as the beneficiary of your life insurance policy.
Avoiding estate taxes. If you own your insurance policy at the time you die, the proceeds are included in your taxable estate. If your estate is large enough to face estate tax liability (at least over $2 million), your life insurance proceeds will be subject to estate tax. On the other hand, if you don’t legally own your life insurance policy, the proceeds are excluded from your taxable estate. This can significantly reduce your death tax liability.
If you’ve determined that life insurance is right for you, contact me to learn about different types of insurance policies. Or, if you already know the type of policy you need, then let’s talk.
Business Needs
If you are the sole owner of a business, how much cash will it need when you die? Do you want and expect that some of your inheritors will continue the business? If so, do you think there will be enough cash flow for them to successfully maintain the business? You may need insurance proceeds to cover any cash flow shortage of the business. Will there be liquid funds to pay estate taxes?
Example
Alicia owns several valuable pieces of real estate and a profitable antique store, but she has very little cash and no life insurance. When she dies, she owes debts of $90,000 (aside from mortgages) and estate taxes of $120,000.
To raise this money, her beneficiaries (technically, her executor) must sell some of her real estate or her interest in the store. Unfortunately, the country is suffering a recession, and the market value of both antiques and real estate is down. To make matters worse, canny real estate people spread the word that this is a “distress sale” to raise money for estate obligations. As a result, the price the beneficiaries receive when they sell one of the pieces of real estate is far below what they would have received had they been able to choose when to sell. Had Alicia purchased an insurance policy with a payoff at death of $210,000 or more, they wouldn’t have been forced to sell.
If your inheritors won’t continue the business, the questions are different: How much is your death likely to affect the value of the business? Will there be enough cash to keep the business alive until it is sold?
If you are one of several co-owners, life insurance proceeds can be used to buy out co-owners’ interests. For more information on using life insurance to fund buyouts, contact me.
Click the button below to get a free quote, or give me a call at 618-233-0034.
