Tuesday, May 24, 2016

Fed is party responsible for making the poor poorer

The wealthy benefit by playing the game differently from the rest

No matter what the Fed did policy-wise to prop up assets, it was their policies that allowed the banks and the ultra-rich to create such a bloated housing market in the first place, and it was the collapse of that market-based on the poor bets of the banks that created the financial crisis-that most Americans are still reeling from.

The numbers are the numbers. The rich are substantially better off in America than the poor. So, the question remains, "Is it the Fed's policies that are making the poor poorer?"

The answer is yes and no.

Yes, in that the policies contribute to the problem, but no in that what really makes the poor poorer is their lack of financial education.

For many years, I've said that the system is built to benefit the rich. So, those who play by the old rules of money-go to school, get a good job, save money, buy a house, and invest in a balanced portfolio of stocks, bonds, and mutual funds-are at a disadvantage. It just doesn't work any longer. In fact, I'd wager that the top 10% of those high-wage earners that saw a decline in income from 2010-2013 were simply high-paid employees who play by the same obsolete rules of money.

Of course I don't have to make that bet, since this chart from the Economic Policy Institute shows that the top 1% of earners (i.e., your business owners and entrepreneurs) were actually up around 4% in income between 2010 and 2013:



Why is this? Because the ultra-rich know how to play by different rules when it comes to money. In fact, I wrote about those new rules in Conspiracy of the Rich over six years ago. The rich who play by these rules still prosper today.

Monday, May 16, 2016

Rich vs Poor - Work smart not hard

My poor dad said he could not invest because he had no money. My rich dad said, “Invest your time when you have no money.”

Unfortunately, most people have no time to invest. Why? Because they think that working harder and longer will make them richer. Nothing could be further from the truth.

Consider these facts:
- The average U.S. worker clocks in about 1,804 hours per year at work — the highest output in the world
- 56% of Americans report doing work from home
- 20% report doing it every day of the week
- 25% didn’t take any time off last year
- 43% took less than a week off

Those numbers represent a 400% increase in productivity since 1960 — and a lot of tired, time-constrained Americans chasing the almighty dollar.

Yet, the inflation-adjusted wage growth for the middle class has stayed stagnate or declined. As the Economic Policy Institute reports, “From 1973 to 2013, hourly compensation of a typical (production/nonsupervisory) worker rose just 9 percent while productivity increased 74 percent.”

Clearly, working more doesn’t mean making more.

Why the poor stay poor
If you ask most people why they’re doing all this work, they’ll tell you it’s for money.

By this, they mean a steady paycheck that provides security. Money is one of the primary reasons people take on thousands of dollars in college loans to get a degree for a high-paying job that they don’t like but which they spend most of their waking hours at — all while the things they really love in life sit on the sidelines waiting for them to finish working.

The problem with this approach is that you only make money as long as you work. The only thing of value that you have to sell is your time. So, in order to make more money, you have to work longer hours, which is physically taxing.

Because you only have a finite amount of time and energy, as an employee, your earning potential is finite.

Why the rich get richer
Conversely, if you ask most rich people what they work for, they’ll tell you it’s for assets.

By this they mean investments and businesses that provide steady cash flow each month with little-to-no work. Instead of spending their life working for money, the rich work to understand how to make money work for them through financial education.

Adding more assets is much different than working for a paycheck. For instance, adding assets doesn’t require working longer or harder. In fact, the higher your financial IQ, the less you have to work to acquire high-quality assets. These assets then provide passive income, even while you’re sleeping or playing.

In other words, money works for the rich.

Plan to get rich
This is not to say that the rich don’t work. They just work differently.

Each year, Kim and I sit down together and set goals as to how many new assets we want to purchase. It’s important to note, we don’t make goals to make more money. We don’t spend our time looking for a better, higher-paying job. We know that if we focus on finding high-quality assets, the money will come — and for many years, even after the work of acquiring our assets is done.

Kim and I have spent many years building our portfolio slowly and steadily and investing in our financial education. We weren’t always rich, and we didn’t always have the financial IQ’s that we do today. But, like rich dad, we invested the time to grow our financial IQ through financial education when we had no money to speak of. We didn’t put that time into a job; we invested it in our financial future.

Today, we make millions of dollars a year in passive income — money that works for us instead of the other way around.

How about you? What are you working for? What are you investing your time in? Are you working towards making money work for you through the power of assets? Or do you spend your days toiling away at a job you hate in order to make money? If so, what’s holding you back?

Today, I encourage you to start investing in your financial education and building for your future through the power of assets.

Monday, May 9, 2016

Fort McMurray fire has hurt many but you can rebuild and thrive

When I was a young man I volunteered to serve my country in Vietnam. There were times when I saw terrible destruction and carnage. What I also saw was the resilience of the human spirit. The unwillingness to accept defeat and the universal instinct to survive, rebuild and prosper.

