Robert Kiyosaki Blog

Financial Education Portal inspired by Robert Kiyosaki

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Investing Humour

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5 Tips for Surviving Tough Times

1. Don’t Buy What You Can’t Afford We all want that designer sweater, leather handbag, or cute sports car, but most of us just can’t afford to make the purchases. There’s a simple solution to this dilemma. If you can’t afford it, don’t buy it. This is often the easiest point to understand, but it is one of the hardest to implement when all those goodies are staring you in the face and all your credit companies are telling you it’s OK. 2. If You Can’t Pay Cash, You Probably Can’t Afford It In our credit crazy world, amassing debt no longer carries a social stigma. Everybody has a car payment, a house payment and credit card payments. Well, remember what your mother said about everybody jumping off of a bridge? Just because “everybody” is doing it, doesn’t make it a good idea. Buying something you can’t afford now, especially when the economy is unsettled, can double the pain of paying later. For example, if you purchase a $450,000 home today and the market goes into a slump and devalues your home by $200,000, you will be paying the bank twice what the home has come to be worth. Just because it was easy to get the credit to buy that home, doesn’t mean it was the right time for you to buy in. 3. Paying Interest on Anything Makes Somebody Else Rich When you pay interest on a purchase, you are overpaying for that item for the luxury of getting to use it now. The simple act of paying interest means that the price you are paying to make the purchase is greater than the sale price of the item. You are giving away even more of your hard-earned money in order to own that item than the manufacturer thought the item was worth. For example, if you buy a car for $25,000 with a loan at 7% interest for five years, in the end, you will pay almost $30,000 for the car. Once you factor in depreciation, you’re left with a very cheap car that cost you thousands more than it should have. 4. If You Are in Debt, stop Spending Money Sometimes, such as when purchasing a home, the cost of the item is so great that you simply cannot afford to pay cash. This should be the exception rather than the rule. When it cannot be avoided, you need to close your purse and stop spending. Getting yourself further it debt doesn’t help your financial situation. Making a realistic budget in this case is the key to success. Once you know how much you’re actually...

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How to Declare Financial Independence

  By BRETT ARENDS You’ve eaten the hot dogs. You’ve watched the fireworks. Now it’s time to declare another kind of independence — your own. If you’re like most Americans, you haven’t been free in a long, long time. Instead you’re in chains. You’re manacled to dozens of monthly bills you can’t seem to escape. Mortgage payments. Car payments. Credit-card payments. Cellphone, landline, cable TV. TiVo. You name it. Thousands of dollars. Call them tribute. Or tithes. Who’s really free here? Our Founding Fathers probably would have thrown their cable boxes into Boston Harbor. But then, they ranked liberty ahead of the pursuit of happiness. Take a look at the chart. Maybe it should become our new national symbol. It shows how much more we owe than our parents did. In 1976, around the time of the bicentennial, the average family of four owed about $56,000. That’s in today’s dollars, after accounting for inflation, and includes mortgage, credit cards, car loans and the like. The figure now? Oh, about $185,000. Gosh, it’s just amazing we have a credit crisis, isn’t it? Of course it must be somebody else’s fault. Insert conspiracy theory here: [   ] But instead of blaming other people for our problems, or looking to political candidates to solve them for us, maybe we could start by looking a little closer to home. Do we really need the Super Duper Every Movie Ever Made cable package? All those meals out? The endless trips to the salon? The supersized caramel double iced latte with extra whipped cream every day on the way to work? Really, how lazy we are. Could there be anything easier in the world to make at home than an iced coffee? It isn’t just the big bills that are shackling us. It’s all the little ones. They add up. If we cut just one dollar a day from our budgets and saved the money instead, in thirty years we’d have…. about $26,000. Yep. That’s assuming we earned about 5% after inflation on our investments – a reasonable assumption, but not a heroic one. Twenty six thousand bucks.That’s in today’s money. If you’re not maxing contributions to your 401(k) plan, it’s even more because of the tax savings. Try $34,300. That won’t buy complete freedom. But it can’t hurt. Read more: How to Declare Financial...

