Making Your Money Work Harder
At Money Counts, we can show you how to use the Velocity of Money principles to build more assets with the same money. To better explain how we help you build assets, let's use an example. In the example below, we'll use real estate**.
Multiple Uses of Money
- Investment Real Estate
- Rental Home Purchased: 10 years ago
- Purchase Price: $100,000
- Down Payment: $20,000
- Today's Mortgage Balance: $65,000 ($80,000, less payments and interest)
- Mortgage Payment – Principal and Interest $450, Escrow $150 – Total $600
- Monthly Rental Income - $1,200. Net cash flow before maintenance expenses - $600/month
- Home Appreciation: $55,000 (5% per year)
- Today's Home Value: $155,000
Using Today's Home Value of $155,000 less the $65,000 remaining mortgage balance, the home equity has built to $95,000. You now have two "buckets" of money that can be used in case of an emergency, for your child's education, or during retirement. The first bucket is the home equity. You could borrow a portion of the home equity to pay for college and then use the second bucket, net cash flow, to make the payments on the equity line. The rental property and the renter are paying for your child’s education. As time goes by, the renter pays for the full property value, creating a retirement income stream from the rental income, or an asset that can be sold and used for other retirement or unplanned expenses. Using the excess income from the rental, you can create a third bucket by investing the monthly excess, or by using the excess to fund permanent life insurance which will create increased value for your heirs.
The Money Counts Difference
At Money Counts, we look at more than just your financial statement. We are committed to integrating our financial strategies across all of your financial resources to design the most suitable plan that we can - for your personal situation. We know that your financial goals are more likely to be reachable when your money is actively working for you.
We believe that diversifying your asset mix is not just a decision about how to construct a portfolio of stocks, bonds, and mutual funds. True diversification involves all of your assets and can help you reduce overall risk by creating your "money buckets" with investments that have different economic cycles, and different tax consequences. In the example above, the real estate investment is acting as a fixed income investment with an inflation hedge since rents are likely to increase over time.
We hope that you will give us the opportunity to put our strategies to work for you, your family, and your future.
**For illustrative purposes and should not be used as investment advice.
* This does not represent financial advice. It is intended for clarity purposes. No financial advice will be offered by Money Counts until we have a complete understanding of your individual financial picture. Diversification does not ensure a profit or protect against a loss in a declining market.
* These are the views of Money Counts, Inc., and not necessarily those of LPL Financial and any of its affiliates and should not be construed as investment advice.