Robert Kiyosaki Blog

Financial Education Portal inspired by Robert Kiyosaki

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I got a Margin Call on Silver Future position
Aug11

I got a Margin Call on Silver Future position

When I first talked about “Margin Call” and explained what it means to my girlfriend she understood that someone will call me say something like this: “Peeter, thank you for your money. You don’t have it anymore.”The real truth is that no one calls you – just there is no asset anymore and no money also…I have had two earlier posts on this: Silver is going up 🙂 Background story about buying Silver So what happened?After writing “Background story about buying Silver” in some moment I changed to Silver future from SLV position. First I bought one Silver Mini-Future contract which was approximately for same quantity of Silver than I had in SLV before, so for 2500 ounces. Then it felt good and I thought – let’s take some more risk and I changed to one Silver Future contract, postion for 5000 ounces. So bacically to make it simple, I put 20 000 USD to my investing account and did these earlier mentioned deals. Today just some moments ago I have 4054,69 USD on my account and no position in anything. Couple of thing I didn’t take into account: Silver may go down in price. OK, I read a lot of articles about the price in future… and all those suggested rather higher prices… I even read a realistic article that the price should stay between 15 and 30 USD and hoped for 30 :-pAs long as Silver stayed above 15 USD I had enough funds to cover this position in my account. Today it went under… at least I see SLV price now 14,44 USD. I didn’t take into account that the Exchange NYMEX will lover the Margin needed… I went in knowing that it is 8000 USD and I thought that when my position is worth less it gets sold automatically. They lowered the Margin needed to 5000 USD and as I found out now it got sold automatically when I had 4000 USD left in my account. Good that I didn’t had any other assets on that account 🙂 I had no stop order on place… accually I even don’t know how to put this into place :-/ Now I can say this was a costly wake-up call. I better start learning more… At this point I have the plan to add some funds to this account and buy a new position in Silver Futures when Silver price will go over 14-day moving average or 200-day moving average whichever comes first. So I will at least have some kind of other strategy than buy and pray (Just kidding!). At this moment I’m looking this information at...

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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
Aug07

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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Getting A Millionaire?s Mindset
Jul24

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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It’s Your ‘Outcome’, not Income that Matters.
Jul10

It’s Your ‘Outcome’, not Income that Matters.

Most people out there always talk, or worry about how much money they make.  They compare salaries for jobs.  They get second jobs to supplement their income.  They leave jobs to go make more elsewhere.  Everything they do in life is based on the final end of year income.  How much did that W2 or 1040 claim you made for the year? Well, I’ve learned that this is the absolute worst way to judge your financial situation.  In fact, it doesn’t matter how much you make.  Your financial situation has very little to do with your income. It has everything to do, though, with your expenses, or what I like to call your ‘outcome’. Expenses are the key to getting rich. As Robert Kiyosaki said in his book ‘Rich Dad, Poor Dad’, the definition of wealth is how many days you can live without working.  In order to live everyday without working, you must have more passive income than expenses.  Passive income is defined as income you gain without having to do any physical work (i.e. collecting rent checks, music royalties, stock dividends, etc.). In our education system, they teach us to do well, go to college, and get a prominent job with a great salary.  However, let’s look at some of the jobs.  Most doctors go to school for umpteenth years, and then get out and have to build their practice.  They make nice incomes, but they also usually have very high expenses due to student loans and the cost of their education. A doctor may make over $200,000 / year.  But add in a family, education bills, insurance cost, taxes, natural debt, and everyday expenses, and your ‘Outcome’ is maybe about $50,000/year.  Now let’s take a cop. A cop does not have to go to school for that long, if at all.  He makes a salary of somewhere b/t $60 -$100k (at least in NJ). That sounds like a lot less than the doctor, but it’s not. The cop has very little, if any, expenses.  Being a cop, he gets a lot of ‘privileges’ and connections in the town.  He spends very little money on anything except everyday expenses.  He also only works 4 days/week, so he has 3 days to do something else to supplement his income.  At the end of the year, he probably had the same ‘outcome’, if not better, as the debt-ridden doctor. Now, not every doctor is left with student loans.  Not every cop is debt free.  It is not necessarily the job I am criticizing.  I am speaking about the thought process this country teaches in its education system.  They expect...