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Don?t Panic – Buy Index Funds and Real Estate

  – Ben Stein Now for some reassuring words. Of all of the columnists writing in this space, I suspect I am the oldest. This means I have seen the most economic fluctuations. This also means I am less terrified about them than younger heads. Let me put this differently. I read recently in The Wall Street Journal that the stock market was at the time of that writing almost in “Bear Market Territory,” which is to say, down roughly 20% or more from its high. This, said the author of the piece, shows that we are about to have very bad economic times. The author helpfully noted that the market has been down into “Bear Market Territory ” some nine times since the mid-1960’s. Without doubt, this author was trying to do his best, and to serve his readers. But here’s a relevant addendum: yes, the market may have fallen 20% or more nine times since then. But there have only been five recessions since then. That is to say, the stock market predicts 10 out of five recessions. Not such a great record. The truth is that while the economy is clearly slowing down we are not yet in a recession. There has so far not even been one quarter of negative economic growth, nor even a break-even quarter. We may well have one soon, but two in a row are required for the classic definition of a recession. And as I keep saying, if anyone can call anything a recession, the whole subject loses all intellectual or factual meaning. This too could happen-a real recession-but it has not happened yet. There are still reasons for hope. Exports are phenomenally strong. Minerals and agriculture are strong. Medical is strong. The government sector is large and robust. Sadly, military must remain strong indefinitely. The government is running an immense deficit, and this is stimulative. True, finance is in tatters, as is transportation, refining, and home building. These are large sectors. They may fall so much that they bring the economy into recession. But think about this: somewhere out in the big wide world, there is voracious demand for minerals and commodities. That (along with speculation) explains their major price increases. It would be extremely rare for there to be a spectacular worldwide demand for commodities along with a serious fall in demand for other factors in an economy. That is, it would be rare for demand to be both rising and falling at the same time. It could happen, but it would be rare. However, let’s assume we do have a recession. I hope we don’t, but we might....

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Save Money ?Rich Dad, Poor Dad? Style

I learned a lot from the Rich Dad, Poor Dad book. Robert Kiyosaki is a great entrepreneur and really knows how to teach how to make money and save money. This article will teach you how to save money “Rich Dad, Poor Dad” style. The main premise the Kiyosaki’s Rich Dad, Poor Dad book is that you need to stop thinking like an employee and start thinking like an owner. One of the first steps in this process is to make you money work for you. To often people keep their savings in a traditional savings account. However, they could be earning higher interest on that money be investing in a high interest savings account, high yield cds, high interest money market accounts, or stock or bonds. Any of these option typically pay better than the tradition brick and mortar bank savings account. While Kiyosaki spends most of his book talking about how to increase your earnings, he also explains how passive income and compounding interest rates really help you to save money. By developing passive income streams you can allow today’s effort to pay of big time even when you are not actively working it in the future. Developing passive income streams is the true way to start building a business. Unlike a 9 to 5 job, a passive income stream can make you money even while you are not working. Once you earn money however, you also have to be reinvesting that money into other stream of income. This could be a high interest savings account or high interest money market accounts. This money could also be invested into growth stock, dividend paying stocks or bonds. This type of investment will often give you a higher return on investment than a high interest rate savings account. However, you lose the security of FDIC insurance when you invest in stocks and bonds. So, in order to save money “Rich Dad, Poor Dad” style, you need to be focusing on earning money, developing passive income streams and growing your savings through investing it in high yield investment vehicles. This is the key to Robet Kiyosaki’s money saving system. Everyone needs to be focusing on these concepts throughout their lives. You need to start thinking like an owner not an employee. Excerpt from:Save Money ?Rich Dad, Poor Dad?...

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Getting A Millionaire?s Mindset

Let’s face it; we all don’t make millions of dollars a year, and the odds are that most of us won’t receive a large windfall inheritance either. However, that doesn’t mean that we can’t build sizeable wealth – it’ll just take some time. If you’re young, time is on your side and retiring a millionaire is achievable. Read on for some tips on how to increase your savings and work toward this goal. Stop Senseless Spending Unfortunately, people have a habit of spending their hard-earned cash on goods and services that they don’t need. Even relatively small expenses, such as indulging in a gourmet coffee from a premium coffee shop every morning, can really add up – and decrease the amount of money you can save. Larger expenses on luxury items also prevent many people from putting money into savings each month. That said, it’s important to realize that it’s usually not just one item or one habit that must be cut out in order to accumulate sizable wealth (although it may be). Usually, in order to become wealthy one must adopt a disciplined lifestyle and budget. This means that people who are looking to build their nest eggs need to make sacrifices somewhere – this may mean eating out less frequently, using public transportation to get to work and/or cutting back on extra, unnecessary expenses. This doesn’t mean that you shouldn’t go out and have fun, but you should try to do things in moderation – and set a budget if you hope to save money. Fortunately, particularly if you start saving young, saving up a sizeable nest egg only requires a few minor (and relatively painless) adjustments to your spending habits. Fund Retirement Plans ASAP When individuals earn money, their first responsibility is to pay current expenses such as the rent or mortgage expenses, food and other necessities. Once these expenses have been covered, the next step should be to fund a retirement plan or some other tax-advantaged vehicle. Unfortunately, retirement planning is an afterthought for many young people. Here’s why it shouldn’t be: funding a 401(k) and/or a IRA early on in life means you can contribute less money overall and actually end up with significantly more in the end than someone who put in much more money but started later. How much difference will funding a vehicle such as a Roth IRA early on in life make? If you’re 23 years old and deposit $3,000 per year (that’s only $250 each month!) in a Roth IRA earning and 8% average annual return, you will have saved $985,749 by the time you are 65 years old...

