When we hear the word money, what comes to mind — savings in banks, investment in mutual funds, investment in equity, investment in real estate, investment in antiques?
In my opinion, it is a combination of all. Investment gurus call it the ‘diversification of portfolio’.
We learn the discipline to manage money effectively outside the classrooms. It reminds me of an old incident.
Once, almost 20 years ago, I visited my friend and we were busy talking when her young son entered happily, showing his mom a $100 note gifted by his granny. All he wanted to do with it is buy chocolate.
His mother explained to him that chocolates are unhealthy and he should do something else with the note, preferably put it in his piggy bank. Reluctantly, he agreed.
A few months later, I happened to visit her again. That day she was busy with her son, helping him open his piggy bank, overloaded with coins and notes. They both counted them and were delighted that the total was beyond their expectations.
Again this time as a responsible mother, she advised him to put this fund into a savings account. She taught him to fill up the deposit slip. The boy tried, but could not. So his mom filled the slip and he left for the bank along with an office help.
Years rolled by, and his mom is now proud of his saving habits. However, the amount is earning interest only in the bank. “To save must be a habit of childhood, but to invest must be the habit of adulthood.†My friend, as a responsible mother, could reach only her son’s childhood and not beyond.
What is the count of your investment portfolios? Are you working for money or is money working for you?
“The poor and the middle-class work for money. The rich get the money to work for themâ€- Robert Kiyosaki, the author of Rich dad poor dad said in the book. It’s generally seen that many people have the habit of switching off their minds when it comes to money matters. People in the other category have a habit of exercising their minds when it comes to money.
The difference depends on many criteria. It doesn’t matter if the child doesn’t listen to you, or doesn’t obey you. The child always observes you.
Since childhood, we listen to and observe many things in our parents, teachers, friends and others. This plays a vital role in developing our thinking patterns.
I will explain two different thinking patterns by picking up some of the effective sentences from Rich dad poor dad.
Generally, we veer towards high returns with low risk. We often fear taking risks, but always expect to have high returns.
So to overcome our fears, it’s advisable not to have all eggs in one basket, but to diversify the investment to different avenues, so as to benefit in times of inflation, interest rate changes or market volatility.
Our thinking patterns depend upon our age, sex, goals and objectives, risk appetite, future needs etc. With a simple thinking pattern, people can accumulate money, whereas a dynamic thinking pattern leads to generation of wealth.
One survey conducted in the US revealed the fact that only 4% of the population was confident of the future financial security of self and family as they had generated enough wealth. More than 60% of the population has to work part-time even after retirement.
It’s best to have financial independence and financial literacy. As per a recent survey, almost 50% of our population is young, that is, in the age group of 15-35 years. The Indian working population is increasing. Hence, with a proper financial literacy we can enhance our economic growth.
Chhaya Kothari
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Saving?s not enough, invest your money
I’ve been delinquent the past few months in posting. I’ve been quite busy, what with some of my business ventures (including a couple of new ones), real estate and the real estate investment clubs. There’s a lot of fodder for blog posts over the past few months. From more bank collapses including Fannie Mae and Freddie Mac, insurance company implosions including AIG, foreclosures skyrocketing, etc. But keep reading because you’ll find what finally motivated me to blog today when I’ve already get about 18 hours of work in the next 5-1/2 hours.
I’m pretty much sick and tired of hearing mortgage brokers lay the blame squarely at the feet of borrowers. Let’s face it: there are (or were) a lot of bad brokers that coached borrowers and in some cases outright misled them. There were also borrowers that went along knowing full well that they were lying and could. The borrower knew it, the broker (and originator) knew it, the bank knew it.
Even the insurers knew it. AIG was “insuring” these loans that everybody in all financial sectors knew were fundamentally unsound.
Then they were put together with other loans of all grades into a great big pot. Then, like apples that you wouldn’t eat because they look bad and are on their way out but when pureed you don’t know the difference when made into apple sauce and sugar is added, they got sliced and diced into little pieces sold to investors as a sanitized product that had supposedly reduced the risk. Then they paid the companies to rate the new securities. Just like banks that had their preferred property appraisers that were compromised (think the investigations in NY and CA into inflated appraisals pushing people into jumbo mortgages or sub-prime products by collusion), the ratings were inflated (and unregulated). To further wash these bad mortgages, these securities were sliced and diced again in new securities, and rerated even higher!
What investors doesn’t want some of their assets in AAA rated securities that pay a rate of about 8%? For those wondering, that AAA rating is supposed to mean that there’s about as little risk as there could possibly be.
Ever since falling out of the last real estate bubble in the early-mid ’90′s, government has wanted to increase home ownership. That’s good for everybody including real estate investors and government because, lets face it, prices go up and so does tax revenue in a world of increasing value. So let’s just drop that partisan political nonesense. Republicans have been trying to blame Bill Clinton, Democrats, Congress, etc. In other words, it’s that nebulous “them”. Democrats have been trying to blame “them”, corporate greed, Republicans, Congress, George W. Bush, etc. And they are all right and all wrong.
