For real financial security, DON’T do what everyone else does

If you had to characterize the perfect investment, how would you describe its characteristics? Most likely, he is describing something that does not exist: a financial unicorn that, if it really existed, would wipe out all other financial products. But while it doesn’t exist as a single product, there are ways to design an ideal portfolio of products that encapsulates the features you want; you just have to know what you’re looking for to do it.

Business coach Dan Sullivan has a saying: “Our eyes only see and our ears only hear what our brain is looking for.” In other words, to find what you are looking for, it is essential to know what you are looking for.

Simple concept, right? But I see people doing mitakes with your money daily in my practice by overlooking options that are not the status quo. People by default do things that don’t always align with what they want to achieve. Here are some examples I’ve seen:

  • 45-year-old business owner who stores cash in a bank account and earns nothing while borrowing money from a bank and paying interest to finance equipment purchases.
  • A 35-year-old man contributing to a retirement account at work while trying to figure out how to pay for a son’s college tuition.
  • A 60-year-old man with stock market retirement accounts while needing a fixed income for his retirement plans.
  • A 55-year-old man dedicating all available resources to paying off a mortgage while wanting to retire as soon as possible.
  • A 40-year-old man motivated to save and defer taxes in a 401(k) as he wants to retire at age 50.

In every scenario, we see people looking for financial security and settling for a typically accepted path out of a desire to do “something”, but more often than not it is not what they are looking for. This disconnect is the result of the continuous drumbeat of the status quo:

  1. Defer taxes in a 401(k).
  2. Keep money in the bank.
  3. Pay off your mortgage.

This advice is repeated over and over again, leading people to follow this ideology aimlessly simply because of the absence of other obvious options.

However, these three money management concepts can cause more problems and difficulties for people than anything else other than debt problems. Its simplicity makes it attractive, and on the surface it may make reasonable sense, but the results are disappointing and mostly frustrating. Why? Because:

  • If you are storing money in the bank, the bank is making money on your money without paying you almost anything in return.
  • If you’re borrowing money from the bank, you’re giving up control of a portion of your cash flow to pay off the loan while paying the bank’s interest.
  • And when you deposit funds into a tax-deferred account, you’re letting the government dictate when you can access your money, and they’ll have to tell you later what tax rate you’ll pay them, since they don’t know what taxes will be charged. be in the future.
  • When it comes to mortgage payment acceleration, it’s a race to zero with no wealth creation and no access to cash.
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Is this how you would describe your perfect investment? Of course not, and while there is no such thing as a perfect investment, you do have a choice: you can settle for the status quo, or you can think outside the box and do something different.

As I mentioned, what most savers are looking for is financial security. I define financial security as having access to cash when you need it for the rest of your life. This is easier said than done, of course, but it’s where we need to start.

There are four broad categories to consider when looking for products to accomplish this goal. Long-term growth, steady income, access to cash, and tax mitigation.

long-term growth

Aside from entrepreneurship and real estate, the public equity markets have the most long-term growth potential. But there are two other aspects of growth that savers often overlook: growth through income and the idea of ​​uninterrupted growth.

Growth through income focuses on an asset that generates income to reinvest, and is best achieved through private markets, such as real estate, private equity, and private debt. There is simply too much volatility in the public markets to effectively pursue a growth-through-income strategy. It can be done, but not as effectively.

Uninterrupted growth has more to do with how the money flows. Let me explain. When you spend money, that money is gone and no longer works for you. However, using a private banking strategy that takes advantage of the unique features of a whole life insurance policy, you can actually accumulate money in the contract while you borrow money to make your purchases. This leverage strategy keeps your money growing without interruption while you access the money through contract-backed loans. In other words, you are accumulating wealth with money that you would otherwise spend. This is one of the least used strategies because most people (including insurance agents who sell insurance) don’t understand how it works.

Another thing about insurance design…money grows and is available tax-free and without age restrictions. This is a big problem, as you’ll see in a moment.

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Stacking these three growth strategies together expands your diversification, reduces risk, reduces volatility, and can increase your wealth more efficiently and with more control.

