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)?


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.


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.

Using Your Retirement Plan in Your Wealth Strategy

Your wealth strategy and your retirement plan are one in the same. Don’t just hand your money to someone else to do what’s in your best interest for you and your family’s future. If it is up to be, it is up to you! -Joshua Gamen


Using Your Retirement Plan in Your Wealth Strategy
One of the most popular questions I receive about a wealth strategy is this:I want to use the money in my retirement plan for a specific investment. Should I make the investment inside my retirement plan or should I distribute the money from my retirement plan and make the investment outside of my retirement plan?

My answer (of course) is it depends. It depends on your specific facts and circumstances.

Today, I’ll share some of the key factors to consider to help make this decision.

Factor #1: What Investment Options Are Available in Your Retirement Plan?
The term “retirement plan” covers a huge range of retirement plans – each of which has their own specific set of rules.You will first want to determine what your investment options are in your retirement plan. Some retirement plans, like an employer sponsored retirement plan, limit your investment options. Other retirement plans offer a broader range of investment options.

Factor #2: Are the Distributions Subject to Penalties?
While the rules vary by the specific type of retirement plan, in general, if money is distributed from a retirement plan early, meaning before the date allowed by the government and/or employer rules, then the distribution will most likely be subject to penalties.Penalties don’t rule out distributing the money, they just need to be factored in to your analysis.

Factor #3: Are the Distributions Subject to Income Tax
Depending on the type of retirement plan or when the distribution is taken, retirement plan distributions may be subject to income tax.Like penalties, just because the distributions may be taxed doesn’t rule out distributing the money – it just needs to be factored into your analysis.

Factor #4: What is Your Personal Situation?
Your personal situation plays a big role here. For example:– Is your tax bracket low or high?
– When can you take distributions from your retirement plan without penalty?
– What is your expected return on investment inside of your retirement plan?
– What is your expected return on investment outside of your retirement plan?
– What will you do with the investment long term?

Factor #5: What Type of Income Will Your Investment Produce?
Investments can produce different types of income including ordinary income, interest income, dividend income, rental income and capital gain. Some income types work very well inside a retirement plan, and others may cause your retirement plan to pay tax.
Factor #6: Does Your Investment Involve Leverage (Debt)?
If your investment involves debt, then this is a critical factor to understand.In some retirement plans, the tax implications of debt can be significant. For example, income generated from the debt can be taxable. Or, if you guarantee the debt personally, there could be tax consequences.

It’s important to not only understand the tax implication of using debt in your retirement plan, but also to understand how it can impact your investing. Many lenders are not willing to make a loan to a retirement plan without a personal guarantee. However, a personal guarantee, as noted above, could trigger tax. Lenders who are willing to lend to a retirement plan without a guarantee are usually not willing to lend as much as they would if there were a guarantee and the rate is usually higher.

It is extremely important to understand your leverage options inside and outside of your retirement plan before moving forward with your investment.

Factor #7: What Tax Benefits Will Your Investment Generate?
While retirement plans are often viewed as a great tax deferral vehicle, many tax benefits can be lost in retirement plans.For example, if a distribution is taxable from a retirement plan, it is generally taxable at ordinary income tax rates. This is true even if the income inside the retirement plan was capital gain income – which outside of a retirement plan has lower preferred tax rates. The tax benefit of the lower rate is lost.

Another example is investments that create losses for tax purposes. Some investments, like rental real estate or oil and gas, often create losses for tax purposes even though they generate positive cash flow. Losses inside a retirement plan are typically lost because the retirement plan usually doesn’t have any tax for the losses to offset.

Your Retirement Plan and Your Wealth Strategy
Your retirement plan can give your wealth strategy a tremendous boost. The key is understanding the best way to integrate your retirement plan into your overall wealth strategy.

