Robert Kiyosaki Blog

Financial Education Portal inspired by Robert Kiyosaki

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Free ebook: Guide to Financial Literacy Resources

Competency in managing money appears to be a skill that doesn’t come naturally to eve ryone. Unless a person is exposed to the practice of money management, he/she is less likely to understand how it works and its long-term benefits. It is easy to develop poor spending and financial habits resulting in significant negative consequences such as a poor credit rating, denial of credit, rejection for a checking account and bankruptcy, to name a few. Early financial literacy is the best way to pre vent such consequences. Financial institutions have a vested interest in supporting or providing financial literacy programs. Rrlative to cost, financial literacy provides both immediate and long-term returns. The most obvious is brand recognition and market share. Financial literacy offers an excellent opportunity to personalize ones institution among consumers who have myriad options in selecting financial service providers. Consumers who understand the merits of responsibly managing their financial resources are more likely to effectively and profitably utilize the services of a traditional financial institution. Financial literacy is a good way to teach consumers about the benefits of having a relationship with a financial institution. Among these are economical access to funds and credit, the ability to establish a positive financial history, consumer protection and perhaps most important, a higher propensity towards savings, which increases net worth. Financial literacy can also break the cycle of poverty, which is often associated with the unbanked. Individuals who have experience handling a bank account and an awareness of other effective money management/asset building techniques are more likely to pass these on to their children. Providing financial literacy training is not a one-size-fits-all effort . Financial literacy is most clearly divided into four categories: early intervention, basic literacy, credit rehabilitation and long-term planning or asset building. Introduction at the earliest stage can often eliminate the need for corrective intervention at later stages. Given the breadth and variety of materials available, it may be useful to first determine your institution’s purpose and objectives for undertaking financial literacy training. This will assist you in specifying the audience you would like to reach and in identifying the most appropriate materials. Download Guide to Financial Literacy Resources PDF format, 526KB,...

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Grandma Needs Money. Now What?

My grandmother recently, and reluctantly, asked if I could give her some money. There’s no question my wife, Amy, and I will give her the funds; she raised me and is, by and large, the woman I consider my mom. She has always been kind to Amy. If we have the discretionary cash that can make my grandmother’s life happy, shouldn’t we hand it over? Yet the request has caused us a lot of angst. Part of our concern is where this will lead. Although my grandmother isn’t asking for a lot of money — just a few hundred dollars — when you open your wallet to family members, the first time is rarely the last. We don’t want to get in the position of becoming my grandmother’s ATM. But it’s more than that. Amy and I have worked hard to earn this money, and it’s frustrating to have somebody want to tap into our account. What’s more, my grandmother will no doubt use the money for things that we’d never buy ourselves. We don’t want to feel like suckers for funding a lifestyle that we might consider indulgent. So that leads us to the question we’ve been grappling with: When providing financial assistance to a family member, is it fair to say the money comes with constraints on how it is spent? Or, is financial assistance an exercise in unconditional love? * * * Let me say it at the outset: I don’t believe children bear an obligation to their parents as a cost of having been raised by those parents. Bringing a child into the world is a parent’s choice, not the child’s. Thus, the obligations that do exist run from parent to child, not in reverse. That said, I certainly feel a desire to assist my grandmother out of a sense of love and caring. She also has always been careful with money — in terms of both spending and saving. And she and my grandfather obviously weren’t my birth parents, but they did choose to raise me. Still, loving and understanding don’t necessarily erase the questions that inevitably arise when family members seek funding. In particular: Why do you need this money? And how are you spending the money you do have? If you, the giver, don’t agree with how the person spends his or her money, do you have a right to impose your restrictions? Do you have a right to tell someone to change his or her spending habits in order to get any money from you? One of my longtime friends, who’s providing financial support for her two sisters, says no. She’s...

