Wednesday, May 4, 2011

What Are You Worth? Reevaluating Your Human Life Value

How To Live a Life of Abundance
by Investing in Your Human Life Value

Today is the perfect day for me to post this blog on human life value, as it is my birthday. As we grow older we tend to appreciate our health and others more, and I want to share with you what I have learned. Fortunately, I have been blessed beyond my expectations with spiritual, physical and material gifts. In reading this I’d like you to consider your worth and the impact you have on others lives.

Throughout our lives we are told that financial success and material worth is what we should strive for. We’re told that we should invest for the long-term and put our money into the stock market. When you follow this financial advice you are devaluing your importance as a person and decreasing your worth as a human being by basing your beliefs on an economic model that is dependent on opinion.

“The real problem is we don't have any financial education in our schools.” Robert Kiyosaki

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The accumulation theory of compounding and the concept of dollar-cost-averaging are the basis for traditional financial planning and have been ingrained into our minds since we were children. These flawed methods of personal economics focus on the accumulation of wealth by consistently contributing to an account and compounding the interest earned over time. When we subject ourselves to this form of thinking we are limiting our human life value.

Over time fallacies and falsehoods develop into myths. Falsehoods developed and perpetuated by so called “financial gurus” limit our productivity and stifle our human life value. Myths destroy our confidence by instilling our minds with doubt and fear. 

You have probably heard the following fallacies and myths:
1. You’re in it for the long-haul.
2. High-Risk = High Returns.
3. The market has averaged 10-12% over time.
4. Work hard, go to college and get a good job.
5. Save money, get out of debt, invest for the long-term and diversify.
6. When you retire you’ll be in a lower tax bracket.
7. When you retire you won’t need insurance.

“Myths which are believed in tend to become true.” ~George Orwell

What makes theses myths so destructive is that they are based on a scarcity mindset and are perpetuated from generation to generation. When we embrace the scarcity mindset we are buying into the belief that our resources are limited. Scarcity fails to account for self-worth and further limits our opportunity for ownership and growth.

“Try not to become a man of success but rather to become a man of value.” ~Albert Einstein

In order to achieve our maximum potential we must breakthrough the boundaries of traditional thinking and challenge our minds to live a life of abundance. An abundant life is developed through action and practicing our talents and abilities. Action is created with thoughts produced in our minds based on our knowledge. As we increase our knowledge we increase our abilities and we are free to make our own choices.

When you live a life of abundance you follow your soul purpose and increase your human life value. You are free to focus on God’s work and your personal passions without the limits and confines of a scarcity mindset. You create value in others by sharing your knowledge and developing their abilities. You live a life of prosperity.

God has blessed us with an abundant supply of spiritual and material things. Our challenge is to utilize these blessings to honor God and fulfill our purpose as Christians.

For whosoever hath, to him shall be given, and he shall have more abundance: but whosoever hath not, from him shall be taken away even that he hath. Matthew 13:12

Further reducing our value is people, the media continues to bombard our lives with stories that limit our thinking and convince us that we live in a Darwinistic society. We are told that only the fittest will survive, and that we have to fight for ourselves by struggling to survive and taking from others. Relating this to finance, consider how this theory of economics places you in a position of dependency where we are all pursuing the same finite piece of the pie. Subconsciously we believe that for us to have more, someone else has to have less.
To understand how the scarcity mindset affects our ability we should examine these myths and their origins.

“You’re in it for the long -haul.” –  Today’s financial advisers have to convince their clients to invest with them over a long period of time or they could lose their fees and commissions. Correspondingly financial institutions would lose the ability to make money with our money. Where does this method of thought come from? We are told that over time our investments will produce a return, just as the markets have done. The problem with this myth is that it based on a pre-conceived thought of retirement and fails to address the fact that the investor has no control over the market. If the market is down during their period of period of retirement, the investor must wait for the market to return before withdrawing their funds.  The damage is when we lock our money up and have to wait until retirement to enjoy the benefits our investments, we give up the ability to live a life of abundance now.

“High Risks = High Returns.” – Certainly with all investments there may an element of risk involved. However, taking on more risk does not constitute a higher return. Somehow, this correlation between risk and return has been taught over and over until most of us believe it to be true. When meeting with a traditional financial planner, inevitably a risk tolerance questionnaire will have to be completed. This further promotes the thought that in order to get higher returns, we must take more risk. So, they are telling us that in order to win, we must be willing to lose! The financial institutions have shifted the risk from themselves to us. They have convinced us to believe that financial success is a matter of gambling. Contrarily, the most successful investors take little risk at all. When we follow this advice we limit our potential and avoid the responsibility of making investment decisions.

