Entries Tagged 'Budgeting' ↓

I first read the Robert Kiysaki Rich Dad, Poor Dad books nearly ten years ago. Reading those book taught me some great lessons, and opened my eyes in new ways to how to think about financial security and wealth. It’s taken me a long time to figure out how to apply it (teaching old dogs new tricks isn’t impossible, but it’s still damn hard!), but I’ve been teaching my 10-year old too, and he gets it right out of the gate. Economic downturn be damned – this is a good time to get your stuff in order and plan to grow rich with opportunities all around.

But of all the Rich Dad products, the one that turned my head the most was playing his game, Cash Flow 101. In this game, you attempt to gain eneough passive income to cover your expenses, all while bumping into those speed bumps of Life. You keep track on an actual financial balance sheet, and learn what it takes to get wealthy.

I learned something in playing that game, that I couldn’t have noticed in real life as it unfolds – how I approached risk, and money, and what would have to change if I wanted to make money and grow wealth. This game was a priceless lesson. It was a way to “model” behavior, just like “real” economists do, and see how different strategies and actions would pan out – without suffering the real financial losses that could occur, and building confidence in making seemingly risky decisions that actually are the path to great wealth.

If you’ve never played Cash Flow 101, it’s a real eye opener. There are also groups all around the country that get together to play periodically. Give it a shot – it’s a financial literacy education you can’t get anywhere else.

And at the very least – if you  haven’t read his books – get your hands on Rich Dad, Poor Dad, at the library even if you are short for bucks.  (I saw at Barnes & Noble a compilatoin of his first three books for under $15!)  If you read Rich Dad’s Prophecy – he called everything that is happening now, and is likely to happen, except it was years ago.  He recommends that you start a business (and a good way to get started today is with online business ideas), so that you control your future income and wealth. There are tons of great ideas to pursue in these books.

Another benefit of reading these books are to answer the difficult economic questions of today. People are asking: Should I be in stocks? Should I get out of the market? Should I buy bonds? Should I be investing in real estate? Have we hit a bottom?  Believe it or not, the Rich Dad series helps you figure out how to answer these questions – for yourself.  This is the kind of education people need to avoid being at the mercy of brokers, advisors, television “experts”, in a time of economic downturn, but also great opportunity.  Start – or enhance – your personal finance literacy with these books and games.

As a result of the financial turmoil, there are plenty of families which will be torn between putting aside money for retirement, and saving for college for their children’s college education.  Many parents now paying for private school in grades K-12 are now rethinking that decision.  As for college costs, they keep rising, and enrollment in local community colleges is skyrocketing. Yet do parents always have to pay for college?  If high school age children are encouraged to do everything they can to apply for all available grants, treating it almost like a part time job, they may find that there is cash available.  In addition, holding down a part time job or two in the summer can give teens a way to afford school.  When parents give up financial security in their old age in favor of paying tuition today, that is probably a far bigger danger than the impact on their children of having to attend a community college instead of a major private university.

There are plenty of state colleges that are priced under $20,000 per year for state residents, including tuition, fees, books, and room and board.  A part time job that pays $10-15 an hour can cover a large portion of that amount.  Community colleges are far less, especially if the student lives at home for a year or two.

Spend Less for Entertainment

Do you really have to cut back on entertainment jut because your budget is cut back?  Not really.  There are really hundreds of things you can do, for less.  One website, GoCityKids, offers lists of things to do, free and paid, for dozens of locations around the country.  Public libraries are now swamped with requests for movie rentals, music rentals, and the old-fashioned book.  Many municipal and college libraries show films to the public.  Schools, colleges and local orchestras offer free concerts.  Some communities sell discount tickets to events like theater and concerts, along with movie and museum tickets.

Are We Addicted to Debt?

So some personal financial gurus tell you to pay off debt till you are “debt free”!  That sounds great! But the idea is, you want to have paid off your debt, past tense, when bad times hit. Now that we’re getting hit with bad times, today, this minute, do you really want to go there?

What if you’ve been paying off debt by taking an extra job, putting an extra $500 a month toward that credit card – and you lose your primary job, your main income?

What would you give to have your hands on that cash you paid debt with?

With times like these, putting more away for emergencies BEFORE you pay down your balances is probably a smarter choice. When times get better, for sure pay down debt.  But if you don’t have much cash set aside, pay the minimums on your debts to stay current, and put the rest in a good high-interest savings account you can get your hands on as soon as you need it.

I like Dave Ramsey.  It was because of his book, Total Money Makeover, that I started using the envelope system, and actually now save some money each month.  I think he’s being proven correct right now about being debt-free – and I’m working to get there myself.

But he’s still telling people to put their money in “quality index funds” so you can earn “14% over time” – WHAT??  There is NO truth to the 14% number (actually that’s the highest I’ve ever seen – 10%, 12% is the usual number).  In this market, telling people to do this is a complete misrepresentation of what their specific, actual results may or may not be.

The simple fact is that any money put into index mutual funds 10 years ago are back where they were then.  There has been NO increase in the last ten eyars – let alone 14%!!  How many people will blindly do this based on his suggestion alone?

He is good with the “get out of debt” idea. But he should just plain stop telling people where to put their investment money.  The whole “stick it in an index fund and sit back and enjoy the winnings” method is out the window.  It never really was true, and today even less so, that this is the best way to invest.

Bottom line:  If you don’t know anything about investing, stay out of the market.  Don’t get your advice from people on tee vee.  If you want to hire somone, you better know what the heck they are talking about, or you’ll get screwed, either intentionally or accidentally.  If you don’t know and don’t want to know, then buy CDs.  Anyone who invested in a 6% CD ten years ago would right now be far far ahead of anyone who had their $$ in the market.

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