Robert Kiyosaki Blog

Financial Education Portal inspired by Robert Kiyosaki

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How Deep Must You Dig to Pay the Mortgage?

Jack M. Guttentag As the unemployment rate rises, more mortgage borrowers must choose between default and making the payment out of savings. That can be an agonizing decision. See the letter below: “I was laid off recently but am reasonably hopeful of finding another position soon… We have stayed current by drawing down our IRAs, but there is only about $4,000 left, enough to cover us for one more month…Our family is counseling us to keep the $4K left in our IRAs and not make the next monthly mortgage payments. Do you agree?” Not making the payment will hurt your credit, but if the choice is between missing the payment this month and missing it next month, I would miss it this month and keep the cash. I would only use the rest of your cash to make the payment if you manage to get a job before 30 days after the payment due date. In that event, you have a reasonable hope of being able to work your way out of the jam you are in, so using your remaining money to save your credit makes sense. This question is heavily value-laden, which is why I answered it in terms of what I would do, which is not necessarily what someone else with different values might elect to do. Some, especially investors, could take the position that a borrower is morally obliged to make the payment if there is any possible way to do it. This is a defensible argument, but it assumes that the borrower’s only duty is to the investor. The borrower in question has a family to consider as well. The issue of a borrower’s obligation to continue making payments out of savings after their income-generating capacity has been impaired arises in connection with the government’s Home Affordability Modification Program. See another letter from a reader: “I have applied to have my loan modified, and am in process of filling out the financial questionnaire that my servicer sent me. It asks for the amounts in my bank accounts. Although my income has dropped, I have enough money in the bank to cover the mortgage payment for three years. Should I take it out, and where should I put it?” To be eligible to have your payment reduced under this program, you must document not only that your income is insufficient to meet the payment but also that you do not have “sufficient liquid assets” to make the payment. I have scrutinized the specs for this program issued by Treasury, and could not find a definition of either “sufficient” or “liquid assets.” It is a thorny...

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Banks Get Picky in Doling Out Credit Cards

When Edward Miller recently applied for a Charles Schwab Corp. credit card, a company representative asked him to fax in copies of his bank-account statements to verify his net worth. It was “a bit of a hassle,” says the 64-year-old retired economics and finance professor from Bethesda, Md. He complied and was eventually approved for the card with a $5,000 limit. After years of mailing cards out to just about anybody, banks are suddenly freezing out all but the most creditworthy customers. Those who do get cards have to jump through more hoops, such as sending in copies of their pay stubs. And they’re being hit with higher rates and fees. Banks always tighten credit standards in an economic slowdown. But the recently passed Credit Card Act of 2009 is forcing the industry to rewrite the play book it has used for years. The new legislation aims to limit fluctuating interest rates, ban some controversial practices and arm consumers with more information on their debts. Banks have until February 2010 to comply with the act’s key provisions, although some parts of the law have earlier deadlines. Beginning in August, for example, issuers have to mail bills at least 21 days before the due date and provide at least 45 days’ notice before changing any significant terms on a card. The result: Many banks are tightening things up now before many of the restrictions go into effect. For consumers, the tougher underwriting standards by banks may seem like a pendulum shift back to an earlier era when credit cards sported annual fees and double-digit interest rates. In recent years, issuers cast as wide a net as possible by offering credit to millions of customers, knowing they could always raise rates on those who turned out to be bad bets. That pricing flexibility helped firms rapidly expand their operations, as those with less-than-stellar credit many of whom carried a balance or paid late fees and penalty rates generated millions of dollars in revenue. Now, the industry is scrambling to figure out who its new profitable customer is. “Without the ability to reprice customers, raise fees or rates, the old profitability calculation won’t apply,” says Alan Mattei, managing director at Novantas LLC, a bank consulting firm. In recent months, banks including Bank of America Corp., Citigroup Inc. and J.P. Morgan Chase & Co., have raised interest rates and fees, switched customers with fixed rates to variable ones, and dropped credit lines and closed accounts. Credit Suisse Group’s Moshe Orenbuch expects credit-card balances could shrink by 10% to 15% through 2012 as banks drop their teaser-rate offers and cut back on offering credit...