Consistent income

Consistent income is at the top of the list of things necessary for financial security and is the main reason traditional public stock market investments in or out of traditional retirement accounts are less likely to be used for this purpose.

Without consistent income flowing into your checking account, you can’t manage your cash flow effectively, and if the source of that income is at risk of losing value, you add another layer of insecurity about the longevity of your income. This is a huge eye-opener for people, considering that the public stock market is the default status quo in retirement planning and is the least manageable of all the ideas being discussed.

You cannot control the markets and therefore cannot predict income, account value or longevity. It’s all hypothetical to assume what the stock markets will do, but supporting your cash flow needs for 30 years in retirement isn’t hypothetical…it’s real and there’s little room for error.

Annuities and private market investments are the most suitable for earning income and should be the primary source to meet the goal of consistent income. You just need to know how to solve this effectively.

access to cash

To have access to cash it also ranks high on the list for financial security and is another reason why traditional public stock market investing in or out of traditional retirement accounts is not the best option for holding cash. Age restrictions, market volatility, and tax obligations are all downsides to these products, making them problematic for storing cash.

Bank accounts are another default option for storing cash, but these accounts earn next to nothing and are taxable. Those two reasons alone are the motivation to find an alternative.

Once again, public markets are best suited for long-term growth, and banks are best used for moving money to pay bills and conduct business. They are not the best suited to holding cash.

A purpose-built whole life insurance contract, as mentioned above, is much better suited to storing cash with tax-free growth, tax-free access, steady growth, and no government age restrictions.

tax mitigation

Everyone wants tax cuts, but it’s heard most of the time and seldom seen in real life. The reason is simple: these strategies fall outside the status quo. People mistakenly think of tax deferral as a method of tax mitigation, but it’s actually the number one source of tax problems in retirement.

It’s a paradox that people who defer taxes with 401(k), IRAs and similar retirement accounts think they’re saving on taxes, because they’re actually causing themselves a bigger tax problem. The real tax savings is not tax deferral. The tax deferral simply makes the can go by the wayside.

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If you’re already in a situation where you have a lot of money in tax-deferred accounts and you’re looking for strategies to turn taxable assets tax-free, you’ll want to work with a team of experts who can guide you. through what is being discussed in this article.

The process for this is situational and has no magic formula for the masses, but I want to say that this is not simply advice for a Roth conversion. A Roth conversion can certainly be part of a tax mitigation strategy to prevent the problem from spreading in the future, but we must first try to minimize the taxes of the conversion.

Conclusion to design your ideal investment portfolio

The status quo will make you believe that there is nothing more to learn and that trusting the banks and the government is in your best interest. As ridiculous as it sounds, deferring taxes in a 401(k), putting money in the bank, and speeding up your mortgage payment is exactly what defines the status quo.

The biggest challenge is keeping an open mind and considering the fact that there is a better way. There is a saying that your brain is like a parachute; it only works when it is open.

If you want to know if what the ultra-rich are doing can work for you, take the Family Office Questionnaire at to see if you qualify.

Securities offered through Kalos Capital Inc., a member FINRA/SIPC/MSRB and investment advisory services offered through Kalos Management Inc., an SEC registered investment adviser, both located at 11525 Park Wood Circle, Alpharetta, GA 30005. Kalos Capital Inc. and Kalos Management Inc. do not provide tax or legal advice. Skrobonja Financial Group LLC and Skrobonja Insurance Services LLC are not affiliates or subsidiaries of Kalos Capital Inc. or Kalos Management Inc.

Founder and Chairman, Skrobonja Financial Group LLC

Brian Skrobonja is an author, blogger, podcaster, and speaker. He is the founder of the St. Louis-based wealth management firm Mo. Skrobonja Financial Group LLC. His goal is to help his audience discover the root of their beliefs about money and challenge them to think differently. Brian is the author of three books, and his common sense podcast was named one of the Top 10 by Forbes. In 2017, 2019, 2020, 2021 and 2022 Brian received the Best Wealth Manager award, in 2021 she received Best in business and Future 50 in 2018 from St. Louis Small Business.