FinancialMentor.Com Financial Freedom For Smart People Fri, 01 Aug 2014 05:00:13 +0000 en-US hourly 1 Retirement Planning Checklist Fri, 01 Aug 2014 05:00:13 +0000 How to Plan Your Retirement Whether You’re 20 or 80: Get Started with this Simple Retirement Checklist for Each Stage of Life

Key Ideas

  1. Discover the no-brainer first step everyone must do – starting today!
  2. Find out which advanced strategy is seldom used but amazingly powerful.
  3. Learn why formal retirement planning too early is actually a bad idea.
  4. Uncover the exact action steps required in the years immediately before retirement.

Retirement planning doesn’t have to be complicated.

You don’t need a degree in finance and you don’t have to read a bunch of books to understand the important action steps.

For the bulk of your working years, there are just a few important and very simple actions that need to be done right. The rest can be figured out in the years immediately preceding the day you retire.

That is why we created this retirement planning checklist: to demystify the vagueness around retirement planning, simplify the process where appropriate, and provide a step-by-step guide so that you can do those few important things right at each stage of your life.

The retirement planning checklist is an easy-to-use reference for people who have other things to do besides get a degree in financial planning.

Retirement Planning Checklist in Your 20s: Save Money & Build Assets

You’re out of school and you’ve begun working at your first job. You’re finally on the path to independence after relying on your parents or other adults all your life. The future is in your hands, and so is your financial security.

Let’s face it: at age 25, your priorities don’t include reading books on retirement planning. Yet, if you don’t begin the process of saving for retirement now it will only get harder with each passing year.

You stand at a crossroads. You can choose between good money habits or financial ignorance.

You can take the easy and secure path to financial security by saving from each paycheck… or you can follow the more common path of consumerism and financial mediocrity by putting it off until later.

Which path you choose will largely determine your financial outcome in life.

Admittedly, saving for retirement is easier said than done for most in their twenties because old age seems impossibly far away. Why save for it now?

The Importance of Starting Now

There’s plenty of time so it’s not a priority. Right?

Not really. Every 60 year old that started building their assets later in life wishes they started earlier.

Every 60 year old that started building their assets later in life wishes they started earlier.
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The math is simple, compelling and undeniable. And that’s good news: there is no need to get complicated at this stage.

You don’t have to read investment books, get a masters degree in finance, or build some fancy plan because that would only cause you to put off doing what is important at this stage.

Trying to immerse yourself in complicated materials doesn’t do anything to help you. Instead, it serves as a great excuse to not get started because you feel overwhelmed.

But that’s the only thing to do right now: just get started.

“Sometimes the questions are complicated and the answers are simple.” - Dr. Seuss

How to Begin

One simple action is sufficient. Here’s what you can try to just get started today:

  • Max out your government sponsored, tax-deferred retirement plans. Your employee benefits department, accountant or any mutual fund company can show you how.
  • If your company offers a 401(k) or similar plan, contribute the maximum.
  • Fund either a traditional IRA or Roth IRA to the maximum amount allowed by law. (Self-employed? Try the SEP IRA.)

Put as much money into tax deferred savings as you can. Few things are black-and-white clear in financial planning. If you’re in your 20s or 30s, you’re in luck: you just found one of them. Just do it and get started.

In your twenties? The only thing you need to do for your retirement: just start. Take one action...
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Want Retirement Planning Extra Credit?

For those that are savvy wealth builders, an additional smart strategy at this stage in life is to buy real estate with a fully amortizing, fixed-rate mortgage that can produce income and provide positive cash flow.

Notice the details of that last sentence: positive cash flow, fully amortizing fixed-rate mortgage. These are important details. Don’t gloss over them.

Rather than rent an apartment, buy a starter home or a small apartment building that you can live in now and use as a rental unit later. The fully amortizing loan will be paid off by the time you are ready to retire and you will have inflation-adjusted income you can never outlive.

This is also a very good strategy for people who choose lower paying careers thus making it harder to save large amounts of money in retirement plans. Skilled deal-makers, handymen, and construction workers with specialized talents can also benefit from this investment approach.

These two strategies may sound aggressive, but anyone in their 20s or 30s today must own up to the idea that the Baby Boomers will either bankrupt Social Security or change it beyond recognition.

You can’t depend on Uncle Sam to pay for your retirement. If you are going to retire in style, then it is up to you to make it happen. You’re on your own. Sorry, but that’s reality.

To sum up, here’s all you need to worry about right now:

  1. Max out your tax deferred retirement plan contributions. This is the no-brainer first step that everyone should do. It requires no education or financial experience so you can start immediately. It’s as simple and direct as anything gets in the financial world.
  2. Acquire positive cash flow rental property: This strategy is for more aggressive wealth builders with the skills and inclination to go one step beyond the basics. It’s not necessary and isn’t for everyone, but it has the unique advantage of providing inflation-adjusted income during retirement that you can never outlive.
  3. Oh yeah, and don’t forget to have fun! You’re only young once.

Don’t worry about creating a highly-detailed plan at this stage of life. Complicating your situation will only serve as an excuse for procrastination.

You don’t need to learn about retirement planning or hire a financial planner. Just follow these two simple action steps designed to put you in the asset accumulation mode and never touch the savings that accumulate.

If you keep it simple and get started accumulating assets, you’ll complete all the retirement planning that is necessary at this stage of life.

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Retirement Planning For Mid-Career: Grow Your Assets and Financial Intelligence

Mid-career is defined as the period following your 20′s and 30′s but ends 5-10 years before your retirement.

The length of “mid-career” retirement planning varies widely from person to person: some will retire in their 30′s and others won’t retire until their 70′s. Some will have very long “mid-careers” and others will have very short “mid-careers”.

Your retirement planning objectives for mid-career are twofold:

  1. Grow a nest egg large enough to support retirement.
  2. Grow your financial intelligence to make smarter, more profitable, financial decisions

Your twenties were about getting started building assets. Your mid-career years are about turning up the volume on asset growth and your financial skills. It is the beginning point of real retirement planning but is still too far away from your actual retirement date to benefit from formality and over-planning.

“Our life is frittered away by detail. Simplify, simplify.” –Henry David Thoreau

The reason you don’t want to get into formal retirement planning yet is because too many factors will change between now and when you actually retire. Much of the planning you would do now would just be invalidated by the time you reach actual retirement.

Instead, focus the available resources you do have where they can make a difference. Emphasize your investment skills to grow your assets by developing your financial intelligence. It is a skill that will pay you for a lifetime, and by now your assets should be large enough to justify the time and effort required.

Below are the mid-career action steps that you can add to the savings process you already put in place during your 20s:

  • Build Your Financial Intelligence: Now is the time to begin learning more about investing and personal finance. Read books, listen to audio courses, and study the investment masters. You need to learn what works and what doesn’t with investing so that you can hire smart money managers and make wise investment decisions.The reason this is important is because the return on your assets will be a far greater determinant of your financial security than your savings abilities, and the return on your assets is a function of your investment knowledge and decision making. By contributing to your investment education regularly you are compounding your financial intelligence just like regular contributions to your savings compound your wealth. It is essential to a secure retirement and true financial independence.

“Employ your time in improving yourself by other men’s writing so that you shall come easily by what others have labored hard for.” —Socrates

  • Keep Accurate Records: Another habit to develop in mid-career is good record keeping. You want to run your finances like a business. That’s exactly what it is: a financial management business. Maintain expense records showing how much you spend and where it all goes so that you know how much income you need to retire securely. Keep your investment records efficiently organized and monitor the progress of your assets. Treat your money with the respect it deserves and it will respect you back by sticking around and growing in your accounts.
  • Create Your First Ballpark Estimate: Make your first attempt at figuring out how much money you will need to retire comfortably. Don’t worry about doing it perfectly because so much will change between now and retirement that perfection and accuracy are impossible at this stage.All you want to do is create a ballpark estimate so that you can get your head around the size of the goal and whether or not you are on track. Determine the low end range of acceptable savings required using optimistic assumptions then determine the high end range using pessimistic assumptions. Reality will likely be somewhere in between. This task is easily completed using our free retirement calculators.
  • Never Raid Your Retirement Accounts: This should go without saying, but just in case there was any vagary – you can never, ever raid your retirement accounts to support current lifestyle. If you lost your job and can’t find a suitable position then take an unsuitable position but don’t use retirement savings as an easy solution. If the car is broken then fix it but don’t buy a new car with your retirement money.Whatever problem you face in life must be solved as if the retirement accounts don’t exist. They will always appear as the easy solution to life’s economic difficulties, but that will only create bigger problems for you in the future and defeat the whole purpose of saving for retirement.The truth is you would find a solution if you didn’t have the retirement plans, so just assume they don’t exist and find that solution anyway. Never raid your retirement accounts – never. Did I say never? Yes, never…ever.
  • Think Long-Term: Your habits will determine your success. Every day you make a choice between consuming today and delaying gratification by saving and investing for consumption tomorrow. You can enjoy a BMW or Lexus today or you can invest that money so that you can enjoy a lifetime of BMW’s and Lexus’s. Similarly, you make a choice every day between the mindless rot of television or growing your financial intelligence with good investment books and seminars on CD or DVD. The habitual way you spend your limited resources of time and money during mid-career will determine your long-term financial success. It’s not how much money you make that determines your financial success, but what you do with what you make. Your habits will determine your success.

