Dear Friends,

I caught myself shadow boxing in the mirror as I was brushing my teeth Saturday night.  My wife and I had rented the move “The Fighter” starring Mark Wahlberg. Author Willa Cather once said, “There are only two or three human stories, and they go on repeating themselves as fiercely as if they had never happened before.”  Possibly no story is better than that of the triumphant underdog: the long-shot that scratches and claws their way against incredible odds for a chance to succeed. When the opportunity presents itself, they seize it with the determination of a fighter who knows that the training and sacrifice they endured for years when no one was cheering had earned them the right to become what they always knew they were. One thing I enjoy about my career is that I see those people every day. Through our doors pass men and woman like you who believe they are the best landscapers, concrete contractors, home builders, computer technicians, therapists, accountants, you name it.  I believe you are.  Your passion  transcends your work and positively affects those around you. I hope that you never lose that passion, because it fuels mine as well. When asked what he would have become if he didn’t box, Muhammad Ali claimed that he would have been the best at something.  If he would have become a garbage man, he would have been the world’s best garbage man. May you live your success story every day.

Seeing the forest through the trees: Consider your net gain

Your total wealth can be broken down into three categories: Lifestyle money, Accumulated money and Transferred money.  Those three categories represent all of the wealth that you will have or lose in your lifetime.  Lifestyle money of course is the money that you will spend on maintaining your lifestyle: your home, cars, entertainment, toys, etc.  Accumulated money represents all of the money that you will accumulate through savings and investments.  Transferred money represents the amount of money that you will give away to other institutions in taxes, interest payments, fees and lost opportunity costs.  When we work with clients, our focus is on net gain.  In other words, we are looking at the forest rather than the trees.  For example, Charlie Brown may come to us and say “I have gotten a 7% return on my investments over the past 5 years, but I’m going backwards. How is that possible?” A review of their finances may indeed reveal a 7% return on his investments, but his net gain may be negative because this client is paying 5% interest on his auto loan, 13.5% on his credit card balance and 6% for on his student loans.  In addition, his investments that were earning 7% where in taxable accounts such as mutual funds, which means his actual return is around 5%.   Anyway you look at it, Charlie Brown is giving away more money than he is accumulating.

There are two ways to fill a bucket with holes: you can either increase the amount of water that you are putting into the bucket or you can plug the holes so even a trickle will eventually fill it.  Our aim is to plug the holes because it requires no pain to your lifestyle money.  In fact, most clients find that their Lifestyle money increases as well.  Many financial advisors are constantly looking for the next hot product to sell to their clients.  Its like they are trying to give their clients Tiger Woods’ clubs instead of teaching them how to swing like Tiger.  You don’t need the latest high priced driver if the technique is true.

Your home mortgage: should you over-pay if your are financially able?

The goal behind paying more than your required monthly mortgage payment is to save on money that would be paid to interest down the road, but with today’s interest rates is that the best use of your money? To answer that question we must first understand that your home, bad or good, is an investment.  Owning a home with equity in retirement can be a powerful financial asset.  Having the option of being able to pull the equity from your home to create a stream of income can be a tremendous advantage and financial safeguard. For those of you with a permanent life insurance policy, we can show you how to really unlock the potential of your home’s equity, but that is for another discussion.

If your home is losing its value (like most in today’s market) does it make sense to pay extra money into the mortgage? Would you be better off to take full advantage of the tax deduction by only paying the minimum mortgage   payment and funnel additional funds into an investment that will actually make you money?   Conversely, if your home’s value is increasing does it make sense to pay extra money into the mortgage? Again, would it make more sense to pay the minimum amount, take the tax deduction, invest the additional amount and allow your home’s equity to grow naturally as its market value grows? Buy low, sell high.

Still concerned about the money that you pay in interest on your mortgage?  Good, you should be, but with today’s low interest rates, combined with the mortgage tax deduction, you do not need to look far to find a guaranteed return   investment that will outpace the interest you pay on your home. Too often our eyes are focused on individual trees and in doing so, we don’t see the forest.  In other words, we miss the money that we are really gaining or losing.

The Royal Wedding, Multi-car Accidents and Split Liability Limits.

I actually have nothing to say about Prince William and Kate’s wedding, but that is all the media is talking about so I thought it might grab your attention so I can discuss something more interesting. I have a folder that is full of newspaper clippings on various insurance topics (told you I was interesting).  One particular article from this past winter reported that a woman lost control of her car driving through an intersection in Willoughby.  She struck a stopped car and spun out of control, hitting five other vehicles before her car came to a stop.  While the extent of the property damage is unknown, it is safe to say that it was much higher than a typical accident.  Proper insurance protection plans for both the expected and unexpected. That is an accident one would soon like to forget. However, if you find yourself underinsured you may have years of garnished wages before your debt is paid off. 

Split liability limits are common in Ohio. What are split liability limits?  The term refers to what limit insurance companies will pay out for bodily injury and property damage if you cause an accident. For example, the State minimum for liability is $12,500/$25,000/$7,500.  This means that if you had those limits of coverage, your insurance company would pay a maximum of $12,500 in bodily injury per person for those that you injure with a maximum of $25,000 in bodily injury per accident if more than one person is injured.  In addition, the insurance company would pay a maximum of $7,500 in property damage to repair the vehicle(s) that you damage.  In the above example, you can imagine how those limits would be exhausted quickly leaving the driver personally on the hook for paying for the excess damages.  Our agency recommends that you carry a combined single limit of $500,000 on your personal auto policy for your financial protection. *The liability limits of the above, unnamed driver are unknown.  The example is for the purpose of conveying the potential danger multi-car accidents pose to your liability.