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Balance Transfers

Transferring your credit card balance, or balances, to a lower interest rate card can save you money. The process is a tricky one — there are a lot of possible fees, penalties and ‘catches’ to beware of lest this move actually end up costing you money. It is also getting harder to do. Credit card companies are try to stop losing customers, and they are also trying not to gain customers who are only there to take advantage of introductory rates before they move on again. This is one credit card move that absolutely demands you read — and understand — all of the fine print. Different card companies handle it in different ways and have a wide range of fine print containing a myriad of rules. But just because hopping from one card company to another is harder than it used to be rates for balance transfers, but there are low fixed rates offered for balance transfers (that’s the card company’s way of getting you to bring your balance and stay). Key numbers If you do not transfer to a fixed rate (or even if you do because fixed — the rate you are getting, how long it lasts and what it jumps to when that rate is over. With a fixed rate you may not know when it will change, but there will at least be a guaranteed period before it can change. After you have those numbers, check out all of the related costs: • Does either company charge a fee for moving the balance? • Is that fee a flat sum or a percentage? • Does your old card company charge you another fee for terminating your account? • What fees and rates does the new company charge for new customers? • Will both card companies notify you when the transfer is done? • Under what circumstances can the new company change the introductory rate it gives you for your balance transfer? Beware of ‘tiered’ arrangements. These will let you transfer a balance and give you some sort of interest amnesty or super low rate for a period, and then there may be another rate or arrangement for some more time, then a third (or even a fourth) rate. The trap here is that you may start with a great arrangement and slowly find your deal getting worse and worse. Different rates There may also be different rates for purchases you make with your new card. For example you may transfer with no interest for three months on your transferred balance and any new purchases. Then for three months you may have different, but not...

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In defense of Suze Orman

Zac Bissonnette Suze Orman is in a federal court in Oakland defending herself against civil fraud, breach of fiduciary duty and conspiracy charges related to a long-term care insurance policy sold by her financial advisory business in 1999. It’s a convoluted case, but the gist of it is this: The Suze Orman Financial Group of Emeryville, California sold a long-term care insurance policy and there was confusion about what it covered and the policyholder sued. The brochure specified that in order for the policy to pay out, the caregiver “cannot be a member of your immediate family living with you.” but the fine print in the actual contract specified that payments couldn’t be made to family members, regardless of where they lived. When the policyholder got sick and her family cared for her, CNA Financial Group — the issuer of the policy — refused to pay up. Forbes reports that “The complaint, which seeks unspecified damages from CNA, Orman, her firm and others, quotes repeated advice in Orman books to buy long-term care coverage.” Orman’s lawyers say the case is without merit. The case itself is not that interesting, but Forbes’ decision to cover it is. Forbes writer William P. Barrett adds to the piece, somewhat clumsily, that “At the time, Orman, now 57, portrayed herself to the public as a practicing financial planner. But a contemporaneous Forbes story said she hadn’t done such paid work in years; her financial services earned income was coming mainly from selling insurance. Our story pointed out a number of other false statements in her published author’s bio, which was quickly changed.” And that has precisely nothing to do with the lawsuit, but who cares about that? Barrett adds at the end that “The lengthy New York Times Magazine profile of Orman published Sunday calls her “the best-known financial adviser in the country” and “a trusted national adviser.” It makes no mention of this litigation, which has been pending in the courts against her for several months.” It makes no mention of the lawsuit because the lawsuit has nothing to do with anything. People who run businesses that sell financial services like insurance end up in litigation from time to time. Who cares? For a combination of reasons — jealousy, sexism, elitism, and arrogance come to mind — a number of financial journalists have made mini-careers out of Suze-bashing. Maxed Out director James Scurlock recently wrote a piece titled If You Knew Suze Like We Know Suze ,You wouldn’t listen to her advice — and then failed to explain what part of Suze’s advice is so bad, other than a trashing of dollar-cost...

