It’s Your Business

• Author: Terry Greenhut, Business Editor
• Subject Matter: Management
• Issue: Financial planning

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Many “hands-on” employees and small-business owners are way more into the production, sales and distribution of their products or services than they are into the financial end of the business. They leave the tasks of managing money and paying bills to others; hopefully those who are honest and won’t get them in trouble.

I know; I’m one of those people who is bored to death by numbers. I’ve often wished I weren’t that way. If I had learned how to master numbers I might have made a lot more money without physically working as hard, but I opted for getting my hands dirty and liked the action of doing business, solving problems and making things happen. The trouble with that is, you can’t totally leave your finances in the hands of someone else because one day you might wake up and realize that you don’t have any finances left. I was very fortunate to have hired honest people who could see the long-term benefits of doing the right thing.

No matter how successful you’ve been in business, the day comes when it’s time to retire, and you need to be ready for it. While you’re still working, if you lose some money or want to buy something, you can always earn more. When you retire you don’t have the luxury of earning more whenever you want to. Investments that you’ve made over the years will need to start paying off to provide the money you need to live on.

• When you retire you don’t have the luxury of earning more whenever you want to.

If you’ve let the wrong people handle your money and if you haven’t been watching and planning for that eventuality you could be in for a major letdown. The lifestyle that you’ve come to enjoy may not be affordable in your declining years.

The Federal Reserve claims that as high as 31% of Americans have no money at all to retire on other than their Social Security, if they’re eligible to collect it. The amount retirees get from Social Security is dwindling because of the income tax charged on its benefits and the Medicare payments withheld. Middle-class America needs to understand that the government does not work for them. It uses them to fund what it does for the rich and the poor. So no one is going to come along and provide anything for the working man and woman because doing so doesn’t get them votes. They will continue to dig deeper into our pockets to fund activities that provide no benefit to us. If we don’t provide for ourselves, we’re done.

• Middle-class America needs to understand that the government does not work for them.

Those who are old enough to remember might recall that the Franklin D. Roosevelt administration began Social Security as a forced savings plan so that when the average American was ready to retire he or she would enjoy a livable income for the remainder of their lives. President Roosevelt claimed at the time that the money in the account would be used only to pay benefits to those who had contributed and that the benefits would never be taxed because we, the American people, had invested our own money into it. Now 85% of the benefits are taxed, and if the giveaway artists get their way the whole amount will be because the money is used to fund so many other programs for which it was never intended. To make matters worse, when figuring out the cost of living and deciding on how much it’s gone up to see whether recipients should be granted an increase in benefits, two of the highest-cost and most-increased numbers are not even factored in; they are the cost of food and fuel. How in the world can you figure the cost of living without including two of the most-basic needs in life?

• When choosing a financial adviser do a background check.

So what it all boils down to is that nobody is looking out for you, so you’re going to have to look out for yourself. Although there is no way I would ever try to influence my readers as to which investments to make – because I am not a qualified financial planner – I can only tell you what I’ve done successfully over the years. Then you can at least see what one person has succeeded in doing to ensure his family’s future after retirement.

First I must mention that I am basically conservative with my investments. I don’t look to make a killing on anything, just a steady income stream. A little from this and a little from that adds up over the years. If you’re older and have not invested for your eventual retirement you may need to take bigger risks for the chance of higher returns, but if you’re young there’s no hurry. You can make very sound investments that will grow nicely over the long term. Kind of strange, you might think, because when you’re older you can least afford to lose, but taking the chance is the price you pay for not starting much earlier.

Warning: When choosing a financial adviser do a background check. Find out everything you can about this person or firm. Keep in mind that many financial advisers started in other positions and now do this to try to make money while waiting for their next big break to come along. Find out which investments they have. For that matter find out how much money they’ve amassed as a result of their investments. A broke financial planner is just not your guy, so find out.

I’ve invested in a lot of “dirt” over the years, dirt meaning real estate. The reason being, there is only so much of it on the planet so it has to be bought and resold over and over again. If you buy the right pieces you can often use them to make money while you own them, then sell them for a profit. My shop was a great example. I bought a building five times the size of what I needed, then proceeded to rent most of it out. For 25 years I never paid a dime for rent, insurance or taxes, all the while collecting rents and watching the building grow in value. So not only did the business operate rent free but also the building made money at the same time. That’s a great double header.

I was also able to flip a few houses along the way – not that I bought them to flip. I lived in them, so again I derived the benefit of living in them for very little cost while watching their value increase.

• Investing in yourself and your own ability to make money is the most-controllable situation.

I had a lot of good fortune making conservative investments in things like insurance certificates from top-rated insurance companies. They are like buying zero-coupon bonds. You buy the certificate for a fixed amount and they guarantee an interest rate for some period of years. When the time is up you can roll the money over to another of their products or cash out and go invest it somewhere else if another company is offering a higher rate of return. Although there is no true guarantee that your money will be safe, investing with insurance companies that have been in business for well over 100 years and have a great track record does go a long way toward making you feel safe. In addition, when you buy these certificates they are in your name, not the financial adviser’s, so you don’t have to worry about being ripped off. Your connection is directly with the insurance company.

Whole-life insurance policies can also be a good investment. They grow in cash value over time so you can borrow money from them when you need it or use the dividends to pay premiums so that after a while you’re getting the insurance for nothing. The death benefit also increases over time if the company’s investments yield a decent return.

Investing in yourself and your own ability to make money is the most-controllable situation. If you’ve made good money in your own business, for example, you must know how to run it successfully. Investing some time and money in another similar and/or existing business that you can apply your expertise to could bring a great return on investment. Just don’t ever think you can buy in and just walk away from it. You have to stay on top of everything, just as you do in your current business, to make and keep it successful. The idea is that most of us can walk into a business and pretty quickly see what’s wrong with it and what would make it better, just as someone could walk into one of ours and do the same. It’s the old “can’t see the forest for the trees syndrome,” being too close and too involved to see answers or having spent too much time and money working on the same day-to-day problems. Looking at a new venture allows for a clean slate of ideas and a whole different feeling about the amount you’re willing to invest to make it work.

Trust in yourself. It makes a lot of sense to listen to advisers. It just doesn’t make a whole lot of sense to blindly follow their recommendations. You have to understand that many have hidden agendas. Often they are trying to sell you a certain financial product or some type of insurance. Not that their products aren’t good; they might be. It’s that you need to understand exactly what you’re buying so you can figure out whether it’s good for you on the basis of things like your tax situation, length of investment time, rate of return and amount of risk.

Whatever you decide to do about your future finances, make sure you do something. Anything with relative safety is far better than doing nothing at all.