Wednesday, April 27, 2016

15 money lessons that should be taught in schools

How I would teach money if I ran our schools

What is financial education? That’s a good question, and one that has many different answers depending on who you talk to.

For some, financial education means teaching kids how to save money, balance a checkbook, and use a credit card responsibly.

For others, it means teaching how to invest in the stock market and manage a 401(k).

Whatever your definition of financial education, it’s clear that there’s one thing we can all agree on—financial education is nearly non-existent in our schools.

A recent survey by Ipsos shows that only 13% of Americans were taught about investing in school. The same people surveyed believe overwhelmingly that financial literacy should be taught in school (87%), and that it should start as early as Middle School (72%).

This begs the question, what would it look like to teach financial education in our schools?

If I ran the school system, I'd create a financial education program that included the 15 following lessons. Even if you're not in school anymore, these would be valuable things for you to study and learn on your own as part of your journey towards financial literacy.

Lesson 1: The history of money

It's important to understand how money works, and part of doing that is by studying how it's worked in the past. Money has progressed over the centuries from something pretty simple, like bartering, to something pretty complicated, like derivatives. It's gone from being an object to an idea, so it's not tangible and intuitive. It's important to study money to grow rich. Some dates that are important:

1903 - Rockefeller's General Education Board takes over the U.S. education system

1913 - The Federal Reserve is formed

1929 - The Great Depression

1944 - The Bretton Woods agreement

1971 - Nixon takes the dollar off the gold standard

1974 - Congress passes the Employee Retirement Income Security Act

Lesson 2: Understanding your financial statement

My rich dad often said, "Your banker never asks to see your report card. A banker wants to see your financial statement—your report card when you leave school."

To grow rich, you must know how to read and understand the three parts of your financial statement: Profit and loss statement, balance sheet, cash flow statement.

Lesson 3: The difference between an asset and a liability

One reason many people are in financial trouble is because they confuse liabilities with assets. For instance, many people think their house is an asset when it's really a liability. A simple definition of an asset is anything that puts money in your pocket. A simple definition of a liability is anything that takes money out of your pocket.

Lesson 4: The difference between capital gains and cash flow

Many people invest for capital gains, meaning they're betting on the price of something to go up. Unfortunately, today, many people are taking it in the shorts. Investing for capital gains is akin to gambling, only not as much fun. Instead of investing for capital gains, the wealthy invest for cash flow and capital gains are icing on the cake, if they do happen.

Lesson 5: The difference between fundamental and technical investing

Fundamental investing is the process of analyzing a company's financial performance, and that begins with understanding a financial statement. Technical investing is measuring the emotions or moods of the markets by using technical indicators. You can invest successfully doing both types of investing, but both take commitment and continued financial education.

Lesson 6: Measuring an asset's strength

There is no shortage of opportunities in the world of investing. The question then becomes, which investments are worth pursuing? A key component of a full financial education is understanding how to measure whether an asset is strong or not. One of the best ways to do this is to refer to the B-I Triangle, which looks at an asset's full properties: Team, leadership, mission, cash flow, communication, systems, legal, and product.

Lesson 7: Know how to choose good people

Partners are crucial to business success. My rich dad used to say, "The best way to know a good partner is to have had a bad partner." You need to learn from every interaction. A good deal can blow up if you have a bad partner. So choosing partners and team members well is crucial.

Lesson 8: Know what asset is best for you

There are four asset classes: Business, real estate, paper assets, and commodities. To grow rich, you must study these classes, choose what is best for you, and work towards becoming an expert.

Lesson 9: Know when to focus and when to diversify

Ideally, you'll want to be diversified in all four asset classes, but you'll want to focus on becoming an expert in one at a time. An old adage is that if you try to please everyone, you'll please no one. The same could be said for investing.

Lesson 10: Minimize risk

In investing and business, there is always an element of risk. A smart investor knows how to minimize risk by hedging. There are a number ways you can do that within each asset class. Study up on ways to minimize risk in your chosen asset class.

Lesson 11: Know how to minimize taxes

It's not about how much you make, it's about how much you keep. Taxes make an unintelligent person poor. A financially intelligent person understands how to use the tax code to his or her advantage.

Lesson 12: The difference between debt and credibility

As many of you know, there is good debt and there is bad debt. The key to using debt is knowing how to borrow wisely and how to pay back the money. Without a solid plan to pay back debt, you'll soon have no credibility. A solid financial education will include understanding debt and how to pay that debt back.

