Why Do Company’s Really Match 401k Contributions?

The average person, if they even have a retirement account, have a 401k which is investing in mutual funds. Don’t be average. Take responsibility and have some control 🙂 – Josh

There’s No Such Thing As Free Money

Posted on: Tuesday, January 31, 2012|Written by: Robert Kiyosaki

Get a Financial Education and Stop Thinking Like an Employee

Years ago I had a conversation with a young man about 401(k)s. “I have a question for you,” he said. “I’ve read that you say 401(k)s are the worst investments, but I don’t understand why you say that.”

“What is it that you don’t understand?” I asked.

“Well,” said the young man. “Most employers match your contribution. For instance, my employer matches up to four percent of my salary. Isn’t that a hundred percent return? Why is that a bad investment?”

“It’s a bad investment,” I said, “because it’s your money to begin with.”

He looked puzzled and perplexed.

“Listen,” I said, “if it weren’t for 401(k)s, your employer would have to pay you that money as part of your salary. As it is, they still pay it, but only if you give up four percent of your existing salary in to a retirement account where you have no control. And if you don’t, well the employer comes out ahead. It’s your money, but they’re in control.”

Thinking like an employee

The young man still didn’t look convinced, but I could tell he was thinking hard about it. The reason this young man and many others don’t understand my reasoning is that they only think like employees. As an employer, I know that if it weren’t for 401(k)s, I’d have to pay that money to employees in their salary in order to be competitive.

For me, as an employer, a 401(k) is an advantage because I don’t have to pay the money unless an employee opts in, and if they leave my company too early, I don’t have to pay because they aren’t vested.

A recent study confirms what I’m saying and should help those of you who still find this logic confusing or not convincing.

A 401(k) steals your money

A recent study confirms what I’m saying and should help those of you who still find this logic confusing or not convincing. According to Steven Gandel, a study issued by the Center for Retirement Research indicates that, “All else being equal…workers at companies that contributed to their employees’ 401(k) accounts tended to have lower salaries than those at companies that gave no retirement contribution…In fact, for many employees, the salary dip was roughly equal to the size of their employer’s potential contribution.”

Translation, companies that don’t offer 401(k)s must pay a higher salary to compete with companies that do. Those company’s employees simply get their money as part of their salary rather than having to match it and save it in a tax-deferred retirement plan where they have no control and have high fees.

No financial intelligence? Stick with the 401(k)

Control is an important aspect of investing. As I mentioned, with a 401(k), you have no control over your investments as you generally invest in funds and indexes controlled by brokers, who are controlled by bankers, who invest in companies that are controlled by boards — all of which you have no control over.

If you want to be rich, you must have a financial education and control over your money and your investments. This is why I like to invest in my own business, purchase real estate and create products. I have a lot of control over those investments. Generally a good matrix is the more control you have, the higher your potential return. The less control you have, the lower your potential return.

Of course, it takes high financial intelligence to invest in things where you have control because you have to make a lot of important decisions. This is why being forced into a 401(k) probably isn’t a bad thing for most people. This is because most people have little-to-no financial education and wouldn’t know what to do with the extra money other than save it or spend it.

But I expect the average Rich Dad reader to be head and shoulders above the average person in terms of financial intelligence. The reality is that if you’re investing in a 401(k), you’re not making a return on your employer’s match. You’re simply getting what is owed you by your employer.

For some, this might be the first time you’ve ever thought of this. For others, I’m probably preaching to the choir.

Some questions for the Rich Dad community

If you’ve avoided the 401(k) trap, what ways are you using that money to build your wealth outside of a 401(k)?

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Are You Living On Financial Edge?

             Are You Living on the Edge without a Financial Education?

Posted on: Tuesday, January 24, 2012|Written by: Robert Kiyosaki

When I was a young boy, the path to retirement was simpler. For the most part, if you saved your money regularly, paid your mortgage off, and lived modestly, you could retire well. This was partly because inflation was low since the dollar was pegged to gold and also because most employees could expect a company pension and health benefits until the day they died. It did not take much intelligence to have a secure, financial future.

Today, we live in a world that requires an extremely high, financial intelligence to retire well.

It is no longer enough to save money, as higher inflation and taxes wipe out your earnings. You can’t rely on a company pension because most companies don’t offer one. Instead, it is expected that you contribute to a 401(k) plan that may or may not provide you a secure retirement and that is simply a glorified, tax-deferred savings account that benefits the rich, not you.

