Do you invest to build wealth because of fear of the future? You probably will say no but many financial firms want to change that. Here is why:
I get lots of financial magazines targeted to the professional financial advisor and despite the ads touting investment companies boasting their benefits and value add to our clients, there is still a lot of slick psychological fear based marketing. Take this title I received,
“Advising Boomers in a World of High Taxes”
I didn’t know we were in a world of high taxes. In fact, we have been in a low tax rate environment now for the past 50 years according to the Urban Institute-Brookings Institution Tax Policy Center. They say the tax rate are the lowest it has been in the past 50 years, with the exception of the period 1977 to 1986, when it was zero (but when there was no standard deduction, as there is today).
The article goes on to say,
“Taxes may be rising. Beginning in 2011 tax laws may change, and not to the benefit for many investors. Unless new proposals pass by year-end to eliminate or modify these changes, investors need to be prepared for higher taxes.”
Did you notice the twice used “may” word. Doesn’t that make you just want to go out and change your portfolio to “prepare” for the coming higher taxes? Of course, this financial firm has everything to gain by getting your funds moved over to them and you have everything to lose if the high tax rates don’t happen.
We live in a world of constant change. As a Financial Planner for over 25 years, I can honestly say that more changes are on the way. So how to we plan for those changes? We don’t. I always plan on what is happening right here, right now. We don’t know the future (no crystal ball here) and I would never give advice on what the Congress, the Senate, and the President, MIGHT pass into law. When it is law, I give advice on what you can do about it, but until it is reality, you are just speculating on the future and do you really want to gamble with your hard earned money? (Some of you already did in the last downturn.)
So if someone wants to talk to you about financial strategies to build wealth based on proposed legislation, run -don’t walk the other way. And when some financial pundit, news anchor or newspaper article talks about the coming financial crisis, turn off the TV, or turn the page. We have enough to worry about in real time without worry about what “could happen”. Don’t what if, shoulda, coulda, woulda your investments. Invest to build wealth for what you know is real- this time, this tax rate and this goal that you have for your future. Now that’s reality.