From the category archives:

Retirement Planning

Taking Ownership Distinguishes the Adults from the Crying Infants

November 27, 2011

Podcast: Download (22.9MB)

This week Doug Andrew discussed the following:

Upcoming Free Webinar

Attend our free 90-minute webinar live over the Internet this coming Tuesday, November 29th at 11:00 a.m. pacific (12:00 p.m. mountain, 1:00 p.m. central, 2:00 p.m. eastern), and again at 6:30 p.m. pacific (7:30 mountain, 8:30 central, 9:30 eastern). The topic is “True Asset and Wealth Optimization.” You’ll learn how to choose the right investments for liquidity, safety, rate of return and tax benefits.

Click Here to Register Now

All attendees receive a bonus hardcover copy of Last Chance Millionaire, Doug Andrew’s New York Times best-selling book.

A Political Puff Piece or a Metaphor for Modern America?

A recent feel-good article in the San Francisco Chronicle illustrates the mindset of dependency held by many Americans.

“President Obama spent only a few hours in San Francisco, but he spent only a few seconds to prove why he is the baby-whisperer. Moments after landing at San Francisco International Airport on Air Force One, Obama spotted 6-month-old Josie Knight, who was crying while being held by her mother, Gina Odom, 37, of Oakland.

“It’s OK,” the president said repeatedly, taking the squalling infant into his arms. Obama bounced gently and held her for about 10 seconds before flashing a smile and returning her to Odom.”

This incident isn’t just a harmless human-interest story about a baby-kissing politician; it’s actually a metaphor.

ABC News, reporting on the speech said:

“At a million-dollar San Francisco fundraiser today, President Obama warned his recession-battered supporters that if he loses the 2012 election it could herald a new, painful era of self-reliance in America.”

Did you catch that? The only thing standing between us and having to rely on ourselves is the President.

Self-reliance used to be one of the distinguishing characteristics of an adult. You can’t be truly self-reliant until you are willing to take charge of your own future. This is especially true in financial matters.

If the objective of the president is to have the government provide everything for us, we’re setting ourselves up for failure on a grand scale. Government hasn’t paid off our mortgages, our kids college educations, or helped us get better jobs despite spending nearly $3.6 trillion in economic stimulus money.

If just 20% of that amount had been given to employers instead and they were allowed to hire the employees they chose to, it would have provided a $50,000 per year salary for two years for every single unemployed person in America.

Instead, we’ve seen the unemployment rate swell from 7.2% to 9/2%.

We need to get out of this mentality that big government needs to step in and take care of us. We need to take ownership in our future. Ownership has traditionally been the American way, but it appears to be falling from favor.

It doesn’t have to be this way.

Ownership Equals Power Over Your Financial Future

Even the IRS recognizes and incentivizes the value of taking ownership of your financial future. For instance, in section 163 of the Internal Revenue Code, you’ll find that the cheapest money you can borrow is that used for the purchase of a primary or secondary residence.

Right now you can borrow money at less than 4.5% interest for such a purchase and deduct interest up to $1,000,000 of acquisition indebtedness and $100,000 over and above that in equity indebtedness.

So if you borrow money at 4.5% and it’s deductible, in most people’s tax brackets, it’s only a net cost of about 3%. The government does this to incentivize people in order to make it easier to own a home. This is why the deduction has been in the tax code for decades.

Should Congress decide to do away with the tax deductibility of mortgage interest, it would be a huge discouragement to potential home-buyers.

Now consider what taking ownership means in terms of your retirement.

Our government is obligated to pay out nearly $115 trillion in unfunded liabilities over the next few decades. If you’re expecting government to be able to take care of you in your retirement, you’re likely in for a big disappointment.

The good news is that you can choose to take ownership of your financial future rather than expecting the federal government to pick you up and comfort you.

You can learn to re-direct, legally, otherwise payable taxes to causes you support by learning and applying the Missed Fortune strategies. By taking ownership, you become self reliant and you’ll do far better than you would by depending upon the government to meet all of your needs.

