I have a financial planner that is a great friend of mine as name Nelson Rood. I went to visit him about three months ago because I was just feeling that my life was a quickly turning into a financial disaster. Now I’ve had planners in the past that I have gone to speak with when my finances change, and for the most part the conversation is always the same.
They tell me not to worry and that they just need to take a look at all my statements, paystubs, and bills. I spend about two weeks trying to gather everything to hand over to them, and of course another week goes by before they call me back in. Now for the part I love: They sit me down and tell me about all the debt I have. They tell me about how much money I make. And they tell me about how much money I have saved. (This of course, is nothing new to me – after all I supplied all the information). But of course the typical advisors I have had the pleasure of working with prior to Nelson, takes the extra step and divide my savings by my three girls, letting me know how much I have saved for their college education. They are good at it too. They can divide my $3,300 in my savings account, by three to let me know that each one only has $1,100.
Of course they don’t take into account that I saved the $3,300 to take my family to Disney World, and when I tell them this, they often look down at me and ask, “is that the wisest choice? You need to invest that money to put toward your children’s education. That money could be worth $7,000 in 8 more years.” Well actually it won’t because the $3,300 I decided not to spend on my family’s vacation, along with all the other money I miser away caused so much discontentment within my family that my wife decided to leave me, so my now hypothetical $7,000 was split in half, and ultimately paid out to the divorce lawyer. Fortunately I took the vacation, so none of this happened.
Now the point is Nelson understands the balance between financial goals, personal desires, and family time, and his goal is how to realistically achieve these goals, or in some cases, modify them without actually killing the goal. Not everyone may be in a position to save $250,000 for each child to go to a private college, but we all should have some kind of plan, even if its understanding scholarships and financial aid, and how it will have to play in your child’s future.
I asked Nelson about a Reverse Mortgage for my Parents. They are in their late 70’s and although my dad still works, they have their fair share of bills to pay, in addition to 4 children with subsequent spouse, and a total of 12 grandchildren. And did I mention, more than half of these family members live overseas? The cost for my parents just to see their kids can cost several thousand dollars a year. In addition they want to spoil their grandchildren, (and with any luck they still want to spoil their children).
But here’s the catch, my parents don’t qualify for a new mortgage. My dad is self-employed and makes a good living, but like most self-employed individuals has substantial tax write-offs, thus lowering is adjusted net income. So how do you leverage your assets? Wells as my Nelson pointed out; you begin with the Reverse Mortgage to create wealth.
With a reverse mortgage, there are no income or credit qualifications so you can access the equity in your home. Then, as Nelson advocates, instead of simply spending the money, my parents could purchase a whole life policy, and then take loans out against it. The interest may be a tax deduction at the end of the year, and if you can’t make a payment on the loan during a given month, it doesn’t go against your credit. You are your own bank. My parents could give an “inheritance” to their grandchildren and still be around to watch them enjoy it. Plus they are still hold life insurance should they pass away. Now that’s a financial plan
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