Cashflow Blog

 - By Roosevelt Cooper -

As we enter the 2nd year of the US Financial Economic Crisis that started in August of 2007 with the sub-prime lending meltdown, the impact on the economy and the average American has been devastating. Economy.com is predicting that by the end of 2008 over 2.8 million US households will either be in foreclosure, be forced to give their house over to their lender and move out or sell their home for an amount lower than their actual mortgage balance.

And Federal Reserve Chairman Ben Bernanke said that mortgage defaults wouldn’t harm the US economy!

So far besides foreclosures being at an all time high, we’ve had the collapse of practically every sub-prime lender out there including New Century Financial, which was the largest subprime leanding company in the United States. Even regular lenders like American Home Mortgage and Countrywide Financial Corporation were effected. AHM filed bankruptcy and CFC narrowly avoided it with a last minute loan.

If you brought a home in the last year or so, take a look at your property value. There’s a good chance it is lower than what your mortgage balance is. And to think all of the financial experts bashed Robert Kiyosaki ten years ago when he said your personal residence was a liability not an asset back in 1997 in his best selling book Rich Dad Poor Dad

We also saw the collapse of many of the largest companies in the world in the financial sector. In March of 2008, Bear Sterns, one of the largest investment banks in the world was forced to sell itself to JP Morgan and Chase for a fraction of what it traded for prior to its collapse. The source? Investing in a wide variety of high risk investments, many of which was tied to the sub prime lending crisis.

In September of 2008, the Federal Housing Finance Agency announced that it was taking over Fannie May and Freddie Mac. This was done because there were huge concerns that due to the two companies’ exposure to the mortgage market, increasing loan defaults could result in the companies failing to meet its obligations and commitments. Merrill Lynch was forced to sell to Bank of America due to its massive losses from the subprime lending market. Lehman Brothers was forced to file bankruptcy due to is losses from the mortgage crisis.

Then it was announced in the same month that AIG - American International Group, which was the 18th largest company in the world was at serious risk of going out of business as well. Despite the fact that most of the companies’ business units were healthy, one business unit that invested in debt security derivatives gone bad due to the subprime meltdown threatened to bankrupt the entire company. The company was saved by an emergency federal loan bailout in exchange for a huge stake in the company to the US government.

So what lessons can we as average investors can learn from this crisis? Here are 5 lessons for you.

1. Only buy a house you can afford. Robert Kiyosaki is right. A house is not an asset unless it is making you money. If you are not collecting more rent than you are paying in mortgage, (chances are in your personal residence you aren’t collecting any rent at all), your house is a liability. There is no guarantee a house will always appreciate in value, as we have all learned the hard way from this crisis.

2. There is no such thing as a guaranteed retirement. If your company files for bankruptcy you can kiss your pension goodbye. Think it can’t happen to you? Do a search for an article written in Time Magazine called The Great Retirement Ripoff What would you do if your pension check bounced? Are you prepared to have to go back to work in your 60’s, 70’s, or even 80’s?

3. Be wary of 401K plans. 6 months ago AIG traded for $43 a share. Today it trades for $2 a share. Your 401K plan mutual funds are investing in companies like AIG. If a market correction occurs, you can see your portfolio take a nosedive. In addition, although many companies offer to match your investment in a 401K plan up to a certain amount, their “match” is in the form of company stock. Imagine how all the poor souls at AIG whose 401K plans are loaded with $2 a share company stock are feeling right now.

4. There’s no such thing as a “safe secure job.” Many of the largest companies in the world are laying off people by the thousands. At my 2nd to last job literally a few months after I left, my entire business unit was laid off. At my last job again a few months after I left, my entire business unit was once again laid off.

5. You MUST have a Plan B. If you get laid off tomorrow and it takes 6 months to a year to find a job paying what you make right now, how long can you make it before you are out on the street? If your 401K takes a huge dip right before you are expected to retire, what are you going to do? If your pension gets wiped out how are you going to survive?

Hopefully you have learned these lessons and are doing something about them. Otherwise as the saying goes…”those who fail to learn the lessons from history are due to repeat them.”

If you lost your job, your 401K plan crashed or your pension check disappeared do you currently have the financial wherewithal to survive? If not, you need a Plan B. You need a business that can produce for you up front immediate income, leveraged income that is based on the efforts of others, not yourself and residual income that continues to come in based on work done years ago. To learn more about such a business visit http://www.createthelifestyle.info today and get started on your Plan B!

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Lessons Learned From the US Financial Economic Crisis

Robert Kiyosaki’s bestseller, Rich Dad, Poor Dad, has helped millions to create roadmaps to their financial goals. Central to his series is the notion of open-mindedness. Instead of sizing up a situation and saying, “I can’t afford that,” he suggests saying, “How can I afford that?” By reshaping the idea into an open-ended question, creativity is stimulated, which leads to inspiration.

Here’s a list of critical thoughts and their positive replacements. I hope these help to prime your mind for money-making thoughts.

