Tuesday, July 31, 2012

Paying Cash For Cars

This post has been moved to http://sizusfinlit.blogspot.com/2014/12/paying-cash-for-cars.html.

Thursday, July 26, 2012

Spring and Fall Cleaning

Read on to see how I saved $845 in auto and home insurance costs!

I was recently talking to one of my friends about finances. He had mentioned that he was cleaning through his whole house and decided to take a look at some of his finances, following the same cleaning mentality.

I thought what an excellent comparison! This goes well with my belief that one should do spring and fall cleaning in their house. Now, I like the idea of spring and fall cleaning of your finances. Earlier this year, my spring cleaning literally found thousands of dollars by going through some of my finances. You can check that out in my history. This was inspired by Suze Orman.

I don't like to spend too much time fall cleaning, so I kind of build up a todo list and then crank everything out all at once.

AUTO INSURANCE

So I finally got my act together and called for the Auto Insurance quote. First of all, I had Progressive which I found to be really good in comparison when I first got them. One day, I received a letter in the mail to get a Progressive quote, so I called and received a quote about $100 less than I was paying. When I told them I was already a customer, they didn't give me the discount!

I believe that auto insurance companies classify people into several categories and try to give great rates in one of these categories. This way, if someone does some research and is offered a low rate, he or she will bring along friends, even if they are in another category with okay rates. In addition, auto insurance companies probably snag your business and then slowly increase the rate over the years without you knowing. This is why it is good to keep your eyes open and every few years checkup on things. This is true with your savings, checking and other accounts.

I was paying $324 every six months with Progressive and called Primerica Secure (see below). They compare several companies so I don't have to. I ended up getting a quote for $369 for the year! This saved $279.

HOME INSURANCE

I stayed on the phone and checked my home policies, reducing one policy from $558 to $239. This saved $319. I was underinsured and ended up getting more coverage for less! Whenever you deal with insurance, you should always try to get higher coverage for lower premiums.

My other policy was reduced from $613 to $373. This saved $240. Both policies were switched from Allstate to Halmark.

CHASE

So earlier in the morning, I called Chase which charged a $7.11 fee even though I paid the balance off in full. Notice that this is $10.94 pre-tax dollars if you are in the 35% tax bracket. It took less than five minutes to clear this up and get the fee removed. Evil credit cards, charging fees and not reversing them without your phone call. Although it is some stress, I saved post-tax dollars at a rate of $90 per hour. This is like saving pre-tax dollars at a rate of 138.46 per hour.

Saving post-tax dollars is a lot like spending pre-tax dollars, except the opposite. For instance, spending $90 pre-tax will save you $48.46 pre-tax dollars ($138.46-$90) which is $31.50 post-tax dollars, if you are in the 35% tax bracket. When you spend pre-tax dollars instead of post-tax dollars, the amount you save is based on the following formula.

AmountSaved = AmountSpent * TaxRate / 100

One should always try to spend pre-tax dollars or save post-tax dollars, but most people just spend post-tax dollars.

I recently spoke to an international business man who literally destroyed me in a financial debate. I still strongly believe in what I was arguing and absolutely believe that most Americans would benefit from listening to some of my advice regarding finances. However, I must admit some people are playing a whole different ball game and I should be learning from them. I learned one very important thing that day. I can only teach people to get to a place that I have already been.

If you are planning to call for quotes, please don't think ten minutes can save you ten percent or more on car insurance. This morning's fall cleaning took me a good two hours. However, as I am about to show you, going through the headache of paperwork can not only enlighten you to where you are headed, but spending a few hours can pay off dearly.

By the way, in general shopping around for mortgages and insurance along with other items related to buying an automobile or home, generally will save you thousands of dollars. Don't just take the referral of the person helping you buy. The extra paperwork is well worth your time. Also, I strongly believe that people should pay cash for their cars, but thats a whole other blog.

Here, I am advocating to clean up finances, when I hadn't done my own fall cleaning. Shame on me. In the end, I saved 845.11 for two hours of work, post-tax. Since I am in the 5% tax bracket. So really, using the formula above, its like I just earned $444.79/hour! By the way, this ignores state taxation and is really low because I am excellent at utilizing tax strategies. This year, it took several months to do my own taxes, but I learned quite a bit and the result was a huge stack of paper.

