Illumination Wealth April 2014: What Does Weight Loss Have to Do With Building Wealth?

We hope everyone has enjoyed March Madness so far (I have as my Wisconsin Badgers have made the Final Four) and the first few weeks of Spring.  Over the last few weeks we have picked up on a lot of going’s on that are really relevant to this month’s wealth building and weight loss related newsletter.

First, anyone that was hoping to get rich quick and win one billion dollars from Warren Buffett by picking all 63  games correctly in the NCAA tournament had their hopes dashed on the first weekend of games. Getting rich quick just isn’t the answer, especially when the odds are 1 in 9.2 quadrillion. Buffett has amassed his fortune by living frugally, investing when the odds are in his favor and having the patience to let his wealth compound for 60 years.

Second, having Spring here means that Summer and spending time at the beach is not too far off. As we have been driving around town we have noticed many more “beach body” related advertisements. Everything from muscle sculpting injections to marine style boot camps to fasting are being offered up as the way to looking your best ever at the beach. Your health and body is not about a weekend fast or a shot but about your lifestyle and commitment to your long-term health goals.

Here’s what we cover this month for you on your path to health and wealth:

· The Market Scoreboard for March 2014

· Illuminating Insights: What Does Building Wealth Have to Do with Weight Loss?

· Articles of Illumination: Curated Articles for Your Enlightenment

Market Scoreboard

 Here is the market scoreboard for March 2014:

Notes: S&P 500, MSCI World Index ex US, Gold, DJ-UBS Commodity Index returns exclude reinvested dividends (gold does not pay a dividend) and the three-, five-, and 10-year returns are annualized; the DJ Equity All REIT TR Index does include reinvested dividends; and the 10-year Treasury Note is simply the yield at the close of the day on each of the historical time periods.

Sources: www.stockcharts.com. Past performance is no guarantee of future results. Indices are unmanaged and cannot be invested into directly. N/A means not applicable.

After a strong month of gains in February, March has shown it’s signs of fatigue. The U.S. broad stock market index S&P 500, chopped around for the month finishing [up / down x%] while the technology laden NASDAQ fell 3% for the month. This performance differential is something to be aware of. Our foreign stock market counterparts declined x% while the laggard emerging market economies such as China, India and Brazil rose in excess of 3%.

Even with the Fed attempting to cut back on their money printing and stimulative efforts, investors are still being impacted by talk of new programs in China and Europe. From CNBC:

“In a speech reported by state media on Friday, China’s premier indicated the Beijing government was prepared to take action to bolster the world’s second biggest economy, saying the government would gradually roll out targeted measures to help economic activity. And on Wednesday, Germany’s Bundesbank said the ECB could buy loans and other assets from banks to support the euro-zone economy, with the statement marking a dramatic departure from its previous stance on the policy.”

During the past week there has been lots of mixed messages on the economic front as the U.S. economy remains far from robust. New home sales fell to a five month low in February, the latest evidence that the housing market rebound may be cooling. Consumer confidence fell in March to its lowest level in four months, according to a private survey. However, other economic data was more reassuring. The U.S. economy grew at a revised 2.6% annualized pace in the final quarter of 2013, more than the government’s 2.4% estimate last month. Consumer spending—which accounts for about two-thirds of the U.S. economy— also rose in February by the most in three months.

Despite some  vulnerabilities in the current market profile, a research note by Charles Schwab’s Liz Ann Sonders made the case that the current economy and stock market is reminiscent of the mid 1990’s – as it more than doubled in price until it’s climactic top in early 2000. Should an investment be based on the 1990’s analog alone, no? But it should have you keep an open mind to better than expected outcomes in the years ahead, just as worse than expected returns are possibilities as well.

As the great investor Gerald Loeb reminds us, “To make money in the stock market you either have to be ahead of the crowd or very sure they are going in the same direction for some time to come.”

Illumination’s Insights: What Does Building Wealth Have to Do With Weight Loss?

This past week I came across an article from the Star Tribune that discussed What makes dieter’s give into temptation? It explained how most dieters know all to well how difficult it is to keep the weight off for good. Researches discussed the need for people to become more aware of the various personal, situational and environmental factors that expose them to temptations. Over half of the participants gave in to temptation during the short study. Yet the one thing that appeared to help the dieters was an ability to focus on their long-term goals.

With a wife whose career is committed to improving people’s physical health, I have become keenly aware of the similarities between building wealth and successful weight management.

It’s a Lifestyle

So many people go from one diet to the next and never consistently keep the weight off. Despite all weight loss hoopla, it all comes down to a simple formula: The amount of calories you consume minus the amount of calories you burn. If you eat the same amount of calories as your burn, your weight holds steady. Eat more calories than you burn, you will gain weight. Weight management is all about the lifestyle choices you lead on a daily basis – from the foods you eat to the exercise you do.

