Leverage or Lifestyle

Notorious for bragging about their lifestyle are the Montana ranchers — while they use the leverage of debt as a crutch to hobble down to oblivion.

There is a better way.

Million or Penny a Day?

What would you rather have — a million dollars, today, or a penny doubled for a month?

A Penny Doubled

Your answer will be an academic letter grade of your comprehension of the magical concept of “compounding” — either a grade of A (passing) or F (failing). The good news, today, is you’ve discovered this presentation — and can save (literally) yourself millions of dollars in Interest (expense).

You can enjoy fancy trips with your Family — rather than financing those vacations for your neighborhood Banker.

I hope you said, “Give me that penny doubled for thirty-one days.” Because that answer is worth an additional amount of $9,737,418.24.

“How can that be?!” you ask.

“Compounding,” I reply.

Now, that you know the most important aspect of this financial principle, “What will you do?”

Good Debt & Bad Debt

Okay, this is a little like Good Cop — Bad Cop. Insomuch that we can only really appreciate the good after experiencing the bad. Odds are good that everyone has done “it” in our Twenty’s — enjoyed using a Credit Card until the Bill came.

Then, we stared at that Total wondering, “How the heck can all those little amounts add up to such a big one?!” In the world of Finance, that big Total is known as the Principal.

Now, the fun begins (for the Bankers) — because for every dollar of Principal, from the beginning of that original thought, “I just can’t live without…” and a swipe of the plastic, Interest is calculated. The challenge then becomes, “How fast can we pay that Debt back?”

If the swipe of that Credit Card was to purchase something which made YOU more productive, that is Good Debt. If, however, you simply caved into fleshly desires and temptations, then, you have experienced Bad Debt.

And — all Debt is worse than Income Taxes. Interest accrues from the moment of indebtedness until payment is made. Year after year Bankers are like predators circling a carcass — they will demand their Interest be paid in good years and bad. We only pay Income Taxes in the good years.

History Lessons

Those who refuse to learn from History are forced to repeat it. That, my friends, is another Universal Principle — we will keep getting opportunities to learn until we understand the lesson inherent in the experience.

For an entire generation, we have been sold a Bill of Goods known widely as Quantitative Easing. That’s a fancy term for Free Money. And, oh how the Bankers have pushed that money at People. Maybe, even you. Did you take it? Because if you did, YOU need (and want) a Plan to get rid of that Debt.

Leverage or Lifestyle

“Why?!” you plaintively ask.

“Because I have vivid memories of a 19% interest rate in 1985,” is my reply.

The interest rate on Home mortgages for us twenty-somethings was 15%.

What’s the difference between 5% and 15%?

You’ll find it hard to believe — but, here’s the reality. And, I can explain it a couple different ways. First we’ll start with the Monthly payment on a modest house of $250,000 in today’s Billings, Montana, real estate market. Then, we’ll take a look at what Rates do to Prices.

The only two resources available to human kind are Time and Money. As we consider the investment of these resources, we also need to know Rate of return — Risk, or Reward. Before this current generation of “creative economics” and “funny money,” historically, interest Rates are a measurement of Risk. Does the phrase Credit Score come to mind?

Knowing the Principal, Term Certain, and Interest Rate we are ready to examine some Examples of a typical young couple in love — with their first house.

Examples

$250,000 at 5% for 20 years — Monthly Payment is $1,649.89. (CLICK)

$250,000 at 15% for 20 years — Monthly Payment is $3,291.97. (CLICK)

But, you exclaim, “We can only afford $1,649.89 per month!”

Okay, let’s see what that does to the Price of houses on the Market.

$125,296.40 at 15% for 20 years — Monthly Payment is $1,649.89. (CLICK)

So, if you have invested blood, sweat, and tears into Home ownership, then, be happy to live in your current home for many years, be ready to have a negative equity position for many years, or have a Plan to become debt free.

This societal notion of “free money” does not work — being “debt free” is a goal worthy of your Time and Money.

Bankers

I hope you noticed the total amount of Interest paid over the life of the loan for that $250,000 home, for a period of 20 years (please, review the last page of the Amortization Schedules).

