Category: Finance

How Funds Pooling Helped an Entrepreneur Grow His Business

 

While working in the corporate world as an accountant, Dean Vagnozzi realized that he wanted to be proactive with investments rather than sit back and wait for what will happen to his savings. He decided to quit his job and founded A Better Financial Plan. As a successful entrepreneur and financial advisor, Dean Vagnozzi shares his story about how he grew his business as it is known today.

Putting money into his 401k did not provide Mr. Vagnozzi with ready cash to throw into real estate or any other form of investment that would give him a short-term return. Inspired by a book written by real estate legend, Robert Kiyosaki who proposed using life insurance cash value to invest in real estate, he withdrew the cash value of his 10-year old life insurance, which as at $65,000 at that time.

Within one year. he purchased three small houses that underwent renovation before reselling them. He made $70,000 with these deals. Convinced that he was making money out of this strategy, he repeated the process ad within the next five years, he purchased, restored, and re-sold 15 houses. He also built 15 single-family homes in 15 plots of land.

Soon, his friends wanted to join his new brand of investments. At his lawyer’s advice, he utilized the Private Placement Memorandum which acted as prospectus that provided essential information to prospective investors, including the risks involved in investing. he and his group of investors pooled funds to invest in larger properties. Their first investment gave them $4 million in profits three years after they invested.

Mr. Vagnozzi used this model to grow his own business named A Better Financial Plan. Through his financial advice, over 16 other companies were organized using this model. Investors have pooled more than $100 million in funds for investments in real estate, life settlement and other forms of unconventional investment strategies.

Hidden Costs of 401(k) Plans

Dean Vagnozzi possesses more than a decade of experience in personal finance and wealth management. In his book “A Better Financial Plan”, financial advisor Dean Vagnozzi advises caution when investing in traditional retirement vehicles, such as IRAs and 401(k)s that are reliant on the stock market and often exposed to higher tax liabilities.

In practice, employees put away pre-tax contributions into a 401(k) account with the expectation of paying taxes upon withdrawal in retirement. However, since tax rates historically rise, this means that individuals relying on 401(k) investments have a high probability of paying a higher tax rate in 40 years than in their present circumstances.

For those who aspire to retire with their mortgages paid in full, their children grown, and a huge sum of money in their retirement account, the thought of a sizable income tax every time they withdraw can be troublesome. Unfortunately, this is what awaits those who invest in 401(k) and choose to defer incurring income tax in the future.

Figuring Out How Much Money You Need for Retirement

The founder and CEO of A Better Financial Plan, Dean Vagnozzi has been working in the investment sector for more than 15 years. Dean Vagnozzi works to help clients obtain the money they need to comfortably retire.

Most people have heard the advice that they need a retirement nest egg that is 10 to 12 times their current income, or $1 million. While this may provide a general guideline for retirement saving, it is not a suitable amount for everyone. Figure out your nest egg on a personal basis by looking at your living costs.

When you first retire, you will likely need 100 percent of your preretirement income to continue living your current lifestyle. If you have an income of $100,000 a year, for instance, save enough to take $100,000 per year after retirement.

You should also consider how long your retirement will be. Retirement length depends on your retirement age and life expectancy. If you retire at 65, there is nearly a 50-percent chance you’ll live until 95, which means you’ll need a savings of $100,000 per year for 30 years.

Further, you should consider inflation and rising interest rates during your retirement. On average, inflation is about 3 percent per year. Add that 3 percent to your annual expenses for every year of your retirement.

How Reverse Budgets Increase Savings Rate

Since 2004, Dean Vagnozzi has advised his clients on several wealth-building strategies to increase financial security. Dean Vagnozzi’s company, A Better Financial Plan, implements the 1346 Plan that emphasizes prudent investments and a savings rate of at least 10 percent.

Putting aside at least 10 percent of one’s income creates a financial safety net that allows individuals to avoid going into debt or having to lose their home or assets in case of job loss. One of the best ways to maintain a savings habit is by creating a reverse budget.

Rather than calculating expenses first and saving the leftover amount, a reverse budget puts savings on top of the priority by setting aside a percentage of income before allocating the remaining amount on expenses.

For example, a person with a set savings rate of 15 percent should keep all living costs within 85 percent of his/her take-home pay. If current expenses exceed what is left over after savings, then variable, non-essential expenses such as entertainment or eating out should be reviewed and reduced.