Why The Size of Your Nest Egg Isn’t As Important as You’ve Been Led to Believe

By Dawn Fleming

Abraham Harold Maslow, a psychology professor at Columbia University, was best known for creating Maslow's hierarchy of needs. His theory of human psychological health was based on the idea that there is a pecking order for fulfilling innate human needs based on priorities.

Dr. Maslow said humans are motivated by their unmet needs. In this article, we look at the hierarchy through the lens of our human economic need for money.

Particularly in the United States, we are not programmed to be “satisfied”. Instead we are expected to alway want more, better, faster, etc. From a mental standpoint, there is much to be said about being satisfied with what you have. On the economic side, being satisfied reduces stress and feelings of inadequacy. In my opinion, too few wealth conversations are focused around creating an income stream that meets our economic “needs” and matches our desire for fulfillment, purpose and legacy.

By focusing on your MONTHLY CASH FLOW, not the size of your Nest Egg, you feel empowered to your best life. We can’t let other people, marketing messages and conflicted financial planners define our tomorrow. Particularly because the image of retirement you’ve  been sold is a lie. A study by the Employee Benefit Research Institute shows less than 50% of retirees report being “highly satisfied”, over 10% reported “not at all satisfied”. 

Why is this so? Retirement as it has been defined for us, is neither attainable nor enjoyable, as evidenced by the cited statistics. Let’s face it: Boredom is not typically on anyone’s bucket list.

The words “retirement planning” usually conjures up the word “money” - but deep down we know that it is so very much more! How do you, or will YOU define “retirement’?

After we climbed out of our financial hole, from the 2008 crash, we decided not to purchase real estate in Florida. Instead we came to Isla Mujeres, Mexico and purchased an income producing vacation home. This property put money in our pocket immediately.  

I learned a big lesson about this years ago. Many people think their home is an asset.  They think that way because that's what their realtor told them, or maybe an accountant told them. The reality is, the definition of an asset is something that puts money in your pocket.  I shared a quote about that in the Paradise Post last week.

So if your house doesn't put money in your pocket, it becomes this big albatross around your neck with a mortgage, insurance, taxes, maintenance and utilities. It’s a monster that demands to be fed every single month. That’s not an asset, it's a liability. Understanding that difference was huge for us.  

The best time to make your plan B, to create your backup plan, is not when your back is against the wall, but when things are going pretty well. As a sailor, I know that the best time to prepare for a storm is before the storm comes. Fortunately for us, we did that. Even though we were making a very good income at the time, we said, “Hmm, we got most of our eggs in this basket…” and elected to diversify our income by buying foreign real estate. 

At the time, we could have easily purchased a beautiful oceanfront home for ourselves to live in. If we had, it would cost us money every month and be that liability. We decided to purchase property that put money in our pocket.

It was a smart choice because, in fact a storm DID come two years later when our nice income vanished - literally overnight. Boy, were we ever glad we’d made the choices we did, to scale back our monthly expenses and focus on increasing our monthly cash flow.

I still own property in Florida that’s cash flowing nicely. That has turned out to be a really good investment long-term, in spite of the 2008 crash. Creating little streams of income that can grow is a smart strategy.

A lot of people make the mistake of trying to focus on too many income streams at one time - and frequently they end up with trickles. What I've learned is to focus on one stream at a time.

Get an income stream going. Then after it is flowing, you can shift and focus on “what's my next income stream going to be?” In our economic playbook, Cashflow is KING!  We are not that concerned with accumulating a huge mountain of money or “nest egg”. We do have other investments, but our main economic focus is: how much do we need each month to FUND the LIFESTYLE we want?  Do you know your monthly number?

How the Notary System Works for Home Buyers in Mexico

By Harriet Murray - April 26, 2022

If you plan to purchase property here, you will need to know how the notary system works for home buyers in Mexico, and also be knowledgeable about the Know Your Customer form.

Notaries

Notaries are appointed attorneys with special education in notario law to transfer real estate from a seller to a buyer.

Notaries doing the closing are in a similar position as an escrow title company in the U.S. I believe attorneys perform closings and transfer property in Canada.

How we close here in Mexico is with a notary. Unlike the U.S. notary who witnesses signatures, in contrast Canada, South America, Europe and parts of Asia all have the kind of notary who is on the same level as a judge who is appointed to transfer ownership of property from one entity to another.

Notary closing costs are in the currency of the country where the property exists and under the laws and currency of said country.

This means here, Mexican pesos are charged for the notario work. Historically, the buyer’s currency goes further with the conversion of their money into Mexican pesos from U.S., Canadian or European currency.

What are the notario-related costs?