$250,000 at 5% for 20 years — Interest paid by you is $145,973.60. (CLICK)

$250,000 at 15% for 20 years — Interest paid by you is $540,172.80. (CLICK)

Yes, that’s right — and we older kids did it — pay for that beautiful Home three times: once for Principal and twice for Interest.

Now, we made this better with 15-years of payments. $379,814.60 (CLICK)

Or, much worse (by advice of Bankers) with 30-years. $887,999.60 (CLICK)

So, it is possible to help ourselves and take fancy trips with our Families, to the tune of $160,358.20*, by paying $207.00** more per month.
[*$540,072.80 – 379,814.60 and **$3,498.97 – 3,291.97]

Or, if you are bound and determined to let a Banker do your thinking, you will pay an additional $347,826.80*, by “saving” $130.86 per month.
[*$887,999.60 – 540,172.80 and **$3,291.97 – 3,161.11]

I beg of you, please, “Do your own thinking!”

Help Yourself

When interest rates are 15%, the average Citizen cannot afford $250,000 houses. The price will come down to something in the neighborhood of $85,000 to $125,000.

Because this is another Universal Principle — there is an inverse relationship between Interest Rates and the Price of what Debt purchases.

The magical thing about numbers is they are proportional — 1/3 of $250,000 is $83,333.33 and a monthly payment of $1,097.32 [$3,291.97 / 3]. (CLICK)

Wherever you find yourself on the spectrum of debt, use these examples to make decisions, today, to help yourself in Building Your Dynamic Future.

Will interest rates go all the way back up to 15%?

I don’t know, for sure — but having lived through Mortgage rates of 15% and having paid Business loan rates of 19%, I’ll offer this, “They did it before — and it is possible for them (Bankers) to do it, again.”

In the “olden days” there were two purchase options to prevent people from becoming indebted: Savings and Layaway. Yes, it is possible to stay in vogue with societal trends by saving for the purchase of a consumable — or by placing the item out of sight and out of mind, with the Merchant, while making monthly payments (of Principal only) to acquire it.

Leverage

Debt is (AKA) also known as leverage.

Leverage or Lifestyle - Pry

The reason “why” is that debt will let us “pry” our way into deals bigger than what we are capable of doing on our own — from the Cash in our own back pocket.

Again, if we are using Good Debt for a good reason — to become more productive in life and business — then, we will create new wealth.

Remember, though, a debt must be paid back with after-tax dollars. For those in a 40% Income Tax Bracket, this means they pay back debt with 60 cent dollars.

In other words to pay back $1,000 of debt, they need to earn Wages or Profit of $1,666.67 [solution: $1,000 / .60] and they will pay $666.67 in Taxes [solution: $1,666.67 x .40] to, then, have $1,000 to pay back the Banker plus the market rate of interest (Prime + Banker Profit).

Debt is (via Bankers) a cruel taskmaster — you will be a slave to a Banker.

Lifestyle

Remember my story about the Montana ranchers?

For 35+ years, I’ve teased them about their lifestyle.

“I’m sure glad you didn’t waltz in here with your crowbar,” I’ll say.

Puzzled, perplexed, and border-line offended they respond with, “What do you mean?!”

“Well,” I’ll continue, “When you encounter a big rock at the bottom of a posthole, you go to the toolshed and get the crowbar. You leverage the rock out of the hole and, then, put the crowbar back where it belongs — away in the toolshed.”

“Why, then, do you believe living in constant fear of having all your stuff repossessed is good for you?”

I have yet to receive a positive answer to that question. I’ve listened to them swear a blue streak of profanity — at me and the world. But, there have been very few Debtors change their beliefs and actions.

Sad, because I’ve watched good people lose farms, ranches, and mainstreet businesses — simply because they refused to hear and use Common Sense.

If you want a new, debt-free, lifestyle, contact me and we’ll take the steps forward to building a bright dynamic future for YOU — and your Family.

Magic of Three

“The definition of genius is taking the complex and making it simple.”
― Albert Einstein

And… the best way to do that is by using the Magic of Three.

The blue hyperlink, above, is an excellent explanation of why this is true.

Automobile Univesity

On a road trip this weekend, the concept was reinforced in my mind. For many years, I’ve been enrolled in AU (Automobile University). Through the curriculum offered by Audible, extensive course selection is available on audiobooks.