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Smart Money Moves for Young Investors

At a conference on financial literacy on Apr. 20 in Chicago, Federal Reserve Chairman Ben Bernanke said it was time for Americans to learn to manage their money. Ramit Sethi couldn’t agree more. The 26-year old personal finance guru has made it his mission to help Americans do just that and he tries to make it as simple as possible. In his new book, I Will Teach You to Be Rich, and on his blog of the same name, Sethi shows twentysomethings how they can automate their financial decision-making and learn how not to overanalyze. This is especially true when it comes to investing. He says money should be automatically diverted to investment accounts, then automatically invested and rebalanced, according to a set calendar. Sethi met with BusinessWeek’s Ben Levisohn on Apr. 17 to discuss how fearful investors can get started in this vexing environment. You’re only 26. How did you start investing? When I was in high school, I applied for a number of scholarships because my parents told me we had to. The first scholarship, for $2,000, was written to me and I invested it in the stock market. This was back in 2000. I lost a lot of money. I still have some of those stocks. One is worth 90% in total. I probably lost 99% of that money. That was a great eye-opener. It made me realize that just because you see a stock on TV that does not mean you should invest in it. Just because you’re wearing clothes from Gap doesn’t mean it’s a good investment. That’s when my eyes started to open. But if you ask most people, “hey, what investments do you have,” they say, “you mean stocks?” Which causes me to throw my hands up in the air. So you’re not a big believer in buying individual stocks. How should people invest? I want to reduce choice and encourage people to invest. For most, a target date fund is perfect. That’s the 85% solution. It’s not perfect, but it’s good enough. There’s no need for people to rebalance by themselves. The fact that we have 60- to 70-year olds losing 50% of their money speaks volumes that just because you should rebalance your investments, it doesn’t mean you will. Just like you should practice safe sex does not mean you will. But what if investors want a little more control? If you really want to tweak it, if you’re a type-A nerd and you’re reading about all different asset allocations, then let me show you how to do this. Here’s a recommendation: the Swensen model, by Yale’s Chief Investment Officer...

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Free eBook: Financial Reform: A Framework for Financial Stability

Financial Reform: A Framework for Financial Stability addresses flaws in the global financial system and provides 18 specific recommendations to: improve supervisory systems by redefining the scope, boundaries, and structure of prudential regulation; enhance the role of the central banks; improve governance practices and risk management; address pro-cyclicality via capital and liquidity standards; enhance accounting practices; strengthen the financial infrastructure; and increase coordination internationally. FORWARD In July 2008, the Group of Thirty (G30) launched a project on financial reform under the leadership of a Steering Committee chaired by Paul A. Volcker, with Tommaso Padoa-Schioppa and Arminio Fraga Neto as its Vice Chairmen. They were supported by other G30 members who participated in an informal working group. All members (apart from those with current and prospective national official responsibilities) have had the opportunity to review and discuss preliminary drafts. The Report is the responsibility of the Steering Committee and reflects broad areas of agreement among the participating G30 members, who participated in their individual capacities. The Report does not reflect the official views of those in policymaking positions or in leadership roles in the private sector. Where there are substantial differences in emphasis and substance, they are noted in the text. … INTRODUCTION Market economies require robust and competitive financial systems, national and international, to intermediate between those with financial resources and those with productive and innovative uses for those resources. That intermediation necessarily poses risks—risk with respect to bridging maturity preferences of savers and borrowers and risk with respect to creditworthiness. The process, to be effective, depends on mutual trust—trust based on confidence in the integrity of institutions and the continuity of markets. That confidence, taken for granted in well-functioning financial systems, has been lost in the present crisis, in substantial part due to its recent complexity and opacity. … Visit Financial Reform: A Framework for Financial Stability Download Page You can download full report in PDF format. Group of Thirty www.group30.org 1726 M Street, N.W., Suite200 Washington, DC 20036 ISBN I-56708-146-0 View original post here: Free eBook: Financial Reform: A Framework for Financial...

