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The Allocation Plan evolution

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1The Allocation Plan evolution Empty The Allocation Plan evolution on Mon May 10, 2010 12:06 am


A few days ago I had the opportunity to meet personally with a couple of the consultants who are affiliated with the IWMS. Dozens of emails and a handful of phone calls preceded this meeting. I felt like I had a pretty good grip on the organization and its purpose. I was wrong.

Throughout this process I’ve made what I call the “common sense” mistake many times. The “common sense” mistake occurs when you’re presented with an issue or event with which you’ve had no personal experience but yet you’re inclined to use “your common sense” in making a judgment about the issue or events purpose or legitimacy. Clearly, the personal financial transition that’ll happen with the RV of the IQD is not a common occurrence. Thus, it really has been silly for me to think that “my conventional wisdom and common sense” would allow me to competently understand the types of financial considerations with which I’d have to deal with. Obviously, Wealth Management must be preceded by Wealth Accumulation and that is a tall mountain that most people will never scale. However, for those of us with IQD the top of that mountain is close.

I’ve been working on my asset allocation plan for quite some time. Very early on it was based on two simple objectives; (1) eliminate debt and (2) establish a bank account that would yield interest that I could live off for the rest of my life, thus making an additional income source purely optional.

Objective (1) hasn’t changed. However, though counsel I’ve come to also understand that the creation of new debt is something that should also be avoided as well. What this personally means to me that if I want to purchase a second home or a recreational property then it needs to be done with cash and not with financing. To eliminate debt is a big step in increasing peace of mind. The establishment of peace of mind should be a fundamental objective for everyone. Note that financing is a tool that is used by the masses of people every day. It fact, it’s even openly stated conventional wisdom amongst the masses of people that financing is a good way to leverage your money. However, those of us with IQD and in particular those that are part of this forum should be financially in a position not to have to use debt or to ever have to use long term financing for anything. Moving forward, if a financial deal requires any type of long term financing I’ve come to believe that it should be approached with extreme caution.

As for Objective (2) virtually everything about my understanding has changed dramatically. First of all I’ve come to realize that if I’m going to be serious about Wealth Management then I need to understand all that I can about taxes. Secondly, I’ve come to learn that the financial tool of life insurance really isn’t fundamentally about life insurance. This is a concept that has been a little painful for me to adapt to as I’ve been part of that group for decades that was taught to believe the best financial plan was to “buy term and invest the rest”. However, with the legal reduction of taxes now as a fundamental objective it has been interesting to start to understand the use of insurance as tax reduction strategy. I’ve heard this talked about over the years but never really needed to understand the real financial benefits and tax-related tools that insurance plans make available. Also, the use of a series of differing types of CRT’s will be put in place almost immediately at the time of the RV and certainly prior to IQD exchange. Much has already been written about this in the forum and each time I read through various articles my understanding gets a little better.

I am a work in progress.


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