Financial Tips

Back in the Spring of this year, good news came out of CNBC regarding average 401k returns when they published an article titled Big Surge in 401k Balances, but Workers still not Saving Enough. The news out of this article was that the average 401k balance had grown $42,400 or nearly doubled from five years ago. Sounds great and it looks like Americans achieved a super awesome return on their 401k balances (finally).

Only, it didn’t happen that way.

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Most of us have seen the marketing brochures distributed by mutual fund companies and investment products salespeople as an inducement to place our money in a fund. At the very least, we’ve encountered historical returns posted within a 401k plan that some people use to help select where they place their money.

But have you ever noticed that when you look at the historical return data, your rate of return seems to magically be different? What gives? Some might explain this as entry and exit variances that alter the yield vs. the calendar year assumptions put in place on the historical data and to some degree this is true. But the real answer to this lies a little deeper and has to do with a little slight of hand, and some simple mathematics.

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Have you ever met someone who has had the next great investment idea?  It may be a really good friend, perhaps someone that you see on the cocktail party circuit or in many cases it’s your friendly investment advisor, insurance agent, stock broker, financial planner et. al.

I’m not talking about the guy who always has the inside scoop on the latest stock pick necessarily.  No…I’m talking about the guy who in 1991 had the inside track on how to make a fortune in the Russian telecommunications business.  Guess what?? You can be a part of it for only $100,000.

As we’re sort of famous for saying, “That’ll work out good for someone….probably not you, but someone’s gonna make a lot of money”

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I know what most of you are probably thinking: the rule of 72? Have the Insurance Pro Blog guys run out of ideas for post topics? Or busy week? Maybe they didn’t have time to come up with something more creative than a boring post about a finance topic known the world over.

For those who don’t know the rule of 72 is a simple rule of thumb used to determine the amount of time an investment will take to double given a certain interest rate. You simple divide 72 by the given interest rate and boom you have the number of years it will take the investment to double.

Simple enough, and no real need to labor this issue any further. So, happy Monday and we’ll be back to you on Wednesday when the next episode of the Financial Pro Cast goes live.

Unless of course, the Rule of 72 is wrong…

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Normally we leave Suze Orman alone, but now I've written a post about her two weeks in a row.  I promise next week not to talk about her at all.

Actually, this piece has been in the works for a while.  Brandon started it a while back when a colleague steered him to yet another video capture from Suze's talk show where “real” callers call in to discuss their financial woes.

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Today, I’m venturing a ways off the strictly insurance-related path to discuss a topic that is more closely tied to general personal finance. While it’s an important topic to address, the majority of financial bloggers/writers/authors tend to screw it up.

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Today the most fascinating experiment on the human condition took place on (of all places) Facebook.  When I took my somewhat usual stroll into check Facebook this morning I happened upon a post with a very simply math equation: 9-5+5*0+3=?

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In the spirit of the Holiday Season, which just wound down for the most part (hurray I can drive by major commercial locations again!), I figured I'd make today's piece a sort of “holiday gift ideas with cash value life insurance that kick ass” type post.  For years I've been advocating what I'm about to roll out here, and I've got clients who have accomplished some seriously nice cash positions that are crushing what others are traditionally taught to do with their emergency fund money on a rate of return playing field.

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