How much you make doesn't determine financial success. It's what you do with what you make.
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Checklist For 5 To 10 Years Before Retirement

Up to this point the retirement planning process has been intentionally oversimplified so that you don’t get distracted by unnecessary information that might divert or delay accomplishing the most important tasks. Your responsibility so far has been to build a solid foundation of good financial habits so that you can grow your assets and grow your financial intelligence.

Now it is time to up the ante because retirement is within sight. You have a limited number of years remaining to adjust for any errors or shortfalls.

“We think in generalities, but we live in detail.” - Alfred North Whitehead

It’s time to take retirement planning seriously and dig into the details. You’re getting close enough that time is running short.

Any critical adjustments must be made now while there is still sufficient time to change course. In order to know what adjustments to make you will have to get more detailed.

Below are some actions steps to consider now that you can see light at the end of the retirement tunnel:

  • Build Your Dream: Grab a favorite bottle of wine, relax with your spouse and share your dreams for retirement. You want to answer the “what, where, and when” questions.Where do you want to live? What do you want to do? When do you want to do it?Answering these questions is essential because they determine “how much” your retirement will cost. You must know the “what”, “where” and “when” of retirement planning to go to the next step and figure out “how much”. Think in stages because the early period of retirement when you are active and traveling will be very different from late stage retirement. Build a vision that both of you are excited to live.For the whole story on how to complete this step please see Five Essential Questions For Pre-Retirement Planning on this site.
  • Create A More Accurate Ballpark Estimate: Once your dream for retirement starts taking shape you can then sharpen your pencil when estimating “how much” assets and income you will need to retire securely. Your dream for retirement determines the cost. Five-star travel is more expensive than camping, and playing golf costs more than playing bridge. Where you live and what you choose to do will determine your financial needs. It is time to tighten up your budget estimate and determine if your assets are on track or lagging behind. With just a few years to go you have precious little time to make adjustments. For the whole story on how to complete this step please see How Much Do I Need To Retire and 27 Retirement Savings Catch-Up Strategies For Late Starters on this site.
  • Consider Paying Down The Mortgage: If your savings is on track and there is still more money than month then consider paying down your mortgage. There are many advantages to living mortgage-free in retirement: not only does it lower your monthly income needs but your home is a uniquely protected asset against certain debts and financial obligations. Many retirees feel more secure and sleep better at night when they own their home free and clear.
  • No More Consumer Debt: Consumer debt including auto loans and credit card debt are a no-no at this stage of the retirement planning game. Debt is antithetical to wealth building and financial security. You should only spend what you can afford because retirees need to earn interest – not pay it. Eliminate debt and learn to live within your means now before it is too late.
  • Take Care Of Your Health: There’s not a lot of value in spending your working years building a robust nest egg only to die of a heart attack before you get to enjoy it. As youth fades, your body becomes less tolerant of poor health habits. It may be a cliché but now is the time to build the habit of exercising and eating right so that you can add more years to your life and more life to your years. Get regular checkups and screenings so that any problems can get caught early enough to do something about them. Take care of your health now so that you can live a long, full retirement.

Your health is as critical as your wealth. Take care of yourself today; thank yourself tomorrow.
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  • Encourage Independence For Dependents: You may be at a tough stage in life where aging parents need help and adult children are just getting started. When you get squeezed at both ends like this it is hard to take care of your own retirement planning needs at the same time. If your kids are out of school and not disabled, encourage their independence. Empower instead of enable. It is important to respect your financial needs as much as everyone else’s.
  • Review Your Insurance Coverage: Life insurance that was appropriate when your savings and kids were both small may be a wasteful expense now. Alternatively, it may be appropriate to raise the liability limits on your home and auto insurance policies and consider an umbrella policy as your assets grow. You should also understand long-term care insurance and how it fits into your overall financial plan. You’re entering a different phase of life and your insurance needs should change to mirror life’s changes.
  • Get Defined Benefit Plan Estimates: Contact Social Security and your company’s human resource department to get a benefits estimate based on possible retirement dates. How are your benefits affected by your expected retirement age? Are any special severance packages being offered? What career changes can increase or decrease benefits? What about health care insurance? Learn the arcane rules and intricacies for both the public and private pension systems so that you can plot a strategy to maximize the benefits you will receive. This knowledge can make a significant difference.
  • Get Health Insurance Estimates: It’s time to determine what Medicare supplemental insurance will cost and get estimates for self-insuring the time period between when you retire and when you qualify for Medicare. Fidelity Investments estimates that a couple retiring at age 65 with no employer health coverage will need close to $200,000 just to fund out of pocket medical expenses in retirement. These numbers are significant and must be built into your budget.
  • Get A Second And Third Opinion: Get referrals for at least two fee-only financial planners who specialize in retirement planning. Have them look over your portfolio, budget, and investment allocations and provide additional opinions. You want to make sure you haven’t overlooked something important or completely misjudged the situation. Fee-only financial planners can help you sort out some of the more technical questions like taking Social Security early or waiting until later for bigger benefits. Should you take a lump-sum retirement plan distribution or monthly payments? What is the best order of liquidating assets to support spending in retirement? What is their recommended asset allocation and investment structure?

These questions are complicated and vary with individual circumstances. The fee charged for the personal advice is cheap insurance for the value provided by having an educated, second set of eyes look over your retirement plan. Just don’t let them sell you any investments or insurance. You want impartial advice – not a sales pitch.

[dont-hire-a-financial-coach] I would be remiss if I didn’t mention that a retirement planning coach such as myself can be very valuable as well. See our page contrasting financial advice with financial coaching do decide which is best for you.

If you and your hired experts agree that you are on track for a secure retirement then congratulations: you are a retirement planning genius. On the other hand, if it looks like you are lagging behind then now is the time to do something about it. (Again, you can check out 27 Retirement Savings Catch-Up Strategies For Late Starters to learn how to correct the problem.)

Also, because this stage of retirement planning is about detail it is important to understand the limits to what can realistically be accomplished here.

The scientific appearance of the retirement planning process paints a deceptively detailed picture about what is essentially an artistic and inherently imprecise process. Don’t be deceived by the mathematical precision of it all. Retirement planning deals with the vagaries of life – not the precision of science.

For these reasons it is wise to use a range of assumptions from pessimistic to optimistic to determine how secure your retirement plan is.

Try inflation at 7% rather than the customary 3% and watch the impact. Throw a bear market, cancer, and Parkinson’s disease at your plan and see how it holds up.

Ultimately, no retirement plan is ever complete no matter how accurate it appears today. This is just the unfortunate reality of making a long-term bet on an unknowable and unpredictable future. Do the best you can and build a safety cushion just in case one of your assumptions proves to be too optimistic.

The problem with retirement planning is the necessity of making a bet on an unknowable future. You must make assumptions about the future to build your plan, but the assumptions could be wrong. Inflation might be higher than expected, you might live longer than expected, or your assets might grow slower than expected.

Worst of all, you could experience catastrophic and expensive health problems. Each of these risk factors is potentially large enough to undermine the best planned retirements.

This may not be a pleasant or comforting way to approach retirement planning, but reality is reality whether we like it or not.

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Checklist For 1 To 3 Years Before Retirement

Up to this point you have been progressively adding more and more detail to your retirement plan.

You began in early career with simple asset accumulation strategies then added growing your financial intelligence to the picture during mid-career. In recent years you formalized the process with more concrete retirement plans. At this stage your retirement plan should be fairly complete.

If it is not, then please review the previous sections of this article for any missing pieces.

Using a home building analogy you have laid the foundation, raised the walls, and capped it off with a roof. The structure should be more or less complete so the only tasks remaining at this stage are to paint and decorate as a final preparation for moving in.

In other words, with just a couple of years to go it is time to put the finishing touches on your retirement plan.

  • Color in The Dream: By now the “when”, “where”, “what” and “how much” of your retirement plan should be very detailed. Your budget should be based on real numbers rather than generalized assumptions. Your future lifestyle should be estimated, and your expected income from investments and retirement plan benefits should be known. If you don’t have these in place then there is no time like the present. Retirement is right around the corner.
  • Test Drive the Dream: If you are thinking of spending your retirement in Panama then schedule your next few vacations for different times of year in different locations throughout the country. Also, brush up on your Spanish lessons and begin building your network so that you are ready to go. Similarly, if you plan on retiring at home with only 50% of your current income try living on that budget now while you still have earned income to bail you out if it proves unworkable. Or if you plan on building a second career then begin laying the groundwork. In short, start test driving your dream today so that you can correct and adjust any incomplete plans and move toward your new future with confidence. Getting started now will smooth the transition.
  • Review Social Security and Pension Benefits: Rules can change and data can be entered incorrectly. Go through your benefits statements with a fine tooth comb to check for errors and correct as necessary. Make sure the benefits you were expecting to receive match the current rules.
  • Long-term Care Insurance: Examine the risks and benefits of long-term care insurance so that you can make an informed decision. Get cost estimates and learn the various alternatives when purchasing this insurance product.
  • Financial Planning: Are you going to take a lump sum payout or monthly payments? Are you going to leave your 401(k)s where they are or roll them over into an individual retirement account? Are you going to take Social Security as early as possible or delay for a bigger monthly benefit? What is your investment strategy? What will be your asset allocation during retirement? Are you going to purchase fixed annuities or accept the risks of fluctuating investments in hope of a higher return? You are entering the window where these decisions must be made. It is time to begin finalizing these plans. A fee-only financial planner and a retirement planning coach can help.