I am watching this same thing in Fort McMurray, Canada as we speak. Yes, there is chaos and destruction as the largest wildfires burn through the northern country. Yes, lives are being changed forever and it is hard to see the purpose or silver lining.

I also see the human spirit growing and the community bonding. My advisor Darren Weeks, right now, is housing 20 displaced people as they search for help and search for hope. These brave people are not wallowing in their misery. They have not turned into victims. These people are fighters and they are not just fighting for themselves, they are fighting for each other and for their community.

I know destruction of homes, comforts, and businesses are devastating. From every wildfire comes fertile ground. And so it is with people. Every disaster makes us stronger. Every devastation grows community and spirit and even money.

I feel the pain, but there is a lesson here too.

Some of you in Fort McMurray have followed the Rich Dad advice. You have businesses that do not rely on you being there running them. You’re investments are run by other people and using other people’s money. If this is you, I am so glad. You can be there in Fort McMurray and help rebuild. You do not have the added stress of trying to rebuild your life and your investments. Your time and focus can allow you to be in Fort McMurray helping family, friends and neighbors instead of worrying about income.

There are many of you though who did not follow the Rich Dad advice. Your house was your greatest “asset” and now it is gone. I do not write this to discourage you, but there to uplift you.

It is not too late. As you rebuild your lives and businesses, keep the Rich Dad principles in mind. You have a fresh canvas and you have the knowledge. Rebuild your life knowing what truly is an asset and what is a liability. 

It isn’t over. Nothing is over. You have a new beginning. And those who already built their foundation on the Rich Dad principles will be there to help you and mentor you. The human spirit is so strong. And because of your adversity…

The spirit in Fort McMurray is now one of the strongest in the world.

I won’t wish you luck. When you embrace this spirit you will have already won.

Monday, May 2, 2016

How todays youth can prosper and get financial independence

When I was a young man, the world of money was fairly straightforward. For the most part, you could do ok if you followed the old advice of 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.

As I got older, the world of money became more and more complicated. The dollar was taken off the gold standard, creating volatile swings in its value. Defined benefit plans, aka employer-funded plans, were abandoned in favor of defined contribution plans, necessitating investment in the stock markets by employees not financially educated. The financial adviser class rose as a result. And the world of money became increasingly global, making it harder to keep up on the markets. The result has been a baby boomer generation that is not ready for retirement, and a looming financial crisis.

One would have hoped that the baby boomer generation would have at least learned from their mistakes and focused on financial education for their children, the millennials, but they did not.

According to a recent poll by Harris, "Nearly 80 percent of millennials are not invested in the stock market."

When asked why:
  -  40% said they don't have enough money
  -  34% said they don't know how
  -  13% blamed student debt

All of these are the symptoms and excuses of those who lack a financial education. If you don't have enough money it's because you have never been taught how to make money outside of getting a good job—old money advice. If you don't know how to invest it's because you weren't taught how money works and were probably told to save and buy a house—old money advice.

If you have so much student debt you can't afford to invest, you believed the lie that you needed to go to a good school to be successful—old money advice.

Top that off with the fact that millennials love to spend. In fact, a recent study shows that millennial men "are more likely...to withdraw money early for a purchase to pay for a vacation, boat, or wedding...They're also more likely to feel 'hopeless' when checking their savings balance."

And finally, as I wrote before, the state of financial education is abysmal. Only 13% of Americans received any education about money. Bad financial education and bad financial decisions. It's no wonder millennials feel hopeless when it comes to money.

The good news is it's not too late to change hopelessness into empowerment.

If you're a millennial reading this, here are some things you can do to change your financial fortune. 

Invest in financial education

Take charge of your financial future. Don't rely on or expect someone to do it for you. Examine your schedule and ruthlessly cut out activities that suck up your time but provide little value. Then, fill that time with a prescribed course of financial study. Read books and blogs, listen to podcasts, attend seminars and network, and find a mentor.

Stop saving for retirement

And start saving for investments. With your newfound financial knowledge, don't just sit on your savings. Put it to work in investments. And don't think that means just the stock market. Look into all four asset classes: real estate, commodities, paper, and business. Start small, learn, and build from there. Treat it like a real life video game.

Buying the latest gadgets can be expensive

Learn to delay your gratification

Once you start seeing some success investing, it will be tempting to "treat yo self." Don't. At least not yet. Rather, use you earnings to invest more. Once you master investing, then use you cash flow to cover your liability purchases like cars, vacations, and more. But only once you've replaced your salary with investment income. Until then, delay your gratification.

If you do these three things, you will change your financial fortune. And you will be light years ahead.