Written by: Tom Wheelwright

Tom Wheelwright

Cash Flow VS Capital Growth



Awesome post. I love these ones where Jeff Brown goes into the numbers and compares scenarios. I always knew there was going to be good money involved with getting good at story problems when i was young in school. I didn’t know how, but i knew..

Written By: Jeff Brown AKA “Bawld Guy”

BawldGuy Axiom: To the extent the real estate investor pursues cash flow, they hinder capital growth. The converse is equally true.

Let’s construct an example to illustrate the principle.

At 42, you own your own home, but will be buying your first income property. Your plans are to retire at 62, if possible — giving you 20 years to get the job done. You have no problem going to 65 if it makes sense. You have a total of $200,000 for down payment(s) and closing costs to get you started. If you opt for bigger down payments and higher cash flow, using accumulated cash flow for future purchases, you’ll begin with two initial acquisitions.

Two properties at roughly 260,000 apiece, using 35% down plus closing costs will take about $190,000 or so. The cash flow generated will total approximately $14,300 annually. It’ll take ya 6 years 8 months to accumulate enough for your next purchase. That’s IF interest rates haven’t risen too much, and IF there’s been no real increase in values. If either one of those is true, much less both, your plan hits a significant roadblock.

Let’s pause here and see how the capital growth approach plays out, using the same initial capital.

Using 20% down on one, and 25% on two more, he’ll begin with three properties. His cash flow will exceed $15,000 a year, but we’ll use that figure here. Each month he’ll be applying $1,250 in cash flow directly to the principal pay down of one of the property loans — not all three. I’ve dubbed it the BawldGuy Domino Strategy. You knock ‘em down one at a time.

In 8.75 years, (105 months) the first property is debt free and now cash flowing at just over $1,500 monthly. We’ll round down to $1,500.

With the vastly increased cash flow the second property is completely paid of in the next 4.67 years, (56 months). Elapsed time: 13 years, 5 months. Let’s finish it off now.

The third and last property is then paid off in 3 years, 1 month. Total elapsed time: 16.5 years.

In the 3.5 years he has left before retirement, if he chooses to wait, his cash flow would add up to, give or take, a tad under $193,000. ($55,080/yr) Think he might be able to find a use for that cash about then, don’t you?

OR . . .

He opts for borrowing enough to buy a couple more duplexes at 25% down. That option leaves him with an annual cash flow of $50,500 AND 5 properties. He pays off the newly refinanced property in 33 months. This leaves him just 9 months short of his planned retirement. What to do?

I have a suggestion: Delay retirement if necessary by 20 months. At that point all 5 properties are now completely debt free and producing annual retirement income of a couple steak dinners short of $92,000 — a 67% increase.

What he did there, was decide it was worth 20 more months of working to increase his ultimate retirement income by over $3,000 a month. If he decides against that, his income would be $55,000 yearly, but he’d retire on the date planned.

Let’s revisit the alternative strategy of using cash flow to buy more property.

Though a silly, and frankly, a dangerous assumption, prices remaining static for nearly 7 years — this strategy does just that. It’s no less silly than assuming prices will do anything, as his crystal ball is as cracked as the rest of ours, right? Right.

Anywho . . .

He buys his third property, which closes at the end of his seventh year. His first 2 properties now sport loan balances of about $149,400 apiece — almost $300,000 PLUS the new property’s loan of $165,000. Cash flow remains static. He owes $465,000.

He buys another property about 5 years later. Elapsed time: 12 years. He buys his 5th property at about the 16 year point. Let’s review where he’d find himself at 20 years, his intended retirement date.

He’d own 5 properties, though each one would be relatively heavily encumbered. Let’s me specific, shall we?

The initial two purchases are still sportin’ loans with balances of roughly $87,000 each.

The third property’s loan has a remaining balance of just under $123,000 at the targeted retirement date.

The fourth property’s loan still has about $146,000 left.

The fifth one has barely been dented, with a remaining balance of $155,000 or so.