For the wealth builder’s it’s all about lifestyle as well. In this case, it’s not about calories but about the amount of money you take in versus the amount of money you spend. The first step to wealth involves saving. You can never build wealth by spending money. A wealth builder needs to create a sufficient gap between what he makes and spends. A lifestyle that allows you to save 15-20% of your income is the starting point. You must control your spending so that your lifestyle lags your income or you will never have a comfortable retirement or the ability to build wealth.

There’s No Such Thing as Get Thin (Rich) Quick

Diet pills, ab simulators, muscle sculpting shots and gastric bypass surgery are just a few of the many things that people think will help them get thin and stay thin. It’s quick and easy and sounds much more fun that eat less and exercise more.

Building wealth is very similar. Nobody really likes to budget and be told you need to save more and spend less. I mean who really wants to be told that smart investing (e.g. keeping costs low, diversifying, risk management and having an investment plan) is pretty boring.  It’s much more exciting to attempt to get rich quick on the next hot thing like Bitcoin or the Candy Crush IPO. Extreme diets and get rich quick schemes do not work over the long run.  

Good Nutrition

Some food are just plain old better for you than others. A diet heavy on processed food and saturated fat will do no wonders for your waistline. Eating wholesome foods and “real” food has proven effects on your metabolism which helps in  maintaining a healthy weight . Building wealth through healthy investing is no different. Investors can buy processed investments such as variable annuities, front end loaded mutual funds and whole life insurance and have fees drastically eat into their investment portfolio. Or the investor can pursue investing in real companies, real estate, and low cost traditional paper assets such as stocks, bonds and index funds. The healthier you eat and invest (which is something in your control), the better the prospects are for your financial health and wealth.

A Commitment to Long-Term Goals

The one thing that helped dieters was a focus on their long-term goals. Losing and/or maintaining a healthy weight is never about the food or exercise itself. It’s about the energy, vitality and experiences that come with it. It’s about long-term health and the ability to age and have the ability to experience and live the things that one values most.

Building real wealth is just the same. Wealth builders have long-term goals and a plan to achieve them. They know specifically how much they need to make, save and invest to bridge the gap financially. But the most successful wealth builders long-term goals are not simply monetary, they are about life. Making more money is not deep enough to drive you to prioritize the wealth building process long enough to succeed. It’s about reaching the long-term goals of how you want to live your life and live your values.  

Money is just the means to certain ends, but it’s not life. You must make sure you have plenty to live for when you are working less or no longer working. Take care of your health so you have the energy to do whatever you want to do. Ensure that you are investing in your relationships and your health. Eat well, exercise and get a good night’s sleep. It can be said that we never realize the value of our health until we lose it.

Articles of Illumination

Here’s our monthly compilation of interesting articles and videos designed to keep you informed and engaged in the areas of personal finance, the economy and life. We hope you enjoy this month’s edition. Please send us your thoughts on this month’s articles and suggestions for future posts.

Personal Finances

Matt Rinkey: 3 Reasons why you should clean out your financial junk drawer.

Behavior Gap: Investing Doesn’t Happen in a Vacuum

The Wall Street Journal: Should Parent’s Pay for Their Children’s College Education

Economy & Business

Mackay: If you don’t have a Plan B, you don’t have a plan

The Wall Street Journal: 10 Tax breaks for the rich

Life

StarTribune-Health: What makes dieters give into temptation?

USA Today:  Retirement Living: Biggest retirement regrets

Great TED Talks & Videos

Clayton Cameron: A-rhythm-etic. The math behind the beats

“Wealth is the ability to fully experience life.” – Henry David Thoreau

We wish all of you an early and Happy Easter, Happy Passover and just plain old Happy Days ahead. Thank you for taking the time out of your day to read our newsletter. We care about each and every one of you.

If you ever want to sit down and talk about the essential wealth building tools you need and what it takes to overcome the primary hurdles and temptations that keep most people from succeeding financially, please let us know.

All the Best,

Matt & The Illumination Wealth Team

Feel free to forward this newsletter to any of your family, friends or colleagues; if this was forwarded to you, you may subscribe here.

The opinions and forecasts expressed are those of Matt Rinkey, President of Illumination Wealth Management (IWM) and may not actually come to pass. Mr. Rinkey’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security or Illumination Wealth services. No part of this material is intended as an investment recommendation. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any of IWM’s services. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that investment objectives outlined will actually come to pass. Investors should consult an Investment Professional before investing in any investment program. Neither Mr. Rinkey or Illumination Wealth nor any of their employees shall have any liability for any loss sustained by anyone who has relied on the information contained herein. Entities including, but not limited to IWM, its officers, directors, employees, customers and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. The analysis contained is based on both technical and fundamental research. Although the information contain is derived from sources which are believed to be reliable, they cannot be guaranteed. Past performance is never a guarantee of future results.