Checklist For Less Than 12 Months To Retirement

You’re in the home stretch now. You should be complete on everything listed in this article up to this point.

The golf clubs are dusted off and you can almost taste that fancy drink with the little pink umbrella in it.

But don’t make the mistake of celebrating too early because you still have a few important details to tend to. Below are some final actions steps:

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  • Get Organized: If you are like most people you have retirement accounts and savings scattered in various places. Find a service where you can consolidate your accounts and view them as just one source. Automate as many of your financial transactions as possible including routine bill paying and monthly deposits so that you have the flexibility to run your financial affairs on the road or in a foreign country. You want to simplify so that you are free during retirement to do as you please without being bogged down by disorganized financial problems.

Simplify finances before retirement. Live free from #money problems caused by disorganization.
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  • File for Defined Benefits: If you will be filing for pension and Social Security benefits get the paperwork prepared and finalize any last minute questions. Plan on Social Security and Medicare requiring a three month lead time to process so don’t wait until the last minute or you could be throwing away some benefits. Consider requesting direct deposit to reduce your paperwork while also eliminating delays in processing checks while away from home traveling.
  • Finalize Your Withdrawal Strategy: When the time comes to replace your paycheck by withdrawing assets, where will the money come from? How much income will you need each month? What are your sources of income? If you are liquidating savings to fund current living expenses what accounts will you liquidate first and why? You want to have the answers to these questions before your paycheck ends.
  • Finalize Health Insurance Coverage: Get up to date quotes for any supplemental coverage to Medicare or transitional coverage until Medicare kicks in. Complete and file the applications once you have decided the plan that best fits your needs.
  • Finalize Your Long-Term Care Insurance Strategy: Learn the facts about long-term care insurance and decide if and when it is appropriate for your retirement plan.
  • Complete Any Rollovers: Rolling over a workplace retirement plan to an individual retirement account can take anywhere from several weeks to a couple of months. If you are relying on that money you will have to begin the process well in advance of when you need to make your first withdrawal.
  • Give Notice to Your Employer: Find out from your employer what is required to begin receiving the benefits your have earned and to end employment. Most employers appreciate receiving more than two weeks notice. Determine the timelines and complete the required paperwork.

A Checklist For After Retirement

Congratulations! You did it. You are now retired and hopefully living the fulfilling life you always dreamed was possible.

But even though you are now retired, it doesn’t mean retirement planning is finished. There are still a few financial matters requiring your ongoing attention beyond just deposit and spend. Think of these actions as your long-term maintenance plan.

  • Annual Budget, Asset and Cash Flow Review: Just because you put a retirement plan in motion doesn’t mean it necessarily worked according to plan. Sometimes your finances do better than planned and sometimes they do worse. For that reason, you must review your assets, budget and cash flow each year so that you can correct and adjust. This includes reallocating assets, reviewing investment performance, adjusting withdrawal rates, and anything else necessary to make sure your money lives as long as you do.
  • Healthy Habits: Multiple studies show the human body has a remarkable ability to recover from a lifetime of abuse with just a few short years of healthy habits. Now is the time. You may have used the excuse of being too busy working and raising kids to rationalize not preparing healthy food and exercising regularly, but you don’t have that excuse any more. It is hard to imagine a more important and worthwhile way to spend your new-found extra time than taking care of your health. After all, what is the point in spending a lifetime building a secure retirement only to die early and never enjoy it all?
  • Don’t Forget Required Minimum Distributions: Traditional IRAs require minimum distributions beginning at age 70 ½. Check with your accountant or financial advisor as the rules may change and exact details may vary depending on your situation.
  • Beware of Fraud: Retirees are unfortunately a favorite target for con-artists because they usually have more assets to be conned out of than the average citizen. See our extensive list of articles on How To Avoid Becoming A Victim of Investment Fraud to assure you aren’t next in line.
  • Update Your Estate Plan Periodically: Check with your attorney to make sure your estate plan includes such items as powers of attorney, gifting, account titling, and all beneficiary designations are accurate and current.

Finally, go out and enjoy yourself. You’ve earned it. Live all those forgotten dreams that got buried in the busy-ness of working life and have a great time doing it.

It is time to live your dream retirement. You deserve it.

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How To Pick Dividend Growth Stocks – A Fully Revealed Model Mon, 16 Jun 2014 17:50:51 +0000 Editor Note: This is a guest post from Mike who manages dividend growth stocks portfolios. (affiliate link) He reveals his entire dividend stock investment model for free in this extremely valuable, educational article. It is a complete system for dividend growth stock selection. Take it away Mike…

Dividend Growth Stocks Image

I started investing back in 2003 when the bull market made everything easy.

Between 2003 and 2006, I made enough money to buy my first house with a 25% down payment. Those were the good years.

While I spent numerous hours in front of my computer analyzing trends and company fundamentals to become a successful investor, many other investors just picked stocks based on the news and made almost the same returns. The economy was booming, and we were able to find stocks doubling within the year.

Then 2008 Happened

I was somewhat lucky when the 2008 bear market occurred because most of my investments were cashed out in 2007 to buy my second house. Even though I was still hit by a -27% drop in my portfolio, the total dollar loss wasn’t too bad because my account was much smaller.

Anyway, I was too busy working my way up the corporate ladder and completing my MBA to worry about it. I didn’t have much time to invest my money.

From 2003 to 2008, I had a very aggressive investing model making a few trades per month on average. I was fast on pulling the buy and sell trigger in order to generate more profit.

But after 2008, the game changed and I didn’t have enough time to continue with my original investing plan. Plus, losing 27% of my portfolio in one quarter had left a sour taste in my mouth. This is what drove me, in 2010, to develop the dividend investing strategy I share with you here.

How I Developed My Own Dividend Growth Model

Over the past 4 years, I’ve continuously tweaked my dividend investing strategy to achieve two goals:

  1. Build a powerful portfolio– able to generate both capital and dividend growth
  2. Keep it simple but efficient– I wanted to build a simple investing system that works consistently

I’ll tell you upfront, I don’t hold the key to becoming a millionaire through dividend investing. I still make mistakes, but they are rarer and smaller than most investors. This is how I was able to beat the market in 2012 & 2013 with my dividend stock picks.

In 2012, I wrote a very popular book about dividend growth investing, Dividend Growth: Freedom Through Passive Income, and received hundreds of emails. People wanted to take charge of their investment portfolio because they were upset about their advisors’ inability to answer their questions and/or the high fees they were paying. And while I received many different questions, two main points kept coming up:

  1. The lack of time to build and manage a solid dividend stocks portfolio
  2. A systematic method for buying and selling dividend stocks.

This is when I realized that I had battled with  the same issues and found a way to solve these two essential investing problems. Over the past four years, I’ve worked on an investing strategy that doesn’t take me forever to apply and tells me when to buy and when to sell stocks.

Below I will share that same dividend growth model with you. It’s the same model I’ve used that has performed so well over the past few years.

A Dividend Growth Model That Works

As I’ve previously mentioned, my investing strategy is built on a simple but efficient model. It is relatively straightforward and easy to implement, but it requires discipline. That is the success of my strategy.

Let me break it down step-by-step for you:

Step 1 – Start with Stock Filter Research

I start the investment selection process with a stock filter. I use a paid subscription to Ycharts (no affiliate link here) as it provides an enormous quantity of information. But you can achieve almost the same results with a free stock filter called FinViz.

FIN VIZ stock filter doesn’t provide the 5 year dividend growth metric. This is one of the reasons I use Ychart (and the fact that I can create multiple charts to compare several metrics at the same time!) But if you prefer the free way, you can still select other metrics to pick stocks that will show great dividend growth. Below are the metrics I use:


  • Dividend yield: over 3%
  • P/E Ratio: under 20
  • Forward P/E Ratio: under 20

Company Fundamentals:

  • EPS Growth next 5 years: positive
  • Return on Equity: over 10%
  • Sales Growth past 5 years: positive
  • EPS Growth past 5 years: positive
  • Payout ratio: under 70%

This is enough to give you a good list to work with. It’s not perfect, but you will discard several bad stocks in a blink of an eye with these filters. (Editor Note: This approach is called stock factor modelling. It will be discussed in greater depth in future posts and podcasts.)

Step 2 – Sort For Sales and Earnings Per Share

Everyone first wants to look at dividend payouts, but I think it’s more important to look at revenues and earnings. If sales are not up, chances are profits won’t keep an uptrend. It’s really common sense: if you can’t generate sufficient cash then how can you pay dividends?

The relationship between sales evolution and earning per shares will tell you 3 things:

  1. How is the companys main market doing (are sales growing?)
  2. How are the companys profits growing (are they making more profit or not?)
  3. How are the companys margins doing (if the sales and EPS graph don’t head in the same direction that can be a red flag)

Below is an example of a combination of EPS and Revenues graph with two different companies in the same industry.

The first is Procter & Gamble (PG)

P & G EPS for dividend stocks investing

P & G Sales Chart For Dividend Stocks Investing

As you can see right away, there is a call to action to dig deeper inside the financial statements; the sales are going up but the EPS is trailing behind. There must be something hurting the margins or special expenses that won’t happen in the future. You need to get these facts straight before you can consider buying this stock.