Income at his scheduled retirement date using this strategy would be $37,000 annually, give or take a weekend getaway. I’m underwhelmed. You?

He’d still owe almost $600,000 before he’d have the same income had he used the more efficient capital growth strategy.

Go over these numbers a few times. Get comfortable with ‘em. Make your own charts or columns for comparisons in order to really get a clear picture of what they mean in real life.

BawldGuy Takeaway

In order to increase cash flow initially the real estate investor is forced to put more capital into each investment. The more down he puts, the less property he, or she, can buy. Over time this results in a somewhat nasty surprise — a sorta good news/bad news joke — only not funny.

The good news? Ha! Ha! You bought the same 5 properties as you would’ve doing it my way.

The bad news? When retirement time arrives, your choices are not too cool no matter how ya spin ‘em. Either retire at just over $3,000 a month till ya pay off another $600,000 in debt — which will take a truly long time.


Delay your retirement by about the extra decade or so it’ll take to finish payin’ all that debt off. In simple terms, you can wait till your 70-72 to retire, or exist on $3,000 monthly till the $600,000 pays itself off — and that will be MUCH longer than a decade.

Beginning to see what I mean, Verne?

Look, this is nothing compared to what I could come up with, given enough time to get more deeply into the analysis. In fact, I’m fairly certain I could come up with a scenario with better results on the capital growth side of the comparison. But not so much on the cash flow approach. The whole “Save the cash flow and buy more property” comes from Grandpa.

Didn’t work real well for him, either. Just sayin’.

Why Real Estate is still not recovering and doesn’t appear to be anytime soon – and why that’s GOOD NEWS for real estate investors

Well… It’s good news for REAL real estate investors that is..The ones who understand cap rates and cash flow. Below is a post fresh off the presses from Jeff Brown AKA Bawld Guy.


Written By: Jeff Brawn at Bawldguy.com


So many from Realtor organizations at all levels, economists, and various elected (and unelected) officials seem to think we’re ‘just around the corner’ from the beginnings of a real recovery. These are the same Einsteins who, less than a year ago said we were in recovery. Go figure. My thoughts have remained consistent the last four years — we’re not close to a real estate recovery.

My crystal ball remains as cracked as yours, but here’re my thoughts.

In my opinion the vast majority of the country’s markets aren’t prudent places for your hard earned capital. Take San Diego — please. :) The same folks who were certain we’d hit bottom here in 2007 are explaining to those who believed ‘em, why their newly purchased properties lost 5-10% almost immediately. Sure enough, prices rebounded a bit as a result of temporary artificial stimulation. They’ve been steadily dropping ever since. It hasn’t been precipitous, but it’s been steady, according to Case-Shiller. I think it’s now been about eight consecutive months San Diego prices have been headed slightly down. Also, ya may wanna consider avoiding Vegas and Florida. Again, my considered opinion.

Why we’re not near a recovery now.

Sophisticated economic mumbo jumbo isn’t necessary here. It’s all about two factors: 1) Foreclosures/Short Sales and 2) Unemployment. This ain’t rocket science, people. Here’s how it looks from where I sit.

Unemployment and its ramifications speaks for itself. At nearly double digits, the drag on the economy, much less it’s affects on real estate markets are predictably negative. Duh. Till unemployment plunges significantly, real estate won’t have a healthy recovery.

Foreclosures and its pipeline are an even more predictable story. The numbers already bank owned are still gruesomely large. Add to that the equally prodigious volume of homeowners who’ve already defaulted but not yet made it to the sad, bitter end, and the picture worsens. But wait! There’s more! The final reason I think this factor has legs, is the daunting hundreds of thousands of those who’re 30-60-90-120 days — and longer, much longer — late.

Even if lenders figure a way to speed the process up a bit, not to mention develop the motivation to do so, the foreclosure problem can’t possibly be sufficiently removed as a drag on real estate markets before the end of 2013. Frankly, I suggest that timeline is a fantasy. If we’re back to relatively normal markets — Remember what that looks like? — by give or take 2015, we’ll be in decent shape, with one exception.