• Tax appraisal
• No lien certificates
• Transfer tax
• Bank trust
• Foreign permit, if there will be a new trust
• Registration in the public registry
• Notary fees
• IVA taxes, which are a sales tax
• Others as per the location of the property.

Bank fees, for example, are charged to a foreigner buying inside the restricted zone, which is a set-back from oceans, rivers, and lagoons that can never be owned by foreigners. For foreigners to acquire property within this zone, they will need to apply for a trust, which in Mexico is 50-year renewable with a Mexican bank that has a trust department.

The notary works with the bank trustee to create the legal document, which makes the bank trustee the holder of the title, and the buyer the primary beneficiary of the trust. A beneficiary has the rights to buy, sell, remodel, build new and designate his/her heirs, as secondary beneficiaries.

Upon the primary beneficiary’s death, the secondary beneficiaries can assume the primary position by paying the notary for a current tax appraisal, transfer tax, notary fees and registration fees.

So, closing costs to set up the trust for the primary beneficiary is on average US$575, paid in advance. These trusts are only available in specific Mexican banks.

Currently, closing costs in the restricted zone in the Bay of Banderas area are 5-7 percent of the purchase price.

Your purchase price will be recorded in the escritura at the number of pesos from the conversion of the other currency. The notary is to use the Bank of Mexico exchange rate for the day or day before the closing.

You can read the rest of the article by going here. Used with permission from Expats in Mexico.

Give Yourself a Big Fat Raise!

By Dawn Fleming

How can you lower your taxes as a W-2 employee, without quitting your job? EASY! Start a side gig. By starting a business while still working, you may be able to allocate a portion of your personal expenses, such as your phone bill, internet, or automobile, that you are paying now - to operate your side gig business which converts them to tax deductible business expenses. That savings goes straight to your bottom line - directly increasing your income. I share several examples of how significant this can be in Claim Your Dream Life.

Essentially, the government will subsidize you to start a small business. Of course, you will need to understand and follow IRS guidelines and the advice of your accountant.

There is a lot of talk about the number of jobs that have been created and how low the unemployment rate is. That said, I can’t help but wonder how many good jobs have been created?

Many are low paying, service sector jobs that quite frankly - no one wants! I personally have met very few people who have both a job and a lifestyle I’d want. 

Perhaps more importantly, it is unlikely you can get ahead - much less acquire significant wealth unless you learn how to get your tax obligations down to the bare legal minimum.

The first step is understanding that there are two very different tax systems in the US. There is one system for employees and a completely different system for business owners. 

The former pays their taxes first, before ever receiving any proceeds of a paycheck. The latter pays their taxes last, after they deduct a long list of legally available business expenses.

Business owners, unlike employees, are only taxed on the portion of their “income” that’s "left over" after all of these marvelous, perfectly legal tax deductions. It is astounding to me how few people bother to learn and really understand this important distinction. 

Why wouldn’t everyone have a home-based business? You can even deduct a portion of your living expenses if your home is your primary business location - of course if you follow the rules!

The wealthy also use a strategy called “income shifting”, and there is no reason you can’t too. Properly documented, you can deduct travel, lodging, meals, cruises (by taking courses), conventions, seminars, medical expenses and premiums. You can legally hire your spouse, kids or other relatives.

There are even sale and lease-back strategies that can essentially give you a double tax deduction for some expense. The wealthy understand the significance of using the tax code to build wealth That’s why I often say my favorite bill to pay is the one for our accountant. 

How do you find a good one? (That’s VITAL) For many years I’ve recommended a great book you can get on Amazon - worth its weight in gold! It has a list of "must ask" questions for anyone you considering relying on for tax advice. It's awesome, and I use it to interview potential accountants.

The author, Sandy Botkin, is a former IRS Attorney and he not only shares many of these strategies - he explains exactly what you need to document the deductions to become audit proof. His writing is very easy to read and entertaining - he’s actually quite funny!  You can grab a copy of it by going here. 

MINDSET–Think and Prepare Like a Warrior–Revisited!

By Gail Minogue

In 2021 I wrote about this topic. We were still in pandemic mode but better able to work with it than 2020. I sent out this piece about thinking and preparing like a warrior as it seemed it could be helpful in light of all that was going on with jobs, vaccinations, masks, etc.

Now I find this information is even more important as the world has become a giant battlefield of real war, global economic problems, food shortages, inflation, supply chain challenges and life and death decisions. The world is shaping up as allies and non-allies and sometimes depending on a non-ally for your survival. You hear about good versus evil now and horrific photos of humankind’s destruction of itself. We weep at what we have done to ourselves and yet many of us turn a blind eye to what is going on in the world. We can’t seem to understand that we are all connected. We equate everything to a competition–even our houses of worship. They can be some of the worst offenders. Our leaders continue to focus on staying in power and represent themselves as actors playing to cameras, soundbites and disingenuous promises. We are in the last and final stage of sickness–arrogance.