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The Rich Dad Real Estate Summit 2009

The Rich Dad Real Estate Summit 2009   How to find and analyze great investment opportunities in this economic climate. Great investments are made when you buy…not sell. This is the time to be buying. To achieve success in real estate you have to know how to find great investments, analyze, finance, and manage property. That kind of knowledge isn’t inherent – it has to be learned. Develop your inner real estate genius at the Rich Dad Annual Real Estate Summit. Regardless of whether you are an expert or just beginning in real estate, this event is for you. This event is exclusively designed for investors looking for long-term, positive cash flow.   [carousel keywords="rich dad...

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Earn More Desire Less

Earn more and desire less. These are the words that have utmost importance when you want to achieve financial freedom. No matter how small your income is, if you desire less, definitely you will spend less and you can consider yourself to be “wealthy”. I believe our lifestyle determines whether we will be wealthy and financially free. There are a lot of persons out there who earns a lot but still because of their high lifestyle, however how huge their income is, all are spent and nothing is put into savings. I always say to some people whom I know that despite their huge earnings, they cannot save to remember the saying in Filipino: “Ubos ubos biyaya, bukas ay nakatunganga”. You might be lucky earning that huge income now but how sure you are that you will continuously receive it for the rest of your life? Life is full of uncertainties. Therefore, you must take advantage of that huge earnings. There are very few people who might be rich forever. There are few Paris Hilton, Tiger Woods, Ayala Zobel, Henry Sy, etc. I remembered during the financial planning seminar I conducted in our office, there was one person who asked me: “How can I save if there are a lot of bills to pay and other expenses and my income is not enough to support these? I just answered the four words – EARN MORE and DESIRE LESS. Earn more from its very essence means to have another source of income. You may take a second job, take a part-time job, or transfer to a job with a higher pay. But the great secret of the rich according to Robert Kiyosaki is not to earn more from active income but to earn more from passive income. For those of you who are new to these words, active income is you work for money and passive income is your money working for you. I wrote an article about active vs. passive income. But shifting from active income to passive income requires hard work. There is no other way to go to passive income directly except if you are born rich or inherited wealth. So for most of us, we need to educate ourselves about financial intelligence especially the cash flow patterns of the poor, middle class and rich persons. Remember that for the poor and middle class, they always buy liabilities that they think are assets so all their income eventually goes to expenses while the rich only buy assets that will provide them enough passive income in the future. It’s always us who are making our own destiny. So...

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Trust Your Gut

~ Kim Kiyosaki As my mind ran through all the mistakes I’ve made over the years, two thoughts came into my head. First, I don’t consider a mistake something bad or something I wish I hadn’t done. A mistake, to me, is simply an action I took that did not have the outcome I intended. Every mistake I make teaches me something I didn’t know. Human beings are designed to learn from mistakes. The more mistakes I make, the smarter I become. So even when I lose money on an investment, that loss tells me there’s something I need to learn. People who avoid making mistakes stay stuck, even trapped, by what they know. They rarely venture into untested waters and don’t learn anything new. Second, I found that my mistakes–where the actual results didn’t match my intended results–fell into two main categories: 1. when I lost money or 2. when I lost a good deal. These cases all had something in common. The mistake was not losing the money or losing the deal. That was the result. What was more important was what caused the result. That’s where the real mistake–plus the lesson–lies. It turns out that every memorable and costly faux pas I made was the result of the same simple but powerful failing: My biggest investment mistakes occurred at times when . . . I did not trust my gut. It was those times when I doubted myself: when something sounded so good it had to be true (that’s also known as greed) or when I allowed the so-called experts to talk me out of it. Not trusting your gut, also known as not following your intuition, can last just a moment. It’s when you see or feel something, as subtle as it might be, and you ignore it. “No, I must have heard him wrong.” “I’m sure this case is the exception.” “But all my friends have invested in this. They must know something.” My “mistakes” occurred when I didn’t listen to the warning signals going off, and that’s when I got into trouble. It may be as simple as a gut feeling that says, “Sell those ABC stock shares now.” Then the broker talks you out of it . . . and the shares go downhill. I’ve done that one. Or when I knew, from one snapshot moment, that I should walk away from a deal because my gut was screaming “No, no, no!” I went through with it because the returns being reported were better than anything I had seen–and I wanted those returns. Here’s the story that goes along with that scenario:...