If unemployment is still significantly higher than 5%, considered ‘normal’ by most, say 7%+, owner occupied sales will still remain far from normal.

What this means for real estate investors.

None of this is bad news for investors, especially those thinkin’ big picture — long term. In some markets, demand for rental housing is rising quickly enough to be measured almost in real time. The percentage of renters vs homeowners will be altered for at least a generation, in my opinion. This is an extremely rare opportunity for those with access to sufficient investment capital. They’ll be able, and have been for the last few years, to acquire superbly located property in markets which are welcoming their capital with smiles and open arms. The location quality is also higher by far than is typically available, even in down markets.

Add to these perks historically low interest rates, treading in the 5-5.375% range, and you have the perfect storm. In all my nearly 42 years in the business, almost 35 of which have been on the investment side, it’s never been possible to put down payments as low as 20%, while acquiring a 30 year fixed rate loan allowing cash on cash returns of 5-10%. Remember, this for properties with very good to excellent locations. It’s simply unheard of in my experience.

Stellar location quality + new or newer properties + low down payments + extraordinarily low FIXED interest rates = THE perfect storm of a lifetime.

The normal cycles have never included the opportunities currently available in the economic reality in which we’re currently living. I entered real estate in the fall of 1969, a recession, and it didn’t happen then. Nor did it happen in 74-75, the ’81 recession, the S&L Crisis of the early 90′s, or the almost stealthy recession of ’01. What I’m tryin’ to tell ya, is that the debacle in which we’re all living, is offering real estate investors opportunities of a lifetime. That’s not hyperbole by any stretch. It’s as real as oatmeal ‘n raisins for breakfast.

Investors who’ve been buying in markets with all the right factors in place are settin’ themselves up for stellar retirements. This perfect storm will last as long as all of its ingredients remain in place. Common sense and simple logic tell us that those factors that have brought us this wondermous perfect storm won’t be here forever — and yeah, that’s hyperbole. :) Once it’s gone, that’ll pretty much be it.

If you’ve been wondering about the viability of your retirement plan, and wanna know the options on your menu, now’s the time to find out. Your retirement can become the reality for which you’ve been planning, but which hasn’t been materializing. If this describes your current mindset, I strongly suggest you seriously consider givin’ a guy like Joshua Gayman a call. In fact, try to make it happen sometime around 4:30 yesterday afternoon if ya can. :)


What is Freedom? – Rich Dad’s Take

Below you will read an amazing post written by Rich Dad Poor Dad author Robert Kiyosaki.

A great way to invest for many is cash flowing real estate. This is knowledge that can build true wealth. It combines the elements that Rich Dad talks about that are big wealth stealers for the masses, and turns them into money machines. Retirement(funds you use to fund your investments, used with proper leverage of good debt to provide cash flow.) – Inflation(land should generally keep up with inflation along with other commodoties like oil, silver, gold,e tc.) – Taxes(Real estate has AMAZING tax advantages) – Debt(good debt used for positive cash flow-worth repeating 🙂

-Joshua Gayman


Written By: Robert Kiyosaki


Yesterday, most Americans celebrated freedom by wearing red, white, and blue, barbequing meat, drinking too much beer, and blowing things up.

As a Vietnam Veteran, I fought to uphold the ideals of freedom, including Capitalism. And I’ve spent most of my adult life educating people how to become financially free, which I believe is the basis for almost all other freedoms. I believe freedom is definitely something to celebrate—and to fight for.

Freedom is under attack

For much of its history, America is a country that has valued free markets, allowed people to pursue their interests, and created opportunity for anyone, without too much government intervention.

Today, freedom is under attack by a massive public debt and trade imbalance, a recession that won’t go away, stagnant wage growth, high unemployment, and a looming retirement crisis.