This actual war is going into a new phase. It will probably get worse. All countries who want and love democratic freedom must realize that Ukraine represents an invigoration of democracy and an enhancement of European security. A strong democratic Ukraine can thwart Russian expansionism because its borders would be secure. Unfortunately, the West seems blind to this historic chance. It is shortsighted. It does not assist in Ukraine in taking a more offensive mode but keeping it always on defense. Ukraine has won the first phase just by surviving. It now needs to advance and the West would make a terrible mistake if what stood between a bad peace and good one was a failure of imagination in the capitals of Europe.

Dear reader, you will now see how relevant this Mindset piece is. As you read it, see how important the mindset is being played out in Ukraine. Pay attention to how Zelensky thinks and acts. Compare it to the delay and discussions of Europe and the United States. Sanctions take a long, long time to work, if they do. Meanwhile, Zelensky lives in the chaos and the destruction.

These 9 points are from an article by John Perkins a judo and black belt instructor. He worked with rooky cops coming out of police academies back East. Although they had police training, they had to learn how to think in the chaos of the streets. The 9 points can apply to all areas of one’s life. Whenever under stress, return to these 9 points and manage yourself. I am not sure I titled it “Think and Prepare Like a Warrior” or John did. It is definitely a MINDSET.

Go here to read the rest of the article.

Dreaming of retiring abroad? Watch out for these 3 giant pitfalls

By Dawn Fleming - March 26, 2022 published on MarketWatch

You can read plenty of articles about how great it is to retire abroad. My husband and I are thankful every single day that we moved to Mexico five years ago. That said, moving abroad is a little scary and it’s not for everyone. I’ve met many people who love it and couldn’t imagine going back, but there are also those who decided it wasn’t for them.

The good news: It’s OK to try it out and return to the U.S. if you don’t like it. You won’t have to wonder “What if…” One of my podcast guests did that and is really glad to have gone for it, even though it did not work out.

And remember: Many people experience a sense of “What have I done?” at about three months after a move. This mini-setback is typically gone by the sixth month.

These are the three biggest reasons your overseas retirement might not work out.

You moved for the wrong reason

Changing locations alone will rarely make you happy if you’re unhappy in your current environment. Sometimes people feel animosity toward a place (or relationship) when they are “done”. I urge you to try gratitude instead. Plan to be happy and grateful exactly where you are right now.

I lived near the charming downtown area in Orange, Calif., for over 20 years. We knew over a year in advance that we’d be moving away. During my walks through the area, I was intentional in soaking it all up, taking it all in like taking a deep breath, as if I’d never see it again. I felt incredibly grateful that final year, a sense of joy and completeness as if a chapter of my book was closing.

While we were “done” with our life in California, we weren’t running away from something as much as running toward something else: a simpler and more joy-filled life. We were tired of the concrete jungle, six lanes of traffic in each direction (none moving) and the incredible high cost of living in Orange County.

Instead of seeking external factors for a “perfect retirement location,” figure out who you are and what you really want in your life. Know exactly what’s most important and nonnegotiable.

For example, I told my husband shortly after we met that this Minnesota girl was DONE with snow. Tom was a black diamond skier but decided his knees should retire. He took up golf and tennis so we have compatible interests. He was an avid sailor. Our first two dates were sailing to make sure I didn’t get seasick—that would have been a deal breaker for him.

You had unrealistic expectations

Many people retire without a well-thought-out plan. They neglect to define what their new daily life will look like. Being retired with an income stream is not a plan. It defines your situation, but not how you’ll spend your days.

Without structure or purpose, people can drift. Not knowing what else to do, some may head to the bar every day or just sit in a new place and wonder why they moved at all. The place you love on vacation may not bring the same joy when living there.

One woman I met moved to Mexico to retire. Then she moved several times around Cancún, looking for happiness, which turned out to be illusive. She decided return to live in the United States, got a small apartment and took a job as a cashier. Not knowing what else to do, she went back to her old life.

Naming what is important to you at the beginning of your search will help you find places that fit your vision of paradise and help you craft a plan for your new life. Do you need to learn a new language? Are you willing to do that?

Don’t be afraid of trying out several locations to find the best fit. Some good options include taking a sabbatical, house sitting or otherwise temporarily living like a local. All of these options let you learn what daily life is really like.

Read the rest of the article at MarketWatch by going here.