“The market has averaged 10-12% over time.” – This is almost laughable when you understand how financial professionals are allowed to legally hoodwink investors into believing this lie. If you look at any of the major markets, they may have averaged 6% to 9% since their inceptions, however the myth becomes more evident when you dig a little deeper. First, the small disclosure in your prospectus, “past performance may not be indicative of future results” is nothing more than an insurance clause for the financial institutions. As a matter of fact, advisers use this clause to joke about the prospect of much larger returns. Second, no mention is ever given to the difference between “average” and “actual”. Just because a stock, fund or index averaged an amount that does not mean that the return was that amount. And, that’s before about fees, taxes and inflation.
This is an example of how advisers legally get away with showing you average returns. But, you have to ask yourself, did you realize the gain? Here’s a chart of the last 11 year history of the DOW:

Work hard, go to college and get a good job. – Nowadays it’s almost a given that you have to graduate college to get a good job. But, who says you have to get a job? When you look at the time it takes to go to college and the loss of income over that time, it doesn’t always make sense. What if you have the qualities of an entrepreneur and the ability to create value in others? Should you stifle this talent and focus on your education? I’m not suggesting that anyone forgo their education, quite the contrary. I’m only suggesting that we evaluate our strengths and follow our soul purpose in life.

Save money, get out of debt, invest for the long-term and diversify. – Over the past 10 years people who have followed this advice have seen their financial worth depreciate and evaporate into the abyss of the stock market. Trillions of dollars were lost in 2000 and in 2008 to normal people who invested their life savings into the stock markets. Diversification to most people is buying a mutual fund through their 401k at work. The truth is that when you follow this advice you are increasing the risk in your financial future.

“Diversification is required when investors do not understand what they are doing.” Warren Buffett

When you retire you’ll be in a lower tax bracket. – Do you believe this? If you do, you’re saying that you are going to be poor. Inflation is eroding your money faster than you can save it and your health is declining while you are getting older. Let’s examine this further, say you are making $100,000 per year, and you have 20 years until retirement when you’ll be 67. This is the time that the Social Security says you can retire to get your full benefit (insert laughter). Over your working years you save $1,000,000 into your 401k. Now you are faced with choices on how you will spend that money. Traditional planning says you can spend 4% per year without fear of running out of money. If you are making $100,000 per year now, could you possibly live on $40,000? Oh, I forgot to mention that after inflation, it will take $ to spend like $100,000 does now. What does retirement mean to you anyway? Will you want to take those vacations you’ve been putting off? Will you want to do things for your kids and grandkids? Back to the taxes and your bracket, if you follow traditional advice, when you retire your house will be paid for and the kids will be grown. So, you want have those tax deductions, what tax deductions will you have in the future? Do you think taxes are going up or down? Here’s a chart showing the history of taxes:
History of the Marginal Tax

When you retire you won’t need insurance. – This is malpractice! Any agent or adviser that tells you this should lose their license. You may not need it, but if you have it you’ll want it, and you’ll be glad if you do.  At retirement you are more vulnerable than ever to loss. And, the fact is if you want it you may not qualify for it medically. There is no such thing as “self insurance”. In order for you to fully self insure, you will have to the value of your asset in liquid cash in the event of a loss. Will you have that? If you do and you have a loss, what will you have then?

As you can see these myths can destroy your ability to create wealth and your value as a person. Instead when you follow your soul purpose and focus on creating value in yourself and others you can have a life filled with abundance prosperity.

Your human life value as described by the late Solomon Huebner is the capitalized monetary worth of the earning capacity resulting from the economic forces that are incorporated within our being: namely, our character and health, our education, training, and experience, our personality and industry, our creative power, and our driving force to realize the economic images of the mind.

“Time And health are two precious assets that we don't recognize and appreciate until they have been depleted.” ~Denis Waitley

In closing, I’d like to encourage you take a personal inventory by asking you a few questions. Ask yourself what’s really important to you? Are you protecting the things that matter the most? When you make investments, consider if you are investing in yourself as a person. Will these investments increase your value? Are you expanding your knowledge? What are you reading and whom are you listening to?

"You are the same today as you will be in five years except for two things: the people you meet and the books you read." ~Charlie 'Tremendous' Jones 

Until next time, live a life of abundance!
Barry Page, RFC
Registered Financial Consultant
Licensed Life Insurance Agent

Barry Page, RFC is recognized as a leading expert on life insurance and private banking. He is a Registered Financial Consultant and independent life insurance agent who helps clients with tax advantaged investment alternatives. He specializes in showing families how to protect their assets, income and lives utilizing a macro-financial approach to planning.

His specialized knowledge and services help consumers find alternatives to traditional investing and the stock market that not only safely protects their savings, but also provide tax advantages. His business is based in Ocean Springs, Mississippi and he services clients throughout the Southeast. 

Legacy Insurance Agency

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