Freedom is not security

Often, in times of distress, people give up their freedoms in exchange for what they think is security. It’s telling that many despots and dictators throughout history have come to power in times of economic crisis.

Ironically, many people don’t understand that freedom often means less security. It means having the ability to take risks and the understanding that our decisions have consequences that we must face—and rewards that we can enjoy.

I don’t know where the world will be in ten years. My hunch is that we’ll be worse off, not better. If our leaders continue to ignore the problems in the world instead of fix them, many people will be poorer and less free—and a few will be richer and have more control.

Enemies of freedom

Some enemies of freedom are high taxes, inflation, and bad debt. All of these things are big problems in the US and around the world. Because of our bad debts, most governments are faced with the choice of raising taxes or printing more money, both of which hurt the middle-class and the poor.

As our financial problems grow, many people will be content to give governments more power and control—and more money from their paychecks. Others will not be content, try to fight, but have very little ability to change things and still end up paying higher taxes and suffering from the effects of inflation because they’ll lack the financial knowledge to fight them effectively.

Financial freedom is key

Kim and I founded the Rich Dad Company because we believe in freedom and fighting for it. It is our belief that knowledge is the ultimate weapon in the battle for freedom—and financial knowledge, the knowledge most lacking around the world, is the most important part of the arsenal.

You can make the choice to be informed and to move ahead. Although the conspiracy of the rich seeks to keep financial knowledge limited in order to consolidate money and power into their hands, the reality is that you can play by the rules of the rich and enjoy the freedoms that they enjoy.

Today, the day after the celebration of freedom in America, I encourage you to ask, “What is Freedom for me?” Is it more time with your family? Is it the ability to travel around the world? Is it building a great business and helping others financially?

Freedom is different for everyone, but I’ve learned that one of the keys to achieving our definition of freedom is to be financially free. I encourage you to increase your financial education and knowledge, to learn to play by the rules of the rich.

For many with a low financial IQ, times ahead will be tough as taxes, inflation, and debt steal their freedoms away by taking away time from their family, diminishing quality of life, and making life more expensive. As freedom diminishes for many, it will be those with a high financial IQ and who understand how to use things like taxes, inflation, and debt to get richer that will become freer.


Real Estate Investor Priorities – It’s ALWAYS About Timing

I chose the above picture because it relates to the game we all know and love, Monopoly. The formula to win at the game of Monopoly is the same formula used to build wealth. That is, to buy cash-flowing properties. Landing on “Free Parking”(If you play that way) is great, but that is just a capital gain. Capital gains are nice, but you cannot win the game of Monopoly if you don’t buy properties for rent(cash flow) and then convert them to hotels(even if you were to land on free parking every time around the board.) Not to mention, in real life, when you land on free parking(or flip a property, AKA capital gains), it is taxed by the government, and taxed at a rate much higher than the tax you would be charged for your rental income(cash flow).

Cash flow is the #1 thing in real estate investing. Flipping is great to earn a check, but to build wealth you need to have cash flow. In real estate, this means owning property that puts money in your pocket each month, above and beyond your expenses for the property. These expenses include monthly payments for capital(if using OPM-other people’s money *strongly recommended*), insurance, taxes, property management, etc.

The reasons I prefer real estate investing to other vehicles is that it has great potential to leverage with OPM(other people’s money), it provides cash flow(money in your pocket on a regular basis), and it has AMAZING tax advantages.

One HUGE variable with real estate investing is time. This is true with cash flow investing just as it is with “flipping.” As with all investing, you should have a plan. Your plan will be different if you are 5 years from retirement as opposed to 40 years from retirement, and anywhere in between..

If you are not satisfied with what your retirement account is doing for you in your 401k, give me a call and we can discuss a personal real estate investment strategy to secure your retirement. 623-252-3234

I will now turn it over to a very wise real estate investor. My friend in San Diego, Jeff Brown.

