Faith Based Investing

BOOK REVIEW

Killing Sacred Cows?
Garrett Gunderson author of Killing Scared Cows will be on The Jay Peroni Show this week. With his upcoming appearance, I wanted to give a formal review of his latest best-selling book Killing Scared Cows.

“Killing Sacred Cows” has a catchy title and cover! Killing Sacred Cows is about money myths that perpetuate, and the reasons why they are myths. What I like most about this book is it challenges common financial advice. Many often rely on the financial media, friends, relatives, and others to get their financial information. Well how many of those people are wealthy? Think about it. If you get advice from those who have not experienced wealth, how can you truly get good advice? Many of us simply believe what we are told. Misinformation often gets spread like a disease from person to person. Should you live frugally, should you maximize your 401K? What is wealth really about? Garrett helps answer these questions.

Though this book is not a traditional how-to book, it does offer practical advice and wisdom that can help you become wealthy and successful today by embracing a revolutionary perspective of personal finance. Garrett relies on his own personal experiences and shows how pervasive and destructive money myths can hold many people hostage. He sets out to help others realize financial freedom when they understand the principles in his book.

Who is Garrett Gunderson?
Garrett Gunderson is an entrepreneur who became a multi millionaire by the age of twenty-
six. He is the owner of 5 companies, winner of the SBA Young Entrepreneur award, and one of his businesses is on both the Inc. 5000 list and the Utah 100 list of the fastest growing companies. Garrett coaches elite business owners in the financial services industry and has created programs that empower people to achieve wealth.

What is the book about?
This book is about debunking money myths. In particular, each chapter is separated by common money beliefs that many assume are true but truly wreak havoc on one’s financial life. Much of what Garrett teaches, I subscribe to fully. Such as: there is infinite amounts of wealth, net worth does not determine self worth, we are called to find our true purpose in life – that’s how we will become wealthy, the way many invest is like gambling, and we should make sure our values are incorporated into our investment decisions. Garrett’s message is in many ways similar to my message yet it has many unique characteristics. I really enjoyed reading Killing Scared Cows and learning more about money myths.

The myths covered are:
Myth 1: The Finite Pie
Scarcity thinking brings out the worst in us including fear, pride, jealousy, selfishness, and adversarial competition. Replacing scarcity with abundance helps us to increase our creativity, productivity, health, wealth, and happiness.

Myth 2: You’re in it for the Long Haul
The accumulation theory of wealth creation, which teaches us to save money and compound interest for long periods of time, prevents us from achieving our full potential. A more productive financial theory is utilization, which helps us to
maximize our value creation and therefore our wealth in the present moment.

Myth 3: It’s All About the Numbers
Prosperity has less to do with our financial numbers on paper and more to do with our happiness and fulfillment. This shift in mindset helps us to put numbers in their proper perspective.

Myth 4: Financial Security
True financial security does not come from the government, corporations, benefits, and entitlements; it comes from within us. Taking responsibility for our wealth leads us to transcend false security to find both true security and freedom.

Myth 5: Money is Power
Money has no power except the power that people give it. Money is an effect, or a byproduct; value creation is the cause.

Myth 6: High Risks = High Returns
“High risk equals high return” is a gambling, not a true investing, philosophy. The best and safest investments are those that align with our passions, knowledge, and abilities and that we can control.

Myth 7: Self-Insurance
“Self-insurance” really means no insurance. The best way to reduce your insurance expenses is to get the best insurance and as much of it as possible.

Myth 8: Avoid Debt Like the Plague
People fear debt because they don’t understand the technical definition. Understanding the technical definitions of debt and liabilities opens up a world of possibility.

Myth 9: A Penny Saved is a Penny Earned
Value is a far more important consideration than price when it comes to our purchases and investments.

One of the greatest lessons?
According to Garrett, however, money in itself has no value, it’s people who have value. Money is simply the result of “adding value” to the world. How do you “add value”, you ask? Through finding what Garrett calls your “soul purpose”.

Finding your soul purpose is discovering what brings you the most joy and creates the most value for others. It’s what enables us to develop to our full potential. Ask yourself, if you had all the money you ever needed, what would you do everyday to be productive? Also, in what areas do you have superior skill and have extreme passion?
These questions regarding “soul purpose” should really get you thinking: Are you working toward your full potential with your current career, business, or job? Do you wake up in the morning excited, energized, and passionate or do you simply go to work for a paycheck? This is part of what I call the magic formula: Purpose + Passion = Performance. Garrett does a great job asking the right questions!

