Robert Kiyosaki Blog

Financial Education Portal inspired by Robert Kiyosaki

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Financial Literacy For All – Assets & Liabilities

In Accountancy an asset is defined as “a resource controlled by the entity as a result of past events and from which future economic benefits are expected to flow to the entity.” A liability also defined as ‘present obligation of the entity arising from past events, the settlement of which is expected to result in an outflow from the entity of resources embodying economic benefits”. These are the classroom definitions and technical for those in the Accountancy field and these definitions are mostly related to assets owned and liabilities owed by corporate entities. Human beings, as we are, we also have personal assets and liabilities and we can define them in our personal ways that would give us better understanding. This would help us take proper personal financial decisions. Now let’s look the definitions given by one renown American Entrepreneur, Writer and Teacher, Robert Kiyosaki. Roberts defines an asset “as anything that puts money into your pocket and a liability as anything that takes away money from your pocket”. Robert’s definitions are great and relate to our daily lives, because as human beings we make, spend or waste money every day and we need to know the differences between assets and liabilities are. When we spend money, we should spend it more greatly on assets and very less on liabilities. Whether it is personal or corporate expenditure, the quest should be to spend more on buying assets rather than wasting the little funds on liabilities that drain us and our organizations financially. Some assets to buy are: Hotels, hostels, hospitals, guest houses, office complexes, schools, colleges, churches, universities that bring money home Pieces of land to sell later for more cash Building houses and rent them out or sell them for more cash Pharmaceutical shops for sale of drugs, shopping malls, sheds, stores, warehouses, that bring money home Taxes, buses, trailers, articulated trucks, aero planes, ships, trains, that bring money home Build companies in any industry that will bring more money home Treasury bills, fixed deposits, call accounts, mutual funds, unit trusts, real estate investment trusts (REIT) these can bring more money home Specific assets that will defer tax payment for your organization Diamond, gold, and other available minerals whose value will appreciate depending on the world market price to bring more money home Farming-cocoa, cotton, coffee, onions, carrots, cabbage, lettuce, spinach, cassava, plantain, banana yam, potatoes, millet, sorghum, beans, maize, wheat, mangoes, guava, oranges, peas and avocadoes, pawpaw, watermelon, palm nut, coconut, shea-butter nut, all edible berries to sell for cash Constructions of dams, boreholes, wells, canals, lakes, swimming pools and others to rent out or even sell...

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HELOC: Home Equity Line of Credit FAQ

A HELOC, or a home equity line of credit, is set up to have a maximum draw limit rather than just a set dollar amount in the form of a lump sum like a home equity loan. Similar to a home equity loan, a home equity line uses your home as security. This line of credit is set up to a certain amount decided between you and your lender (generally 80% of the market value on the home in question minus any fees currently owed upon it) that can be drawn out in a set amount of time. A HELOC, in simple terms, is a recommended alternative to a home equity loan for those with ongoing projects. So, you are in desperate need of cash, got projects to fund, mouths to feed, bills to pay, and so you decide to drop by the bank and get a loan. First option you are presented with when offering your home as collateral is whether to go with a home equity loan or a HELOC, or simply a home equity line. In most cases a HELOC will probably be your better choice, simply because when you need the cash, you have it, and when you don’t, don’t worry about it. Sounds simple enough, and for those in need, a HELOC is a welcome alternative to many other loan choices because you won’t have a lot of money just sitting around that you have to pay interest on. The easiest way to describe how a HELOC is a superior loan alternative is safety. With a HELOC you obtain safety in both terms of being more likely to handle your payments as well as safety from yourself. When the money isn’t just dumped into your pocket all at once you are less likely to waste it and end up in trouble. A HELOC generally has low settlement cost rates (on a $150,000 line of credit it would be around $1000 compared to $2500-5000 for a home equity loan of the same amount). While other fees associated with a HELOC tend to be more expensive, overall a HELOC doesn’t cost that much more that a standard home equity loan. In addition, the idea of saving you from, well, you, plays an important role as well. If you just receive all the money up front and it’s just sitting there, you are going to be tempted to spend it on things you don’t need. Obviously this situation can come back to hurt you. However, in a HELOC, since the money isn’t just sitting in the bank but is rather drawn out when you need it, you...