However, if you look at Colgate-Palmolive (CL) you will find a more consistent trend (but not perfect):

CG Net Sales Bar Chart For Dividend Stock Investing Analysis

CG Dividend Growth Stock Bar Chart Showing Earnings

Step 3 – Analyze Dividend Growth History

Now that you’ve created a list of companies able to pay dividends over the long haul, it’s time to perform some deeper analysis.

The process of choosing final “buy” candidates from your screener list can’t be formulated in a rules-based structure here because it will be different for every investor based on risk preferences, portfolio objectives, and personal preferences. Instead, what I will do is provide several ideas for you to consider in developing a selection process that specifically matches your objectives.

The first thing to do when choosing final “buy” candidates is to download the company’s financial statements. Often, you will find an “Investor Fact Sheet” or “Recap” giving you some key ratios such as Earnings per Share, Sales, Profit, and Dividend Payouts over past years.

If you can’t access this information from investor fact sheets then you’ll have to dig inside the company financial statements. Another alternative is the annual report because it will provide more than one year of information with all the necessary numbers already calculated for you.

I like to use the past 5 years when analyzing dividend growth history. Also, I suggest you make a quick graph of the past 5 years’ dividend payouts instead of simply calculating the dividend annualized growth rate. This will give you a clear idea of which stocks have a strong dividend payout strategy compared to the others. The graph can be as simple as the following:

Dividend Growth Chart

Which looks a lot better than the following:

Unstable Dividend Growth Pattern

The first graph is a good indication of a solid company that is looking to consistently increase its dividend year after year. You want to invest in companies with a favorable dividend policy.

Step 4 – Examine For Sustainability

If this seems like a lot of work, it is important to note that we are only halfway through the process. That is why I offer an affordable alternative that does all of this for you for just $15 per month. (Affiliate link) After all, if picking double digit dividend growth stocks was easy, we would all be rich!

As a quick recap, what we’ve done so far is examined past data with stock screeners and financial statements as an efficient way to clear out the most “unreliable” stocks. Your next step in this process is to examine current information about the company to see if it will be able to increase and sustain its dividend.

  • How is the Management?

Something that is ignored too often is the current management team. Have members been there for a while and are they responsible for the previous performance? If so, are they still on board to continue their good work, or are they just trying to get their golden parachute?

The management compensation system explained in the financial statements along with the longevity of the board will help you make up your mind about their competence. If you are lucky, they might even disclose their dividend payout philosophy for the upcoming years. If they put a lot of emphasis on the dividend in their financial statement then that’s a great sign it is a focus that will continue into the future.

  • How Does the Company’s Recent Quarterly Performance Look?

Besides pure metrics, which we analyzed in Step #2, recent quarterly results will tell you if the company has been beating analysts’ expectations. In addition to analysts’ opinions, you can check to see if the company is confirming their previous sales guidance. A good site to get this information quickly is Reuters because they usually report when companies comment about their outlook for the upcoming year. This is a good way to interpret the current and forward results.

Your objective in this step is to find companies confirming or increasing their earnings and sales guidance for the upcoming quarters.

  • What Projects Are They Currently Pursuing?

While you are looking for financial ratios within the financial statements, also look at their current and future projects as well. A company dominating its sector must always look towards the future. For example, Intel (INTC) has been dominant in the PC world. However, they are experiencing problems entering the tablet and smartphone sectors. Since PC sales are slowing down and INTC is still not able to expand into other markets, future growth will be harder to achieve and margins will likely be reduced.

I personally looked into INTC and saw that they are multiplying their efforts in order to expand their niche into other markets. Following these current projects will tell me if INTC can successfully transition their previous business model (being the leader in processor chips for PCs) to a new business model (which not only includes tablets and smartphones but also servers and hosting services). Again, the goal is sustainability of the dividend and this is yet another quality indicator.

Step 5 – Look To The Future

All of this analysis of past data and company fundamentals serves one purpose – to figure out if the company can continue its dividend payout strategy. It is not a Crystal Ball, but it’s your best indication of future results.

A stable evolution of past sales, earnings and dividend payout ratio are all positive indications for the future dividend. If the company has a proven ability to generate growth and manage earnings then chances are good that their payout ratio will remain stable over time. It’s important to form your own opinion about the company instead of blindly believing what you read.

However, even if everything looks good, it is still important to remember that market and technology innovations can cause bad things to happen to good companies. That’s why you want to determine:

  • If the company is solid enough to weather a recession?
  • What kind of impact would a sales slowdown and pressure on margins have on the dividend payout?
  • Is the company distributing all their profits (i.e. high dividend payout ratio) or is there room for bad luck?

Once you reach this point in the analysis then these questions are easily answered. That’s why it is so important to have your own opinion with the economic facts to back it up.

From Stocks Picks To Dividend Portfolio

Now that you’ve had fun screening stocks and sorting for fundamentals, it’s time to get serious: how do you build your portfolio?

Do you simply invest in a random selection of 20-30 stocks from your list and rake in the dividends? You can certainly do that (I know investors that have a few Dividend Aristocrats and just wait for their quarterly payout), but my experience says you can do a lot better with proper selection.

The purpose of the rest of this article is to provide you with the tools you need to build your portfolio from your final list. These techniques don’t contain the absolute truth, but they will prevent you from mistakenly chasing too much yield or too much growth without properly considering investment fundamentals.

My favorite technique is to build quadrants to compare stocks, use diversification to your advantage – and as a bonus – I’ll also show you how to cheat on your investing strategy.

How To Use The 4 Quadrant Strategy

The first thing you should do when building your portfolio is to test the stocks that passed the screening criteria against 4 different types of quadrant analysis.

Quadrant analysis techniques are used to quickly compare how stocks rank relative to each other. It also reveals specific shortcomings not easily found through other analysis techniques. What is cool about quadrants is that they are easy to use, easy to understand, and don’t require much time.

The idea of building a quadrant system is quite simple: first, you select two characteristics you want to compare (consider dividend yield and dividend payout ratio). Next, you compile the data for both characteristics for all stocks on your shopping list that passed the earlier screens. Once you have all the data, you simply position each stock according to its yield (on the X Axis) and their payout ratio (on the Y Axis). Here’s a quick example:

Dividend Yield vs. Payout Ratio Quadrant Graphic

In this example, it is quite obvious that you would like to see as many of your stock picks in the #4 quadrant (high dividend yield with low payout ratio) as possible. The least attractive quadrant is #1 (low dividend yield with high dividend payout ratio). Within minutes, you can determine which stocks are a good addition to your portfolio and which are not.

Different quadrants can be used to cross-compare related data to see contradictions and inconsistencies thus allowing you to further narrow your shopping list. Companies use quadrants to position their products (high-end vs low-end, mass consumer vs. niche, etc.) We will use them to position your stock.

For example, if you hope to live off dividends one day, you need stocks that:

  • Provide a healthy dividend from day one.
  • Grow their dividend over time.
  • Grow their income over time (so they can keep up with their dividend and provide you with capital growth at the same time).

In order to find those stocks, you would want to use the following four quadrant models…

Dividend Yield Vs. Dividend Payout Ratio

The next quadrant we will look at compares the stock’s dividend yield to its ability to continue paying the dividend (the dividend payout ratio). In other words, most dividend investors first look at dividend yield. But instead of chasing yield blindly, like a dog running after a cat that just crossed a boulevard, you should check the dividend payout ratio to make sure your dividend (or your dog) doesn’t get squished!

Using an actual example, I’ve pulled 10 stocks from the S&P 500 and the NASDAQ to show you how they compare using this first quadrant analysis. Here’s my data compilation:

Ticker Dividend Yield Dividend Payout Ratio
T 5.63% 259.00%
CPB 3.67% 47.20%
HRS 2.93% 21.60%
AFL 2.87% 28.11%
MSFT 2.48% 23.33%
BMY 4.03% 60.96%
GIS 3.09% 40.56%
CVX 3.02% 22.83%
BLK 2.93% 43.39%
GRMN 3.83% 59.62%


As you can see, you have both high and low dividend yields and payout ratios. That doesn’t mean, however, that all of the low yields have a low payout ratio and vice-versa. This is what the quadrant will show you at a glance:

Dividend Yield vs. Dividend Payout Ratio Quadrant

The less attractive quadrants, in my opinion, are above the 100% line. It really doesn’t matter how high the dividend yield is because they’ll eventually have to cut the dividend or sell assets to balance the books when paying out more than 100%.

Since we only have one stock in that category (AT&T), I would go back into their financial statements and calculate their payout ratio myself. Unfortunately, data on payout ratios can be less than accurate when you use free sources (the 259% payout ratio was taken from Yahoo Finance back in April 2012). But T is showing such an attractive yield for a large utility that I think it’s worth a little bit more investigation to understand why the payout ratio is so unsustainably high.

In an ideal world, we would only pick stocks in the #4 quadrant because those stocks should provide high & sustainable dividend yield. Fortunately, many of the stocks on our list are part of this quadrant (GRMN, BMY, CPB, GIS & CVX) and we have three stocks very close (BLK, HRS & AFL). Those stocks show a great combination of good dividend yield with a sustainable payout ratio.

Dividend Yield Vs Dividend Growth

Once you’ve narrowed your shopping list to companies showing sustainable dividend levels, the next step is to sort these same companies for dividend yield compared to dividend growth.

The goal is to find high dividend yield-payers with low payout ratios that also show 5 year dividend growth. Conversely, you want to avoid companies with a temporarily high dividend because its price has been devalued due to recent news or a market downtrend.