You’ll learn how to protect your retirement nest egg from the devastating triple whammy of rising taxes, growing inflation and continuing market volatility. Your serious money will enjoy liquidity, safety and a guaranteed rate of return all while accumulating and eventually transferring tax-free.

Are you ready to enjoy a greater sense of confidence and self-reliance in your financial future?

The first step to taking ownership is to meet with a Missed Fortune advisor.

Bonus Missed Fortune E-Book: Baby Boomer Blunders The average Baby Boomer has less than $50,000 accumulated for retirement (which means many have less than that), primarily due to bad habits and having money invested in the wrong places where economic downturns can diminish their nest egg. Download this e-book now at www.babyboomerblunders.com.

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Why Your Your Money Should Outlive You

November 20, 2011

Podcast: Download (22.9MB)

This week Doug Andrew discussed the following:

Upcoming Free Webinar

Attend our free 90-minute webinar live over the Internet this coming Tuesday, November 22nd at 11:00 a.m. pacific (12:00 p.m. mountain, 1:00 p.m. central, 2:00 p.m. eastern), and again at 6:30 p.m. pacific (7:30 mountain, 8:30 central, 9:30 eastern). The topic is “True Asset and Wealth Optimization.” You’ll learn how to choose the right investments for liquidity, safety, rate of return and tax benefits.

Click Here to Register Now

All attendees receive a bonus hardcover copy of Last Chance Millionaire, Doug Andrew’s New York Times best-selling book.

The Question that Keeps the Boomers Awake at Night

One of the biggest questions on the minds of those who are saving for retirement is whether they will outlive the money they’ve saved for retirement.

Where once they were earning rates of return around 8-9%, lately they’ve seen returns of more like 1-3%. The losses of the last decade have proven difficult to overcome and many soon-to-be retirees are looking at the very real possibility of outliving their money.

You need growth on your money in order to have income for your retirement.

For your money to grow, you must have liquidity, safety and a solid rate of return. These are the three key elements of any successful retirement savings plan.

In a nutshell, you need to be able to get your money back when you need it back. Your money must be safe and either insured or guaranteed to protect you against loss of principal. Finally, you must have a rate of return that allows your nest egg to grow faster than the rate of inflation or rising taxes.

These are essential strategic considerations for anyone who recognizes the effects of inflation and taxes and the corresponding need to protect and grow their serious cash for the future.

Those who have their nest eggs tied up in a tax-deferred environment like a 401(k) or an IRA are especially at risk to the tax and inflation power curve. Even with a $1 million nest egg, you’re at significant risk.

Federal and state taxes are likely to take at least a third of your money in taxes the moment you begin to access it. The Congressional Budget Office estimates that, with increasing federal spending, many Americans will be paying nearly 40-50% taxes in order to cover federal deficit spending as well as government debt.

Many investments are not liquid, safe, or earn a predictable rate of return. They fail what is referred to as the LSRR (laser) test that measures how well an investment satisfies these qualities.

Tax-deferred vehicles leave your money vulnerable to higher tax rates because most people, at retirement, no longer have children living at home and their homes are paid off. This lack of deductions, coupled with the prospect of Congress hiking tax rates means that many retirees find themselves in their highest tax bracket yet.

Add to this the effect of rising inflation and its relentless decrease in the purchasing power of each dollar, and it’s easy to understand how even a $1 million dollar nest egg can be drained within a remarkably short time.

Shielding Your Nest Egg Against Taxes, Inflation & Market Volatility

These effects can be successfully countered with Missed Fortune strategies that place your serious cash in a tax-free environment where it can grow, be accessed and ultimately transferred tax-free. This is a perfectly legal maneuver under certain grandfathered sections of the IRS code.

Linking your returns to those things that inflate will allow your money to grow safely ahead of the rate of inflation.

And Indexing strategies provide all the benefit of linking your return to the performance of certain market indexes without the risk of putting your money directly into the market.

Those who know and implement these Missed Fortune strategies can effectively protect their serious retirement money and avoid the fear of outliving their nest eggs.