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Housing Market Crisis Opportunity?

Last night I happened to catch an episode of “Larry King Live” which included a feature on the current housing crisis along with a panel of participants including Robert Kiyosaki, author of ‘Rich Dad Poor Dad’, and Donald Trump. While the stats by now are known to most people – The Shiller Home Price Index was down 15.5% for April ‘08 vs April ‘07, and over 1 Million foreclosures have been filed with many many more expected, the real overarching questions were a) is this a good time to sell and if you have to sell then what can you do to sell, b) what do you do if you are a homeowner facing foreclosure, and c) is this a good time in terms of opportunities to buy and invest? The unanimous consent amongst the parties was pretty much as follows a) This is not a good time to sell obviously and if you do not have to sell then you shouldn’t. If you do have to sell then you can sell if you price your property appropriately. This means first of all IGNORE what other homes are listed for, the only thing that matters is what homes have actually SOLD for recently as a valuation bench mark. If you must absolutely sell then discount your home 20% below current market value and you will find that it sells very rapidly. The bottom line is that it is not that there are no buyers, it all boils down to the numbers. At our business we have been working diligently for the past 2 years, communicating to our sellers that the one thing that is more important than anything else in determining whether or not a listing will sell is price. We have some listings that have lingered without activity for a year where sellers simply refuse to face the realities of the market, and then other listings that are selling in a week, because in those cases the sellers are realistic and follow our advise. The Sarasota real estate market is what it is and if you ignore market realities then you simply will not sell. b) If you are a home owner in trouble the resounding agreement was that the very worst thing you can do is ignore the lender when you get your notice. Lenders do not want to own your home, and they are willing to work out loans with home owners and today you have a lot of leverage as a owner in renegotiating your loan. The only predicament today is unfortunately that lenders will not discuss your loan until you are at least a...

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A fine line between good and evil…

There’s been a lot of posts on leverage lately in the blogworld so I didn’t think it would hurt to have one more… Also – I’m in no way advocating anyone use leverage for investments unless they are comfortable with the extra risks. Leverage is an instrument that almost everyone uses when they buy their house. Although most people buy a house to live in, not as an investment, it’s an example of where people are using leverage and they might not even realize it. If you ask people on the street about how they feel about borrowing to invest they might give you a lot of negative feedback. I suspect this is a holdover from times when margin accounts were the only way to borrow for investing. The problem with margin accounts is that if your investments drop in value enough then you have to come up with cash to pay the difference which is why certain investors were running out of windows in 1929. My opinion is that leveraged investing can be a useful tool but definitely entails extra risk. However it occurs to me that sometimes the idea of leveraged investments can be a question of semantics. Consider the following: Person A gets a $200k mortgage on his house with a 25 year amortization. After five years, his mortgage is $185k and he also has $10k in cash that he has saved. This person decides to invest the $10k into a dividend stock, let’s say…BMO. So now he has a $185k in mortgage and $10k of stock. Person B also gets a $200k mortgage on his house with a 25 year amortization. After five years, his mortgage is $175k but he has no extra cash to invest because he has been making extra mortgage payments. This person decides to borrow $10k from his secured line of credit and buys $10k of BMO as well and gets the tax rebate on the interest paid. According to popular wisdom, person A is the epitomy of responsible investing using good old cash to buy his stock. Person B on the other hand has made a deal with the devil and plunged into leveraged investing. So what’s the difference between the two? The only difference I can see is that Person B can write off his interest on his investments and Person A can’t. Obviously there are interest rate differences but I’m ignoring those since they shouldn’t be too significant. Moral is – if you don’t make extra payments on debt and use cash to do investments then you would be better off to put that cash into the mortgage...

