Brian Eyster | Wealth Strategist at Financial Architects, Inc.
Money is not math and math is not money.
Over and over again, I see that people are misled by this concept. To be fair, “we, the people” are fed misinformation and conflicting stories by the financial institutions as well as the media. The problem with math and money is that mathematics is an accurate science, while money is a commodity. They simply don’t mix, just like oil and water. We all know that 2 + 2 = 4. But when you try to mix that accurate science with human behaviors and the inaccurate variables of inflation, taxes, the propensity to consume, planned obsolescence, illness, lawsuits, market fluctuation, political issues and more, no amount of mathematics can create verifiable standardization. That's why plans created by traditional linear planning are destined to fail. There is a huge difference between the “average” rates of return used in this type of planning and “actual” rates of return. Look at your quarterly statements to understand this simple fact. That is, if you are still opening them. Sadly, there are no “magic beans” to fix your plan, but if you take a look at the process your financial professional uses, you may begin to understand.
Macro-economics — the process I utilize with my clients — verifies, measures, and weighs every financial decision you make. Traditional planners recommend measuring on a micro-economic basis, looking at one financial decision at a time, which means there is a lack of integration and coordination in the plan, and that lack costs you millions of dollars over the course of your lifetime. The worst part is, you don’t even know it. Should you max out that retirement plan? Pre-pay that mortgage? Buy that insurance product? Before you do, ask yourself two questions:
Is this a winning strategy and the most efficient and effective use of my money?
How can it be verified?
If your financial professional can't give you verifiable answers, perhaps you should consider verifying their ability to steer you in the right direction.