Breaking Down the HUD for Tax Purposes

This post has been moved to http://sizusfinlit.blogspot.com/2014/12/first-off-i-am-not-tax-advisor.html.

Trading Stocks Two or Three Times a Year

This post has been moved to http://sizusfinlit.blogspot.com/2014/12/trading-stocks-two-or-three-times-year.html.

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

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...

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.

Momentum

He woke up in a good mood, ready to attack the day in good spirits. As he rolled over, to sit up on the edge of his bed, he thought of how today would be a new day. Someday, he would do something special with his life.

He got ready as usual, moving quickly through his one bedroom studio. As he went out the door, he glanced at the pile of bills accumulated on the table. He was determined to pay these off, break the chains and make a good life for himself.

He walked to work, often feeling distanced from the remainder of society, most of which had cars. He never understood how they were all able to afford these beautiful cars. He dreamed of the day, he would roll up to a night club in his flashy black camaro, with purple trim and watch as the people stared in amazement, a thought he knew was one of many brainwashed into his mind.

Snapping back to reality, he looked around the neighborhoods he walked through. Cracked pavement and pot holes, a plenty, some of which were quickly fixed with a lightning pattern of black tar. Trash being blown any time the wind picked up. Usually, he didn't notice, but today he took a closer look: a straw, a ticket, some broken glass, a Capri sun... Every step he took, he saw more. The houses weren't in great shape either, paint chipping, damaged shingles. But then again, he would love to have any one of these homes.

He arrived at work and began his shift. Washing dishes wasn't great, but hopefully, this would only be temporary, until he found something better. He was glad to have this job and it had several perks like getting free food or finding extra shifts anytime he needed them. He would enter through the back door. The shift started off smoothly enough. Loud clanging and talking meant a busy restaurant, which meant prosperity for all.

Mid shift, the chef came to the back, angry, ranting and raving. The chef was bald headed, with a thinnly shaved goatee and tatoos along his right arm. The chef started to yell at him and continued to yell for a few minutes straight because he had not stacked the dishes perfectly. The dishes were expensive and if not stacked properly, they would break. The possibility of them breaking, seemed rare, and the chef's reaction made clear his worth in comparison to these dishes. The shift could not end quickly enough.

His body boiled. He could physically feel these emotions spread throughout his body. It was almost as if he was on the outside looking in, with no control. His body was tense and his pace quick. All he wanted to do was get home, the safety of home. His thoughts from the morning about his neighborhood and his debts all seemed to race through his mind, and with the anger, he began to doubt his self worth.

Entering his apartment, he quickly went to his closet, and pulled down a box. He was so angry, he just wanted this feeling to leave, but everything he tried, he could not shake it. He opened the box, and pulled out a 9mm. It felt good in his hands. The cold hard steel, made him feel powerful. A power, completely opposite from the helplessness he had felt the whole day. Perhaps, if he wanted a new life, he needed to take it. With this gun, he could forcefully take what he needed. He could force others to give him what he needed. He sat lonely, frustrated and stuck in an internal battle.

The longer he sat, the more control he seemed to gain over his body. Still angry, but not with the intensity he first felt. Gun still in hand, sitting on the edge of the bed, the voice of his third grade teacher entered his mind. His third grade teacher, was a tall man, with a gentle voice, who always seemed to have full control of any situation, very humble and preacher like. He could hear the teacher explaining why violence wasn't an answer and that each individual truly has the power to choose. At that moment, a glimpse of understanding hit him. He begin to realize that his power was not in the gun he wielded as a lone soldier, but in the pain he felt right then. The pain that would make the masses relate to his suffering, and unite a much more powerful force. It was alone that none of them would have power, but together that they would be unstoppable. As he laid down the gun, he knew in his mind that this force was beyond measure compared to the power he felt holding the gun.