When comparing dividend yield and dividend growth over 5 years, you want to pick the highest yield with the highest dividend growth. Continuing the same example, here is my data for the following quadrant:

Ticker Dividend Yield 5 Yr Dividend Growth
T 5.63% 5.05%
CPB 3.67% 8.83%
HRS 2.93% 22.69%
AFL 2.87% 15.80%
MSFT 2.48% 13.63%
BMY 4.03% -2.24%
GIS 3.09% 11.13%
CVX 3.02% 8.86%
BLK 2.93% 23.85%
GRMN 3.83% 31.95%

You can already guess that BMY will get eliminated in this analysis. Here’s the quadrant:

Dividend Yield vs. 5 Year Dividend Growth Quadrant Image

This time, the most interesting quadrant is #2 because it provides stocks with high dividend yield and high dividend growth. GRMN is a great example. However, we also have BLK, HRS & AFL showing a strong dividend growth (over 10%) with a divided yield closer to 3%. CVX and CPB are close runner-ups because of decent dividend growth too (8.86% and 8.83%). You can see that, for a second time, MSFT is being penalized in this analysis due to a low dividend yield compare to other stocks.

Use this quadrant analysis to build your portfolio. More aggressive investors might ignore MSFT, while retirees might consider it a reasonable choice because of its leadership position within its industry accompanied by strong dividend stats.

5 Years Dividend Growth Vs. 5 Years Revenue Growth

The first two quadrants showed you stocks offering a combination of attractive dividend yield and dividend growth. The next two quadrants will take a different look at the same stocks to determine if they can sustain their dividend level over time.

Why compare the five years dividend growth with the five years revenue growth? Because the first depends on the latter. Since dividends are paid with after tax income, you want to make sure the company has enough funds to maintain its dividend payouts. More importantly, it will tell you more about the dividend distribution strategy of the company.

Low dividend growth combined with high revenue growth (quadrant #1) demonstrates that the company is in a growth stage. The company believes it’s best to use cash flow to push the company to another level instead of giving back to the shareholders. This might be good if capital gains are your goal, but it’s not desirable when seeking dividend growth.

Alternatively, high dividend growth with negative revenue growth (quadrant #4) demonstrates that something is wrong and requires further investigation. In these situations the company dividend payout ratio will increase over time, which is not a good sign for an investor.

The perfect scenario would be to find a company with a steady dividend growth and revenue growth at a similar level. This tells you that the company is growing and has the intention of giving money back to its shareholders at the same time. Staying with the same sample stock list, below is the data:

Ticker 5 Yr Dividend Growth 5 Yr Revenue Growth
T 5.05% -18.83%
CPB 8.83% 6.83%
HRS 22.69% 21.91%
AFL 15.80% 7.20%
MSFT 13.63% 17.63%
BMY -2.24% 28.37%
GIS 11.13% 13.27%
CVX 8.86% 11.50%
BLK 23.85% 26.17%
GRMN 31.95% 2.61%


Before looking at the quadrant, you can already see that BLK and HRS are following an interesting trend on both revenue and dividend growth. Now let’s take a look at the big picture:

5 Year Dividend Growth vs. 5 Year Revenue Growth Quadrant Image

Notice how things get clear on a great graph?

We have only 2 stocks in quadrant #2 showing both strong dividend and revenue growth; however, we also have 3 interesting stocks (MSFT, GIS & CVX) in quadrant #1 showing a great combination. We can also see that BMY & T are far from being in a strong position in this quadrant. GRMN obviously shows a shift in direction while they have decided to become a “strong dividend-payer” over the past several years. This is quite logical for an established company with a lot of cash flow (after powerful dividend growth over 5 years, their payout ratio is now at 59%).

P/E Ratio Vs. 5 Year Income Growth

The last quadrant (but not the least) compares the P/E ratio with 5 year income growth. It’s like comparing future assumptions with past results.

The P/E ratio is the current evaluation of a stock by the market – the future assumptions. A high P/E ratio means that the market is anticipating strong growth. You will more likely find overvalued stocks in this category (just think of RIM a few years ago). The historical P/E ratio of the S&P 500 is 16. Anything over 20 means the market is pricing in a great deal of growth making the stock much riskier for decline in the event of a disappointment.

On the other side, a low P/E ratio is consistent with a stock evolving in a mature industry, or occurs when a stock is undervalued. It is obviously tricky to determine which stocks are priced correctly or not. Also, please keep in mind that the P/E ratio will be greatly affected by the stock market’s assumptions.

For example, after two years of deceiving financial results, RIM has traded at a P/E ratio as low as 3.81! This doesn’t mean that the company is undervalued; it means that the market doesn’t believe the company can keep up with its previous results!

This quadrant will help you find stocks with the lowest P/E ratio relative to the highest income growth. In other words, it helps you find growth without paying a premium.


Ticker P/E Ratio 5 Yr Income Growth
T 14.33 19.59%
CPB 12.44 0.09%
HRS 9.61 8.17%
AFL 7.28 20.20%
MSFT 11.9 11.21%
BMY 15.07 6.41%
GIS 16.04 6.29%
CVX 8.13 7.21%
BLK 17.29 23.02%
GRMN 17.4 14.79%


With this quadrant, look for stocks in quadrant #1 (low P/E ratio with positive income growth). Those stocks are more likely evolving in a stable environment (this is why their P/E ratio is lower) making them lower risk, but with income growth (so they are able to increase their dividends). Those types of companies will likely only become stronger over time:

P/E Ration vs. 5 Year Income Growth Quadrant Image

This quadrant highlights AFL as being the only stock with a high income growth and low P/E ratio. This is also related to the fact that AFL is evolving in the financial industry. Stocks like BMY and GIS are quite deceiving because they are trading at higher P/E ratios without showing strong income growth.

This quadrant will help you choose stocks in terms of their past growth showing how much you are paying for expected future growth. For example, GRMN had an interesting 5 year growth and is expected to grow in the future… unless the stock is overvalued. As long as you stay under a P/E of 20, you should be playing in a relatively safe playground.

Cross Referencing the Quadrants

Now that you know how to use the four quadrants, the most important thing is to use all four of them!

Don’t get complacent and use one or two comparative measures. Use all four of them to paint a complete picture. Don’t jump to a conclusion and don’t be afraid to look into financial statements once in a while to understand how a stock might be less attractive in one quadrant compared to the others.

By cross referencing the 4 quadrants, you will find certain stocks that keep showing up with desirable combinations of characteristics such as GRMN, BLK and AFL. While none of the 10 stocks are strong in all aspects, those 3 stocks have a better “batting average” than the others.

Other stocks might look promising based on the fact that they passed the screener and measured well on a couple different quadrants thus requiring deeper research to understand the inconsistencies. Stocks on the “to be researched further” list include CVX, MSFT and HRS. These are three mature companies leading their respective markets. They should be on your “stocks on the radar list” according to the screener and quadrant analysis.

Finally, you have other stocks that didn’t quality half of the time or more (T, BMY, GIS and CPB). I would just eliminate these because they miss the target on important metrics. It doesn’t mean that they are not interesting stocks, but when your goal is reliable dividend growth there are better purchases.

So out of 10 stocks and 4 quadrants, you have:

  • 3 very interesting picks (GRMN, BLK & AFL)
  • 3 “further research” picks (CVX, MSFT & HRS)
  • 4 “not very interesting” picks (T, BMY, GIS, CPB)

Doing this exercise can require some time as you first need to put all of your stocks in an excel spread sheet, then find all the metrics and create your quadrants. In order to do it, here’s a very easy tutorial for excel users:

  • Create a table as shown in this book (ticker, metric #1, metric #2)
  • Select data only in metric #1 and metric #2 (the 2 columns)
  • Click on “insert”, then “other charts” and select “X Y (Scatter)”

Analyzing Divdend Stocks In Excel

  • You’ll get your points in a graph. You select Chart Layouts and take the circled one in the second line of options.

Dividend Stocks Investing Using Excel

  • Then, you simply have to print it and add the stock name besides each dot and you have your quadrant!

Using Dividend Stocks Rock to Facilitate Your Investing Process

If you are thinking, “Wow, that looks like a lot of work”, then you would be right.

Yes, it takes time and effort to first complete all the factor screening to create a dividend stock shopping list and then further sort for quality and consistency using company fundamentals and then quadrant analysis.

After teaching this method to many people the one consistent response was, “Interesting. I like it, but is there a way for me to just pay you to do it for me?”

And so that is why I’ve developed a membership web site that does exactly that. (Affiliate link) If you want to do it yourself, you have all the knowledge you need in this article. I gave it to your freely. You don’t need me because this is the complete recipe. Nothing held back.

However, if you want someone to do all the screening and quadrant analysis for you then I’ve built a website that does exactly that by allowing you to:

  • Search through my pre-screened stock lists,
  • Monitor my model portfolio performance,
  • Read my stock commentary every two weeks,
  • Know exactly when any company in my model portfolio provides quarterly reports,
  • Benefit from my unique stock ranking system.

You can get to this website here and it simply does what I taught you here at such a low price that it really doesn’t make sense for you to do it yourself. (Affiliate link)

I hope you found the ideas in this article helpful for your dividend growth stocks investing strategy.

Please let me know your thoughts in the comments.