It’s US as in America that got us into this mess. And it’s US that need to get us out of it.
The big popping sound and then the rushing air going by as the vacuum is drawn pulling down home prices, wages, tax revenues, stock values. Oh, yes, and inflation is being drawn up by forces like running the printing presses and massive government spending.
Let’s face it. The country turned more socially and fiscally conservative starting with the election of Ronald Reagan and culminating with the election of George W. Bush. Everyone agrees that taxes were high. But over the last 8 years, the Congress and President have pursued a cowardly tax policy. Lot’s of Libertarians with a big L joined the Republican party because the figured out that they were going nowhere as big L Libertarians.
Yes, that’s what I said. Cowardly.
Why do I say they are cowards? We let’s see. We had a huge deficit and we were finally paying it down and paying it down quickly. But we had an enormous crushing debt load still. So instead of maybe making a small cut to taxes and still paying down your debt, a big one was instituted. What happened is the equivalent to you or me having huge debt (that we have to pay for) and deciding that we don’t need 1/4 of our income. Now we are upside down and paying out more than we take in. You can think of it as quitting your job or being laid off and living on your credit cards. Sounds good when we talk about tax cuts but it’s really like losing your job but you still have the same expenses. Oh, just stop eating or heating your home. Now you won’t be spending as much! Especially if you don’t spend on you spouse or kids!
Then throw in a very unpopular war and try to lower taxes again! This is the first war in American history where taxes were lowered in wartime! Too bad the government doesn’t act like we are at war! Except of course for spying on us. Think of it as now you’ve been laid off but you just decided to double your expenses and you just naively think you’ll borrow and let your heirs pay for it!
Isn’t that the opposite of what we are trying to do?
Fast forward to bank failures, insurance giants failing, etc., because of their bad decisions. Their leaders got paid upwards of $100 Million per year and justified it by saying look how much we made the company and shareholders! Of course, shareholders would and should have received a bigger piece but that’s a different story. Basically, they took the money and ran. Now we see that there was widespread fraud.
There have only been about 6% of sub-prime foreclosures and 3% of prime. That shouldn’t bring down the financial situation. Except that the securities were weaker than advertised and how do you break them up and get the mortgages out.
Yea, the free marketeers now want a socialist answer. Not that I think that’s necessarily bad, but the same people that wanted no regulation want the government to fix it. Call it what it is. It’s nationalizing these businesses and essentially these industries. So what do we call it something else when it happens here? Or right, because America doesn’t have refugees either, just evacuees like after Katrina. Anywhere else, we’d be calling them refugees.
If I were in Congress, I probably would have voted for the bailout/rescue/nationalization. Then I’ve have gone to the john and puked.
So who suffers the most? Sure investors do. Sure the government does because there won’t be as money to spend (oh, wait, I forgot about the aforementioned printing presses). We do, the tax payers. We’d suffer if these businesses failed and we’ll suffer with the bailout. Which would be worse, we won’t know. But the bad fiscal, monetary and tax policy, especially over the past 8 years allowed for a death blow.
Why do I think we are in this mess? Greed? Incompetence? Greed? Fraud? False populism? Vote pandering ($600 tax rebate and a bigger deficit)? You bet. But they are symptoms.
It’s deregulation, my friends (oh, great, now I sound like John McCain). It started under Reagen, continued under Bush the Elder, accelerated under Bill Clinton and reached it’s peak under Bush the Younger and a Republican party that controlled Congress and could deregulate (or defund enforcement which amounted to a cynical way to achieve the same result–see they don’t do a good job anyway inspecting/regulating, see?) yet couldn’t pass a budget.
A number of real protections (that’s what regulations are for) were put into place because of widespread fraud, misrepresentation and a believe that too many people were speculating on stocks among other things that led the Black Friday in 1929. Through the 1930′s, these regulations came into effect for insurance, banking, stock markets, etc., etc. Fast forward and we’re back to where we were. Just like in the ’30′s, massive foreclosures, growing unemployment, inflation, etc.
I’ve said all of that and now I don’t feel any better. I might feel worse.
So why did I post? Because an act of compassion and humanity. The Cook County, Illinois, Sheriff announced today that he will not evict people living in multi-family housing that are being evicted because the owner is losing the property. He won’t put them on the street.
I’m in the market for these types of property so why am I posting?
Because he’s right. He’s right from a humanitarian aspect. It’s also pretty dumb sometimes when banks evict when they’ve got paying tenants and I see it every day. Property rots like overripe fruit when it’s vacant.
Here in Massachusetts, the Senate in the Spring passed this provision. The State House hasn’t taken it up and we are a largely progressive state.