Final Thoughts
This is a great read! Entertaining and informative! I highly recommend this book. It gives a fresh perspective on how wealth and money work from someone who made millions at a very young age. Be on the lookout for my interview with Garrett on The Jay Peroni Show. I’m looking forward to hearing what Garrett has to share!  Buy the book today at www.kilingsacredcows.com

What do you do when you leave work or your company stops matching?
If you’re laid off, what happens to your retirement money? Well, you have three basic choices with your 401(k). One gives you more freedom and control than the other two. You could just leave your 401(k) alone. The money will remain invested, and the financial firm handling your 401(k) will keep mailing you quarterly statements telling you how it is doing. Any future growth will be tax-deferred.

But this passive choice comes with an opportunity cost. If you just leave the 401(k) assets in the plan, you’re giving up control and flexibility. Your investment choices may be limited, the plan fees may be high, and you may not be able to quickly access your money or do what you want with it. If you have a trail of old 401(k)s left with a bunch of former employers, things can get really complicated when you retire – especially when you have to take Required Minimum Distributions (RMDs). Leaving the money in the plan may not be the wisest choice.

You could withdraw the money.
This is a terrible choice – a last resort. It comes with a severe financial penalty. You will not get all the money you have invested back – far from it. You will lose 20% of your 401(k) assets to withholding taxes, and if you are under 55, the IRS will levy an additional 10% penalty for early withdrawal of the assets. By the way, distributions from a 401(k) are considered taxable income – so expect a big tax bill in the year you cash out. The federal government does not want to see you wipe out your retirement savings. Neither does your financial advisor.

If you really need money, you could consider borrowing from your 401(k).
The problem here is that most companies want the loan balance paid off when you leave – whether you leave work by choice or not.

You could roll it over into an IRA.
This is the choice that usually makes the most sense. You can move the money into an IRA through a rollover or trustee-to-trustee transfer. Or, you could direct the money into a so-called “conduit IRA,” a traditional IRA created to hold your old 401(k) assets until you move the money into another qualified retirement plan. (You can’t contribute to a conduit IRA.)

There’s no tax penalty when you do an IRA rollover or trustee-to-trustee transfer. After you do it, you have total control of the money, continued tax-deferred growth, expanded investment choices, and possibly lower account management fees.

Rolling over the money into a Roth IRA might be a great move.
This provided you can meet two conditions. First, your adjusted gross income has to be less than $100,000 for the year in which you make the rollover. Second, you’ll have to pay taxes on the assets you convert. The upside is considerable: you get tax-free compounding, tax-free withdrawals if you are older than age 59½ and have owned your account for at least five years, and the potential to make contributions to your IRA after age 70½ without having to take RMDs. Contributions to a Roth IRA are not tax-deductible, but there are fewer restrictions on withdrawals.

In 2009, you can fund a Roth IRA with after-tax contributions to a 401(k), 403(b) or 457 retirement savings plan – you can take those contributions and convert them to a Roth IRA tax-free, provided your AGI is $100,000 or lower. There is no limit on the conversion amount. Incidentally, in 2010, anyone can convert a traditional IRA to a Roth IRA – the AGI restriction on such conversions disappears.

What if you have to shiver through a 401(k) freeze?
A “freeze” is when your employer reduces or suspends matching contributions to your retirement plan. FedEx, General Motors and Motorola have all recently chosen to do this.The answer: don’t let up on your personal contributions. If you can manage it, adjust your 401(k) contribution to a level where you effectively replace what your employer contributed. Saving for retirement should remain one of your highest priorities.

How is your money positioned? How are you invested today? Are you doing things designed to preserve and enhance your retirement money? A chat with a financial consultant you trust may give you more confidence and direction for the future.

Finally getting some Answers!

Leading executives from America’s eight largest banks testified on Capitol Hill February 11th, as Congress asked how they spent $165 billion in federal money. Legislators had four questions in mind:
1) Where did the money go?
2) Why aren’t you lending as much as we would like?
3) How challenged for capital are you?
4) Are you really going to be frugal?

Question #1
This was answered in varying degrees. Bob Kelly of The Bank of New York Mellon said the $3 billion BONY received was used to buy $1.7 billion of mortgage-backed securities and debentures and $900 million of debt securities from “other healthy financial institutions”; the remaining $400 million was used for interbank lending.

