Macro Economics and Personal Finance

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In 2015, for the first time, the penta millionaire population in the United States surpassed 1,000,000 for the first time in history. According to a recent study by UBS Wealth Management, Investors don't define wealth by having a certain amount of money. The majority of investors define wealth as having no financial constraints on what they do. When asked to assign a dollar amount to being wealthy, they say it takes $5 million. The security that comes with cash also plays a critical role, and it was uncommon for some of these penta millionaires to hold 20% of their networth in cash for the last 3 years ($1,000,000 in CDs, Money Market, and Cash). It appears that having a large cash cushion allows investors to be more aggressive with their other investments. Investors are also bucketing money based on use, which makes them feel more in control of investment risk.

Wealth equals no financial constraints on activities. Having $5 million in investable assets seems to be the key threshold as majority of these investors felt wealthy according to UBS Wealth Management.

These are percentage of the cash equivalent positions held by the penta millioanires by year.
August 2010 : 20%
April 2011 : 20%
July 2011 : 19%
October 2011: 22%
February 2012 : 19%
May 2012 : 18%
Sept 2012 : 19%
Jan 2013 : 20%
April 2013 : 22%
July 2013 : 23%

The vast majority of penta millionaires hold enough cash to cover emergencies and to enable large purchases without selling any assets. But investors with large cash holdings use cash as a way to reduce their overall risk level, find cash important because they know they are extremely unlikely to lose it, and generally find peace of mind in holding a great deal of cash.

Top industry professions among Billionaires in the United States: 492 Billionaires in the United States

1) Finance + Investments : 267 Billionaires 24% of fortune
2) Technology : 14% of fortune.
3) Real Estate : 7 % of fortune.

 

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1. Financial: Your personal or family finances
2. Spiritual: Your connection with God
3. Intellectual: Your engagement with significant ideas
4. Emotional: Your psychological health
5. Marital: Your spouse or significant other
6. Parental: Your children if you have any
7. Social: Your friends and associates
8. Vocational: Your professional and career
9. Avocational: Your hobbies and pastime
10. Physical : Your bodily health

 

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David Green
Founder & CEO of Hobby Lobby

When I first started out in life, I had a few modest plans.  I can tell you exactly what they were. First,  I wanted to be successful in business. Second, I wanted to be have a great marriage. Third, I wanted to raise children who would serve God. Accordingly today, I've expanded my personal goals for life from the three I mentioned before to five. I've also changed the sequence.

The list now reads:
1. To have a great marriage.
2. To raise children who are serving God.
3. To be successful in business
4. To see our grandchildren and even our great-grandchildren serve God.
5. To use our resources to tell as many people about Christ as we can.

Command those who are rich in this present world not
to be arrogant not to put your hope in wealth, which
is so uncertain, but to put their hope in God, who
richly provides us with everything for our enjoyment.
Command them to do good, to be rich in good deeds,
and to be generous and willing to share. In this way
they will lay up treasure for themselves as a firm
foundation for the coming age, so that they may take
hold of the life that is truly life.

1 Timothy 6:17-19

 

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For God so loved the world that he gave his one and only Son, that whoever believes in him shall not perish but have eternal life. - John 3:16

Dowon and his wife Jinsook Chang are the wealthiest Korean Americans in the United States. Dowon and his wife immigrated to Los Angeles from South Korean in 1981 when he was 27 years old. Between 1981 - 1984, he took odd jobs washing dishes, pumping gas at a gas station, and working at a coffee shop in order to make ends meet and provide for his family.

The U.S. media states that Dowon got into the clothing business because he noticed all the people driving nice cars in LA at a gas station he was working at were in the clothing business, but in reality he had specific calling from God. In 1984 Dowon and his wife decided to put all of their life savings in a small retail store in Highland Park Los Angeles. Everyone told them that they would fail in that location as the previous owners only made $3000 the entire year and couldn't even cover their rent. God had favored and blessed Dowon and his first year in operation in 1984, Fashion 21 (Forever 21 today) generated $700,000 in sales. Every Forever 21 clothing has a label John 3:16 on it.

Dowon is a faithful Christian and his daughters who work in the business mentions that their parents never skip early morning prayer and have a deep ministry calling for overseas missions. I was able to find a Korean video from 2012 where he shared his life story and his calling from God in Korean in front of his church congregation in LA. I was absolutely blown away by his testimonial. 

 

[momopi]

Yeah I like to learn more about this routes. I like to direct some of my IRA funds there.

There are several self-directed IRA service providers in Irvine/Newport area, you can google or yelp them.  They work with lenders that offer Non-Recourse Loans for your IRA, so you could borrow money to buy investment properties.  But if not done correctly it may result in taxable transaction.

After evaluating the options I decided not to use self-directed IRA, because I wasn't comfortable with the rules and putting all my eggs in the same basket.