-Joshua Gayman

The following written by: Jeff Brown AKA “Bawld Guy” – http://bawldguy.com/

Cash flow is a wonderful thing. Capital growth is truly something to celebrate. Yet both can derail your retirement faster than you can watch it happen in real time. So many real estate investors behave as if both concepts exist in a vacuum, unaffected by all other factors. One of those factors is time — and I’m here to tell ya, time won’t be ignored. Much like gravity, those who ignore it’s powers will either pay a stiff price, or look back and realize they were incredibly lucky.

Let’s don’t talk in terms of age, but instead, years before retirement. If you have more than 10, surely 15 or more years till that day, puttin’ cash flow at the top of your priority list will be the kiss of death — to your retirement income. Of course, that doesn’t matter much if your agenda isn’t to maximize cash flow at the point of retirement. I’ll assume your #1 goal is maximum reliable income at the point of retirement.

BawldGuy Axiom: To the extent the real estate investor goes for cash flow, capital growth suffers — and vice versa. You’ll only get the best of both in the movies.

There’s no gettin’ around that truth. There are types of properties more appropriate for capital growth, just as the same is true for cash flow. Also, the structure/strategy used to acquire a real estate investment property will dictate whether or not it will be more productive for growth or income.

But again, the elephant in the room is timing.

If you’re 43 years old with plans to call it quits at 65, and makin’ plenty of money at work, why on earth would you sacrifice capital growth for current cash flow for which you have no need? Putting cash flow at the front of your chronological line guarantees the inhibition of your invested capital’s growth. But, you might ask, why is that such a big deal? Excellent question, grasshopper.

What is cash flow anyway, but a yield on capital, right?

Retirement income is nothing if not the yield on your accumulated capital, set aside for that purpose. The bigger the pile of capital you amassed, the larger the yield will be in terms of, you know, actual dollars. To put it more simply, a 6% yield on $3 Million is more than the same 6% on $1 Million.


$180,000 is more than $60,000.

BawldGuy Takeaway: Those who opt for capital growth first, then switching gears to cash flow as retirement looms, will be living on the former. Those who insist on emphasizing cash flow now, will be settling for the latter.

There is no third alternative people. Make time your friend, cuz it’s a merciless enemy.

-Jeff Brown

Gold Value from 1935 to 2011

Here is a graph of gold from 1935 to 2011 me discussing the trend it shows and why it is doing what it is doing.

The Recession is Over: BS! – Take II

By: Joshua Gamen

I am downright ticked off when I hear politicians say that the recession is over and that we are in a recovery. I understand what they are trying to do(gain votes), but it disturbs me when politicians play off of the naive, hard working Americans. I don’t like it when business people do it either. It seems every other commercial I see on TV now days is from an insurance or “investment” company, begging people to give them their money so that they can have a “bright future,” or “safe retirement.” Hear this: there is no shortcut. If it were so easy that you could just hand your money to someone until you retire and have them pay your retirement for you, the government would do that. Or wait, isn’t that what social security is? Then again, social security and medicare are estimated to be a $50-$60 TRILLION dollar time bomb! We will start to see in the near future that there is no money in these funds, as the massive demographic of baby boomers begins to try to retire. No, it’s just not that easy. If you want a brighter future and a cozy retirement, you need to be financially literate – understand how money works. A good first step would be to take notice that financial “advisers” are actually in fact, financial salespeople! And politicians will play off of whatever emotions they need to so that they can gain your vote, and along with it, power – for themselves and the ultra-rich of whom they represent.

The recession is not over. First of all, it’s a depression, the government just quit using the term after the the “Great Depression.” Unemployment is still soaring, the government manipulates the numbers and does not count the people that they don’t want to count, to manipulate the statistics so that they can brag about recovery to gain votes. US trade is not increasing either, and the world is moving away from the dollar. Countries are not buying US debt anymore. Housing prices are not seeing any stabilization, people still can’t get a mortgage and the number of foreclosures is still growing. I have yet to see one stat on CNN that suggests housing is rebounding that makes any sense to me, and I work in real estate every hour of every day! The only thing I hear that is up these days is luxury luggage, which is a clear indication of the only people profiting from these economic times are the rich. The middle class is being wiped out right now and it is time for that demographic to get their minds right and take action! Individually, the best thing you can do is get yourself educated. In this global economy where our dollar is drowning(which happens to be the reserve currency of the world), knowledge is the new currency.