This two hours includes creating an new online accounts, performing the e-signing of documents and calling to cancel old policies. It also includes writing this blog. What do you have in your fall cleaning?

Support My Mission

1. You can support my mission by visiting http://www.izuservices.com and donating. A dollar lets me know you support my mission or like my posts. Thank you for those who have already donated.

2. Donate to SAGE via http://sagescholars.berkeley.edu/. The UC Berkeley SAGE (Student Achievement Guided by Experience) is a self-funded experiential leadership program that provides education, professional development, mentoring and internships to UC Berkeley students who come from poverty and low income backgrounds. I serve on the Leadership Council for SAGE and want to help raise money for their cause.

3. Call toll-free (877) 855-8111 or log on to www.PrimericaSecure.com to save yourself some money on either your home or auto insurance policies. Be sure to use my last name (IZU) and solution number (2MTFT). PrimericaSecure automatically compares rates from multiple companies such as Progressive, Travelers, Safeco, Hallmark, etc.

Tuesday, July 24, 2012

Kids, Your Legacy, Your Financial Future

So, I love kids. I have always loved kids. I love the fact that they are innocent and do not judge. When they do judge, you can't blame them. Sometimes its hard to let go of child like qualities that we love in ourselves.

Ralph Waldo Emerson said "To laugh often and much; to win the respect of intelligent people and the affection of children; to earn the appreciation of honest critics and endure the betrayal of false friends; to appreciate beauty; to find the best in others; to leave the world a bit better, whether by a healthy child, a garden patch or a redeemed social condition; to know even one life has breathed easier because you have lived. This is to have succeeded."

This quote represents the love shared when one touches a child's life and the legacy you can leave through your children.

Malcolm Gladwell wrote a book called "Outliers: The Story of Success" which discusses the 10,000 hour rule. This rule basically states that in order to be successful in any field, one must spend 10,000 hours toward that success. By the way, Larry Bird used to talk about shooting 500 shots everyday.

This is why reading to your kids each and every night is so important, especially when they are young. If you are like me, 8:00pm hits and you silently whisper to yourself, "Ahhh, my favorite time of the day." I know it sounds mean, but its so true. Raising kids is exhausting. Even so, that little extra effort to read a book to them makes all the difference in the world. People think that the teachers should teach their kids, but the truth is, the battle was long won before they even hit Kindergarten.

This works really well. If you read every night with your kids, it has many benefits, including strengthening your bond with them and helping them sleep better. Eventually you will introduce them to chapter books. If you work it right, by the time the kids can tell time on the clock, you can give them this rule. You can stay up an extra half hour if you get ready for bed quickly and are reading quietly in bed. In addition, after the half hour is up, you have to get to bed by yourself, without us reminding you. This teaches them responsibility. If they are tired, let them go to sleep. If they are not, they can read. Win win. Gives you your peaceful night, etc, etc. Even though you want them to read, don't take away their consequences. My book review for the day, is a great parenting book.

My mother received her Masters in Child Psychology from UCLA and truly believed in the academic capability of young children. I keep reminding her that she needs to write a book one day so others can learn how she did it.

Here are some things I remember as a child:

1. Being forced to sit at the kitchen table for hours until the work was done. There was not a break for dinner, no we finished what needed to get done. This taught us that as long as we worked hard enough and were determined enough, we could handle anything put in front of us.

2. Having a savings account with about one thousand dollars in it, that came with a little accounting book that we kept. We could run in, look at the book and watch the interest added. Imagine growing up with a bank account for 18 years, having money in the account and never touching it. Hmm. Maybe that would help you not touch the money in your account as an adult.

The thing is, one of your best investments is your children.

I once watched a documentary of Mike Tyson. Did you know that he wanted to fight because he was a fat kid that got beat down worse than any kid you've probably seen get beaten. Anyways, a man took him in, when his mother died at age 16 and started to train him, letting Mike Tyson live with him. Throughout training, he would tell Mike Tyson, "You are a champion, you are a champion." He would continue to just tell him positive things, building up his self esteem. You know what happened several years later. Mike Tyson got a record knockout in the Olympics of 6 seconds.

Of course the story continues and Tyson squandered his 300 million fortune, and should have hired me to help him with his finances, but thats a whole other blog, titled "learning to live within your means."