These changes are because of two actions by the U.S. government that I’ve written extensively about, most notably in my book Conspiracy of the Rich. In 1971, Nixon took the dollar off the gold standard, making the dollar a currency instead of money. And in 1974, the Employee Retirement Income Security Act was passed, paving the way for 401(k) plans, forcing uneducated workers into the stock market, and creating the financial services industry.

It’s taken about three decades, but we’re seeing the devastating effects of those actions today as individuals and countries are living on the edge of financial disaster.

On an individual level, take for instance a young friend of mine’s father whose dad worked his whole life in an old-world industrial plant. Every time my friend talked with his dad, his dad would mention how long it was until his retirement, where he’d collect a pension and health benefits and enjoy golf a few times a week and sports on TV. There were no savings to speak of, some stock options decimated by the economic downturn, much debt, and no other plan. Unfortunately, only a few months before my friend’s dad hit the minimum retirement age, the plant went for sale, found no buyers, and closed. Now he, along with hundreds of others at that plant, cannot find a new job, have no savings, and are looking at a very insecure, financial future. For him, it may be too late.

On a national level, look at the Euro Zone. According to The Wall Street Journal, “The global economy faces a depression-era collapse in demand if Europe doesn’t quickly act to dramatically boost the size of its debt-crisis firewall, implement pro-growth policies and further integrate the euro zone, the head of the International Monetary Fund warned Monday.”

As IMF Managing Director Christine Lagarde remarked over the weekend, the Euro Zone’s efforts to stymie debt problems “is about avoiding a 1930s moment, in which inaction, insularity, and rigid ideology combine to cause a collapse in global demand… A moment, ultimately, leading to a downward spiral that could engulf the entire world.” If Europe collapses, the world goes down with it — and the jury is still out on what will happen. But the world’s financial experts are sending out the warning cry.

As you read these stories above, they probably sound vaguely familiar, have little emotional impact on you, and you may have even skipped over them.

Why?

These stories echo stories that have been shared for many years now. The news is filled with stories of people living in countries on the edge of financial collapse, and then buffered by good news here and there to keep us all from falling into complete despair.

The reality is that we have become used to living on the edge, and we’re forgetting what it means to live comfortably inland. This is not all bad, if you have the right mindset.

Living on the Edge Requires a Financial Education

Living on the edge requires alertness and intelligence, you cannot give up or be lulled or else you will fall. Each step must be calculated and taken carefully, but confidently, to get to safety. The only other option is to do nothing and hope someone will save you —which is akin to suicide.

It’s for times like these that the Rich Dad Company was formed. This website, our books and DVDs, our coaching, and financial education all exist to help equip you for the perils of our modern economy so that you can be sure to have the knowledge and practical application required to survive and thrive while others fail and fall.

For many, there is no choice about living on the edge. The die has been cast for us by people much more powerful and influential than us. But we can control our actions on the edge. It’s my hope you’ll step forward confidently and smartly, equipped with as much financial knowledge and courage as you can gain and muster. It sure beats the alternative.

To increase your financial education now, click here to find out about our free resources and online community.

Fed to Buy Back Bad Debt and Push Government for Looser Lending Restrictions

The Federal Reserve is looking to buy back bad debt and pushing for the government to write loosen lending standards on loans that they invest in and write down the balance on mortgages where the home is underwater.

 

 

Fed Looks Foolish

             Fed Looks Foolish

Posted on: Tuesday, January 17, 2012|Written by: Robert Kiyosaki

Last week, I wrote about the Fed’s recent criticism of the U.S. government’s handling of the housing crisis, a crisis that still persists and may only be getting worse (“Fed Cries Foul?“).

According to a number of news sources, the Fed is considering taking unprecedented action in the housing markets by buying back more housing bad debt. And they are pressuring the government to step up efforts to loosen lending restrictions for borrowers and doing loan write-downs for owners who owe more than their house is worth through Freddie and Fannie.

This week, some new revelations about the Fed’s outlook during the run up to the housing crisis in 2006 were released in the form of that year’s meeting transcripts—and the Fed looks foolish.

According to The New York Times, “Meeting every six weeks to discuss the health of the nation’s economy, [Fed officials] gave little credence to the possibility that the faltering housing market would weigh on the broader economy, according to transcripts that the Fed released Thursday. Instead they continued to tell one another throughout 2006 that the greatest danger was inflation — the possibility that the economy would grow too fast.”

Additionally, the Fed poked fun at the growing concern by builders to move housing inventory, “The officials laughed about the cars that builders were offering as signing bonuses, and about efforts to make empty homes look occupied. They joked about one builder who said that inventory was ‘rising through the roof.'”