Last month I wrote the post “BS: The recession is over.” – This month I would like to elaborate on some of the details.

When you look at the size of our deficit, the size of our debt, China getting out of dollars, Russia moving out of dollars, rich oil-producing countries moving out of the dollar, less global confidence in the dollar, China hoarding gold, it becomes obvious that these are trends that clearly show that we are a bigger credit risk than we have ever been. Our debt is absolutely out of control. Soon we will have debt that is 100% of our Gross Domestic Product. This means that our nation’s debt will be the same as the value of the goods and services that our whole nation produces in a year. These trends will effect our national security, our standing in the world, our quality of life, etc. We are headed towards financial instability. If we keep this up, the dollar will soon be removed from the world’s reserve currency. What’s more scary is I don’t see anything coming that is going to fix these problems.

Look at Obama’s budget, TRILLION dollar deficits FOREVER! Now I realize that some people do have faith in the dollar, but long term, when you look at countries like China, Japan and Russia moving out of the dollar, you have to see that the world is losing confidence in the US and in the dollar. We desperately need China and everyone else to buy our bonds. We operate on debt, if we can’t get people to buy our debt, we can’t operate! Our living standards are headed down and if we don’t do something soon, our living standards will never be the same.

Inevitably, I do believe we are going to see some changes in the near future. All you have to do is look at Obama’s popularity rating. What historically has created change has been president’s before them creating disasters. If you look at what created Ronald Reagen, what created Bill Clinton, even what created Obama, it is the President’s before them creating disasters to open up the minds of the people to vote in changes. Look at George Bush, he was an absolute disaster, so along came Obama. We got what we wanted, a bigger disaster! While American people will get bored with the details, they will demand change!

The change is going to have to be very different to create a successful shift. They are going to have to be committed to cutting our costs and shrinking the cost and size of the government. To shine some light on the disaster that is currently in the White House, we are trying to add a new entitlement(a guarantee of access to benefits based on established rights or by legislation) to healthcare. Are you freaking kidding me!!!??? If you are for this, I am sorry, but financially speaking you must be absolutely crazy! We can’t pay for any of the entitlements we already have! We can’t pay for medicare, we can’t pay for medicaid, social security is BROKE, literally. The freaking post office is broke! Everything is bankrupt, and we are adding a new entitlement???!!! Harry Reid(Senate Majority Leader) and  Nancy Pelosi(Speaker of the House of Representatives) are actually trying to get us to believe that we are going to cut the deficit doing this! CRAZY BS!

The American people need to demand an administration that is going to balls up and shrink the size and cost of government, shrink the debt, and shrink the deficit. Make no mistake, we are going to have huge pain in doing this. But I do believe the American people will pay the price if they understand the logic of what is needed. Nobody understands the logic of what is going on right now. I don’t claim to either. None of this makes any sense. The guys who created this mess are in Washington making speeches of what we need to do, that’s freaking BS!


BS: “The Recession is Over.”

By Joshua Gamen

Sure. I recall a lot of hype last summer that the real estate market had hit bottom too.. Try telling that it has hit bottom to the millions of Americans who have lost their home to foreclosure this year. Or to their neighbors, who continue to throw their money at their sinking ship home while the foreclosures around them sink it’s value, and any hope for a return in their lifetime.

Who is the recession over for? The millions of unemployed people? The business owners who don’t have any customers? The guy trying to sell his home? The elderly lady trying to retire? The young adult trying to start his business? TELL ME, WHO IS THE FREAKING RECESSION OVER FOR?!

