The Clutter of Life

We live in an abundant world where we have the potential to accumulate many things, many of which become detrimental rather than beneficial to our well being.

This plain fact, again, was pressed upon my mind this past weekend.  We were visiting some near relatives who are consummate hoarders.  From the exquisitely expensive to the cheapo junk, it was all there, stacked, packed and racked up high inhibiting mobility, visibility and productivity.

Ironically, people’s money management skills can be compared in similar fashion.  Purchasing, keeping and storing everything because you never know when something you thought worthless or meaningless might become valuable or exotic is financial hoarding.  It can be no more beneficial than any other type of hoarding can be.

Being privy to the finances of thousands of people, small businesses and families, it has become significantly obvious, that financial clutter can be more destructive than where there is no investing activity at all.

In fact, Warren Buffet is on record cautioning anyone who will listen, that “Diversification is a protection against ignorance. It makes very little sense for those who know what they are doing.”

And so it isn’t uncommon to find the financially illiterate owning what amounts to a bunch of financial clutter and suffering the consequences.  That is because a clutter of stocks, mutual funds, and other financial investments can destroy your financial mobility, vision and productivity.  Far better to focus on what you know and understand than to stack, pack, and rack an assortment of investments that you have limited or little knowledge about because then you can’t manage them yourself. And management fees are one of the most costly downsides to financial clutter, consuming up to 80% of your earnings over your life time.[i]

Mutual funds were the magic bullet that was intended to obviate the need for knowledge when it came to investing.  But according to Forbes and others, mutual funds have proven to carry such prohibitive costs that owning them can be worse than not investing at all.[ii]  And so it become incumbent on the individual, small business owner and families in general to become more knowledgeable and comfortable with where their money is put to work.

And that is why the rich and super-rich continue to purchase life insurance, even when there is no estate tax benefit from owning it.[iii]  Life insurance, specifically permanent participating whole life insurance (PPWLI), allows the owner to benefit from an average to moderate return on investment, while still allowing liquidity and the ability to recover the opportunity and interest costs associated with financing.[iv]  PPWLI also eliminates the clutter while allowing the accumulation of wealth to grow tax deferred with contractual guarantees.  This is something that no other financial tool can provide.

So if you are tired of the clutter in your financial life and are serious about making more and keeping more of what you make, then it’s time to consider, or reconsider, participating whole life insurance.  And remember, solving for cash value, not face value, is the best way to guarantee that you are not paying more for the insurance than you need to pay.  There is simply no reason to clutter things up with unwanted insurance coverage.   So make sure you make the most of it; keep your cash value high and your face value as low as the IRS allows in a participating whole life policy.  Doing so will make sure you are one more step closer to keeping more of what you make in life.

[i] http://www.marketwatch.com/story/john-bogle-retirement-investors-leave-80-on-the-table-2014-02-06?page=2

[ii] http://www.forbes.com/2011/04/04/real-cost-mutual-fund-taxes-fees-retirement-bernicke.html

[iii] http://www.forbes.com/sites/russalanprince/2017/01/02/why-the-rich-and-super-rich-will-purchase-life-insurance-even-without-an-estate-tax/#6028e45f24c2

[iv] https://www.youtube.com/watch?v=VcFJQL337kc