To learn more, visit with a Missed Fortune advisor today.

Bonus Missed Fortune E-Book: Baby Boomer Blunders The average Baby Boomer has less than $50,000 accumulated for retirement (which means many have less than that), primarily due to bad habits and having money invested in the wrong places where economic downturns can diminish their nest egg. Download this e-book now at www.babyboomerblunders.com.

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Protecting Your Nest Egg By Sticking To the Recipe

November 13, 2011

Podcast: Download (22.9MB)

This week Doug Andrew discussed the following:

Upcoming Free Webinar

Attend our free 90-minute webinar live over the Internet this coming Tuesday, November 15th at 11:00 a.m. pacific (12:00 p.m. mountain, 1:00 p.m. central, 2:00 p.m. eastern), and again at 6:30 p.m. pacific (7:30 mountain, 8:30 central, 9:30 eastern). The topic is “True Asset and Wealth Optimization.” You’ll learn how to choose the right investments for liquidity, safety, rate of return and tax benefits.

Click Here to Register Now

All attendees receive a bonus hardcover copy of Last Chance Millionaire, Doug Andrew’s New York Times best-selling book.

Following the Recipe For Financial Success

The last few years have been frustrating for those who have been searching for the right recipe of how to best protect their retirement nest eggs.

This has been tricky of late thanks to the prospect of rising taxes, inflation and continuing market volatility. The key to success is following a recipe that works.

If you set out to make cinnamon rolls but you either don’t know the recipe, or received a faulty recipe or chose to wing it on certain ingredients and preparation steps, your result will most likely be disappointing.

Failing to follow the proven recipe sets you up for failure. Now, apply that standard to securing your financial future.

Keeping your serious retirement money liquid, safe and tax-free requires first knowing and then strictly following the right recipe in order to be successful.

Here’s an example:

The LSRR (laser) test is an acronym for Liquidity, Safety, and Rate of Return.

Liquidity refers to how easy it is to access your money or to get your money back when you want. Safety deals with how secure your money is and whether or not it is guaranteed or insured. Rate of return is what makes our money grow in spite of the effects of inflation or taxes.

Investment vehicles that can pass the LSRR test are a much safer way to accumulate money tax-free rather than tax-deferred like IRAs and 401(k)s. Not only should your money accumulate tax-free, but also you should be able to access it and eventually transfer it tax-free to your heirs.

The painful reality that will dawn upon those with tax-deferred retirement vehicles is that, upon withdrawing their funds, they’ll be paying nearly a third of their money in income taxes. Their tax liabilities and tax rates will likely have increased, while their deductions will have disappeared. If inflation goes up, the purchasing power of their savings will have diminished.

This means that even a million dollar nest egg will be whittled down to size much quicker than most people can imagine. Between the bite of taxation and even a modest 5% rate of inflation, a million dollar nest egg will be completely depleted in just 11 years.

There’s simply no substitute for learning and following the right recipe.

The Five Toughest Questions Most Financial Advisors Will Face

What has been the actual (cash on cash) rate of return that your clients have realized during the last 10 years?

Take whatever percent they tell you, and divide that into 72. For instance if they tell you their client’s rate of return was 12%, divide 8 into 72 and you’ll get 6.

You’re using the “Rule of 72” to determine how quickly their clients’ money is doubling. So if the rate of return was 12% you’ll ask them if their clients’ money doubled every six years.

Remember, if their clients are subject to taxes on the back end of their investment, that 12% really equals only 8% after taxes. There are better ways to get an 8% rate of return that’s tax-free.

Can you give me a guarantee of no loss of principal or at least a guaranteed return of 1-3% even when the economy is tanking with upside potential when the economy is doing well and can you make it tax-free?

The answer to this question will tell you if your advisor understands how to use indexing so that their clients don’t lose money even in a down economy and start making money the second the economy grows.

During good years they can make up to 14-15% and during bad years they’ll still make 1-3% guaranteed, and it will accumulate tax-free. Again, not that many advisors know how this is done.