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Investment In Property Can Help You Retire

A lot of Americans aren’t going to have enough money to retire on. That is just a un happy reality of these times. Instead of bemoaning that reality (and the unfairness of it all) the best thing someone who hopes to have a healthy retirement can do is simply make sure they aren’t the typical American. We must take actions to assure they will have enough income to enjoy their life and pay their bills, as well as those increasing medical bills. The best way to avoid becoming one of these Americans who end up working at some remedial job through their so-called Golden Years, according to Robert Kiyosoki, author of the “Rich Dad Poor Dad” book series, is to buy investment property. Investing in real estate is a wonderful way for people to prepare for retirement because it supplies a great benefit called “passive income”. After someone has laid the ground work, passive income keeps coming in without a lot of effort. A laborer gets compensated only for the hours he puts in. A real estate investor, after setting up his system, gets paid for keeping it running. And keeping it running, if he been wise about it, will involve paying his team to do the job of inspecting them every now and then. A great thing about passive income (such as from investments) is, the more time the real estate investor holds them, the more ROI they should make for her, with less and less work on the investor’s part. It’s the closest thing to the “Holy Grail” of the world of money. It sounds attractive, but we shouldn’t just take the plunge. And even though it is completely learnable, there’s quite a bit to learn when one is thinking about buying investment property – things like comprehending P&L statements and real estate law. The biggest concept to learn, however, is one’s own limitations. The individual who understands where to find the knowledge he wants is far better off than the individual who remembers tons of facts and formulas around in her memory. In the book “Cash Flow Quadrant,” Robert Kiyosaki advises potential investors to increase their cashflow in addition to their knowledge. He writes of developing a business system that can be set up and left alone, freeing the investor to move to the next step instead of investing all her time working in her business. The next step involves continuing the real estate education and start to look around for specialists to employ and investment properties to buy. Robert Kiyosaki also talks about this change as transitioning from one part of the cash-flow-quadrant to the...

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Treat your first home as a real estate investment?

I remember a lot of comments from readers and also from people I meet in person who tell me that they are just looking for a place to live and are not really looking for a real estate investment. My default answer is “Why not treat your first home as an investment?” In reality, once you buy a property, you become a real estate investor. Buying a home is often considered to be the biggest investment one can make so it’s best to treat it as a real investment — one which will give you reasonable returns if you do decide to turn it into a rental property or if you sell it further down the road. What are reasonable returns? Normally, when a person buys a house which he intends to live in, he does not consider how much rent he would earn if he decides to rent the property out, and whether the possible rental income would be more than his monthly amortization. It is not uncommon for a homeowner who moves up the corporate ladder or improves his situation to move to a better home but keep his first home for sentimental reasons. Thus, if in the future, the homeowner decides to move to another house and converts his first house into a rental property, the rentals are often not enough to cover the monthly amortizations, thereby producing a negative cashflow situation. Had the homeowner considered his first house as a real investment, he could have dedicated more time to finding a property that would fetch better rental rates which could cover the monthly amortizations, thus giving the owner a nice positive cashflow. More often than not, factors that may affect market values and appreciation are not given too much attention by a home buyer as the primary goal is just to have a place to live in. When the time comes to sell the property, it is very likely that there is little or no room for significant profits. At times, the homeowner may even have to sell at a loss. This situation could have been avoided had the home owner considered buying a property that was way below market value*. *-”Market Value” is the estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion. Buying a property below market value would be in alignment with what Robert Kiyosaki often says, which is “You should make money when you buy, not when you sell”.  Money is...

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Investor Types and Risks

The first step in developing an investment plan is to identify what type of an investor you are. Investor types are often determined by their stages in life. Here is a guide: – Single person under 40 years old. Focus: Long-term investments, medium to high risk. Emphasis: capital gain, compound growth. – Two-income married couple, no children, aged 20 to 40 years. Focus: Long-term investments, medium to high risk. Emphasis: capital gain, compound growth. – One-income family, young children, aged 20 to 40 years. Focus: Long-term investments, low to medium risk. Emphasis: compound growth. – Single person, aged 40 to 60 years. Focus: Medium-term investments, medium risk. Emphasis: capital gain, compound growth. – Married couple with adolescent or independent children, aged 40 to 60 years. Focus: Medium-term investments, medium risk. Emphasis: capital gain, compound growth. – All investors, aged 60 and over. Focus: Short to medium-term investments, low risk. Emphasis: Income. The following are examples of investment portfolio mixes for the various types of investors. Low Risk Investments: Low risk investments are predominately cash, fixed interest and superannuation. This has the lowest risk of all investments but has also the lowest return – in today’s market, approximately 3% to 6% per annum. Fixed interest includes cash, cash management trusts and bonds. They return approximately 5% to 10% per annum, sometimes as high as 15% if you invest in global bonds in good markets. Superannuation returns and risk profiles vary from institution to institution, however the best and safest usually return on average 10% per annum. Medium Risk Investments: Medium risk investments include property and non-speculative shares. Diversified funds, which invest in a range of asset groups, are also considered to have medium risk profiles. Average returns from these types of investments will range from 8% to 15% per annum. I also like to include the broad spectrum of mutual funds, to be discussed later, in the range of medium risk investments. Some can return up to 25% and more depending on the fund type and managers. High Risk Investments: High risk investments include all speculative shares, futures and any other type of investment that is purely speculative by nature. Because with these types of investments we are betting on whether the price will go up, or sometimes down, I often classify this as a form of gambling. Accordingly, the returns are unlimited but so is the ability to lose the total money invested. Read more: Investor Types and...