 

[Liar Loan]

Yeah I like to learn more about this routes. I like to direct some of my IRA funds there.

There are several self-directed IRA service providers in Irvine/Newport area, you can google or yelp them.  They work with lenders that offer Non-Recourse Loans for your IRA, so you could borrow money to buy investment properties.  But if not done correctly it may result in taxable transaction.

After evaluating the options I decided not to use self-directed IRA, because I wasn't comfortable with the rules and putting all my eggs in the same basket.

Another thing to keep in mind is you can't commingle funds between the IRA and your non-IRA accounts.  So any repairs & expenses for the property must come out of the IRA.  If you make a mistake here, the IRS could declare the entire account taxable.  This isn't to scare anybody away, but a reminder to be vigilant about this when using a self-directed IRA.

Personally, I would rather have real estate outside of my IRA because it's already tax advantaged (depreciation, etc).  Holding real estate inside of an IRA, you don't get to claim any of the deductions.

 

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I am in agreement with Liar Loan on Self Directed IRA. I am not huge fan of a tax shelter within another tax shelter as you cannot claim any of the deductions. Buy your real estate out of IRA and use your IRA as a personal macro hedge fund if that is your thing. If you own a Roth IRA, even better. You don't want to purchase Life Insurance products as a securities investment just like you dont' want to purchase a tax sheltered asset like real estate within another tax shelter like a self directed IRA.

Yeah I like to learn more about this routes. I like to direct some of my IRA funds there.

There are several self-directed IRA service providers in Irvine/Newport area, you can google or yelp them.  They work with lenders that offer Non-Recourse Loans for your IRA, so you could borrow money to buy investment properties.  But if not done correctly it may result in taxable transaction.

After evaluating the options I decided not to use self-directed IRA, because I wasn't comfortable with the rules and putting all my eggs in the same basket.

Another thing to keep in mind is you can't commingle funds between the IRA and your non-IRA accounts.  So any repairs & expenses for the property must come out of the IRA.  If you make a mistake here, the IRS could declare the entire account taxable.  This isn't to scare anybody away, but a reminder to be vigilant about this when using a self-directed IRA.

Personally, I would rather have real estate outside of my IRA because it's already tax advantaged (depreciation, etc).  Holding real estate inside of an IRA, you don't get to claim any of the deductions.

 

[irvinehomeowner]

The list now reads:
1. To have a great marriage.
2. To raise children who are serving God.
3. To be successful in business
4. To see our grandchildren and even our great-grandchildren serve God.
5. To use our resources to tell as many people about Christ as we can.

Seems like #5 should be higher.

And #1 should be "Serve God".

 

[momopi]

Yeah I like to learn more about this routes. I like to direct some of my IRA funds there.

There are several self-directed IRA service providers in Irvine/Newport area, you can google or yelp them.  They work with lenders that offer Non-Recourse Loans for your IRA, so you could borrow money to buy investment properties.  But if not done correctly it may result in taxable transaction.

After evaluating the options I decided not to use self-directed IRA, because I wasn't comfortable with the rules and putting all my eggs in the same basket.

Another thing to keep in mind is you can't commingle funds between the IRA and your non-IRA accounts.  So any repairs & expenses for the property must come out of the IRA.  If you make a mistake here, the IRS could declare the entire account taxable.  This isn't to scare anybody away, but a reminder to be vigilant about this when using a self-directed IRA.

Personally, I would rather have real estate outside of my IRA because it's already tax advantaged (depreciation, etc).  Holding real estate inside of an IRA, you don't get to claim any of the deductions.

There's also UDFI (Unrelated Debt-Financed Income) tax liability if you buy RE with loans for your self-directed IRA:
https://www.pensco.com/self-directed-iras/the-basics/tax-considerations

 

[Liar Loan]

The list now reads:
1. To have a great marriage.
2. To raise children who are serving God.
3. To be successful in business
4. To see our grandchildren and even our great-grandchildren serve God.
5. To use our resources to tell as many people about Christ as we can.

Seems like #5 should be higher.

And #1 should be "Serve God".

"Serve God" is too broad for a list of goals.  As a Christian, your overall objective is to serve God, but it's not a goal that has a measurable endpoint.

While his list of 5 goals is still pretty broad, they are things he can evaluate each year and measure progress against.

 

[irvinehomeowner]

The list now reads:
1. To have a great marriage.
2. To raise children who are serving God.
3. To be successful in business
4. To see our grandchildren and even our great-grandchildren serve God.
5. To use our resources to tell as many people about Christ as we can.

Seems like #5 should be higher.

And #1 should be "Serve God".

"Serve God" is too broad for a list of goals.  As a Christian, your overall objective is to serve God, but it's not a goal that has a measurable endpoint.

While his list of 5 goals is still pretty broad, they are things he can evaluate each year and measure progress against.

Then how does he measure #2 and #4?

It can be argued that his list is all broad goals.