Can you protect my money automatically from the effect of inflation if we start experiencing higher inflation rates?

Financial advisors who’ve received Missed Fortune training will understand how to link your returns to those things that inflate. This means that your money grows at a rate that outpaces that of inflation.

Advisors who don’t have this knowledge will likely just shrug their shoulders.

Can you protect my nest egg from the effects of taxes going up in the future?

Again, most advisors will squirm when faced with this question because many of them still advise their clients to save their money in tax-deferred vehicles like IRAs and 401(k)s that subject them to further taxes when they begin accessing their money.

There are better vehicles that allow a client’s money to accumulate tax-free, and remain tax-free when at distribution and again at transfer when they pass away.

Can you help me get my money out of my IRAs and 401(k)s with reduced tax or maybe no tax impact?

Most advisors, most CPAs and tax attorneys will be dumbfounded when asked to do this, but an advisor who knows how can help you withdraw 50, 60 or 70,000 dollars a year without getting hammered for taxes.

It’s called a strategic rollover and its another of the Missed Fortune strategies that have been helping people grow their money safely, predictably and tax-free for decades.

Simply knowing to ask the right questions can get you headed in the right direction.

The next step is meeting with a Missed Fortune advisor to learn what to do next.

Bonus Missed Fortune E-Book: Baby Boomer Blunders The average Baby Boomer has less than $50,000 accumulated for retirement (which means many have less than that), primarily due to bad habits and having money invested in the wrong places where economic downturns can diminish their nest egg. Download this e-book now at www.babyboomerblunders.com.

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Moving Your Money to Safety

October 30, 2011

Podcast: Download (22.9MB)

This week Doug Andrew discussed the following:

Upcoming Free Webinar

Attend our free 90-minute webinar live over the Internet this coming Tuesday, November 1st at 11:00 a.m. pacific (12:00 p.m. mountain, 1:00 p.m. central, 2:00 p.m. eastern), and again at 6:30 p.m. pacific (7:30 mountain, 8:30 central, 9:30 eastern). The topic is “True Asset and Wealth Optimization.” You’ll learn how to choose the right investments for liquidity, safety, rate of return and tax benefits.

Click Here to Register Now

All attendees receive a bonus hardcover copy of Last Chance Millionaire, Doug Andrew’s New York Times best-selling book.

Losing Trust in Our Financial Systems

A recent article by Catherine New in Daily Finance shows that Americans are losing trust in the country’s financial system.

The results of the magazine’s quarterly survey indicate that trust in our financial institutions is slipping.

The article points out:

“The latest figures from the quarterly Chicago Booth/Kellogg School Financial Trust Index showed that only 23% of those surveyed said they trust the country’s financial systems, down from 25% in June. The index measures trust in four areas: banks, the stock market, mutual funds and large corporations.

“The findings in this issue reflect what’s been reported in the news and demonstrate the fragility of trust many Americans still have in the institutions where they invest their money,” said Luigi Zingales, a finance professor at the University of Chicago Booth School of Business and co-author of the Index.

Trust in banks has experienced an even steeper decline, falling from 39% in June to 33% in October. Notably, people were much more inclined to trust local banks and credit unions: More than half of those surveyed said they still had faith in those institutions.

The survey also revealed that nearly 60% of respondents were either angry or very angry about the current economic situation — the highest level of anger measured since the earliest months of the financial crisis.”

These findings back up an earlier survey by CNN that revealed that nearly 90% of Americans say the economy stinks.

3 years after the financial crisis pushed this country into a deep recession, financial conditions are as poor as they’ve ever been.

Ask yourself: would you want to stay on board a sinking vessel that has been foundering for the past decade? Those Americans who’ve had their retirement money in the stock market have made little, if any, gains in the past 10 years.

If you had $100,000 socked away in an IRA or 401(k) you saw it take a 30 or 40% hit following 9/11. Then after growing back to its high-water mark it took another huge 39-40% decline in 2008. Even today few people have managed to break even thanks to the market volatility of the “lost decade.”