The implication of the transcripts are clear: the Fed had no clue that the floor was about to fall out from underneath them and the U.S. economy.

So, this begs the question, why do they think they’re now qualified to speak in the housing market?

In 2006, there were plenty of people with enough common sense to know that the housing crisis was going to be bad for the economy, but these were generally considered fringe economists or conspiracy theorists because they challenged the status quo.

Rather than listen, the Fed drank its own Kool-Aid on the fundamentals of the economic system, and the safety net that was supposed to be collateralized debt.

Today, many people, such as my friend and now Rich Dad blogger, Richard Duncan, author of The Dollar Crisis and The Corruption of Capitalism, are sounding the alarm about the coming collapse of the dollar that may result from the Fed’s continued call for printing more money and inflating the economy through debt.

Yet, today, the Fed continues to drink their Kool-Aid and move forward with blind faith — much like they did in 2006, when one Fed member stated upon Chairman Greenspan’s departure, “It’s fitting for Chairman Greenspan to leave office with the economy in such solid shape. The situation you’re handing off to your successor [Chairman Bernanke] is a lot like a tennis racquet with a gigantic sweet spot.”

Those must have been some pretty cheap strings.

The point of all this? I simply want you to understand that the so-called experts can not only be wrong, but they can be dangerously wrong. My hope is that you don’t drink Kool-Aid, whether it’s served by the Fed, or even myself, but that you increase your own financial literacy.

The mission of the Rich Dad Company is to equip you to think for yourself. We provide financial education that helps you do your research, gather all the information, analyze that information, and make your own informed decision.

Think for yourself and get a financial education.

This is why I rarely tell people what to do, but instead simply explain what I’m doing. I never want you to follow my advice blindly. I want you to think for yourself. What works for me may not work for you.

This is also why we redesigned our website to be more useful to you by providing free financial news and resources to help you make informed decisions.

At the end of the day, only you can save yourself and your family financially. Make the decision today to think for yourself and to take charge of your financial future.

We’ll be here to help with our financial education resources.

Less Politics, More Cash Flow

While I still endorse Ron Paul for the 2012 Presidency, I am going to spend less time this year worrying about politics and more time worrying about my own cash flow! Obama or a Republican, either way I have control over my own destiny, and so do you!

Global Economy 2012 – One World Currency Approaching?

As we are diving into 2012 I want to take a minute to talk about a couple of things I see going on in the global economy that I think will have an impact as the world heads in the direction of a one world currency.

 

 

 

 

 

 

5 Tips to Keep Your Wealth Strategy on Track

There is so much more to building wealth than making money. A Wealth Strategy is crucial. If you do not have a wealth strategy, use December to educate yourself and build one, think about what your goals are and write down a plan to get there. A wealth plan is not a “get rich quick” plan, so think education first.  -Joshua Gamen
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5 Tips to Keep Your Wealth Strategy on Track
With a new year right around the corner, it’s a good time to think about the activities that have a positive impact on your wealth strategy.
Here are 5 Tips to Keep Your Wealth Strategy on Track:
Tip #1: Avoid Winging It
Winging it means taking action without a strategy to support the action.

For example, buying gold because it seems like a good investment, or buying a rental property because it seems like a good investment.

What makes an investment a good investment is how it works toward the goals in your wealth strategy. Simply making an investment because it seems like a good investment isn’t enough – what will it do in your wealth strategy to achieve your wealth goals?

While it is great to take action, there needs to be a strategy behind the action so the actions lead to the results you want.

Winging it in a wealth strategy can set the wealth strategy behind by years – even decades.

Tip #2: Make Your Wealth a Priority
Letting your wealth strategy slip as a priority is something that can often sneak up on us.

For example, let’s say you have a goal to invest in a rental property and have a plan to look at prospective properties this month.

However, when you get the call to go look at the properties, you’re in the middle of running errands, or too busy with work, or need to finish a project. The list goes on and on. Looking at properties gets put on hold and your wealth strategy quickly falls off track.

There is always something else to do if your wealth strategy is not a priority.

Tip #3: Your Neighbor’s Plan Isn’t Your Plan
I’ve had people share with me many times that they made an investment because their neighbor (friend, co-worker, colleague, etc.) made the same investment.

What works for your neighbor will not necessarily work for you.

Your wealth strategy must be specific to you based on your likes, your dislikes, your family, your goals, your dreams, and your financial situation. To maximize the results of your wealth strategy, it must be customized to you.

Tip #4: Succeed With a Team
I always share that the 3 most expensive words in the English language are “Do-It-Yourself.”