Instead of saying:

• We can’t afford it.That’s too expensive.
• I don’t have enough money.
• I’ll never be able to afford that.
• That’s a waste of money.
• It’s too late to get started.
• I’m not good with numbers or investing.
• It’s too risky.
• I really want to get that!

Replace with:

• How can we afford it?Where can I get that for less?
• How can I make more money?
• When will I be able to afford that?
• How can I make that productive?
• How can we let another day go by?
• Where can I learn more?
• What could reduce the risk?
• Do I really need that?

As open-ended thinking becomes more natural for you, you’ll also find yourself better able to help clients who have critical objections. Plus, the difference in this kind of thinking is tremendous. If you aren’t already quieting your critic, you’ll find that these suggestions bring excitement into your daily life.

Consider writing out this list, and adding to it when you discover new negative thoughts. Invent positive replacements, and write those down, too. Review the list frequently, and practice!

View original post here:
Open Your Mind To Wealth

The New York Times has an article that tells the story of Diane McLeod and her insurmountable debt. http://www.nytimes.com/2008/07/20/business/20debt

Even though she’s going through foreclosure on her home, she’s still getting credit card offers from “Urban Bank!”

With the aftermath of the sub-prime crash still wreaking havoc, Americans are finding themselves in very uncomfortable debt positions. The blog post on the Consumerist asks, ‘What happened to our values?’

I don’t think it’s a question of values, I think it’s a question of education. Students graduate high school without the slightest idea of what awaits them in terms of credit and debt. Most of them don’t even know what an income statement or balance sheet is. Why do we have such a financially illiterate populace here in the U.S. and what can be done about it?

Original post:
Why Are Americans So Willing To Dig Themselves Deep Into Debt?

By David John Marotta

As Americans try to spend less and go on a budget, this provides an opportunity to teach the next generation financial principles they may never have seen in the prosperous years they have been alive. Here are ten principles for teaching children about money:

Talk about money. Every time money is involved, parents have a chance to teach their children the values and analysis behind their actions. Money should never be the primarily topic of discussion, but it is one of the most important topics through which we communicate our wisdom and values to our children. Every purchase, investment, or donation can be a time to teach your children something about your values.

Talk openly about money. Parent makes a mistake when they keep information from their children. The only way children learn what is a good deal and what is too expensive is by the experience of what their family earns and what items cost. Hiding this information robs children of the financial education they need.

Talk factually about money.  Many parents have strong emotions about money based on their childhood experiences. These emotions are always transmitted to children. Instead of helping children, they can cripple children from growing to make sound financial decisions

Require chores; pay for optional work. Everyone in the family has to help complete the work that needs to be done. If you want to pay your children, only pay them for optional work they can choose to do or not to do.

Provide children an allowance they can make real choices with. Talk about money is important, but children need real-world lab experience to understand the consequences of their decisions. Consider giving them an allowance large enough so that they can purchase some of their own needs. Then continue to give them honest advice, and help them ask the right questions to make wise decisions based on their values.

Help children prioritize purchases. Ask them if this purchase is better than other purchases they are considering making.

Help children comparison shop. Help them consider issues such as cost, quality, and convenience.

Require children wait before making large purchases.  Adults should wait at least a month whenever they are making a large purchase. Children shouldn’t be expected to wait that long. Here is a good rule of thumb: Children should be required to wait as many days as they are old in years before being allowed to make a large purchase (over a week’s allowance). There is always tomorrow and over half the time they won’t remember what attracted them to it in the first place. Developing this habit will help make them resistant to impulse buying.

Don’t use money as a punishment. Your priority should be helping to give your values to your children, not buy their outward behavior.

Don’t loan your children money. If their desired purchase is something they should be saving for, let them save for it. If you want to buy it for them for the value of the experience, buy it for them. The principles are “If they want it, they have to save for it. If you want them to have it, you will buy it for them.” Loaning your children money for items they want teaches them they aren’t responsible and they don’t have to prioritize.

David John Marotta works at Marotta Asset Management, Inc. of Charlottesville which provides fee-only financial planning and asset management.

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10 Principles of Teaching Children about Money

HOW TO PREDICT THE FUTURE

3-Day Seminar with Robert Kiyosaki

October 24th, 25th & 26th, 2008 • Scottsdale, Arizona

During the 3-day seminar, Robert will focus on topics that include:

1. How to predict the future

By studying Dr. R. Buckminster Fuller’s work on prognostication, you will learn how the future is not traveling in a straight line. You will learn how to change your life by changing your future.

2. How to create your future

Robert and Rich Dad’s Advisor Blair Singer will teach PERT (Planning Evaluation Review Technique). Through this you will gain the ability to go into the future and create backwards. PERT was the planning technique used to put the first humans on the moon.

3. How to print your own money (and change your financial future)

One of the most powerful books Robert has read is Dr. Fuller’s Grunch of Giants, GRUNCH stands for Gross Universal Cash Heist. The book is about how the rich print their own money and why they’re rich. You will learn to do the same. More importantly, you will learn how to prosper from the future of money…not be a victim of it.

–  Watch Video - Register   –

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Robert Kiyosaki’s ?How to Predict the Future? Seminar