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Rich Woman Kim’s First Investment

Kim describes her thoughts, decisions and fears of her first investment purchase. Listen in as she talks about the time it took to find the property and her fears of making a bad investment....

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Check out Rich Dad World and Powerpack!

Powerful tool for Rich Dad followers. Check it out!Share With a Friend | Rich Dad PowerPack Shared via AddThis See the original post here: Check out Rich Dad World and...

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How to make money from property

Making money through property investing by generating a passive income is a sweet proposition for anyone. It is a rich man who doesn’t dream of making money without having to lift a finger for it, and the poor man who fools himself into thinking it is possible. Talk to any successful property investor and you are bound to get the same story; that in order to create a passive income, you’ll have to work damn hard to achieve it. Lisa Dudson, co-author of Create Wealth, a bestselling book on property investment, says many who go into in real estate suffer from a delusion that there is easy money to be made in housing. “The whole passive income thing is a bit over-used and under-estimated, really, because nothing is free in this world – you have to work for it,” Dudson says bluntly. A successful property investor, financial planner and entrepreneur, Dudson knows of what she speaks. The tough talking 40-year-old Aucklander has sweated her way to financial freedom, and along the way advised hundred of clients and readers how to do it right in real estate. Dudson says very few ever get to the stage of achieving a genuinely passive income, where rental revenues are creating positive cashflow instead of being used to finance debt. Why? Time for one. “It doesn’t happen in five minutes; it sometimes takes 25 years,” she says. Patience aside, making a profit in property takes sound planning, strategy, wise counsel and firm financial foundations. These four areas are the focus of talks that Dudson gives to property investors when she is invited to speak on the subject. She’s a regular on the lecture circuit. Dudson drives home the same message for clients, most of whom she sees after the damage has been done. “I’ve seen a lot people this year that have $3 million to $4 million worth of property, but they also have 95 per cent debt on it. They’re just sitting on diddly- squat at the end of the day, because if they sold it all today, they’d probably have zero in this market.” Dudson says investors who blunder into property without a proper game plan are setting themselves up for disaster. “They’re building up all these properties and buying all these things, but it’s not actually delivering a hell of a lot to their bottom line. Then they say they’d like to retire in five years and I say, ‘Well, how the hell are you going to do that!’ They haven’t actually given it any thought. They’re not sure what they are trying to achieve.” If property investment requires air- tight...

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Robert Kiyosaki & Joe Aldeguer

World renowned author and Real Estate investor, Robert Kiyosaki, talks to Joe Aldeguer about his insights and strategies in investing into Real...

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Couples Quiz: What’s Your Financial Compatibility

Couples frequently avoid talking about money before marriage. That’s unfortunate, because sharing perspectives about money can help couples resolve the financial issues that doom many marriages. The following financial compatibility quiz can help couples planning to tie the knot discuss financial issues. Answer “true” or “false” to each of the following statements. 1.      We are aware of and comfortable with each other’s money personalities. 2.      We have discussed our short- and long-term financial goals. 3.      My spouse and I are well versed in personal finance. 4.      My spouse and I have discussed a plan to structure our finances. 5.      We have planned for the impact that marriage will have on our taxes. 6.      We have decided how to divide up the money management tasks. 7.      We understand the importance of establishing a realistic budget. 8.      I know my future spouse’s investment personality and risk tolerance. 9.      I know how much debt my spouse is bringing into our marriage. 10.     We have made a commitment to discuss money regularly. Answering “true” to eight or more statements indicates that you and your spouse are on your way to a stable financial future. However, it’s still a good idea to continue to communicate and work together. If you answered “true” to between five and seven of the above statements, you and your spouse need to devote more time to planning your financial future together. With a little luck, you can achieve financial compatibility.  If you answered true to fewer than five questions, don’t call off the wedding yet. Instead, make a sincere commitment to discuss these issues and consider meeting with an experienced financial planner who can help you start your marriage on firm financial footing.  Read on to learn more about the importance of each question. We are aware of and comfortable with each other’s money personalities. Some of us grew up in families where parents watched every dime; in other families money flowed easily. Some people measure self worth in terms of money and possessions. Some people are natural spenders; others are savers. Understanding your future spouse’s background and values can help avert problems down the road.   We have discussed our short- and long-term financial goals. Setting financial goals helps you develop priorities and define the type of lifestyle you will lead. Break down your goals into manageable pieces. If you want to buy a house in five years, determine how much you need to save monthly to meet the down payment. My spouse and I are well versed in personal finance. Parents and schools rarely provide training in personal finance. Work together to develop your financial knowledge and...

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