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FM 019: Expected Value Formula – The Missing Key To Building Wealth with Billy Murphy Sun, 11 May 2014 18:16:48 +0000 Financial Freedom For Smart People

Wealth is math.

That’s bad news for math phobics, but it’s great news for the rest of us because it means there are rules and science behind how wealth building works. It isn’t random luck.

In Episode 19 of the Financial Mentor podcast we’ll explore the most essential math principle to wealth building – the expected value formula.

This essential principle eludes most people because we inherently think in terms of probabilities – the likelihood of something occurring. It could be an investment going up or a business going bust. Either way, you most likely think in terms of the probability of the event occurring, and that is unfortunate.

Why? Because wealth is built according to expectancy – which is probability times payoff.

It’s an entirely different way of thinking that produces surprising results. Discover how expectancy will literally determine the financial outcome of your life, and how you can use this uncommon knowledge to make smarter, more profitable investment decisions.

In this episode you will discover:

  • How a career as a professional poker player shaped Billy’s view on traditional investing.
  • The difference between gambling and investing.
  • Why variance is a dangerously misleading measure of risk that can cost you a fortune.
  • The concept of “edge” in investing or “competitive advantage” in business.
  • How increasing sample size can lower risk, but only if you have positive expectancy.
  • The essential difference between asset wealth and cash flow wealth.
  • Why EV, or the expected value formula, permeates all forms of wealth building – paper assets, business, and real estate.
  • How to use the expected value formula for every business and financial decision you’ll make.
  • The many dimensions to risk management revealed by a deep understanding of expectancy.
  • How to make more by risking less.
  • How diversification, when done incorrectly, can become di-worse-ification.
  • How the pursuit of safety can put you at even greater risk.
  • Why all expectancies are not created equal, and how that spells opportunity for you.
  • The dangerous illusion of results, and why expectancy is actually more important.
  • How recency bias causes you to make losing investments.
  • The two essential skills you must develop to invest with greater profit and reliability.
  • How to use risk management skills to raise your expectancy.
  • The right (and wrong) time to avoid analysis-paralysis in the due diligence process and just pull the trigger.
  • How to test any investment using the “cocktail napkin test”.
  • How missing a positive EV investment is mathematically equivalent to negative EV, and avoiding negative EV is mathematically equivalent to positive EV.
  • Why insurance makes good business sense, even when it has a negative expected value.
  • The right and wrong way to use insurance to manage negative expectancy risk.
  • and much more….

Resources and Links Mentioned in this Session Include:

Expected Value Formula with Billy Murphy Image

Help Out The Show:

The feedback on these podcasts has been great! Your enthusiastic response is what drives me to continue producing them.

5 star reviews and new subscribers over at Itunes increase the show’s rank and help more people benefit from the message.

If you could spare a minute to leave a review on Itunes it would mean a lot to me. Thank you so much!

Click here to subscribe to the show on ITunes and leave a review…

Alternatively, this link below will help you subscribe and leave a review on your device…

Click here to subscribe and leave a review from inside your ITunes account…

Get Episode #19 PDF Transcript – Expected Value Formula: The Missing Key To Building Wealth:

Click here to grab the PDF transcript of Episode 19 where Billy Murphy explains how the expected value formula works to help you build wealth.

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FM 018: How To Break Through Your Most Stubborn Limiting Beliefs With Dane Maxwell Mon, 14 Apr 2014 22:04:34 +0000 Financial Freedom For Smart People

Success is about people first.

If it was just about how-to’s then we would all be thin, rich, and happy because all the knowledge you need to attain anything you want in life already exists. You just have to learn it and implement it.

But it doesn’t work that way. You aren’t a perfect, rational computer.

You don’t just process information, make plans, and produce results in a logical, perfect way because you are an emotional human being. Your emotions and beliefs are a filter that either serves you in achieving your goals, or they hurt you.

I overlooked this essential reality in my early years of coaching and made the same mistake nearly all experts make. I believed that if I just showed people how to do something that they would go out and implement it to produce the same results I did.


There is much more to achieving success than just how-to’s. And there is a lot more to teaching success than just dispensing how-to information.

There’s a second layer of knowledge explaining how humans work that you must understand if you want to  break through your limiting beliefs and rise to new levels of achievement with the least friction and effort possible.

This knowledge is critical to your success…

In this episode you will discover:

  • Why how-to’s are not enough to succeed.
  • The common, yet critical, mistake nearly all self-help gurus make.
  • How results take care of themselves once your limiting beliefs are removed.
  • The surprising role your community plays in achieving success.
  • Why financial freedom is ultimately about giving – not getting.
  • How any lack of abundance in any area of your life can be traced back to a limiting belief. Amazing!
  • An exact step-by-step formula for building your own business today even if you have no experience, no idea, and no money. It really works!
  • How to travel for 90 days, do only 4 hours of work, and come home with $100,000 more in the bank than when you left.
  • The 3 key words you must know to build an abundant life.
  • The 4 essential principles of a lifestyle business so that greater success results in freedom instead of just more work.
  • How “The Work” effortlessly removes limiting beliefs without any psychological mumbo-jumbo or needless drama – and, it only takes a few minutes.
  • Why limiting beliefs are the cause behind lack of success and how that is actually an empowering reality.
  • How to know the exact time when limiting beliefs are THE next required obstacle you must clear to achieve the next level of success.
  • and much more….

Resources and Links Mentioned in this Session Include:

Overcome Limiting Beliefs With Dane Maxwell

Help Out The Show:

The feedback on these podcasts has been great! Your enthusiastic response is what drives me to continue producing them.

5 star reviews and new subscribers over at Itunes increase the show’s rank and help more people benefit from the message.

If you could spare a minute to leave a review on Itunes it would mean a lot to me. Thank you so much!

Click here to subscribe to the show on ITunes and leave a review…

Alternatively, this link below will help you subscribe and leave a review on your device…

Click here to subscribe and leave a review from inside your ITunes account…

Get Episode #18 PDF Transcript – How To Break-Through Your Most Stubborn Limiting Beliefs:

Click here to grab the PDF transcript of Episode 18 where Dane Maxwell explains how to overcome the limiting beliefs holding you back from greater success in just 20 minutes or less.

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FM 017: Why “Follow Your Passion” Is Bad Advice with Cal Newport Mon, 24 Mar 2014 20:20:07 +0000 Financial Freedom For Smart People

You’ve heard it repeated so many times that you no longer question if it is true.

In fact, the career success literature is so overwhelmingly dominated with this dangerous myth that almost nobody disagrees with it.

The only problem is, it’s not true!

What is it, you ask?

It’s called “the passion hypothesis”. The premise is you should do what you love and the money will follow. If you want to succeed then you should follow your passion.

It’s one of those artifacts of conventional wisdom that seems to be right and passes the smell test so it slips under our radar. It is an example of superficial knowledge that appears true but is actually false.

This is not just an idle concept. It is a major source of disillusionment and career dissatisfaction. It also illustrates many concepts taught in Step 3 of my 7 Steps to 7 Figures wealth building curriculum.

In today’s podcast were going to unmask this dangerous illusion. We’re going to set the record straight by digging deep behind the facade of the passion hypothesis and revealing how a remarkable career and an enviable life of freedom and autonomy are truly built. Surprisingly, it’s not what most people believe.

This interview will also introduce a guiding principle behind all teachings on this site – the idea that there is a second layer of knowledge just beyond the superficially obvious first layer that gives you a competitive advantage and helps you build wealth. This second layer of knowledge is based on research and reality – not meaningless platitudes.

Make sure to listen carefully because the truths revealed in this episode will turn conventional wisdom on its head.

In this episode you will discover:

  • The important difference between first layer knowledge and second layer knowledge so that you can develop a competitive advantage.
  • What the passion hypothesis is and how it works.
  • The dangerous premise behind the passion hypothesis that is causing job satisfaction ratings to decline.
  • Why career passions are rare, but that doesn’t mean you’re stuck. There’s a smarter way to find passion and fulfillment through work if you just know the proper steps.
  • The unexpected connection between career passion, skill mastery, and self-determination theory.
  • The 7 traits proven by research to create career satisfaction.
  • The surprising reality reversal – It’s more important what you can offer your job than what it is offering you.
  • Why it’s not about finding the right work: It’s about working right.
  • The important parallel between investing your financial capital into crafting a life you love and investing career capital into work you love.
  • Why you should stop focusing on self-promotion in social media and instead focus on producing something worth talking about.
  • How skill leads to passion instead of passion being a precursor to skill.
  • Why success is hard… by definition. There is always a hard phase so get over it.
  • What the “courage culture” is and why you should avoid it.
  • The two dimension of commitment  that lead to success – what you do before you commit and what you do after. (Hint! They are as different as night and day.)
  • The two different types of goals and the diametrically opposite ways you should achieve them.
  • Why your most important career strategy is to compound career capital. (Notice the parallel to wealth building and the importance of compounding equity. This is not a coincidence.)
  • Discover how the deliberate practice technique is the most efficient and certain path to compounding career capital.
  • How to learn to love strain and discomfort as a good thing (seriously!).
  • How to use career capital to buy the freedom you want now long before you’re financially independent.
  • How to use the law of financial viability to make money and make a positive impact in the world at the same time. (Surprise! The two goals are not mutually exclusive.)
  • How to use the principle of little bets to build a huge success with almost no risk.
  • The 3 step process to create a life you love.
  • and much more….