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5 Best Ways To Earn Passive Income

1. High Dividend Stocks There are a lot of stocks that paying quarterly or yearly dividends. Over time, the power of compounding (with a little help from inflation) can substantially increase the value of your dividends. My mother bought the Indian subsidiary of Unilever (Ticker: UL) called Hindustan Lever about 20 years ago. She’s being reinvesting most of her dividends and today her annual dividends are larger than the value of the original stock purchase. American Capital Strategies (ticker: ACAS) has been growing its dividends approximately 10% every year. According to The Dividend Investor, If we invested $100,000 in ACAS on December 31, 1997 we would have bought 6906 shares. Your first quarterly check would have been $1,726.50 in March 1998. If you kept reinvesting the dividends though instead of spending them, your quarterly dividend payment would have risen to $17,095 by December 2007. For a period of 10 years, the quarterly dividend has increased by 300 %. If you reinvested it though, your quarterly dividend income would have increased by 890%. Yes, reinvesting the dividends in companies that have historically kept increasing their dividends is key. Even though you might get only 2.5% return today, eventually with the increase in stock price and rise in dividends, your annual return should be greater than 12%. This concept is very well explained in Prof. Jeremy Siegel’s excellent book, The Future for Investors, which I highly recommend. 2. Oil & Gas Royalties While there is a lot of fraud and speculation in direct oil drilling programs, they can be very, very lucrative for investors. Charlie Munger invested about a $1,000 in such an oil drilling program in the 60s and he’s estimated that its paid out over $500,000 in royalty payments since then. Apparently it still pays out $2,000 a month. Of course, most people NEVER see these sort of returns, but for the average person, investing in Canadian Oil & Gas Royalty Funds (or Income Trusts) is the next best thing. I’ve invested quite a bit of money into both the direct oil wells and the Canadian Income Trusts (or Canroys) and the overall result has been pretty positive in both (which is in excess of 12%). 3. Royalties on Books and Patents Royalties on Books and Intellectual Property Rights can be even more lucrative. However writing a best-selling book or creating a something thats worth patenting can extremely time consuming and expensive. For most authors and inventors, its a labor of love – something that they would pursue even if there was no monetary reward to it. But many ebook writers who sell get-rich-quick books about “making money online”...

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8 Qualities of a Wealthy Woman

Besides money, a wealthy woman has some qualities that serve as guideposts to make sure she’s always walking toward wealth rather than away from it. This month’s readers each had one or more of these traits out of alignment. Here are the eight qualities and how they can translate into financial success: Harmony and balance. Harmony is the agreement between what you think, say, and do. Balance is the state of stability in which you’re able to make sound judgments that will enhance your financial security. When you use a loan for in vitro fertilization that will leave you so deeply in debt that it would be difficult to care for your new child, you forsake harmony. Aligning your thoughts, words, and actions will put you on a path to balance—and emotional and financial well-being. Wisdom and courage. The ability to make (not just think about) sensible decisions that respect your needs takes wisdom, the voice of experience that’s inside each woman. Courage, the catalyst that creates harmony by uniting our thoughts with our actions, is what lets us assert our opinions confidently. To tell your mother that you love her but can’t ruin your financial life to save hers requires wisdom and courage. Generosity and happiness. True generosity must benefit both parties. No woman can control her destiny if she doesn’t give to herself as much as she gives of herself. That’s why I so often caution you not to cosign loans or deplete your emergency cash savings to bail out someone. While those acts seem helpful, they leave you financially at risk. Happiness manifests itself through generosity—when, for example, a woman makes donations that help others yet don’t deplete her. Cleanliness and beauty. Removing clutter and chaos from our lives brings clarity, which makes it easier to achieve what we want. From emptying closets of unused stuff to streamlining your wallet, cleanliness is a sign that you’re in control. And by bringing the first seven qualities into your life, you feel beautiful. When you commit to finding harmony and balance, you have the courage to make wise decisions that are as generous to you as they are to others. This leads to deep, unwavering happiness and brings beauty into your life. I wish this for the women who wrote to me this month, and I wish it for you. Adapted from Suze Orman’s latest book, Women & Money: Owning the Power to Control Your Destiny (Spiegel & Grau) Continued here: 8 Qualities of a Wealthy...

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