As a business coach and consultant, I’m always interested in what thought leaders have to offer. So, I dutifully paid for the course Million Dollar Consulting, by Alan Weiss.

Magic of Three

What is the magic of 3?

Take a look at the left side of the number — 3 points, which form a pattern, which our mind can process and remember, easily. Two feels lacking, and four feels tedious. Test for yourself — choose three of anything and see how comfortable the relationship is.

As a CPA (Certified Public Accountant) for 35+ years, I’ve been guilty of sharing too much, too fast, and scaring the living bejeezus out of People. I’m still in the process of breaking that bad habit. However, I know for a fact, “Less is More.”

Complex To Simple

So, as I’m cruising the deserts of Wyoming this weekend, in my Ruby Red Ford F-150, the magic of three enchants me, once again. I discovered that a 6-hour and 21-minute audiobook can be condensed into three words.

Objective
Measure
Value

Now, to be clear, the rest of the book explains the importance of those three words. One of the reasons this book can be of value to anyone is that it demonstrates the steps in motivating ourselves and others to grow.

To move from where we are to where we want to be, we must begin with the end in mind (Objective). To maintain our enthusiasm in the middle of a desert journey, we must nurture hope by managing our progress (Measure). We are able and willing to reach our destination, because of the benefit to ourselves and others (Value).

Another Worldview

These 3 words encapsulate another way to think of this concept.

Why
How
What

Why are you thinking about doing something? Does it complement your purpose in life? Will it provide happiness and joy? (People)

How will you accomplish your goal? Are you able to make the sacrifices necessary to let go of the old habits and develop new ways? (Process)

What will be the benefit to you and others in your sphere of influence? Is this legacy adequate for your mark on the world? (Results)

Just like all Universal Principles, it is impossible to describe the logic of magic with words. But, I’ll bet you have felt the power of it.

By reading this article once, you’ll always remember the concepts presented, above — thanks to the Magic of Three.

Three-E Formula

Three Good E’s

Greater than a Magic Wand to wave at the hand of fate, this is E-ven better.

This is E times 3.

Enlighten
Empower
Encourage

The prefix forming verbs of “En” and “Em” are expressions of action and doing, defined as:

To put into;
To go into;
To cover with;
To provide with;
To cause to be;
Thoroughly

Three-E Formula

Just Do It

In the simplest of terms — Just Do It.

Some may ask, “Do, what?”

Let’s examine the Three E words above — Enlighten, Empower, and Encourage.

Do ~ Light
Do ~ Power
Do ~ Courage

The smallest speck of light destroys darkness. To clearly see the next step on our journey of life, we focus to Do what is right, just and fair.

Whether we think we can or can’t we’re right. We have the freedom to choose whether or not we use willpower to Do what is right, just, and fair.

The strength to change the things we can and to forgive difficult people requires the fortitude – always – to Do what is right, just, and fair.

Energy and Efforts

My energy and efforts are focused on your success. If you are ready for a change, I can help — by gently teasing YOU into considering the power of the Three E’s.

Enlighten ~ Individually, our worldview is limited by our education, experiences, and resources. My role as A Business Coach is to broaden your horizons with Stories that shine a light on the path you have chosen — so, you can act on your new aspirations.

Empower ~ Beyond the sage talk, I will provide opportunities for you to learn by accomplishment. Teaching is an honorable profession. I will make sure the right tools are in your hands – and you will have the knowledge, understanding, and wisdom to use them properly.

Encourage ~ The 5-Step Teaching Model can be described as Explanation, Demonstration, Imitation, Correction, and Repetition. With each and every Step to Success, you will be tempted to quit. Until you run me out of your Life, I will continue to ask that you believe in YOU — the I AM.

The Magic

Some might ask, “Where’s the magic in that?”

Answer:

Their purpose is to teach people wisdom and discipline,

To help them understand the insights of the wise.

Their purpose is to teach people to live disciplined and successful lives,

To help them do what is right, just, and fair.

The catalyst for being of service requires the components of Wisdom, Discipline, and Understanding. The result is a successful life of Doing what is Right, Just, and Fair.