Resources and Links Mentioned in this Session Include:

Follow Your Passion is Bad Advice with Cal Newport

Help Out The Show:

The feedback on these podcasts has been great so thank you. I read every single comment. It matters.

5 star reviews increase the show’s rank and help more people benefit from the message.

If you could spare a minute to leave a review on Itunes it would mean a lot to me. Thanks!

Click here to subscribe to the show on ITunes and leave a review…

Alternatively, this link below will help you subscribe and leave a review on your device…

Click here to subscribe and leave a review from inside your ITunes account…

Get Episode #17 PDF Transcript – Why Follow Your Passion is Bad Advice:

Click here to grab your PDF transcript of Episode 17 with Cal Newport explaining why follow your passion is bad advice.

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FM 016: How To Choose A Financial Advisor with Michael Kitces Mon, 03 Mar 2014 19:58:33 +0000 Financial Freedom For Smart People

It’s hard to know how to choose a financial advisor.

There is so much value at stake; yet, how can you tell the experts from the charlatans?

Who can you trust? How do you really know?

After all, you are busy with kids, a career, and life. You want to be able to trust someone to make sure your financial planning is on track, but it’s a den of thieves out there.

Adding confusion to concern are all the sound-alike titles such as brokers, registered investment advisors, certified financial planners, financial coaches, and financial consultants to describe similar services. Who can tell the difference?

It’s time to pull back the curtain on all the techno-babble so that you can find the best financial advisors and eliminate the posers.

In this episode I’ll give you a step-by-step due diligence process for how to choose a financial advisor that fits your needs.

You will learn how to sort your way through the maze of confusion so that you can get the expert help you need to reach your financial goals… without getting ripped off.

In this episode you will discover:

  • Why the starting point to choosing a financial advisor is looking inward.
  • How to match your specific needs to the right specialist (not all advisors are created equal).
  • Why the common practice of using referrals is dangerously flawed.
  • The 4 advisor compensation models and how each impacts the advice you receive.
  • Form ADV disclosure, what it says, and how to get one from your advisor.
  • 6 different financial planner search sites so you can pick the right professional for your needs.
  • Why the “fee only” compensation model means different things in different situations (this is important!).
  • How to analyze a financial advisor web site.
  • Whether or not it is even relevant to meet your advisor face-to-face any more.
  • Where the future of financial advice is heading (this may surprise you!)
  • How to understand the hidden financial incentives hiding behind the advice your receive.
  • A checklist of quality factors to use when judging your financial advisor.
  • What “assets under management” really says about your advisor, and why it’s not an important quality indicator.
  • How to know the difference between CFP, CPA, PFS, RIA, CFA, and CHFC. (Yikes!!)
  • Why all these professional designations imply little about investment skill.
  • The surprising reason financial advisors don’t provide investment track records.
  • Why GIPS audited track records are rare (guess what? It’s the same reason they are the gold standard in performance disclosure).
  • Why there is no perfect advisor compensation model (each has an Achilles Heal that you must watch out for).
  • The key difference between the suitability standard and fiduciary responsibility (well worth knowing).
  • and much more….

Resources and Links Mentioned in this Session Include:

How to Choose A Financial Advisor with Michael Kitces

Help Out The Show:

The feedback on these podcasts has been great so thank you.

5 star reviews increase the show’s rank and help more people benefit from the message.

Please take the time to leave a review. It really helps a lot and I read every review. Thanks!

Click here to subscribe to the show on ITunes and leave a review…

Alternatively, this link below will help you subscribe and leave a review on your device…

Click here to subscribe and leave a review from inside your ITunes account…

Thanks for your support and I hope you enjoyed this episode. Please let me know what you think in the comments below…

How To Choose A Financial Advisor PDF Transcript:

Click here to grab your PDF transcript of Episode #16 with Michael Kitces showing you how to choose a financial advisor.

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How To Become A Millionaire – 5 Secrets Revealed Mon, 17 Feb 2014 17:29:15 +0000 Editor’s Note: Jaime Tardy has interviewed more than 120 millionaires to learn the “secrets” for how to become a millionaire. She just published her new book The Eventual Millionaire explaining the most important insights from those interviews. In today’s article she reveals her 5 favorite tips to help you become a millionaire. Take it away Jaime…

It’s amazing!

After interviewing more than 120 millionaires I’ve found more similarities than differences in their stories.

The basic building blocks to wealth are always the same. All of these millionaires seem privy to the same wealth building “secrets”.

Below I share 5 of my favorites tips so you can become a millionaire too…

Make Your Life Happy Before Making a Million

One of the key things I learned during these many interviews is that you need to make your life happy FIRST. That doesn’t mean being rich or working towards a million. That means working on the other aspects of your life.

Everyone thinks that the million will give us the lives we want. I can tell you after interviewing 120 millionaires, it doesn’t. If you want an enjoyable life, it’s easier to obtain that enjoyable life first – before making your first million. It can still be about the money, but only after you choose your life.

Like Jim Rohn said, “After you become a millionaire, you can give all of your money away because what’s important is not the million dollars; what’s important is the person you have become in the process of becoming a millionaire.”

Action Item: Evaluate your life and change 1 thing that you are not happy with.

Take a good, hard look at your life. Certainly there are things you would want to change. Choose 1 thing you’re not happy with – maybe it’s the amount of time you spend with friends and family, maybe it’s a lack of self-care. Whatever it is, name it and find a way to change it so that you can be happy with that aspect. Changing just 1 thing will have a profound effect on your life as a whole.

Control Your Money (Don’t Let It Control You)

Millionaires set a goal and then work toward it. There is never a nebulous plan for a million. One of the first steps in that plan is often to get rid of your debts and take control. Debts have a nasty habit of controlling you and you have to take control of them before you can ever achieve bigger financial goals!

Next, work on your lifestyle. Figure out what work makes you happy by trying different things. A helpful homework assignment is to write down what your perfect day would be like. This will give you an idea of what will truly make you happy.

As Harvard’s resident happiness professor, Tal Ben-Shahar told Yes, “Happiness lies at the intersection between pleasure and meaning. Whether at work or at home, the goal is to engage in activities that are both personally significant and enjoyable.”

Once you’ve made your work and life happy, NOW you can work on the big money. Figure out what your real goal is, whether it’s to create a million dollar business or just have enough money to retire comfortably. Then start to work toward that goal.

Just remember that your goal should be your own and not just a vague goal of having a certain amount of money. Remember, it’s not all about the money and your goal should reflect that. While your final goal will definitely include money, it should also include other things important to YOU – to be the goal to achieve.

Action Item: Create a debt payment plan and follow through with it.

List all of your debts and their minimum monthly payments. Figure out how much extra you can pay on the debt. Put that extra amount toward the smallest debt or the debt with the highest interest rate and set them all on automatic monthly payments. Once that first debt is repaid, take the entire amount you were paying on that first debt and add it to the minimum payment of the next debt to accelerate that payoff. This is known as the debt snowball method and here is a free calculator to make the math easy. Follow this plan until the debt is gone.

Take Opportunities

Millionaires constantly rise to meet any challenge that is presented to them. When an opportunity falls into their lap, they take it, barreling through any obstacles that might be in the way.

Millionaires don’t sit around for weeks analyzing an opportunity or making excuses for why they can’t follow through with it. They do whatever it takes to meet the challenge and to do it well. This is an important trait of all millionaires and a mindset that you should adopt if you want to become one.

The point is that opportunities, especially the great ones, do not come very often. Therefore, when an opportunity arises you have to take it no matter what, providing that you have the confidence to turn this opportunity into a win for yourself.

Action Item: Say yes to at least 1 new opportunity.

When a new opportunity arises, say yes, even if it’s scary or something you’ve never done. This might be an invitation to speak at a conference, a guest blogging opportunity, or something else. No matter what it is, make it a point to say yes.

Overcome Your Excuses

Speaking of excuses, millionaires don’t let excuses hold them back from anything. They realize that every excuse has a solution and they work hard to find the solution to every excuse that may arise. They take action, any action – no matter how small.

If you want something bad enough then you’ll undoubtedly find a way around any excuse you could come up with. As they say, where there’s a will, there’s a way. Millionaires live by this code.

If you are someone who wishes to become a millionaire, then you have to live by this code too. You can start with small things and see whether you can in fact get around excuses. The more you do it, the easier it will become. This is a very important step because getting past excuses results in you becoming less and less indolent with time which, in turn, creates a strong work ethic and greater results.

Action Item: Identify 1 excuse you’ve been using as a crutch and take action to squash it.

Think about all the excuses you make in a day. Do you ever say, “I don’t have time for…” or “I would do that, but…” These are excuses that don’t help you move forward. Identify one of your more frequent excuses and find a way to overcome it and make that thing happen. If you feel you don’t have time for something, take action by prioritizing your time and making room for that one thing.

Millionaires Play a Bigger Game

Finally, I’ve noticed how things that seem huge or scary to me are old hat to millionaires. This is because they take those scary steps in order to keep moving forward. The more we do things, the more normal they get.

For example, when I first started my site, I was a nervous wreck about interviewing millionaires. But now that I’ve been doing it for so long, I’m totally used to it. It’s old hat for me. The same can be true for you with that thing you’re scared of doing.

When you think about the most famous millionaires, there are a few words that probably come to mind, and one of these words is usually fearless. That’s because when they have a fear of doing something they are brave enough to overcome it, plow through it, and see their plan come to fruition.