The road to achieving your wealth goals is not always a smooth one. In fact, it is common to hit several bumps along the way.

Those who have a team are less likely to get off track when they hit that first bump, or maybe they make it to the second or third bump before turning around. Navigating with an entire team supporting you makes the process much smoother.

Build a team around you to support you and help you achieve your wealth goals.

Tip #5: Avoid Taking it to the Extreme
Taking it to the extreme means you have no balance in your wealth goals. You are trying to go at a speed that no one can possibly sustain – and that means a lot coming from me because I like things to move fast.

The challenge with going at an unsustainable speed is it all too often leads to crashing and burning, and that can be devastating in a wealth strategy.

Set reasonable goals and make your wealth building part of your everyday life.
                                                                                                                  
Tom Wheelwright

Bailout: The name of the game

It is absolutely madness. Yesterday was a huge injection of dollars into the global financial system by central banks. It seems fiat currencies are swirling the drain now.. Look for precious metals to surge again and listen for new talk of a one world currency..It’s only a matter of time. However, as Robert says, “The people who understand that they must increase their financial education, save themselves and not rely on the rich, or the government, survive and thrive in times of crisis”

So increase your financial education which will lead to increase in cash flow. Rely on God and your faith, not the rich or the government, and thrive in these times of oppertunity! – Joshua Gamen

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In my book, Conspiracy of the Rich: The 8 New Rules of Money, I write that bailouts are the name of the game. This means that the ultra rich will never suffer like the middle class and poor do in financial crisis. The institutions that are deemed “too big to fail” will always be bailed out. This also means that sometimes big institutions prefer financial crisis because they know they will be bailed out, and they also know they can make a lot of money from those bailouts.

This week, a bombshell hit on the lending practices of the Federal Reserve to the largest banks in the world during the peak of the financial crisis. As Bloomberg reports in an article entitled, “Secret Fed Loans Gave Banks Undisclosed $13B,”

“The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he ’wasn’t aware of the magnitude.’ It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.”

Additionally,

“The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.”

Big gets bigger.

Everyone knew that the name of the game is bailouts for institutions that are too big to fail, and while news agencies have been talking about the gargantuan $7.7 billion in commitments by the Fed to save the economy, the details released this week through the Freedom of Information Act show what we’ve known all along – the rich will say anything to protect their ass-ets and build their balance sheets.

For instance, in November of 2008, Bank of America’s CEO, Kenneth Lewis said that his bank was “one of the strongest and most stable banks in the world.” On that same day, Bank of America owed $86 billion to the Federal Reserve in emergency loan money.

Jamie Dimon, CEO of JP Morgan Chase, told his shareholders in 2010 that he only borrowed from the Fed to encourage others to borrow from the Fed. In reality, the bank borrowed twice its cash holdings from the Fed, and on one day in February 2009, borrowed a colossal $48 billion – one year after the creation of the Fed’s emergency lending program.

All in all, the big six banks comprised of JPMorgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley accounted for 63 percent of all daily average lending by the Fed to banks and financial institutions, receiving over $160 billion in TARP funds and borrowing around $460 billion from the Fed.

During that time, “Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data.”

Additionally, the Fed helped prop up both Bear Sterns and Wachovia with emergency loans as they were being gobbled up by JPMorgan and Wells Fargo respectively. The Fed transferred $50 billion in secret loans to Wachovia to prevent financial collapse until Wells Fargo could seal the deal, and they sent $30 billion in secret loans to Bear Sterns so that JPMorgan could wrap up that deal—all while providing $29 billion in financing to JPMorgan to fund the deal.

Essentially, the Fed protected the bigger banks and helped them grow even bigger by keeping brain-dead banks on financial life support long enough to graft them into the bodies of bigger financial institutions like a financial Frankenstein.

This was all done in secret, and without the knowledge of the American people and the Congress.

The safety net.

This type of behavior is reckless because it creates a false safety net. The big banks and the ultra rich know they will be bailed out and so they take even greater risks, putting the economy at even greater risk, and playing games with your money.

As Professor Oliver Williamson says, “The banks that were too big got even bigger, and the problems that we had to begin with are magnified in the process. The big banks have incentives to take risks they wouldn’t take if they didn’t have government support. It’s a serious burden on the rest of the economy.”

Of course, this should come as no surprise, as the Fed doesn’t exist to protect the middle class and the poor. Rather, it exists to protect banks and the ultra rich. Something they’ve shown they can do well, efficiently, and without government knowledge or intervention.