Goldman Sachs CEO Lloyd Blankfein told Congress that “Goldman Sachs has committed over $13 billion in new financing to support our clients” since getting a $10 billion TARP injection.

Citigroup CEO Vikram Pandit said the TARP money translated to $36.5 billion in “new lending initiatives and other new programs.” Other CEOs were less specific.

Question #2
This question has been in the air for weeks. Are the banks actually using TARP money to lend, or simply to stabilize themselves? All CEOs maintained they were using TARP funds responsibly, and that lending levels had increased or were increasing. While praising the idea of a “systemic risk regulator” to supervise the U.S. financial markets, JPMorgan Chase CEO Jamie Dimon detailed that bank’s 4Q activity: $50+ billion in new consumer loans, $20+ billion in new credit for small and mid-sized businesses, about $90 billion in “new and renewed” corporate loans, and “an average of $50 billion a day” in interbank lending.

Bank of America CEO Ken Lewis testified that BofA arranged $115 billion in new consumer and business loans in 4Q 2008, and renewed roughly $70 billion in credit lines in addition to buying loans in bulk. Wells Fargo & Co. CEO John Stumpf said that Wells Fargo had made $72 billion worth of loans last quarter and restored lines of credit to some Wachovia customers formerly denied credit.

Question #3
Stumpf proudly cited a profit of “almost three billion dollars” last year at Wells Fargo. The Bank of New York Mellon’s Kelly assured Congress that “we were profitable every quarter last year”. Blankfein pointed out that Goldman Sachs had turned a profit of $2.2 billion in 2008. Other testimonies were less specific.

Question #4
This was answered with acknowledgements of what Citigroup’s Pandit called a “new reality”. Pandit told Congress that his salary would be $1 per year with no bonuses “until the situation improves.” Pandit told Congress that “I get the new reality and I will make sure Citi gets it too.” The eight testifying CEOs said they earned from $600,000 to $1.5 million in 2008; none received bonuses. However, seven of the eight CEOs admitted that their firms owned or leased aircraft. In 2008, Wall Street firms still paid out more than $18 billion in bonuses, and financial firms still planned the occasional merit-based resort getaway.

Banks need to be held accountable.
Why are we in this mess? Too many banks got away from the fundamentals. For decades, they originated home loans and assumed the credit risk themselves. Suddenly, they found ways they could pass the credit risk to investors. Fast-and-loose lending was keyed to assumptions that real estate would probably always go up in value. No person would be advised to owe 25 or 30 times their net worth, but this somehow became permissible for financial institutions.

Consumers made mistakes too. In the last decade or so, American consumers were seduced away from core principles of saving and investing. As the New York Times’ David Leonhardt observed, too many of our financial decisions were made for our “present self” instead of our “future self”, and they mostly involved spending. The recession is teaching us to save. In December, Americans saved about 3.6% of their disposable income, three to four times more than the norm in recent years.

However, personal spending is still the engine of our economy. If we save too much, we’re siphoning fuel from that engine. If the personal savings rate increases, this means more money going into banks. That’s good. The question is whether we can spend and save at appropriate levels at the same time.

Can we spend and save at the same time?
Actually, we’ve done it for decades. Only recently did we get away from the fundamentals – and look how that affected our economy. Our government is working hard to shore up our financial system to attempt to get us out of this mess. We have a trillion-dollar campaign in the works to buy up toxic assets, “stress test” banks, and inject more capital into them. The banking system has got to be fixed; consumers have to be encouraged. The government is positioning its resources to boldly do both tasks. Only time will tell if it will work…

Are you planning for your future?
It may be a challenge, yet it is also necessary. A chat with a financial advisor, planner, or coach may give you some long-range perspective and some ideas for how to reach your short- and long-term goals.

2/11/09:  Jay Peroni on Mornings with Lorri & Larry on FamilyNet TV and Sirius Radio

Click here to download the MP3

Time for some fresh ideas

Difficult times call for creative measures!  As more and more people lose jobs, have reduced incomes, and feel the weight of debt, I thought it would be timely to share some of what I’ve been reading lately. These are 5 blog postings that should give you plenty of food for money making thoughts!