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Poor People Have Jobs

“Poor people have jobs, Rich and Successful people have careers.” – Colin Cowherd ESPN Radio I heard this over the radio one day and it took me a while to figure out what he meant. It was one of those days where I just had a few minutes to tune into the radio. As soon as I turned it on I heard this. I don’t know what lead up to this statement but it struck me and stuck with me. I brought up this statement with my students, most of whom fall into the poor or poverty social class, and they all understood exactly what I was saying. I explained it like this: Poor people have jobs. They work for money and nothing else. So what happens? Is a person who makes $250,000 a year poor? Maybe not by money standards but what is their life like? How much do they work? How much do they enjoy themselves? If they just have a job that pays well they are probably not completely happy. Actually if they are like most of us they have a job that they just don’t like. It is nice to make a lot of money but are they happy? What is the sense of making a lot of money when all they do is work? Then what happens? When people work in a job that they are not happy in they need to supplement this unhappiness with something. Some buy toys, a bigger house, new cars, and more. Then what happens? They have to keep working to pay it off. Some are more destructive and turn to alcohol or drugs. Still others take their frustrations out on others. Rich and successful people have careers. What do they work for? They typically don’t work for money, they get money as a result of their effort and their hard work. Instead of working for money they work to learn. They learn what it takes to get to the next step. That next step may be the next rung up the corporate ladder (something I have no interest in). For some the next step is to open their own business. For others it simply is a case of lifelong learning. These people may not be rich with money, but they are rich and successful with their life. They are happy because they are doing things that they love to do. They are successful not because they work hard, but because they enjoy their work. Since they enjoy their work they tend to spend more time with it, and they tend to do a better job. So what are...

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Buy one home and get a second one free

The grocery shopper’s beloved BOGO — buy one, get one (free) — has moved into the realm of home sales. Yes, home sales. In yet another sign of how anxious sellers have become in today’s housing market, a San Diego real estate developer has offered a free $400,000 row home to anyone who buys one of his estate homes starting at $1.6 million. “We want to reduce our inventory,” Mark Connal, a vice president at Michael Crews Development, told the San Diego Union-Tribune. “We’re prepared to bite the bullet. … Right now, every builder I know is selling houses at less than it costs to build them.”                 Another company official, Dawn Berry, was quoted by a San Diego TV station: “We thought, ‘Why does it just have to be on Pop-Tarts and restaurants? Why not buy one home, get one free.’” Of course, you’ll have to pay property taxes on both. The houses available for $1.6 million and up are gated estate homes in the San Pasqual Valley. The row homes, in Escondido, once sold for $540,000, according to the Union-Tribune. A flier at the developer’s Web site says, “It’s never been done before and may never be done again!” The flier and a post at the company’s blog say the offer was good through May 31. A blog post at L.A. Land about the promotion generated plenty of comments. For instance, reader Greg said: “This is great! It will give me somewhere to park the free SUV I’ll get with the purchase of my new hybrid.” “steve in k.c.” said: “May I default on the first one and then still keep the second one? Thanks in advance. Honey, get the kids, and load the van … we’re moving.”   See the original post: Buy one home and get a second one...

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Why Ask A Stranger About Investing?

My passive income march is starting to take shape, I have found a couple of great resources and mentors that have been successful at creating their own Financial Freedom through passive income and I am studying how they achieved their success and applying the strategies myself. As there are naturally a lot of people looking at their financial situation at the moment, with the changes in mortgages, house prices and inflation, I am reminded of a story about peoples choices when it comes to looking for a return on their investment. Oprah Winfrey had invited Robert Kiyosaki to be a guest on her fantastic daytime TV show to talk about Personal Finance and Raising Your Financial IQ. At a questions and answers from the audience session, one lady raised her hand and asked the question to Robert Kiyosaki:- ” I have $10,000 to invest, what would you advise I invest it in?” Oprah quickly responds, ” Robert, would you like me to handle this one for you?” She then goes on to ask the lady why she feels it is necessary to ask someone how to invest money, when she should be learning about it herself. Now I know some great Financial Planners and Independent Financial Advisers who are experts in their field and I have done in the past exactly what that lady did and simply asked their opinion on what I should do with my money. I have also bought shares in companies I do not know exists, how many of us willingly talk to a broker, or buy shares online in “XYZ” mining company, when in fact we have never even SEEN the mine. It is all fascinating! I spent a day recently at a seminar of 500 women, all had their own businesses and what struck me was the high percentage of those women who had found their financial circumstances had changed beneath them by events such as divorce or redundancy that had left them with a life to rebuild and a financial status that was fragile at best. The reason I have chosen to carry out my own investing is because it is the provider of not only a sound financial independence of my own and choices for my family, but because I do not see why I should ask someone else to look after my financial future above myself. ~~~ source:http://witoo.wordpress.com/2008/05/24/why-do-people-ask-a-stranger-about-investing/ Read the rest here: Why Ask A Stranger About...

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A fine line between good and evil…
Jun13

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
Jun11

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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