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Understanding Money

The Australian Government provides a money-management site that is useful to people around the world. Understanding Money encourages readers to adopt a three-point approach to their finances: Prepare a budget plan – work out how much you earn and what you spend it on, to help you see where you could make changes. Set some financial goals – they don’t have to be big, but they’ll help you see what you could gain by being better with your money. Get into the savings habit – once you’ve set some goals, try to save regularly and as much as you can to meet your goals. Understanding Money includes a free, downloadable budget planner in Excel format; a financial health check with links to financial literacy resources; and a free, downloadable money handbook in PDF format. Though some of the details (such as the types of retirement programs) are Australia-specific, the concepts are applicable to anyone, anywhere. View post:Understanding...

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Rent Out Your Home. Cut Your Taxes.

Cherie Kerr wants out of her home. The 65-year-old comedian and public speaking coach paid $590,000 for a 1,150-square-foot Los Angeles condo two and a half years ago–only to find the construction so flimsy that her upstairs neighbor woke her up by dropping a coin on the wooden floor. “A defect hell,” fumes Kerr of her newly built abode. She has moved back into a suburban home she still owns and would love to unload the apartment, but housing values have fallen so far that she figures such a move would lock in a $200,000 loss. The good news is that Kerr is anything but stuck. A real estate agent recently informed her that the condo can fetch $3,300 a month in rent. That’s enough to cover her mortgage and property taxes. So Kerr has decided to lease out her condo until values rebound. While she no longer harbors visions of becoming rich off the downtown L.A. property, things could be a lot worse. “It’ll be a tax writeoff,” she says. Kerr has lots of company these days. No less a financier (and former do-it-yourself tax preparer) than Treasury Secretary Timothy Geithner is leasing out his Mamaroneck, N.Y. home after failing to get for it a bid he was willing to accept. If you’re one of the horde suffering real estate buyer’s remorse, you too may be able to turn a modest profit renting out your albatross of a residence. How can that be? Thank the trove of tax breaks for residential landlords. The first step in figuring out whether renting makes sense is to find out how much your place is worth. A professional appraisal is best, but written statements from a few Realtors will do as long as they agree on the value and stipulate how much is attributable to land and how much to the building. (The appraisal, as you’ll see later, is essential for two separate tax calculations.) The next step is to see how much the property will fetch in monthly rent and weigh that against the costs and tax consequences. As a landlord, you can’t claim mortgage interest as an itemized deduction on Schedule A of your tax return. Instead, you deduct interest costs, plus property taxes, monthly condo fees, insurance and anything you pay to a property manager (most charge 10% of rent) against rental income on Schedule E. You can also expense travel and other costs you personally incur to look after the property. The other big tax deduction for landlords is depreciation. The tax code allows you to divide the value of your building (but not the land) by 27.5...

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Making Money is not evil

It’s a quote from a book I just finish reading : Cashflow Quadrant: Rich Dad Poor Dad. It’s an interesting read – I know I’ve read it twice and the reason why I bring up this topic “Making Money” is because of the economy. Really – I look at my kids and I wonder … have I wasted my life. Have I been so busy in the pursuit of my own happiness that I can’t offer more for my children because I thought wanting to make more money was “evil”… or maybe because I was scared or too lazy to try? This kind of book – how to make money or the mentality behind it really makes you think. Yes I know – I’m not trying to make it rich or even become rich over night. But I do have that urge to do more, make a little extra so my kids can have it easy. If anything – learn a couple of money managing or wealth building skills I could teach my kids so they don’t end up like dear old dad – a slave to a job – always wondering if this recession or hard time will destroy all my dreams [ if I have any ]. What parent doesn’t want the best for their kids and who doesn’t dream of “making money effortlessly” … I mean seriously! It’s not like it can’t be done – People today are making money sitting at home. You have people who make six figure incomes because they came up with some lame application for the iphone that millions just had to buy. The other reason I bring up the “money and how to make it” plus the mentality behind how you think and spend your money – is because of my loving wife. We are on opposite sides of the spectrum when it comes to money. I am more of a saver thinking of tomorrow and she is more of a “lets have fun today before we die tomorrow” kind of person. Which really makes it difficult when it comes to money and our finances. I’m trying to get my daughter to read – Rich Dad Poor Dad , by Robert T. Kiyosaki… Not because I want her to be money hungry but rather I want her to think differently when it comes to money. In today’s economic crisis – millions of people are learning that having a job is not having security. We are all learning that depending on the government truly is more riskier than playing the stock market. Wanting Better for your Kids Financially Really is it...

