ILLUSTRATION: BLUE SRILASAK
It’s amazing to me that with all the free good consumer information out there regarding financial planning, we still believe in the fairy tales we are sold. Let me dispel some of the out-and-out lies that are commonly believed by most of us. I call these lies puro pedo, nothing but hot, smelly air.
THE 4 PURO PEDO LIES
Puro
Pedo #1: The person selling you a financial product—like a mutual
fund or an insurance policy—is a financial consultant.
What a crock of you know what. Give me a break. When I go buy a car, the
person selling me a car is not my transportation consultant. He or she
is a car salesperson. If the person earns a straight commission from selling
you a product, he is a salesperson who is going to tell you how to cure
all your warts with his mutual fund or cash value life insurance policy.
If you need to see a financial planner, see someone who doesn’t make
his living from straight commissions. True financial advisors will charge
you hourly for their advice. Also, be very leery of the “financial
advisor” who is more concerned about getting you involved in their
business than doing what is right for you.
Puro
Pedo #2: The life insurance policy you are buying will also help you
save for retirement and your kids’ education.
If you bought a life insurance product with any cash savings feature,
you most likely got taken. “But my brother-in-law wouldn’t sell
me something bad,” you say. Cash value life insurance policies carry
some of the highest commissions in the financial planning industry, sometimes
up to 110% of the first year premium. Unless you are making a lot of money,
maxing out on your pension plan, and are committed to putting in at least
$600 or more for the next 10 years, don’t even bother buying any
life insurance with cash value. Stick to term insurance if you need it.
Puro
Pedo #3: Investing money in any plan outside of your retirement plan
is better.
I see this all the time. I see all the proposals from financial salespeople
telling you that if you invest in their annuity or mutual fund you will
end up with more money in your lifetime than if you would have done it
through your retirement plan at work. Listen, when you invest in a pre-tax
retirement plan, you automatically get what I call financial leverage.
In other words, you get to invest the whole dollar; your Tio Sam doesn’t
take any taxes from that dollar. To invest one dollar in a plan outside
of a pre-tax retirement plan you would have to earn at least $1.25. Why
$1.25? Because you have to pay taxes. To have a dollar left over after
taxes, you have to earn more than a buck. Get the point?
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Pedo #4: Put all your money in real estate, or stocks, etc.
Again, I can guarantee you that if someone tells you to do that, they
are just trying to sell you on their particular product. I have seen too
many people lose all their money by putting all their eggs in one basket.
Yes, I know that you have a compadre who made all his money in one thing,
but that is the exception to the rule. The rule is that you need to diversify
in different asset classes. What in the heck does that mean? Different
asset classes doesn’t mean that you invest in different types of
mutual funds, or different types of real estate. If mutual funds or real
estate crash all mutual funds or real estate lose money. You need to invest
in real estate, stocks, bond, and cash. And within these types of investments,
you have different categories. For example, in stocks, you have growth
stocks, value stocks, international stocks, etc. Seek an investment advisor
for help. (But remember Puro Pedo #1).
Listen dudes (or dudettes), it’s time we take responsibility for our own financial health. Listen to Doctor Dinero. Next time somebody feeds you one of these financial lies, tell them, “That’s puro pedo!”
OPEN YOUR EYES
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