Recently, I heard some great advice to constantly tell your kids:

1. No matter what you do God will always love you.

2. No matter what you do, your mother and I will always love, and nothing is going to change that.

3. I don't know which path you are going to choose in life, but no matter which path you choose, I know you will be successful.

4. Throughout life, you are going to have struggles. These struggles will help you grow. During each struggle, I want you to find something positive in it.

If you are struggling financially, look at your interaction with your children. Are you raising them to struggle in life or giving them the confidence they need to succeed. How do you talk to them? Do they know you love them? They can do it and you need to tell them. Good luck.

Support My Mission

1. You can support my mission by visiting http://www.izuservices.com and donating. A dollar lets me know you support my mission or like my posts. Thank you for those who have already donated.

2. Donate to SAGE via http://sagescholars.berkeley.edu/. The UC Berkeley SAGE (Student Achievement Guided by Experience) is a self-funded experiential leadership program that provides education, professional development, mentoring and internships to UC Berkeley students who come from poverty and low income backgrounds. I serve on the Leadership Council for SAGE and want to help raise money for their cause.

3. Call toll-free (877) 855-8111 or log on to www.PrimericaSecure.com to save yourself some money on either your home or auto insurance policies. Be sure to use my last name (IZU) and solution number (2MTFT). PrimericaSecure automatically compares rates from multiple companies such as Progressive, Travelers, etc.

Saturday, July 14, 2012

Cash Value Life Insurance

So one of the reasons I decided that financial education was so important is because I see a definite need across America.

About ten years ago, I was a student. I was one of the few students who did not have a computer or laptop to work with while going through school. One day, I saw some people selling laptops on the street, for a discounted price. I had both my oldest son and my oldest daughter with me at the time, so I was in a little bit of a rush. However, I decided to get $300 from the bank and purchase a laptop. I got home only to find out that the laptop I purchased was really a box full of newspaper! So I had been had. Most people would be upset and for a while I was disappointed. However, in the end I looked it as a learning experience to help me make safer decisions in the future. Shaping a winner's mindset versus a loser's mindset is actually a part of having a strong financial system, but that is a whole other blog in itself.

A few years ago, people were signing up for 0% down home mortgages. They were told that they would pay a certain amount for a few years and then their payments would spike up in a few years. For some reason people are often unrealistic about their finances. They think that in a few years they will be making more, so they will be able to pay more. Or they think this deal or that deal will pan out, so they will get a certain amount of money. That may be true if you "pay yourself first", but most people just spend more when they get a pay raise. When making financial decisions, one should expect the same income in the future as they have today, in some cases planning to make less, or prepare for the possibility of making less. This is why one should put 20% down. This is a convincing argument that one can actually make payments on the house. In addition, this allows for some options during hard times in the future. People who put a little bit of thought into planning tend to be lucky. The reason is that they plan as if the value of the house will stay the same and that their payments will stay the same. Then, if the value increases or their payments can increase, they receive the icing on the cake, feeling lucky. During the subprime mortgage crisis, many people had been had. Hopefully, those people are looking at this as a reason to get educated and a way to turn this previous failure into a driving force for a future success.

All right. Starting with those stories, lets look at something out there today. I recently read a book over 100 pages, which was an awesome book and had some great information. There is reason I am not releasing the name of this book, because good information in the wrong hands is dangerous. This book talked about accumulating cash for retirement, protecting the principal of your investment, protecting the gains of a positive year, tax deferred growth, tax free access to cash accumulation, the age 59 1/2 rule, the age 70 rule and probate fees.

This book is a great selling tool if you sell cash value life insurance. As I was looking at various companies, I actually met two individuals who sold this combination of protection and investment. When I sat down with the first individual, it was very difficult to even find out what services this person provided. When you visit your doctor of financial planner, ask a lot of questions. Ask so many that you might be considered annoying. Why? Because no one else is going to ask or protect you and it may be the difference between life or death (financially).

The second person, laid out the policy and gave a lot of good information. This person even admitted that variable universal life policies were a bad investment.

Alright, so lets crack open, my analysis. There is probably a better analysis, but I want to just give some things to think about. Here are some details of the policy.