Lesson 13: Know how to use derivatives

Derivatives are things derived out of another object. For instance, orange juice is a derivative of an orange. My business is a derivative of my mind. Tax-free money from a refinance is a derivative of another asset, my investment property. There are many ways to use derivatives to create wealth.

Lesson 14: Know how your wealth is stolen

There are four things that steal your wealth: Taxes, debt, inflation, and retirement. A proper financial education will stress understanding how to use these wealth-stealing forces to make money rather than lose money.

Lesson 15: Know how to make mistakes

It's impossible to learn without making mistakes along the way. The key is to learn the lessons of those mistakes, and not let them take you out of the game. Look at failure as a learning opportunity.

Monday, April 25, 2016

Jim Rickards on the Robert Kiyosaki show

Robert Kiyosaki is a Japanese American investor and author of popular book 'Rich Dad Poor Dad' where he wrote of his two dads. His rich dad taught him to think differently, inspired and helped him get rich on his own.

Wednesday, April 20, 2016

3 productive ways to use your Tax Refund money

It's that time of year again where people celebrate the fact that they're getting money back from the government in the form of a tax return. Of course, it's money the government used interest free and money you couldn't use for a year, but money you get back nonetheless.

Putting aside the fact that a tax return is less something to celebrate and more something to avoid through smart tax planning and prep, the reality is there will be many people who receive one this year.

So, what do you do with that minor windfall?

If you're like most people, you spend it on liabilities like a vacation or a new car. Or perhaps you use it to pay down some debt from the liabilities you've already purchased. But there are better, smarter ways to use you tax return.

The following is a three-step, financially-intelligent way to maximize your tax return this year.

1. Start a investment fund

If people aren't paying off their debt or buying some new knickknack, the conventional wisdom is to put your tax return into savings. Honestly, this isn't much better than simply not having the money on hand in the first place. Instead of the government saving the money for you, you put it into an account that makes next to nothing in interest. The only difference is you can now be more tempted to spend it.

I've written before about how Kim and I consider investing an expense. Each month we put money aside, budgeted in our expense column, to save not for saving's sake, but in order to invest that money.

A tax return is the perfect time to seed-fund your investment account. Spend some time deciding what you want to invest in: paper assets, real estate, commodities, or business, and use your tax return as the initial funding for that investment activity.

2. Start a side business

In addition to setting aside your money for investing, consult an attorney and set up a proper legal entity to run your investments and business through, even if it's on the side.

By setting up a side entity, you can realize significant tax benefits by writing off your expenses for the business. This means that if, for instance, you want to get into real estate investing, you can write off all expenses related to that activity-including travel, education, and more.

This is a key step. Because if you simply record all your finances as personal earned income, you have very little recourse to tax savings. All the tax laws are written to encourage investing and business, so the real tax benefits go to those who practice in those areas.

If you liked your tax return this year, you won't believe how good it feels to keep even more money on hand through the smart management of your money via a legal entity like an LLC or S-Corp.

3. Hire a CPA

Finally, as much as you'd think it would be easy to invest money, start a business legally, and save money in taxes, it's not always clear-cut. Ultimately, you should have your financial planning set so that you won't even have a tax return because you have your money on hand rather than sending it to the government to hold onto for a year or more.

But in order to plan well, you need the help of an expert. A good CPA will be able to sit down and help you plan out the best way to maximize your investment fund and take advantage of your legal business entity.

All of these things take relatively little money to start up, and most tax returns can cover a majority, if not all, the costs.

So this tax season, make a true investment in your future by putting that tax return to work for you in a way that will pay big dividends down the road.


Monday, April 18, 2016

I think Gold has bottomed and see Gold as Insurance policy

Robert Kiyosaki is a Japanese American investor and author of popular book 'Rich Dad Poor Dad' where he wrote of his two dads. His rich dad taught him to think differently, inspired and helped him get rich on his own.

Wednesday, April 13, 2016

Panama papers leak shows the game is rigged

Seven years ago, during the heart of the last global financial crisis, I wrote a book called Conspiracy of the Rich. The book was an examination of the events that led up to the Great Recession and an exposé on the ultra-rich who manipulated the global markets to gain great wealth while devastating world markets and wiping out much of the retirement savings of the middle class.

At the time when I wrote the book, many people dismissed it as a conspiracy theory—the ramblings of a known financial provocateur. I admit that I’ve always been a contrarian when it comes to money. But I’ve never been one for its own sake. Rather, I’ve always shared what I truly believe about the world of money.