Learn the rules of the rich with a financial education

All this is to show what I’ve been saying for many years, you can’t rely on the government to save you, and your definitely can’t rely on the Fed. The government doesn’t even know what’s going on in our financial policy and the Fed hides those details in order to help their friends on Wall Street…after all, the people who run the Fed used to work there, and probably will again someday. You don’t bite the hand that feeds.

If you want to avoid getting wiped out by the next financial crisis, you must understand the rules of the rich and play by those rules. With a new presidential election heating up this year, I’m sure you’ll hear many calls for hope and change on both sides. Many people will believe that their candidate will make a difference and that this will be the time things will change.

The reality is that nothing has changed in decades. The rich take care of the rich and grow richer. The poor and the middle class grow poorer. And the people who understand that they must increase their financial education, save themselves and not rely on the rich, or the government, survive and thrive in times of crisis.

Take charge of your financial future so that you can live large when hard times come.

Written by: Robert Kiyosaki

Is Gold Money? And what are the effects of the debt ceiling controversy with gold and money?

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Is gold money?

That’s a good question and one that Rep. Ron Paul asked Fed Chairman Ben Bernanke last week at a hearing on the US economic outlook and monetary policy.

Bernanke’s answer: “No.”

Rep. Paul followed up with another good question. “Why do central banks hold gold?”

Bernanke’s befuddled answer: “It’s tradition.”

You can watch the humorous exchange below:

Why gold is not money…yet

A writer, R.A., in The Economist speaks to this exchange and reminds us that gold isn’t technically money anymore since you can’t take it to the store and use it to buy goods.

The writer goes on to say, “But while gold is not money, it shares a very important characteristic with money: its value (apart from limited industrial uses) is derived from the market’s perception that it has value. This is the nugget of truth in Mr [sic] Paul’s comments.”

Fiat money works the same way. Dollars have value because people have deemed them to have value. But as the writer in The Economist points out, dollars can be printed easily and at will, devaluing them quickly. Gold on the other hand has an intrinsic scarcity to it.

“But that’s precisely the way that fiat money works. People believe the flimsy pieces of paper we call dollar bills are worth some basket of real goods only because everyone else believes the same thing. The crucial difference in the perception of value is that new gold can only be obtained at great difficulty while new bills can be produced by the truckload at virtually no marginal cost.”

Presently, the reason that gold isn’t money in the way most people think of money is because people still think that paper dollars are money.

The writer concludes that dollars will always be money going forward because people have decided to be content with them with money. And regarding gold? The writer says, “What I don’t understand is the argument for gold that falls back on the mystical, 6,000-year old Law of Economics that shiny yellow metal is somehow special.”

All currency goes to zero

Though the writer seems to think it’s an impossibility, indulge me for a second. What happens when people no longer want to accept paper dollars as money? What happens if the Fed prints so many dollars, because it’s so simple and an infinite amount can be printed, that no one cares to use them as money any longer? Then what will be money?

Throughout monetary history, all fiat currencies—currencies that are given value solely based on an authority’s claim of value—have fallen to zero. The writer in The Economist conveniently forgets to share this fact.

And throughout history, societies have always resorted back to gold as money. As the writer in The Economist points out, this has gone on for 6,000 years. The writer can call this mystical if desired, but I call it a hell of a track record.

The dollar is toast

As I wrote about last week (“Time Ticks Away”), the US is currently in a battle over the debt ceiling. If the US defaults on its debt, the dollar will be toast, and savers will be losers.

If the US defaults on its debt, many people will wish they’d saved some of the money known as gold. Because just like has happened many times over the last 6,000 years, people will turn to it as the repository of value again.

But perhaps the US will fix its debt problems. If so, then the dollar will live on—for a time. But like all fiat currencies before it, the dollar will eventually fall to zero. No matter what, the dollar is toast. It just could be later rather than sooner.

Real money

At Rich Dad, we say Knowledge is the New Money. This is because wealth is attained by your ability to understand what is happening in the markets and to act accordingly. This means that if the dollar is tanking, you have enough knowledge to invest in things that hedge against the dollar—like gold.

Conversely, if the dollar is skyrocketing, you have enough knowledge to understand that gold will probably go down in value.

At the end of the day, it’s your knowledge—and your ability to apply it—that makes you rich…not dollars and not gold.

Times are certainly uncertain. I encourage you to continue your financial education. Start collecting real money—financial knowledge. Increase your knowledge, and you’ll increase your wealth.

Written by: Robert Kiyosaki

http://www.youtube-nocookie.com/v/vE_BPZbRCbg?version=3&hl=en_US