Tom Perrone - measuring the risk you don't have to take. 3 minute money tip with Janine Bolon.

Tom Perrone – Measuring the Risk You Don’t Have to Take4 min read

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Janine Bolon: Hi, today is a three-minute money tip with me, Janine Bolon. And my guest, Tom Perrone, is based a brown this one topic and that is “Measuring The Risk You Do Not Have To Take”.

Now in case, you have not heard Tom before. He is someone that has run a financial planning business since 1970 and is known for his one-page solution that is designed to help business owners eliminate that ‘what-if’ in their business as well as their personal life. He has developed a wonderful program and plan. I highly recommend you get his book “Unlocking Your Business DNA”. This program is very effective with business growth and transition planning. It helps increase your company’s profits. It creates a solid planning platform and it contributes to eliminating the stress of life for the business owner. Thank you so much for being with us today, Tom.

Tom Perrone: My pleasure as always, Janine. Thank you for inviting me.

Janine: So today, we are talking about Measuring The Risk You Do Not Have To Take. You have got 3 minutes. Go.

Tom: So many people that I have worked with over the years have said “well, I need to be in the stock market to have enough money.” And I said, well that sounds good but the market goes up it goes down. Are you going to be in that situation where it goes down and you lose a lot? Especially older people where they have created nest eggs, and they are 10 and 15 years away from retirement. If not near retirement. So about 20 years ago I developed software that took all your money and divide it into 4 quadrants, of 4 parts. And it really said “listen every 5 years you are going to use a part of it. So when you retire that is your income and we can inflate it and do all that stuff.”

The money that you are not going to use for many years because we are doing 15 years, cycle 1, 2, 3, and 4. 1, 2, 3 is earning a very conservative rate of 3%, 4%. Maybe 2%, it depends. But that money that people normally would put in the stock market, you measure that and what I mean by that is I could measure and say, well if the cycle 1, 2, 3, and 4 gave you the income you needed for 15 years. You have had this money sitting there for 15 years growing. Let us measure what rate of return you had to get to have this money in cycle 4, 15 years later, grow to the original starting point that you started 15 years ago. And Janine. I am amazed to see that by doing it mathematically like that, you find that they only had to earn 3%, 4%, maybe 5% and that includes purchasing power on their income.

So in some cases that is not the case because they are starting off with such little amount and taking so much out. But I would say it is a way and it is a methodology of really measuring, do I want to take a risk? If I have to only earn four and a half percent on money that I will not use for 15 years. Why would I put it in the market? And if I am in the market it is going to be very conservative. On the other hand, if that report said “No, you have to use 7% or 8% or 9%.” You have to adjust accordingly, but I find too many people especially when they are close to retirement, are jumping into this market because they are chasing these returns not realizing that if they get hit, they do not have the 30 years to rebound.

So I measure it with logic. I believe in logic and math. I do not believe in emotion. None of my clients that are retired will run out of money and the stock market does not affect them when iota because we did it logically. So there is a way of doing it. And if anybody wants to write me about it, I will send them some information.

Janine: That is one of the things you will love about Tom is his willingness to guide you and show you his secret sauce. And yet at the same time put you in a place that will give you a lot of stability. So that was this week’s three-minute money tip. Thank you, Tom. We look forward to having you again.

Tom: My pleasure.


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