Yet calmer, he laid down and thought. The outside world would continue to try to keep him enslaved, a slave without a master, but a slave still. He would not let them and would model his daily actions after the humility of his third grade teacher. The key to controlling the never ending cycle of anger stirring emotion, would be to realize that such feelings were not permanent. The key would be a somewhat meditated state outside of self would allow adverse feeling to dissapate. He would avoid the self-pity and loneliness that consumed his life.

Throughout the weeks, he began to talk to people. More and more, he found the same stories, the same feelings. He knew it all along, he was not alone. He spoke to a woman, an immigrant, who moved herself and her daughter to the states when the daughter was only 14 months old. She moved here because the medical care was better and the american dream inspired her to take action. He learned of the young daughter's dream to become a lawyer, a dream that would be crushed in a few years as she tried to find a university that would take her. A dream that would be crushed with the compromising thoughts that she must have ethical values but at the same time constantly lie to avoid uncovering the truth. But yet, beyond all the odds stacked against her, the daughter dreamed. The key to seeing a dream come true, he thought was to never lose sight of it. A dream by definition would be something improbable, but the very thoughts which created and sustained it meant that it was also possible. He took this story to heart and wanted to one day, make a change that would show the world that the american dream is truly alive, breathing and a beast at that.

He spoke to another man, who had purchased a home but did not understand the terms and conditions, so to speak. The man had given everything to purchase a home which seemed. Only, fifteen years after purchasing the home, the man was almost all but foreclosed on. The man had fell victim to the financial funnel which fueled the motives of our institutions. The man's wife had died from a rare stomach cancer about six months prior. Even when the man's wife was alive, they were in financial turmoil, and now, trying to face the reality of life and the pain of her death, the man was completely lost. Life was a day to day struggle with a guaranteed end to this sad story. The man also explained how the hospitals could not possibly have done everything they could have and his reasoning seemed accurate. The man he spoke to only gave him another reason to continue to fight.

Slowly but surely, he began to push his ideas of prosperty onto others. His thoughts of mind over body and individual strength. The mind has the power to push off the selfish cravings which affect only the present. The mind has the power to make life in general better. And not just for one but for all. He was determined to pay his debts and with each payment he made, he felt more honest and suprisingly, better about himself. He knew he was empowering himself. With each payment, he also began to feel respect, which seemed strange because this was new. It seemed he was even afraid before to feel this, to see his own personal power. He felt like any normal animal would feel when given the opportunity for something better which at the same time was strange. He felt fear.

In the meantime, he attended gatherings with others to face life head on. He learned and found programs to attach to. He also discovered, as he suspected, that he was not the first and would definitely not be the last. He took control.

Fast forward several years, to the present. Many things have changed. He has paid his debts and has helped others find financial advising. He has helped to reverse the brain washing, to show people the reality life should be. He has helped rebuild and restore many homes in the neighborhood. He looked out into the crowd. No longer entering the back door of some restaurant, he was in center view. He walked up to the podium. Thousands were gathered and the day was beautiful. The day felt like a day that would go down in history. The sight of people squished into the streets to support the cause reminded him of Martin Luther King's dream or the freedom of speech movement fought on the steps of UC Berkeley. The memories were of times when people were fighting for the well being of the nation, of other people, and not just themselves.

He began his speech, and continued to recite ideas surrounding the volunteer efforts to support the community which were powered by the individual, education for all and the rebirth of the financial system. No longer would people have to look out and see their neighborhoods rotting. They could empower their futures and break social and class barriers through education. The financial system would no longer guarantee that one's life earnings inevitably ended up where it started or make it probably that people would get trapped beyond help to the point of despiration. As he continued his speech, he paused for just a breif second to recall the moment in his one bedroom apartment, when his third grade teacher's voice had saved his life. An undeniable truth he felt, as he stood, that the pen truly is mightier than the sword.

Closing Down Shop In New Mexico

This post has been moved to http://sizusfinlit.blogspot.com/2014/11/closing-down-shop-in-new-mexico.html.