How Does It Work?
| We could give you lots of complicated formulas, amortization schedules, debt pay-downs, and savings calculations, but the bottom line is simple. The Equity Creator® works by repositioning your assets and expenditures to your advantage. This reorganization follows a four step process that we call "the pathway to financial independence." If a family is able to maintain a balance in these four areas, financial success is mathematically guaranteed. |
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Debt is an area of a family's financial life where the most money is ineffectively utilized. Interest Expenditures on credit cards, student loans, and even your home mortgage often exceed the original principle amount. This means that the products and services to which you are indebted, could ultimately cost you more than double the original purchase price. When the Rule of 72 is applied to these expenditures, it could cost the family hundreds of thousands of dollars over time. The first area that the Equity Creator® addresses is Debt Expenditure.
Because of Americans' lack of overall financial education, we are currently the worst savers in the world. And most of us who do save, are putting money into tax qualified plans with no other financial reinforcement, such as a liquid emergency fund. Without an adequate emergency fund, a family has only two choices when a financial emergency arises: use high interest credit cards, or suffer the tax penalties and other consequences of tapping their tax qualified plan. Either option can easily turn into a financial snowball.
With an unfettered debt expenditure and lack of emergency fund, you can easily see how a family can become a servant of their debt and ignore a critical area of their family's financial plan: proper protection. If an unforeseen event occurs (death or disability), and the breadwinner(s) is/are removed from the family, the emotional devastation could easily be accompanied by financial devastation. Life insurance, disability, and long-term care are all protection tools that are designed to replace the income of a breadwinner in the event of a loss. Most often, families become entwined in debt and cannot rationalize expenditure in this area at the expense of immediate needs and wants (food, clothing, lifestyle, etc). Within the Equity Creator®, the need is defined, and a budget planned for to accommodate the necessary protection.
Once the first three steps have been arranged, only then can long term retirement expenditure begin. Retirement should never be thought of as a lump sum of money. A sum of money that seems adequate today could leave you well below the poverty level once you reach retirement age. Inflation and taxes continually erode at your future purchasing power. The Equity Creator® assumes a moderate rate of inflation and assumes that even after retirement, your income will be taxable (if you can qualify for tax free income at retirement, all the better). We do not look to achieve a particular sum of money, but we look to replace your income indefinitely in today's dollars. Our program sets you up to become self sufficient at retirement, and not to rely on any corporate or government program to enjoy your golden years.
For most of us, financial success could be defined as a self sufficient retirement, coupled with a significant estate to leave our family. To get there, the Equity Creator® works by not ignoring the fundamental steps in "the pathway to financial independence."