The situation becomes all the more uncertain when considering that Congress and the president are still spending with abandon. In just three years the national debt has soared from $9 trillion to nearly $15 trillion.

If you remain on board a sinking vessel by keeping your money in IRAs and 401(k)s thinking that future taxes will be lower, you’re not seeing the writing on the wall. Taxes are only one of the threats to your retirement money; the other two components of the upcoming triple whammy are inflation and market volatility.

You need a strategy that moves your money to safety.

The Triple Threat of the Next 10 Years

Taxes will be going up. The Congressional Budget Office estimates that tax rates could go as high as 62.5% for couples making over $200,000 or single filers making over $100,000. Even if the Bush tax cuts are allowed to expire at the end of 2012, it will be the largest tax increase in history.

Inflation is the second big danger. Over the past two decades inflation has averaged around 2-3%, but those days are over. The days ahead will likely see inflation inching up to 5% on the low end and perhaps as high as 7-10% on the high end.

It’s essential that you protect yourself from the effects of inflation as it robs every dollar you have of purchasing power.

The third big danger is continued market uncertainty. This type of economic uncertainty is what prevents employers from hiring and contributes to the growing unemployment rate.

These three dangers combine to form an economic triple whammy that requires different action than simply following the crowd.

You must understand the tax and inflation power curve.

Let’s say you socked away $10,000 a year for 30 consecutive years and earned 7.2% interest. You’d have a nest egg of about $1 million. Now if you were to withdraw only 7.2%, in order to maintain your principal, you’d be taking out $72,000 a year.

But if that money is in an IRA or 401(k), you’ll be paying a nice chunk of any money you withdraw to the IRS. Your tax situation will be complicated because most people, by this time, will have no dependents to claim, their home will be paid off, and they’ll no longer be contributing to their retirement fund.

This means their tax liabilities will be higher rather than lower. It’s a safe bet that of that $72,000 you’re withdrawing each year, about 1/3 of it–$24,000 will be gobbled up by state and federal income taxes.

Now consider what inflation will do to the remaining $48,000 a year you’re expecting to live on. Even at just 5% inflation, the purchasing power of your dollars will be cut in half twice over that 30-year period. This means that you’ll only be able to purchase with $4,000 per month what $1,000 per month today would buy.

Now you start to see why the effect of the tax and inflation power curve is so important to understand and even more important to counter.

You need strategies that reposition your serious money for the future with a strategic rollout before the end of 2012. This will allow your money to accumulate tax free from that day forward as it’s grandfathered under the Internal Revenue code.

The strategies you choose must allow you to access your money tax-free and transfer it tax-free when you die. They must tie your money to those things that inflate so when inflation comes, your rate of return is outpacing the rate of inflation.

Your strategies must allow you to index your money to the markets without putting it at risk to the volatility of the market. It should grow when the economy grows and protect your principal when the economy declines.

These are the Missed Fortune strategies that have been working for decades for those willing to break away from the crowd and move their money to safety

Learn more by meeting with a Missed Fortune advisor.

Bonus Missed Fortune E-Book: Baby Boomer Blunders The average Baby Boomer has less than $50,000 accumulated for retirement (which means many have less than that), primarily due to bad habits and having money invested in the wrong places where economic downturns can diminish their nest egg. Download this e-book now at www.babyboomerblunders.com.

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Learning From the Mistakes of Others

October 23, 2011

Podcast: Download (22.9MB)

This week Doug Andrew discussed the following:

Upcoming Free Webinar

Attend our free 90-minute webinar live over the Internet this coming Tuesday, October 25th at 11:00 a.m. pacific (12:00 p.m. mountain, 1:00 p.m. central, 2:00 p.m. eastern), and again at 6:30 p.m. pacific (7:30 mountain, 8:30 central, 9:30 eastern). The topic is “True Asset and Wealth Optimization.” You’ll learn how to choose the right investments for liquidity, safety, rate of return and tax benefits.

Click Here to Register Now

All attendees receive a bonus hardcover copy of Last Chance Millionaire, Doug Andrew’s New York Times best-selling book.