Blog #1: 999 Ideas that could make you a millionaire (shared by Dan Miller):

http://www.sixmonthmba.com/2009/02/999ideas.html

Blog #2: Have an idea, need funding? Check out Mark Cuban’s stimulous plan (Shared by Dan Miller):

http://blogmaverick.com/2009/02/09/the-mark-cuban-stimulus-plan-ope…

Blog # 3: Ways to make more income during a recession

http://personalbudgeting.suite101.com/article.cfm/5_ways_for_additi…

Blog # 4: 11 great ways to earn more money

http://www.freemoneyfinance.com/2008/01/11-great-ways-t.html

Blog # 5: 7 ways to make more money online

http://top7business.com/?id=3442

Have you ever played the Game of Life? This board game was originally created in 1861 by Milton Bradley. The game consists of a track, on which players travel by spinning a small wheel with spaces numbered 1 through 10, located in the middle of the board. As you make your way around the board, you choose careers, get married, have kids, buy properties, make investments, and pay taxes like the real game of life. The game in many ways sums up our lives. We scurry to and fro and make decisions, trying all the while to win the game. Yet once the game is over, what is left . . . victory?

As in the game of life and every person’s life, even the best prizes are temporary. When we die, our money and possessions go to someone else. It may be Uncle Sam (taxes), an institution (a church, charity, or ministry), or family and friends. Wherever it goes, your money and possessions are no longer useful to you.

I love John Ortberg’s analogy in his book When the Game Is Over, It All Goes Back in the Box. John writes, “We all have stuff. We see it, want it, buy it, display it, insure it, and compare it with other people’s stuff. We talk about whether or not they have too much stuff; we envy or pass judgment on other people’s collections of stuff. We collect our own little pile. We imagine that if that pile got big enough, we would feel successful or secure. That’s how you keep score in Monopoly, and that’s how our culture generally keeps score as well.”

Just like monopoly, when your life’s game is over, all of your money and possessions go back in the box. Randy Alcorn, who wrote The Treasure Principle, sums it up as well, “You can’t take it with you, but you can send it on ahead.” As an author and ministry leader, Randy has been doing all he can to shape the way Christians think about giving and investing. As the founder and director of Eternal Perspective Ministries, he talks at great lengths in his teaching about how fi nite our possessions are. Why invest so much time and money in things that will not last? Instead of merely investing our money into things with no eternal value, God desires that we invest our money in a stock that will rise in value for eternity: His kingdom.

What makes an Expert?
It was once siad, “An expert is a man who has made all the mistakes which can be made, in a narrow field.” No one enjoys making mistakes, but often when you learn from the mistakes you have made along comes wisdom. You may or may not be at that point. You may be in over your head in debt, or don’t make enough income, or have another reason as to why you cannot save or invest. But just remember, where there is a will, there is a way.

In October 2006, Larry faced a major life crisis and was close to losing his only source of income. He and his wife had managed to rack up more than $40,000 in credit card debt and were literally living paycheck to paycheck. They had a mortgage, two new cars, a new RV camper, and no savings. Larry says, “I was literally financially clueless and scared half to death of not receiving another paycheck.”

God came to the rescue, allowing Larry to receive shortterm disability and helping him keep his job. Realizing how close he was to financial ruin, Larry started visiting various financial websites and discovered Dave Ramsey’s Financial Peace University. He reflects, “I realized I had a great deal to learn and a significant amount of work to do in order to get our finances back in line. I began absorbing every piece of personal finance information I could find. I eventually stumbled upon Get Rich Slowly and The Simple Dollar, the first two blogs I had ever read.

From One Idea Comes a Future
“As I read and learned, I was taking tons of notes. I started thinking it might be a good idea to share what I was learning with others and thought the concept of a blog sounded interesting. At that time, I was also reading through Proverbs and that evening read Proverbs 13:11: ‘He who gathers money little by little, makes it grow’ (NIV). hmm . . . , I thought. Gather Little by Little–now that would make a great blog name.”

Larry worked that weekend to set up his blog and wrote his fi rst article in a series called “How to Get Your Finances Under Control, One Small Step at a Time.” The purpose of Gather Little by Little is simple. Larry wants to share what he’s learned and continues to learn about personal finance. Being a Christian, his faith has a significant influence on every decision he makes. He lets the world know his site is “personal finance with a Christian perspective.” His number one goal is helping others to avoid making the same mistakes he made and providing encouragement to those who may have already made those mistakes. To learn more about Larry, you can visit his site at www.gatherlittlebylittle.com.

Each time you take action on your plan, you are one step closer to success. However, if you keep doing the same things that got you in trouble in the first place, you will dig yourself deeper into the hole. Change begins with your mind-set, your commitment, and how much you really want to improve your financial life. The choice is up to you.