Teachers, Preachers, Engineers, Firemen, Police Officers, Pilots – ATTENTION!

YOU ARE A BUSINESS!

You have monthly expenses. You have income. You need to keep those two items in check so that when you retire, you can have the cushion and income you need to enjoy your lifestyle without working. Sounds a lot like a business right?

So if we were to look at you like a business, how’s your personal stock price doing? Are you at risk of heading to the pink sheets or are you doing so well that the illustrious Dow Jones wants to add you to the Top 30? You need to be keeping an eye on your game plan.

It’s Like Baseball

I love baseball. It’s America’s pastime. It’s what we all practice in the backyard. Bottom of the ninth, two outs, down by three, bases loaded. Pitcher winds up and delivers. Swing – CRACK! HOMERUN THE CROWD GOES CRAZY!

Sadly, when it comes to our finances, we as a society wait until it’s bottom of the ninth and we’re down by three to even play the game. Your first inning is most likely already past – I would say that’s the time between high school and your first two years out of college. Innings two, three, and four are also probably past you. We’re into crunch time now and some of you are already in the seventh inning stretch. If you’re down, you need to bring in the closer and try to win this game. Unfortunately, most of you don’t have too many opportunites for a financial home run.

A Financial Home Run?

Flip a house, sell a business, sell your house and downsize, and winning the Lottery would all be examples of a financial homerun or grand slam. If you don’t have these available to you, then you’re going to have to win the game through basic hard work and run production and GREAT DEFENSE.

DEFENSE: Pay Down Debt

If you’re borrowing for your home at 6% and your savings account, CDs, or other accounts are only yielding 1.1% (the average for a savings account right now), then you have a problem. If you can’t exceed the cost of your debt through your investments, then that money should be allocated to retiring your debt. Start with the smallest debt and “snowball” as you pay them off, rolling the payment to the new debt.

DEFENSE: Consolidate

If you have equity in your home, you can take out a home equity line of credit to consolidate higher interest rate debts like credit cards, car loans, etc. Don’t do this and then just go an bump the card balances again. This is a game that must be played with strategy.

DEFENSE: Pay Less Taxes

Do you have a side business? A hobby for profit? If so, consider forming a business to help you reduce your taxes! Vehicles, meals, computers, internet, and many other expenses may qualify to be deducted from your income. Talk to a tax advisor for clarification on your specific situation.

OFFENSE: Make More Money

Yes, I just said that. Yes, I made it seem simple. There’s a huge difference between not having time to grab an extra job and not being willing to take an extra job. Consider working part time, mowing lawns, shoveling driveways – anything to help make a dent and get back on track. Those of you in the first three innings of your game, get after it. Teachers – work all summer and pad those pockets!

OFFENSE: Get a Higher Yield

I hope you’re not settling for that 1% in the bank account and calling it a day. How can you increase it? Well, that depends on your risk tolerance, need for liquidity (the ability to convert those investments to cash), and other factors. Some of your options would be trading options, playing the market on short-term movements, bonds, municipal bonds, tax liens, tax deeds, real estate, limited partnership interests, and many other instruments that could significantly increase your yield. Tax liens, for example, are relatively safe investments with a little education and can easily yield 12% per year secured by the taxing authority of the municipality (typically the county government) and the underlying real estate. I’ve seen some successful tax lien investors yield over 30% average annual returns.

But Isn’t it RISKY?

Of course. All investments are risky. If you have a financial advisor, go back to all the documentation that you signed but probably didn’t read and you’ll see that you have total risk. Total Risk means that you are at risk of your entire portfolio evaporating. Don’t freak out – that’s the nature of ALL investments. That’s why you need to focus on Risk Adjusted Returns. If it’s inherently risky (like short term market trading), do you have the knowledge and skills to execute the plan and if so, is the return worth the additional risk?

Some Bad News…

The stock market is RISKY. Not doing anything at all is RISKY. Our currency’s value is evaporating with every bit of quantitative easing offered by the Fed. Just so you know (or JSYK for my texters), quantitative easing is a fancy term for printing money. Your money sits in your bank account and while inflation is up to 2% and you’re getting 1%, guess what? You’re LOSING 1% per year!