Contrast and Comparison

One of the most simple and compelling lessons in economics can be drawn from the experience of two neighboring states and their respective experiences with taxes and unemployment.

Both states were facing budget shortfalls. Both states needed increased revenues to meet their financial obligations. Both sought to turn the tide toward economic recovery, but there’s a dramatic difference in the approach taken by each state and a corresponding difference in the results they got.

Anytime government suffers for lack of tax revenue to pay its employees and programs, it has the option of raising taxes to bring in more revenue, or lowering taxes to increase the revenue being taxed. It can either increase regulation of employees and the associated costs of doing business or it can deregulate and create certainty and confidence among employers so they’ll hire more workers.

In January of this year, Illinois chose to raise taxes to address it’s budgetary concerns. The results were swift and sure. But they weren’t the results Illinois was banking on receiving.

From an article in Business Insider:

“[I]n addition to the worst bond rating in the country, the state lost the most jobs of any state last month. The Illinois Policy Institute reported the grim news that “Illinois lost more jobs during the month of July than any other state in the nation, according to the most recent Bureau of Labor Statistics report.

After losing 7,200 jobs in June, Illinois lost an additional 24,900 non-farm payroll jobs in July. The report also said Illinois’s unemployment rate climbed to 9.5 percent. This marks the third consecutive month of increases in the unemployment rate.”

There is a clear correlation between the January tax increase and the subsequent drop in employment numbers. It’s a powerful illustration of the futility of trying to conceal the results of runaway spending by imposing punitive taxes on producers rather than reducing the spending.

If you were a business owner in Illinois, would the prospect of higher taxes motivate you to grow your business?

Faced with a similar budgetary shortfall, Wisconsin Governor Scott Walker asked employers why they weren’t hiring people. Business leaders told him they were feeling uncertainty about whether taxes were about to go up or not. So Wisconsin chose to lower taxes and to deregulate in order to provide the certainty and confidence that job creators were seeking.

The results were astounding.

Wisconsin saw jobs increase dramatically with 39,000 new private sector jobs were created with 14,100 jobs in manufacturing. Wisconsin’s non-farm growth is now two times the national average. One other happy note: the state also managed to turn a $3.6 billion deficit into a surplus in that same time thanks to the increased revenues.

Two states facing similar challenges, took radically difference approaches and got radically different results. The lesson in this for all of us is that economic growth and prosperity only occur where job creators are operating in a climate of certainty and confidence.

This is worth remembering whenever government leaders propose policies that create uncertainty and less confidence by seeking to raise revenue by increasing taxes and regulation.

Principles of Wealth Accumulation

If you’re seeking greater certainty and confidence in your personal financial future, you’ll need to incorporate proven strategies based upon sound principles. Here are two principles that can give you an edge.

The first is the miracle of compound interest. It’s a principle Einstein said was one of the least understood phenomena on the planet.

A single dollar, doubling every period for 20 periods, will grow to $1,048,000 if that growth is tax free.

If you have to pay tax on every gain your money makes, that dollar being doubled every period is instead being eaten up by federal or state income taxes. If you’re in a 25% tax bracket that means you’ll actually only have $72,000 to show after 20 doublings. In a 33% tax bracket it will only grow to $27,000.

This is why tax-deferred or taxed-as-earned investments should be avoided in favor of strategies that allow your money to actually grow through compound interest.

The second principle is that of tax-free accumulation. Most Americans accumulate their money in the worst possible place by paying tax on their income as they earn it. Then they place that money in taxed-as-earned investments and pay tax on any of the gains they make. Finally, they pay more tax when that money is transferred to their heirs.

As a result, what should have been a sizable nest egg is quickly consumed by taxes and ultimately ends up as a fraction of what it could have been.

It’s like crawling towards the finish line of financial independence when they could be running or flying. Is it any wonder why so many Americans are dependent upon Social Security and Medicare?