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Wealth Gurus and Their Financial “Wisdom”

Do you know what a wealth guru is?  A wealth guru is a guy who is usually quite wealthy himself, but whose money principally comes from the sales of books, CDs, and other programs that dispense the unconventional advice that supposedly makes him unique and which is certain to make you wealthy, too. Robert Kiyosaki, he of the Rich Dad, Poor Dad brand, is one of these gurus.  His own success as a business owner, before fashioning himself as a financial “educator,” was mediocre, at best.  He is supposedly a highly successful real estate investor, but there are few publicly-known details on that.  In short, Kiyosaki appears to be a wealth guru on the basis that so many others are – he has managed to successfully market himself as such. Kiyosaki recently wrote an article entitled Why the Cheap Will Never Get Rich (find it here: http://finance.yahoo.com/expert/article/richricher/153515), and it’s horrible.  The article is disorganized and rambling, but that’s not the worst part.  The worst part is that when it does dispense advice, it tells people to do all of the wrong things, or rather, tells them to refrain from doing any of the right things.  Here’s a disturbing passage: “Millions of people are living in fear because they followed conventional wisdom: Go to school, get a job, work hard, save money, buy a house, get out of debt, and invest for the long term in a well-diversified portfolio of mutual funds. Many people who followed this financial prescription are not sleeping at night. They need a new plan. Had they sought out a little financial education, they might not be entangled in this mess.” A key component to the oftentimes non-specific, rah-rah advice these guys dole out is the insulting of people who engage in the standard practices associated with living prudently and building net worth over the long term.  It’s about suggesting that the way to wealth is to be “bold,” to leverage yourself to ridiculous levels in order to buy real estate, stocks, businesses, etc., and if it all doesn’t work out, go bankrupt and try it all over again.  Haven’t you heard that real winners are ten-time losers before they become mega-rich?  Well, haven’t you??  Get out there and be a winner!! When you think about it, the passage quoted above is tantamount to saying that the best way to ensure that you’ll flunk out of college is to never miss a class, study hard every single night, do extra work, and stay after each class to speak with your instructors; the advice simply makes no sense.    Just the sort of “wisdom” we need right now,...

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Credit-Card Traps You Still Need to Watch For

It’s being touted as a big win for consumers — but the new credit card legislation that President Obama is expected to sign into law hardly means that cardholders can start swiping that plastic worry-free. In fact, as the new rules kick in (most will go into effect nine months after the president signs the bill, while others will kick in as early as 90 days afterward)  and banks start curtailing the abusive practices this legislation reins in, other practices will likely emerge that can hurt consumers just as badly. “The pendulum may have swung in the wrong direction”, says Dennis Moroney, research director and senior analyst for TowerGroup, a research and advisory-services firm focused exclusively on the financial-services industry. “The banks now have to respond to these changes.” You may not like that response. Whether you use your credit cards as a tool to rack up free rewards points or you carry debt that you’re hoping to repay one day, you should watch out for new fees, higher interest rates, less generous rewards and fewer promotional offers. Here’s what you need to know. Watch out for new kinds of fees The new law prohibits over-limit fees (unless the cardholder agrees to allow transactions that exceed their limits). To make up for that lost revenue, banks will likely introduce other fees. “You will see a re-emergence of fees for all kinds of other services,” says Robert McKinley, founder of CardWeb.com, which provides industry research and analysis. Among the fees cardholders should watch out for: fees for rewards programs and possibly even fees for checking your balance, he says. Also, expect annual fees to make a comeback, says Moroney. In the 1980s, annual fees were standard, but were dropped as competition among card issuers heated up. Moroney predicts that some issuers will slap annual fees on all their credit cards, while others will tie the fee to spending thresholds, so that only big spenders get a free ride. What cardholders should do: To protect against unpleasant surprises, examine credit-card statements and change-in-terms letters carefully. For now, card issuers can change terms at any time with 15 days’ notice, but once the new law is in effect, they will have to give 45 days’ notice. Prepare for higher rates Universal default allows card issuers to hike rates if a cardholder’s credit score drops or if they make late payments on other accounts. Once the new legislation is in place, issuers will lose this powerful risk-management tool. Without the ability to hike rates if a cardholder’s perceived risk level rises, card issuers will just start charging higher rates across the board, says...