  • The death benefit was $400,000
  • The policy had a cash value
  • The death benefit increased over time to always be more than the cash value
  • The initial payments were about $5000/month for two years
  • After two years, the payments were basically $12000/month
  • A 7.82 interest rate was used to estimate the policy's growth
When I was first given this policy, I thought it was a solid deal. I then read the book mentioned above and thought it was really good. Then, I decided to actually look at the numbers. Here are the disadvantages I found.
  • I could probably get a million dollar policy for $60/month
  • The payments increase to 2.5 times in two years (subprime mortgage crisis)
  • Most of my payment would go toward life insurance rather than growing at an 7.82 interest rate
  • The increasing cost of insurance was hidden, covered by the 7.82 interest rate
  • Policy termination due to hardship would yield a terrible result. For example, termination after 10 years would give 115,000 and payments would have totalled 106,000
  • The IRS has limitations on cash to coverage ratios, meaning that the tax free access is severely limited
Companies love contracts because they mean cash flow. However, one should be wary of the contracts they get involved in. Brokers love cash value life insurance because it means big commisions for them. That is basically where all the money goes for overpriced life insurance. I decided to work with a company that only sells term life insurance, providing a moderate commission, but in certain cases an excellent product for the consumer.

After doing the analysis myself, I checkout out You Tube, to see what Suze Orman and Dave Ramsey had to say. Their advice was to buy term life insurance and invest the rest. They both have given out a lot of good information.

If you've bought some of this stuff, check out your own policy and do the numbers. Or shoot me an e-mail, give me the numbers and I'll give you my opinion. Some policies are definitely better than others.

The book I read actually enlightened me on something. Back in 2008, when everyone's 401(k) was dipping (I know a guy who had $300,000 drop to $175,000), mine was growing. I was not really sure why, but now I know. The theoretical concept was this. Imagine, you stick 100% of your money into a bond, which is a fairly safe investment (assume you will hold the bond for the entire term and ignore comparison to other investments if inflation and interest rise). Assume the bond yields 5% and you take 4% to purchase options. This investing strategy will yield a minimum of 1% per year but has the potential to make larger returns depending on how the options pan out. This concept was also hinted at in The Big Short, because options don't pan out often but when they do, their return is usually fairly large.

As always, I appreciate your feedback and support to start my venture as a financial planner. Based on some feedback I've already gotten, here is what you can do to support my cause:

1. If you believe in my cause, visit www.izuservices.com and donate $1. Thank you for those who have already donated. If you want to donate more than $1, see option 2 below. I ask for only $1 because I believe my mission has value but it helps to know others believe my mission has value.

2. Donate to SAGE. The UC Berkeley SAGE (Student Achievement Guided by Experience) is a self-funded experiential leadership program that provides education, professional development, mentoring and internships to UC Berkeley students who come from poverty and low income backgrounds. I serve on the Leadership Council for SAGE and want to help raise money for their cause. Visit sagescholars.berkeley.edu for more information.

3. Help me raise some startup money for my business. Spend ten minutes to check if you can save some money on your auto insurance. I believe in the concept of “expanding the pie”. Perhaps you can save some money, I can get a small referral bonus and we both win.

Call toll-free (877) 855-8111 or log on to www.PrimericaSecure.com to get started!
Call Center Hours of Operation

  • M-F 8am-Midnight ET
  • S 11am-11pm ET
  • Su 11am-10pm ET

Referral Information:
  • Representative's Last Name: Izu
  • Solution Number: 2MTFT

Additional Information for Auto Insurance Quotes
  • All drivers' Social Security Numbers
  • All Vehicle Identification Numbers (VINs)
  • Drivers Licenses for each insured driver
  • Declarations page of your existing policy

Additional Information for Homeowner's Insurance Quotes
  • The year your home was built
  • Square footage of your home
  • Type of security devices in your home
  • Declarations page of your existing policy

Thursday, July 12, 2012

Transitioning to Become a Financial Planner

I am on a mission to go out and tell people this. Please comment on what you think!

The US is in a financial crisis and I am on a mission to help educate people. On a global scale,the US is 10 trillion in debt and the GDP is also about 10 trillion. This means, the nation is more than a year’ssalary in debt. On a smaller scale, theaverage person has about 10 thousand in credit card debt and less than 10 thousand in savings. The average retireehas less than 25 thousand in savings.

I am transitioning to become a financial planner. Over the past few months I have researched several companies trying to decide where to plant my flag and have finally chosen one. I have interviewed many people as well, learning about their experiences and this has only convinced me even more that my mission has value and now is the time to take action.