A better choice would be a vehicle that allows your money to accumulate tax-free now and in the future, thanks to sections 72E, 7702 and 101A of the IRS code. Not only does your money remain safely yours, but you can access it and ultimately transfer it to your heirs tax free. That’s the power of choosing wisely.

These are just two key principles of wealth accumulation. Missed Fortune strategies incorporate these and many other principles that enable you to enjoy certainty and confidence in your financial future.

Learn more by meeting with a Missed Fortune advisor.

Bonus Missed Fortune E-Book: Baby Boomer Blunders The average Baby Boomer has less than $50,000 accumulated for retirement (which means many have less than that), primarily due to bad habits and having money invested in the wrong places where economic downturns can diminish their nest egg. Download this e-book now at www.babyboomerblunders.com.

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The Economic Power of Choosing Wisely

October 16, 2011

Podcast: Download (22.9MB)

This week Doug Andrew discussed the following:

Upcoming Free Webinar

Attend our free 90-minute webinar live over the Internet this coming Tuesday, October 18th at 11:00 a.m. pacific (12:00 p.m. mountain, 1:00 p.m. central, 2:00 p.m. eastern), and again at 6:30 p.m. pacific (7:30 mountain, 8:30 central, 9:30 eastern). The topic is “True Asset and Wealth Optimization.” You’ll learn how to choose the right investments for liquidity, safety, rate of return and tax benefits.

Click Here to Register Now

All attendees receive a bonus hardcover copy of Last Chance Millionaire, Doug Andrew’s New York Times best-selling book.

Two States At An Economic Crossroads

With so many eyes focused on the efforts of state and national government to turn the economic tide towards recovery, the states of Illinois and Wisconsin have provided a powerful object lesson. One state demonstrated exactly what to do to promote economic and job growth, the other showed us exactly what not to do. All states should learn from their examples.

Anytime government suffers for lack of tax revenue to pay federal employees and programs, they have the option of raising taxes to bring in more revenue, or lowering taxes to increase the revenue being taxed. They can also increase regulation of employees and the associated costs of doing business or they can deregulate and create certainty and confidence among employers so they’ll hire more workers.

Only one of these approaches is consistent with making unemployment go down.

In Illinois, lawmakers raised taxes in January of this year and saw unemployment increase dramatically.

This is described in detail by Business Insider magazine:

“[I]n addition to the worst bond rating in the country, the state lost the most jobs of any state last month. The Illinois Policy Institute reported the grim news that “Illinois lost more jobs during the month of July than any other state in the nation, according to the most recent Bureau of Labor Statistics report.

After losing 7,200 jobs in June, Illinois lost an additional 24,900 non-farm payroll jobs in July. The report also said Illinois’s unemployment rate climbed to 9.5 percent. This marks the third consecutive month of increases in the unemployment rate.”

There is a clear correlation between January tax increase and the subsequent drop in employment numbers. It’s a perfect illustration of the futility of trying to conceal the results of runaway spending by imposing punitive taxes on producers rather than simply cutting the spending.

Ask yourself, if you were a business owner in Illinois, would higher taxes motivate you to grow your business?

By contrast, during this same time frame, the state of Wisconsin saw jobs increase dramatically with 39,000 new private sector jobs were created with 14,100 jobs in manufacturing. Wisconsin’s non-farm growth is now two times the national average. One other happy note: the state also managed to turn a $3.6 billion deficit into a surplus in that same time thanks to the increased revenues.

So what did Wisconsin do differently?

Governor Scott Walker asked employers why they weren’t hiring people. Business leaders told him they were feeling uncertainty about whether taxes were about to go up or not. So Wisconsin chose to lower taxes and to deregulate in order to provide the certainty and confidence that job creators were seeking.

The results speak for themselves.

If we wish to see unemployment grow and business continue to wither, Illinois is a great example of how to do that. However, if we want to see unemployment reversed and business incentivized to grow, Wisconsin is the better example to follow.

Economic growth and prosperity only occur where job creators are operating in a climate of certainty and confidence.

Certainty and confidence are the result of sound strategies. This is true of states, nations and individuals.

Standing At Your Personal Financial Crossroads