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Investors: Don’t Be Average

Robert Kiyosaki I am often asked, “What advice do you have for the average investor?” My reply is, “Don’t be average.” Most of us know of the 80/20 rule. That rule is a good rule for averages. And in the world of money, the rule is 90/10. This means 90 percent of the people make 10 percent of the money and 10 percent of the people make 90 percent of the money. This 90/10 rule holds true in almost anything financial. Take the game of golf, for example. Ten percent of the professional golfers make 90 percent of the money. Taking the ratio to the next level, the top 10 percent of professional golfers make 90 percent of the money. Just look at Tiger Woods. When you compare his winnings plus endorsements, he is in a league unto himself. Last year, my wife Kim was invited to play in a pro-am as part of a professional Tour event in New York. (No, they did not invite me…) Kim is pretty good and was the only woman in a field of around 300 golfers. I was a proud husband as she confidently walked alone to the women’s tee. Without hesitation, she placed her ball on the tee, took a clean back swing, and swung her club. She out-drove two of the men in her five-some. Bruce Vaughn, the professional golfer in the group, rushed up to congratulate her. The men amateurs were also complimentary. I could tell they were relived to have a much better than average “woman golfer” in their group. Kim hits her drives longer than most men, myself included. Tough Way to Earn a Living The tournament was the first time I got to see the real life of a professional golfer. It is a tough life. It is not the glamour I thought it was. If a professional did not make the cut, they simply moved on to the next tournament in some faraway city…and teed up again. They do not stay for the tournament. They pay for their own transportation, lodging, food, and fees. They are on the road, away from their families for months at a time. Even those who make the cut and play on the weekend have no guarantee of enough earnings to offset expenses. It’s a tough way to earn a living. Like professional golfers, who live and die by the ‘money list,’ money is how I keep score. It’s my score card, my report card as an investor. It’s how I tell how well — or how poorly — I’m doing. My rich dad said, ‘Making money is my game.’...

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3 Free Financial-Planning Tools

These new interactive Web sites give you advice — some better than others — to help you reach goals. Online financial-planning tools are getting more personal. Plenty of Web sites crank out cookie-cutter plans, but three recent entrants give users more detailed advice. Voyant, SimpliFi and ESPlannerBasic provide something more than a quick-and-dirty look at your financial state of affairs — for free. These three sites cannot replace the personalized service of a financial planner, but they are helpful to most investors. You can use them to get a general idea of your finances and benchmark your progress without shelling out thousands of dollars for a session with an adviser. Those who use an adviser can treat the sites as a way to double-check their adviser’s plans. Voyant Pros: Voyant is the best of the bunch. Its slick interface lets you map your financial goals, such as buying a home or saving for your kids’ college, along an interactive timeline. It takes less than five minutes to enter the information needed to create a graphic display of your expected income and retirement savings. You can test what-if scenarios quickly without entering much new information. For example, you can easily adjust the growth-rate assumptions of your investment portfolio with a sliding bar on the right side of the planning tool. Most calculators make you plug in a different rate each time you want to test a new scenario. Voyant also supplies a menu of events, such as starting a business or having a child, to see how those decisions will affect your finances. Cons: But some of Voyant’s premade options are a little too cute. For instance, you click on an icon of a sports car to “plan” a midlife crisis. (If you could prepare for such a scenario, it wouldn’t be a crisis.) No Web site would be complete nowadays without an attempt at social networking — in this case, a feeble one. Voyant lets you communicate with other users on the site’s forums. A button on the tool lets you contact financial advisers who use Voyant’s planning software. (The site is still struggling to sign up advisers. When I pushed the button, I was told “financial professionals” in my area — Washington D.C. — were not available for an online chat.) Simplifi Pros: As the name suggests, SimpliFi is not complicated. The site does a decent job at the broad strokes of financial planning. Spend a couple of minutes entering your data and you get a snapshot of how your goals match up with your savings and investments. An animated guide named Sophie grades your financial well-being from...

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