This is a social justice issue. Screw the money. There will be a lot of people on the streets, families, kids, the elderly. Call your state rep. here in MA and ask why they never passed Senate Bill 2664 / House Bill 4734.
It allows for eviction for cause, like non-payment of rent; the tenant violated the lease/tenancy; the tenant is a nuisance, causing damage or interfering with other tenants; being used or permitting to be used for illegal activities; they’ve refused reasonable requests for access by foreclosing owner for repairs or improvements required by law. It’s pretty reasonable.
The act would sunset end of year 2013 and evictions that happen illegally carry reasonable fines.
This should be passed.
If you are in a different state
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What a mess
By David John Marotta
As Americans try to spend less and go on a budget, this provides an opportunity to teach the next generation financial principles they may never have seen in the prosperous years they have been alive. Here are ten principles for teaching children about money:
Talk about money. Every time money is involved, parents have a chance to teach their children the values and analysis behind their actions. Money should never be the primarily topic of discussion, but it is one of the most important topics through which we communicate our wisdom and values to our children. Every purchase, investment, or donation can be a time to teach your children something about your values.
Talk openly about money. Parent makes a mistake when they keep information from their children. The only way children learn what is a good deal and what is too expensive is by the experience of what their family earns and what items cost. Hiding this information robs children of the financial education they need.
Talk factually about money. Many parents have strong emotions about money based on their childhood experiences. These emotions are always transmitted to children. Instead of helping children, they can cripple children from growing to make sound financial decisions
Require chores; pay for optional work. Everyone in the family has to help complete the work that needs to be done. If you want to pay your children, only pay them for optional work they can choose to do or not to do.
Provide children an allowance they can make real choices with. Talk about money is important, but children need real-world lab experience to understand the consequences of their decisions. Consider giving them an allowance large enough so that they can purchase some of their own needs. Then continue to give them honest advice, and help them ask the right questions to make wise decisions based on their values.
Help children prioritize purchases. Ask them if this purchase is better than other purchases they are considering making.
Help children comparison shop. Help them consider issues such as cost, quality, and convenience.
Require children wait before making large purchases. Adults should wait at least a month whenever they are making a large purchase. Children shouldn’t be expected to wait that long. Here is a good rule of thumb: Children should be required to wait as many days as they are old in years before being allowed to make a large purchase (over a week’s allowance). There is always tomorrow and over half the time they won’t remember what attracted them to it in the first place. Developing this habit will help make them resistant to impulse buying.
Don’t use money as a punishment. Your priority should be helping to give your values to your children, not buy their outward behavior.
Don’t loan your children money. If their desired purchase is something they should be saving for, let them save for it. If you want to buy it for them for the value of the experience, buy it for them. The principles are “If they want it, they have to save for it. If you want them to have it, you will buy it for them.†Loaning your children money for items they want teaches them they aren’t responsible and they don’t have to prioritize.
David John Marotta works at Marotta Asset Management, Inc. of Charlottesville which provides fee-only financial planning and asset management.
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10 Principles of Teaching Children about Money
From The Oprah & Friends Radio Show with Dr. Mehmet Oz, 11 September 2008
The Unthinkable: Who Survives When Disaster Strikes and Why by Amanda Ripley
It lurks in the corner of our imagination, almost beyond our ability to see it: the possibility that a tear in the fabric of life could open up without warning, upending a house, a skyscraper, or a civilization.
Today, nine out of ten Americans live in places at significant risk of earthquakes, hurricanes, tornadoes, terrorism, or other disasters. Tomorrow, some of us will have to make split-second choices to save ourselves and our families. How will we react? What will it feel like? Will we be heroes or victims? Will our upbringing, our gender, our personality–anything we’ve ever learned, thought, or dreamed of–ultimately matter?
Amanda Ripley, an award-winning journalist for Time magazine who has covered some of the most devastating disasters of our age, set out to discover what lies beyond fear and speculation. In this magnificent work of investigative journalism, Ripley retraces the human response to some of history’s epic disasters, from the explosion of the Mont Blanc munitions ship in 1917–one of the biggest explosions before the invention of the atomic bomb–to a plane crash in England in 1985 that mystified investigators for years, to the journeys of the 15,000 people who found their way out of the World Trade Center on September 11, 2001. Then, to understand the science behind the stories, Ripley turns to leading brain scientists, trauma psychologists, and other disaster experts, formal and informal, from a Holocaust survivor who studies heroism to a master gunfighter who learned to overcome the effects of extreme fear.
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Amanda Ripley – The Unthinkable: Who Survives When Disaster Strikes and Why
From O, The Oprah Magazine: Fall’s Best Beauty Products, September 2008
Anthelios XL with Mexoryl XL and SX – 60 SPF (3oz)
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La Roche-Posay Anthelios