Action Item: Do 1 thing you’ve been too scared to try and just do it.

What have you been putting off because you’re afraid of failing (or maybe afraid of succeeding)? Name it and put it on the calendar. This gives you a goal and a deadline. Once you do it, you’ll wonder why you were ever afraid to do it in the first place.

How To Become A Millionaire – Summary

These are just 5 of the many ‘secrets’  revealed from more than 120 millionaires interviews that I’ve conducted.

Sure, each millionaire story had its own unique twists and turns, but it was striking how the core of each story was more similar than different. They shared characteristics and habits, and it’s these commonalities that I’ve distilled into my new book The Eventual Millionaire on Amazon.

The key is to implement these lessons into your life and see the positive changes they’ll make. That is why I provided you with specific action steps. My goal is for you to learn how to become a millionaire too.

Just take the first step, even if it’s scary. It’s totally worth it! Never lose sight of what’s important to you and don’t forget that it’s not all about the million bucks!

If you don’t believe me then here is a quote from my interview with Todd Tresidder:(you might be familiar with him) “Once I became a millionaire it was this big ‘so what’. I mean it led to one of the most unhappy periods in my life and I couldn’t really understand why. I just had so many false assumptions in my brain about what it was to be financially independent and what was the basis of happiness and what really leads to happiness and so it really sent me back kind of to ground zero and I started reworking this stuff.”

The goal is your happiness and life fulfillment. Learning how to become a millionaire is an excellent next step in that journey.

You Might Also Like…

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What Frustrates You About Investing? Please Help… Mon, 10 Feb 2014 17:54:45 +0000 I need your help please…

I’m trying to understand what bugs you about investing. I want you to rant and share your frustrations.

The reality is I live in a very different investment world than most people. I want to help you, but the only way I can do it is if I know the problems you face. I need to know your reality so please take a minute and vent about your investing pains and frustrations.

Here’s how you can help. Please leave a quick comment below that answers any one (or more) of the following questions:

  • What is your biggest frustration with investing?
  • What investment solution do you wish was available but can’t find anywhere?
  • If the “investment fairy” could wave here magic wand and solve any investment problem for you then what would it be?
  • What bugs you most about the financial advice business? About financial advisors?
  • Anything else relevant??

I really want to know your thoughts to any (or all) of the questions above. Whatever comes to mind is perfect.

I don’t care if somebody else (or 50 other people) said the same thing already. I still want to hear it from you. I want to know your truth.

Seriously, I don’t ask for favors often so please take a minute to share your thoughts. It doesn’t have to be anything big. Whatever comes to mind.

Have fun with it. Let ‘er rip!!

Let’s create a rant session together about everything that bugs you with how to invest money. My goal is to help you solve it (I’m designing a course this Spring), but I can only do that when you tell me what it is.

I really appreciate your help!!

Thank you.

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FM 015: Early Financial Independence With Luke Landes Mon, 03 Feb 2014 17:37:46 +0000 Financial Freedom For Smart People

Sure, you want early financial independence.

But how do you achieve it?

What are the necessary action steps to reach the goal, and how can you expect your life to change afterward? Surprisingly, it doesn’t work like most people think.

In this latest addition to our podcast series featuring early financial independence success stories (see previous episodes with Darrow Kirkpatrick and/or Doug Nordman), Luke Landes shares how he achieved freedom from day-to-day financial worries at such an early age, and what his life experience has been like since reaching the goal.

Surprisingly, it’s not like most people would expect.

Luke’s story differs remarkably from previous success stories because he never really set out to achieve financial independence. In fact, he sort of fell into it by accident (even though he still worked hard and planned strategically) by being the right guy in the right place at the right time.

Luke’s story is also different from previous stories because he didn’t save his way to methodically reach the goal with discipline. Instead, he attained it through the business path to wealth with a single buyout of a single business.

I really appreciate how generous and candid Luke was in this interview sharing his experience of life and the pursuit of happiness following financial independence. He tells you the straight truth about struggles with motivation when money is no longer a concern. He explains the challenges of leading your own life when normal career constraints and the need to make money are removed.

So get motivated to move to the next stage of your life where the focus is on fulfillment instead of money with tips to help get you there faster and with fewer mistakes.

In this episode you will discover:

  • The many definitions of financial independence… and which one Luke has chosen.
  • Exactly how Luke achieved financial freedom – almost by accident.
  • The role of luck and being in the right place at the right time for some types of financial success. (Hint – you still have to work hard and be strategic even when you’re lucky.)
  • How single point failure risk can destroy a fortune quickly, and what you must do to manage it.
  • The value of diversifying revenue sources within your business model to control risk.
  • How to prepare a business for sale so that you maximize the value.
  • What you must do to find a buyer who will pay more for the business than it is worth to you.
  • The unexpected difficulty with motivation that everyone who achieves early financial independence must overcome.
  • Why you may already be financially independent and not even know it. Seriously!
  • How the human need to serve somebody – whether financially independent or not – turns the whole idea of “freedom” on it’s head.
  • How autonomy affects your motivation and sense of personal freedom – whether employed or not.
  • The million dollar myth – Revealed!
  • Why it’s all about cash flow… not assets.
  • Exactly how your motivation for work and new projects will change after financial freedom.
  • What to do when your passion in life requires hard work, but you no longer have to work at all.
  • How early financial independence is just like 2nd generation wealth… but without the second generation.
  • The absolute, foolproof way to know exactly what you are truly committed to. It never fails.
  • How to master the essential success characteristic – focus.
  • Why building wealth is one of your greatest paths to personal growth.
  • and much more….

Resources and Links Mentioned in this Session Include:

Early Financial Independence with Luke Landes

Help Out The Show:

Giving an honest review on Itunes is one of the best ways to support this show.

5 star reviews increase the show’s rank and help more people benefit from the message. Please take the time to leave a review. Thanks!

Click here to subscribe to the show on ITunes and leave a review…

Alternatively, this link below will help you subscribe and leave a review on your device…

Click here to subscribe and leave a review from inside your ITunes account…

Thanks for your support and I hope you enjoyed this episode. Please let me know what you think in the comments below…

Early Financial Independence PDF Transcript:

Click here to your PDF transcript of Episode #15 about early financial independence with Luke Landes.

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FM 014: Life Reimagined and The New Retirement with Richard Leider Mon, 20 Jan 2014 20:05:55 +0000 Financial Freedom For Smart People

The “New Retirement” is gathering momentum and catching major media attention. Are you on board?

In fact, no less than AARP has gotten behind the initiative with a new book titled Life Reimagined by Richard Leider.

More and more people are realizing the life-changing message the New Retirement delivers. It is much bigger than just financial planning. It explores the intersection between finance and fulfillment showing you how to blend them together into a life well-lived.

You will particularly enjoy in this interview how cohesive Richard and my viewpoints are on this subject – remarkably so – right down to the actual implementation steps and the meaning behind them. In fact, I wrote the introduction to this podcast before ever seeing Richard’s book only to find out it couldn’t have been more perfectly targeted. Not a coincidence.

During the discussion Richard and I go back and forth playing off each other bringing different language and different examples to the same core message – we want to help you get past traditional retirement illusions and embrace a more empowering and fulfilling life plan.

Bottom line – if you have any interest in retiring with financial security and enjoying a happy life (who doesn’t?) then this interview is a must listen. It carefully redefines retirement as a highly misunderstood stage of life so that you know what to expect and how to plan for for the best.

In this episode you will discover:

  • The critical difference between freedom from and freedom to.
  • The 3 revolutions driving The New Retirement.
  • How the 3 revolutions perfectly match the 3 M’s – money, medicine, and meaning. (Not a coincidence.)
  • The last of our human freedoms and what it means for the last stage of your life.
  • The 6 steps to making the Life Reimagined transition so you can enjoy a fulfilling next stage of life.
  • What it means to be pushed by pain or pushed by “inner kill,” versus driven by internal motivation.
  • How do you know if you’re living in the V.U.C.A world? Why should you care?
  • How rapid change connects to your desire for happiness.
  • What it means to find happiness from the inside-out.
  • Why hedonia only gets you superficial, transient happiness, but eudaimonia can lead to deep fulfillment.
  • Why happiness can only be pursued through the “side door” rather than directly.
  • The dead-end path of self-absorption and self-entertainment as your sole purpose in life… revealed.
  • The cause that triggers change in your life and where it comes from so you can be prepared.
  • How to use a sounding board to re-create your life.
  • The reason why lack of curiosity is the number one relationship destroyer in the second phase of life… and how you can protect your relationship from becoming the next victim.
  • The virtues of a circular life solution versus a linear life solution. Yes, it matters.
  • Discover the necessity to embrace discomfort as a positive experience on your path to growth.
  • and much more….

Resources and Links Mentioned in this Session Include:

Life Reimagined Book with Richard Leider

Help Out The Show:

If you are getting value from these podcasts then a great way to give back is to subscribe and leave a review. 5 star reviews improve the show’s rank – the more reviews the higher the rank – which helps more people find the show and benefit from the message.

Click here to subscribe to the show on ITunes and leave a review…

Alternatively, this link below will help you subscribe and leave a review on your device…

Click here to subscribe and leave a review from inside your ITunes account…

Thanks for your support and I hope you enjoyed this episode. Please let me know what you think in the comments below…

Life Reimagined PDF Transcript:

Click here to get your PDF transcript of “Life Reimagined” Episode #14 with Richard Leider

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