I am out here asking for help with my transition. But first, let me tell you why you should help me. How would you feel if you had a financial planner who had a PhD in harmonic analysis and graduated Summa Cum Laude from UC Berkeley? Would that be good? How would you feel if you had someone on your side to give you advice before you bought a home or rental property? Would that be good? Would you like someone on your side to give you the advantages as well as the disadvantages for various life insurance policies? How would you like all this help for free? If you can help me, I will give you my e-mail address, scottizu@gmail.com. I love talking to people about finances so I will do my best to answer the question for you and possibly do some research for you as well.

Can I count on you to help me with my transition? Okay, there are many ways that you can help me and we will get to that, but first, let’s see if I can help you. Do you have fifteen minutes to chat?

Do your thing…

Okay, now I want to go over the ways you can help me.

1. If you believe in my cause, visit www.izuservices.com and donate $1. I believe my mission has value but it helps to know others believe my mission has value.

2. Give me feedback. Send me an e-mail if you like something I say. Send me an e-mail if something I said was not accurate. I am constantly trying to learn more, learn better ways to do things and learn better ways to think about things. Send me an e-mail if you have questions about your personal finances. If there was something that you didn’t like, please let me know as well, so I can change it.

3. Help me raise some startup money for my business. Spend ten minutes to check if you can save some money on your auto insurance. I believe in the concept of “expanding the pie”. Perhaps you can save some money, I can get a referral bonus and we both win.

Call toll-free (877) 855-8111 or log on to www.PrimericaSecure.com to get started!
Call Center Hours of Operation

  • M-F 8am-Midnight ET
  • S 11am-11pm ET
  • Su 11am-10pm ET

Referral Information:
  • Representative's Last Name: Izu
  • Solution Number: 2MTFT

Additional Information for Auto Insurance Quotes
  • All drivers' Social Security Numbers
  • All Vehicle Identification Numbers (VINs)
  • Drivers Licenses for each insured driver
  • Declarations page of your existing policy

Additional Information for Homeowner's Insurance Quotes
  • The year your home was built
  • Square footage of your home
  • Type of security devices in your home
  • Declarations page of your existing policy

4. Donate to SAGE. The UC Berkeley SAGE (Student Achievement Guided by Experience) is a self-funded experiential leadership program that provides education, professional development, mentoring and internships to UC Berkeley students who come from poverty and low income backgrounds. I serve on the Leadership Council for SAGE and help raise money for their cause. Visit sagescholars.berkeley.edu for more information.

5. Help me learn more. I am training with some people who I trust and have a similar mission. Let me get your phone number so we can set up an appointment to go over your financial goals at a later date. If you value what you learn maybe I can get some referrals as well.

This post is dedicated to a book which tells me my dreams are possible...

Sunday, July 1, 2012

Optimism versus Pesimism

I was out with a friend for lunch the other day. He is fairly pessimistic about investing and when I was talking about different investments, he said I sounded like a salesman. I was super proud of that remark because one thing you learn about successful people is that they are constantly looking around them at everyday life and looking for opportunities. Constantly selling themselves.

One of my favorite books covers the creator of the Rainforest Cafe, Its a Jungle in There. In this book, the author was always looking for opportunities.

My friend has a large amount of cash and I told him I didn't have any good advice for his money. He has it is a savings account. After some research I might suggest a CD, tax-free municipal bonds (or other bonds) or an annuity. These are from safest to most risky but are all fairly safe.

Years ago, I had a good friend of mine who had $20,000 in a savings account and had the same attitude toward money. I told him to just stick it in a CD, which back then was paying 5%. He thought that was too risky. I told him that CDs were not risky at all and that I was pretty sure they were even FDIC insured.

Needless to say, he didn't do that. I took my money and placed it in CDs. Years later, I used the money to place 20% down on a house. His money in the savings account was too liquid and he slowly spent a large portion of it, bringing it down to $13,000, which would have been the equivalent of $10,000 if you include inflation. So basically he not only didn't keep the money protected from himself, but also let inflation of about 2.5% per year kill his money.

Focusing on saving even when not making large returns can be better than losing money or not saving anything. And just like constantly looking for business opportunities, one should constantly look for vehicles to invest the money in. And by that I mean learn more about common vehicles rather than getting caught up in the "new" unqiue way to invest.