Sunday, July 15, 2012

Most financial advisors/entertainers when speaking about growing wealth want to focus on one thing and that thing is retirement (yours or theirs?).  Their conversation invariably lands with all kinds of account acronyms like 401k, IRA, SEP.  Not only is it difficult to know what these acronyms mean but the rules that govern these accounts are even more complicated.  In order to access any funds from most of these accounts under current law you must wait until age 60 to avoid the government penalty to your own money.  For most people they are busy raising families, changing jobs, or taking care of the current family emergency.  Most of what little is left is often placed in these government sponsored plans.

So the question is what's the big deal Josh?  Don't we get a tax deduction for putting our money in these government sponsored plans?  Isn't it best to lock away my money so I won't touch it (it's for the future right)?  Besides I'll be in a lower tax bracket in the future (does anyone still believe in this fable)?

I often wonder if plans like the 401k have helped or hurt most of the public.  What I see in practice many times is a nice 401k balance with a mountain of debt, or someone taking a stiff penalty to access their own money from their 401k to pay bills.  Neither scenario is a good start to building or maintaining wealth.

Is the road to wealth built by relying on a system that is unproven and barely 30 years old (the first 401k plans were introduced in the late 1970's and early 1980's)?  Or is the road to wealth built by being a responsible individual and taking back control of your own finances?  Do you place your trust in far off places like Wall Street, or Washington D.C. to succeed in life?  Or do you place trust in yourself?

What if you had full access to your savings at anytime?  Since you had access to these funds it allowed you to reduce the costs on things you did in your everyday life like buying a car, a down payment on a house, or paying for a child's education.  If you could reduce your costs in these areas wouldn't you by definition have more wealth?

If you would like to see how much wealth you could grow by reducing the costs in your everyday life please feel free to contact me:

Joshua Smith
J Smith Financial

Monday, December 12, 2011

Have you blindly overlooked these 4 downside risks of your 401k?

Read any article about 401k's (or any other government sponsored plan) and probably the main focus of the article will be how great the tax benenfits are for the individual. While not having to pay taxes on a pool of money is good, what is often overlooked is the access you give up on those funds (not to mention the complex rules you must follow should you ever need that money). Overlooked often are the downsides of giving up access on these funds can actually make someone poorer not richer (even with a company match!) at retirement. Below are 4 risks people face when locking money away in a qualified plan like a 401k:

1. Lost of capital means more finance charges. I've met many people who have two car payments, student loans, credit card debt, and a mortgage yet they are putting away as much as they can into their employer sponsered qualified 401k plan. People often overlook that if 35% of your income is going towards finance charges, it is very difficult to become financially independent when you are only saving 10% of your income. The other problem is this also results in more costs when unforeseen circumstances arrive. A recent survey stated that 71% of Americans would be financial trouble if their paycheck was delayed by just one week.

2. Hidden fees are also overlooked in 401k's. A recent expose on Bloomberg television stated that many midsize 401k plans they reviewed had fees in excess of 3.5 to 4%. The best run plans still had total fees in the 1.5% range. To give you an idea what this difference means for a 35 year old with $100,000 growing at 5% at age 65 with a 1.5% fee is the difference of $551,601 (no fees) versus $333,359 (with 1.5% fee) or nearly 40% less in retirement (it's more than half if you have fees around 2.5%!)

3. Something only recently realized are the risk inherent in most 401k's since most options are stock market related and typically have no type of insurance program to guarantee against a lost of money. If the market lost 50% or more like it did between 2008-2009 may not be a big deal if you are 35, but imagine it happened a year or two before your scheduled retirement date. This is something of a big concern right now to my parents generation. What's worse is hearing stories of these same folks about how they sacrificed for all these years only to have to sacrifice even longer. If you hear enough of these stories you too will grow tired of the cliche "you're in it for the long haul." What if the "long-haul" is longer than you left on this Earth?

4. The gorilla in the room that we never hear about as a future risk is "Taxes!" Most 401k plans rely on a tax postponement. This means you don't avoid taxes you simply are delaying paying taxes. Typically when people are younger they have a lot of deductions (kids, home interest, etc.) and typically are in the lowest tax brackets they'll be in their lifetime. When people are older the kids are gone, the home is paid for, and they have very few if any deductions. So most people then defer taxes while they are in a low tax bracket only to have to pay taxes when they are in a higher tax bracket on that same pool of money. This single risk can have a huge impact and I'd admit may turnout to be a bigger risk than the 3 above risks combined.

If you would like a copy of a special report on how you can help avoid or eliminate the above risks please please email me at:

Joshua Smith
J. Smith Financial

Have any questions/comments or topics you would like covered? Please feel free to email at the email address above.

Sunday, September 4, 2011

What having a CLUE with your money can mean for you?

What having a CLUE with your money can mean for you?

Control means never having to “ask permission” to access your own money. This means not having to be of a certain age, experience a certain hardship, or face pages upon pages of rules and regulations to access your own money like you do with government qualified retirement programs like IRA’s/401k’s. It means not tying up your funds in home equity so that in a time of need, you do not have to prove your income (again) and get permission to borrow (and pay interest again) on the extra money you’ve already paid on your home. Why follow others’ rules? Why not control your money and set your own rules?

Liquidity & Use of your money will allow you to take advantage of opportunities that come along and reduce the cost of items you already need. My wife and I recently purchased her car from an individual for less than they were offered from another couple simply because we were able to write a check in full and did not have to rely on a bank or finance company. Liquidity means when an unexpected bill or expense pops up, you do not have to rely on high-interest credit cards to make ends meet. Use means we can reduce the costs on things we already need, like paying an annual premium on car insurance versus paying monthly or every 6-months.