 

[Liar Loan]

The list now reads:
1. To have a great marriage.
2. To raise children who are serving God.
3. To be successful in business
4. To see our grandchildren and even our great-grandchildren serve God.
5. To use our resources to tell as many people about Christ as we can.

Seems like #5 should be higher.

And #1 should be "Serve God".

"Serve God" is too broad for a list of goals.  As a Christian, your overall objective is to serve God, but it's not a goal that has a measurable endpoint.

While his list of 5 goals is still pretty broad, they are things he can evaluate each year and measure progress against.

Then how does he measure #2 and #4?

It can be argued that his list is all broad goals.

That would be up to him to decide.  If his kids are young, then he may not know the outcome for a decade or more.  Grandkids / great-grandkids would be several decades down the line.

Serving God isn't a goal that can be achieved, but more like a mission statement.

 

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IHO,

The 5 items you listed are priorities of David Green in his years of starting Hobby Lobby and his present years.

As we are talking about goals, personally I like to start from the end in mind. In weird way, I start out by writing my eulogy. The first step in real wealth planning is to consider where you want to end up. Nobody plans a trip without choosing a destination. That means writing your own eulogy. What will your legacy be? What will your life mean to those closest to you? What will they remember about you? How will your life have impacted others?

It might feel daunting, but I believe this first step is critical in creating your holistic Real Wealth Plan and then start creating your short term 3 month goals, 3 year goals, and 30 year goals. It will not only help you organize your financial well being, but also your heart. One easy way to begin is to list all the people you want to remember you: spouse, family members, friends, co-workers, and so on. Then list how you want to be remembered by each of them: loyal, brave, kind, generous, eager to help - however you most desire to be remembered. Once you have those elements, you can shape them into your eulogy. 

You make categories of areas of your goals important to you where you can measure your progress.

For me, the real wealth categories that are important to me are the following:

1. Business / Career
2. Financial Net worth
3. Health and Fitness
4. Personal Growth which can also include hobbies
5. Spiritual 1) Emotional
6. Fun-time
7. Family 1) Marital 2) Parental

My categories of importance maybe different from you. If you are not married and have no kids, your family goals will be very different from mine. These are categories in your life where you can make intentional goals for our life and measure your progress.

The list now reads:
1. To have a great marriage.
2. To raise children who are serving God.
3. To be successful in business
4. To see our grandchildren and even our great-grandchildren serve God.
5. To use our resources to tell as many people about Christ as we can.

Seems like #5 should be higher.

And #1 should be "Serve God".

"Serve God" is too broad for a list of goals.  As a Christian, your overall objective is to serve God, but it's not a goal that has a measurable endpoint.

While his list of 5 goals is still pretty broad, they are things he can evaluate each year and measure progress against.

Then how does he measure #2 and #4?

It can be argued that his list is all broad goals.

That would be up to him to decide.  If his kids are young, then he may not know the outcome for a decade or more.  Grandkids / great-grandkids would be several decades down the line.

Serving God isn't a goal that can be achieved, but more like a mission statement.

 

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8)

 

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I see wealth management from two prospectives: micro and macro. Micro wealth management is all about your financial wealth. Your allocation of real estate, individual securities, annuities,  retirement accounts, mutual funds, and life insurance. You may have a private money manager or a wealth manager who helps you invest in hedge fund of funds, hedge funds, long term care insurance or derivatives. This is all in the scope of micro wealth management.

Macro Wealth Management which I call Real Wealth Management is much more holistic. Financial wealth is a just a component of Macro Wealth Management and Macro Wealth Management is far more important than Micro Wealth Management. Let you give you an example of this. John is a Deca-millionaire and lives alone in a $2 million dollar estate in Turtle Rock. His family is broken and the last time he has spoken to ex-wife and children has been more than 10 years. He has been divorced two times. In a recent visit with his doctor, was informed that he Is in stage 3 diabetes. The doctor tells him to make preparation to his loved ones which is the doctor code of telling him that that he has only 24 months to live. John is physically, emotionally and spiritually poor. Is John wealthy from your prospective? John is only in his mid - 50s.

Real Wealth Management starts from your heart in four major areas of Real Wealth 1. Financial Wealth, 2. Spiritual Wealth 3. Emotional Wealth, and Physical Wealth.   

 

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Rkp, this post is for you.

It seems like I was only able to find 4 journals dated in 2001, 2002, 2005, and 2006 in my 20s. I did not have a journal in 2003 - 2004 so I may have been lost, disliked my W2 job, trying to find myself, or perhaps not even walking with the Lord. What was really cool about this page was I wrote down what I thought was my ideal vocation. 1) Business owner 2) Real Estate 3) Financial Planner. I even set a goal that I wanted to get married by the time I was 27. I missed that goal by an entire year since I got married at 28.

 

[Liar Loan]

Those who write down their goals are 9x more likely to succeed, or so I've been told on YouTube.

 

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