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Mortgage Crisis Fuels Scams

I have been laid off for seven months and am having trouble making my mortgage payments. I’ve seen a lot of ads from companies that offer to help with mortgage restructuring. Are they legitimate? Maybe. Maybe not. Crooks respond to headlines and trends. When it became apparent that many Americans were having trouble paying their mortgages, the scam artists seized the opportunity to offer their own form of “help.” But instead of getting homeowners out of mortgage trouble, these crooks take your money and run — or may even take your home. You may find them by reading a compelling ad or receiving a convincing phone call. Their tactics are varied and clever. Sometimes they search through the government’s public foreclosure documents and send you a personalized letter offering to help you save your home. The scam artists may offer to negotiate with your lender — then run off with your money instead. In some of the worst cases, they may deceive you by claiming the documents you’re signing are to restructure the terms of your existing mortgage, but instead you unwittingly transfer the title of your house to the scam artists. Another ploy is to ask you to surrender the title and remain in the home as a renter, then buy it back over several years — but the contracts include outrageous buyback terms that make it nearly impossible for you to get your house back. Or they offer to find a buyer for your home and share the profits with you, but only if you sign over the deed and move out. Beware of companies or individuals that charge a fee to enroll you in a government program to help you with your mortgage. You can do that yourself for free. Some may be out to steal your money; others are looking to gather important information to steal your identity. Housing-related scams have become such a big problem that federal and state agencies started working together to crack down on the crooks. The Federal Trade Commission recently surveyed online and print advertising for mortgage-foreclosure rescue operations and identified 71 separate companies running suspicious ads, and states have brought more than 150 enforcement actions against mortgage-rescue companies. The FTC recently warned homeowners to avoid businesses that: Guarantee to stop the foreclosure process — no matter what your circumstances. Advise you not to contact your lender, lawyer, or credit or housing counselor. Collect a fee before providing any services. Accept payment only by cashier’s check or wire transfer. Encourage you to lease your home so you can buy it back over time. Tell you to make your mortgage payments...

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Never a bad time to invest in gold

Gold’s popularity over the centuries has endured wars, plagues, civil unrest and all sorts of other perils. But would gold prices hold up well in a prolonged deflationary spell? For the first time in several decades, we’re starting to find out. With the economy shrinking sharply over the past two quarters, inflation pressures have faded. The U.S. Consumer Price Index has dropped in four of the past six months, and the inflation rate for 2008, at 0.1 percent, was the lowest reading since 1954. Gold prices also have retreated, slumping from a 2008 peak of $1,011 an ounce to a current price of about $915. “Gold is unusual in that it’s an asset that likes inflation,” Natalie Dempster, head of North American investments for the World Gold Council, an industry group, said during a recent stop in Phoenix. Even so, gold has bounced back from a low near $700 an ounce in November. The metal has held up better than many other commodities amid the deflation headwinds. Demand for gold isn’t just a function of inflation and deflation, of course. More than anything, gold is used in jewelry, with 68 percent of the metal destined for this use, Dempster said. Industrial uses such as electronics take an additional 19 percent, leaving a fairly small remaining slice for coins, bars and the like. Much of the demand, especially from places such as India and China, isn’t directly tied to U.S. consumer-price levels. The supply side of the equation, meanwhile, is affected by mining activity and new discoveries, of which there haven’t been many lately. “Mine production has been in a downtrend since 2001,” Dempster said. Supplies also are influenced by the amount of gold recycled as people sell jewelry to raise cash. “A fair amount of scrap has been coming back onto the market,” she said. With the economy showing signs of life, some observers think we may be near a crossroads where inflation picks up. Diversification suggested Russell Biehl, a chartered financial analyst at Classic Investment Management in Scottsdale, sees higher inflation ahead as the economy works through its rough patch and government spending kicks in. He suggests investors diversify a slice of their holdings into inflation-sensitive assets, including gold. “Eventually, the Federal Reserve will gain traction (in inflating the economy) with all the money they’re printing,” he said. Jay R. Penney, a chartered financial analyst in Scottsdale, also sees an investment role for gold. ‘A compelling story’ “As a dollar hedge, it is a compelling story for a portion of a portfolio,” he said. “I do expect inflation to rise, and dramatically so in the future, if things...

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