Enjoyment means being able to enjoy your hard-earned money without feeling guilty. It means taking advantage of vacations when a good deal comes around. Love your home more by doing the home upgrades you want to do without feeling guilty. Enjoy life more without constant worries about money because you have Control, Liquidity, and Use of your money.

If you would like to learn more how you can have a CLUE with your money, please email me and I will send you a special report.

My email is:

This special report will show how being honest with yourself and behaving like a bank, you can reduce or eliminate the interest you are paying banks/finance companies and at the same time, save for the future.

Here’s to having CLUE!

-Joshua Smith

Sunday, June 26, 2011

Financing and Savings: Focus on Volume of Interest Not Rate of Interest/Return

Financing and Savings: Focus on Volume of Interest Not Rate of Interest/Return

I hear it all the time on the television, in the coffee shop, and even when out at dinner. What is it I hear? “I just got a great interest rate on my new car, boat, credit card, home etc.” What most people either do not know or do not understand is that it is the volume of interest that is a wealth destroyer and not necessarily the interest rate.

So for instance say you had a $20,000 car you just purchased and got a great rate of 4.9% over 5 years. Your first payment would be $376.51 of that $81.67 would be interest (21.69%) and $294.84 would be principal (78.30%). Over the term of 5-years (assuming it was not traded in early) $2,590 (or 11.30%) would have been paid in interest.

It is said that the average person spends an average 35% of every after-tax dollar on financing for purchases that were already made and saves less than 5%. So if we are to get ahead in life what rate of return would we need to equal the amount of every dollar we willing sent to a bank or financial institution (700%!!)? What if someone, like myself, could help you change this equation?

When it comes to savings the same thing applies. If we can change the 35% and 5% equation to say 20% and 20% things get a lot better. Would you rather have an account that was at the mercy of the market with a balance of $25,000 earning $2,000 in interest a year (8%) or would you rather a have a safe place with a larger balance of $100,000 (because you saved 4 times as much) earning $4,500 a year (4.5%).

When you focus on volume of interest many things come into perspective.

If you would like help to see how you can focus on volume, not interest rate, and see how you might be able to improve your own equation please feel free to email me at:

Saturday, April 2, 2011

Show Me the Money! Where’s the Beef? Never Trust a Skinny Cook!

Show Me the Money! Where’s the Beef? Never Trust a Skinny Cook!

What are these pop culture sayings telling us? They are telling us to always ask for proof. This is never more of importance than when it comes to your hard earned savings.

Earlier in the week I had a conversation with a younger fellow in a conversation. He worked for a big financial institution and was trying to pitch me on these great new investments he had that were averaging 9% per year (he obviously did not know me very well or what I did). I won’t get in the specifics; however I asked for how long had they averaged 9% per year? Was that a 9% simple interest calculation or compounding interest calculation? What were the fees, and was the 9% before or after fees? What was my minimum return contractually in the event things did not go as planned or I needed the money before my 60th birthday? Finally, could he show me an actual statement from someone (maybe his personal statement since it was such a great deal!)?

Needless to say he was not too happy. I felt bad that maybe I had been harsh. But sometimes we don’t know what we don’t know, or we think we know something that we really don’t. The moral of this is to always ask questions like: Show me proof (i.e. “Where’s the Beef?”). Show me the Money, and how can this company give me this rate of return? Finally, ask the person giving advice can you see their stuff, where have they put their money (i.e. “Never Trust a Skinny Cook”)?

Sunday, March 20, 2011

Today’s Money and Taxes

Look in your savings, checking account, or wallet right now. The money in there is worth more today than it ever will be in the future. The reason is something called inflation, and recently it is getting a lot of press. Going back 30 Years to 1981, the average rate of inflation has been 3.31% per year. This means if you had $1,000 in 1981; it only has the spending power of $364.29 today as it did in 1981.

The next topic is taxes. Today there are record deficits and large unfunded liabilities by both state and federal governments. Our population is aging, and our workforce reduced. Politicians have two choices either they can cut benefits or raise tax revenues. So this begs the question, which direction do you think taxes are headed?

So why does traditional thinking say take as many pre-tax dollars today and defer them for use as far in the future as possible? Think about it, we are taking our most valuable money (today’s dollars); deferring taxes in what most likely will be our lowest tax bracket. So one day in the future we will have less buying power and our money will be taxed the most.

How long do you want to do this?

Would you like an alternative?

If you would like an alternative please email me @:

Sunday, March 13, 2011

The “1” Question you need to ask and consider before you put your money anywhere?

Many people find out the hard way, once it is too late. That once seemingly great place to put their money has now handcuffed them or not available when they need it the most. Even if they thought they would never need that money sometimes life happens. Some of these events include but not limited to:

• Unemployment
• Disability
• Divorce
• Treatment for Medical Illness
• Education Expenses
• Wedding
• House Down Payment
• Business opportunity

The “1” question most people never ask:

How do I access my money and how quickly can I get it in an emergency?

Due to not asking this very question many people are forced to put items and expenses on high interest credit cards or pay unnecessary taxes and penalties at the very moment they can least afford it.

Some factors to consider and ask when placing your money in an account:

• How quickly can I get my money? (Ideally you would want less than a week)

• If I ask for my money, will I get it automatically or will I have to go through an approval process and qualify to get access to my own funds?

• Will I owe a penalty and taxes when gaining access to my savings?

• Will all my money be there when I need it the most or will it be subject to the ups and downs of the stock market?

• Can I use my money for anything I see fit or am I forced to use it only on certain expenses?

Throughout the years I have heard some terrible stories about folks struggling financially. Many times they are struggling financially not because they are not responsible people. They always had good intentions, however due to where they chose to put those savings has caused them many unintended consequences they never thought possible. That is why I think you should always ask this “1” question before putting your money in any account:

How do I access my money and how quickly can I get it in an emergency?