"The recession has exposed a frightening reality for many Americans: A financial plan that relies on a job market and a stock market relies on hope..."
Phoenix, AZ (PRWEB) July 28, 2011
They're on the television. Their advice streams from the radio. Their books litter the library shelves. The mainstream financial experts claim they have the formula for wealth. Seemingly sage advice, it sounds like this: Go to school, get a good job, live frugal, max-out the 401(k), faithfully invest 10% of your paycheck in the stock market for 40 years, and one day, a rich retirement will be waiting.
While this practical advice has been dispensed for years and rarely goes challenged, MJ DeMarco, multimillionaire entrepreneur and author of the #1 best-selling book, The Millionaire Fastlane claims that this financial strategy hides 5 unspoken truths that those financial gurus will never admit. They are:
Unspoken Truth #1
"The strategies that we teach, are not the strategies that made us rich."
Is that financial expert a millionaire because he stopped drinking expensive coffee and canceled the movie channels? Or is it because he sold millions of books and manages nearly $500 million in assets? Most financial gurus are worldwide brands which serve as a marketing funnel for an endless array of "upsells" -- expensive seminars, CD sets, website memberships, life insurance policies, games, and other financial products. While the financial experts are preaching jobs, frugality, and saving, behind the scenes they are moving millions of dollars in products and services. DeMarco claims to be the first author who does the unthinkable author sacrilege: he wrote a book for the sake of exposing the truth, not to upsell his readers into some "backend" sales funnel.
Unspoken Truth #2
"Without a job, our plan doesn't work."
Unemployment or underemployment throws a wrench in the old "get a job and save" advice. The gurus preach saving and living below your means which by all measures, is practical advice. But what happens if when there are no means, no job, or no job prospects? The reality is, the moment a job loss happens is the moment people lose control over their financial plan. To succeed under the guru's plan, savers need to remain employed for 30, 40, perhaps 50 years so enough savings can accumulate to retire. DeMarco asks "How many people can't save money simply because they are unemployed, or underemployed?" Much like the financial experts, DeMarco contends that the wealthy control their income sources through leveraged entrepreneurship, not by trading their time for money in a job.
Unspoken Truth #3
"If a weak economy and a poor stock market doesn't yield 8% for 50 years, our plan doesn't work."
The financial gurus' grand deity is compound interest. It's been repeated countless times: Save a $100 a month and after 50 years, it will be worth $700,000! Again, the financial gurus don't admit that this strategy is premised on hope--hope the stock market yields 8% year after year, decade after decade. The economic collapse has erased trillions of dollars in net worth for middle-America. Many have to start over. Others, have to go back to work. DeMarco says that the economic slow-down has exposed the risk inherent in the plan and finally people are now questioning long-held financial beliefs. "The recession has exposed a frightening reality for many Americans: A financial plan that relies on a job market and a stock market relies on hope."
Unspoken Truth #4
"Most people won't survive to see retirement."
The average life expectancy is about 77 years old. Many won't make it to the age of retirement. Those who do survive will suffer from old age -- retirement won't harbor such wild adventures like climbing Machu Picchu, skiing the black slopes, or running the bulls in Spain. And yet, millions of people subscribe to the "deferred enjoyment" plan where youthful freedom is sacrificed for elderly freedom. Retirement should be a time of fun and leisure and yet, many never enjoy it simply because the plan takes decades to work. DeMarco, who retired in his 30s, says people need to do an exorcism on their financial plan and remove hope and time as the lynchpin and replace it with control and leverage -- doing so makes retirement at any age possible.
Unspoken Truth #5
"After 40 years, any accumulated savings will be virtually worthless in today's dollars."
Inflation is a ravenous termite that destroys the purchasing power of a saved dollar. At 3.5% inflation, a million dollars 40 years from now won't even be worth $250K in today's dollars. That gallon of milk will cost $22. That gas fill-up will run $350 bucks. At the rate the world's governments are printing money, a savings plan that takes 40 years to accumulate seems to be another gamble of hope. Survive the 40 years of jobs and prudent saving and suddenly those millions aren't worth much. If that happens, many will be forced to retire beneath their normal standard of living, or worse, they can't retire at all.
While being debt-free, saving, and frugality, are well-intentioned financial strategies, the fundamental problem is that they are post-requisite to uncontrollable factors. People can't control losing their job. People can't control the economy or the stock market. People can't control mortality. Without control, the quest for financial freedom often stalls behind the wake of failed financial gambles predicated on hope and time: declining economies, worsening job markets, and unpredictable market yields. Financial struggles becomes blameless, even for those considered prudent, educated, and hard-working.
DeMarco advises "In today's economic environment, the best way to achieve financial freedom is to control and leverage the cornerstones for financial success, and those economies frequently occur via need-based entrepreneurship -- the same model that most financial gurus practice, but fail to preach."
MJ DeMarco is the former CEO and Founder of Limos.com (1997-2007), semi-retired entrepreneur, and author of the best-selling book, The Millionaire Fastlane (Viperion Publishing, 2011, http://www.amazon.com/dp/0984358102). He currently lives in beautiful Phoenix Arizona and spends his free time traveling, writing, and promoting entrepreneurship.