To me, it was maddening and appalling that the world’s richest bankers, traders, and politicians got away with so much. And it was a tragedy that so many lives were ruined in the process. That is why I wrote Conspiracy of the Rich, to help people avoid being victims of such corruption again by helping them see the world as it really is.

As of this last weekend, those who railed against the book seven years ago might be singing a different tune today. Why? Because of the Panama Papers.

What are the Panama Papers?

According to The International Consortium of Investigative Journalists:
The Panama Papers is a global investigation into the sprawling, secretive industry of offshore that the world’s rich and powerful use to hide assets and skirt rules by setting up front companies in far-flung jurisdictions.
Based on a trove of more than 11 million leaked files, the investigation exposes a cast of characters who use offshore companies to facilitate bribery, arms deals, tax evasion, financial fraud and drug trafficking.

This is the biggest leak of confidential papers in the history of the world, with over 2.6 terabytes of information on the secretive dealings of many ultra-rich with ties to governments and shell companies around the world.

At the center of the Panama Papers is a law firm called Mossack Fonesca, which is reported to have helped the ultra-rich hide money in these offshore companies in order to avoid taxes and grease wheels.

As Vox reports :
As you would imagine, there is quite a lot in the 2.6 terabytes. Here are a few of the highlights that the team found, with links to the full stories where you can read the details:
- Vladimir Putin's inner circle appears to control about $2 billion worth of offshore assets.
- The Prime Minister of Iceland secretly owned the debt of failed Icelandic banks while he was involved in political negotiations over their fate.
- The family of Pakistan's prime minister owns millions of dollars worth of real estate via offshore accounts.
- Ukrainian President Petro Poroshenko pledged to sell his Ukrainian business interests during his campaign, but appears instead to have transferred them to an offshore company he controls.

Why does this matter?

That the ultra-rich use tax havens to shield themselves is not really news. Indeed, as most news agencies point out, owning an offshore company in and of itself isn’t even illegal. But the Panama Papers are the first massive look into how far reaching this practice is, the abuses of the rules, and that it happens at the highest levels of our governments and corporations.

And the amount of money is massive—to the tune of $7.6 trillion, according to Vox.

For the first time, the world is waking up to what I preached in Conspiracy of the Rich. The game of money is rigged, and living by the old rules of money—go to a good school, get a good job, buy a house, save money, and invest in a diversified portfolio of stocks bonds and mutual funds, is no longer an option for succeeding in today’s financial world.
Everything is manipulated

I haven’t personally reviewed the documents in the Panama Papers—there are millions of them—but a team of more than 370 journalists from 76 countries have . And you can be sure more stories of corruption and rule bending will break from this leak.

More than anything, this should open your eyes to the fact that all markets are manipulated by the ultra-rich and powerful politicians. It’s always happened, and it always will. Because of this, you must continually be educated on what is happening in the financial markets. In a world of increasing financial corruption, it’s imperative to continually increase your financial IQ.

For some, the Panama Papers will be a wake up call. The wise ones understand that they must take control of their financial future, and not rely on corrupt governments and leaders to do it for them. Unfortunately, not everyone will do this. Many will ignore the news or resign themselves to the fact that there is nothing they can do.

Monday, April 11, 2016

Giant flaw with the 401K program could bring a stock market crash

Are we going to see a DOW 25,000 ? I don't think so.

Robert Kiyosaki is a Japanese American investor and author of popular book 'Rich Dad Poor Dad' where he wrote of his two dads. His rich dad taught him to think differently, inspired and helped him get rich on his own.

Wednesday, April 6, 2016

World economy reliant on China for now

China has been in a bubble for 20-something years. It has propped up the U.S. economy falsely. When China stops importing, the world crashes with them. 

Robert Kiyosaki is a Japanese American investor and author of popular book 'Rich Dad Poor Dad' where he wrote of his two dads. His rich dad taught him to think differently, inspired and helped him get rich on his own.

Monday, April 4, 2016

US stock markets will eventually come crashing down

Most investors…are investing for capital gains. And capital gains only occurs when prices go up. But if prices don’t go up, then prices have to go somewhere else…the question is are we going to see a 25000 Dow? I don’t think so.

The big question......we do QE4 ? If we do, the stock market will come roaring back, but it’s not rocket science. If we stop printing money, it crashes; if we print money, it goes up. But, eventually, it’s all going to come down.

Interest income or cash flow on savings is virtually nonexistent, and capital-gains plays in the stock market are thwarted because stock prices are at record highs.