Let’s look at housing numbers:

  • Almost $6 trillion in housing wealth has been lost since 2005
  • Home values have dropped 30 percent
  • Existing home sales dropped 27 percent over the previous month
  • Housing inventories stand at 12.5 months(some part of the country, 24-36 months), over twice what’s considered healthy

What about Income, or Unemployment?

  • The unemployment rate is officially at 9.6%. It is a lot higher unofficially, because many unemployed Americans have been without a job for too long for the government to consider counting them.
  • Americans with jobs have seen their income fall over 4% between ’07-’09, and the % of Americans living BELOW the poverty level rose to 14.3%!
  • The gap is widening largely between the rich and the poor. Furthermore, the gap between the rich and the middle class is growing rapidly, as is the pace.(The top 20% of households now account for over 50% of all pre-tax income in the country = bye bye middle class.)

To quote the great educator/businessman/investor, Robert Kiyosaki:

“Maybe when the NBER says the recession is over, they mean it’s over for the ultra-rich. After all, many corporations are now posting better than expected earnings reports and balance sheets are getting healthier. For instance, FedEx recently announced that their earnings more than doubled. They also announced that they’re firing 1,700 people. Why? I believe it’s because they know what you already know, the recession may be “officially” over—but it’s not really over. Is the recession over for housing? Not according to the numbers. Thanks to high unemployment, new home orders are down 15 percent over last year, foreclosures are still rising, and pricing is not recovering. People are predicting that the housing inventory, which is more than double healthy levels, will take up to three years to work through. There will be no recovery until that happens.”


I wish I could post some stats to show that the market is taking a positive direction, but that would be covering up the truth with illusions. There are plenty of illusions out there to hide behind, but let’s be real..

Unemployment is still rising, and without jobs, nothing can get done. Business owners can’t provide jobs if they don’t have customers. And there aren’t any customers if there isn’t any money to spend. Sure, more money can be printed, but it will only become worth less as they print more and more, and they are..

MASSIVE government printing of US Currency. I call it currency, because it is just that-it’s not money! In 1971 President Nixon took the US off of the gold standard, meaning that the dollar was no longer attached to anything of value. It is simply a piece of paper that is backed by the good faith of the citizens of the United States.(See US dollar bill) They can print as much of this paper as they want, but the problem is, supply and demand will always work their course. Too much supply brings the equilibrium price down, and with the rate they have been running the printing presses the past few years, the market will soon be flooded with worthless pieces of green paper. –

If you study the history of currencies, since the earliest recorded times, every civilization that has had a currency not attached to something of value(ie: gold or silver), has gone to 0. That means, as more and more of the currency comes into existence, the existing currency is devalued, until the currency is no longer worth anything. Sound like pennies? Soon this will be nickels, then dimes, then quarters. Even the metal in them won’t be worth much, since they haven’t been made from silver since the late 60’s.(Weird how the government stopped using real silver and snatched it out of the money supply just a few short years prior to 1971 when our currency was removed from it’s tie to gold. Conspiracy?? 😉

In 1974, the government passed a law called ERISA. This made it so that people’s retirement was up to themselves, not the employer. It gave birth to plans like the 401k, and mutual funds, plans that were devised so that you could “invest for your retirement.” When this happened the American citizens turned to mutual funds, stocks and 401k’s for retirement plans. What they were actually doing was handing their money to wall street to play with until they retire, and expecting that wall street would automatically grow their money for them.

As we saw with the recent stock market crash, Wall Street is not looking out for the mutual funds or 401k accounts, Wall Street is looking out for their FAT KATS. What’s worse is, regardless of your opinion on the stock market, it doesn’t take a lot of intelligence to see that when the largest demographic of citizens(Baby Boomers) start to retire, money will flow out of the stock market like never before. This will be a the second dip of this what I believe to be, double dip recession.

Foreclosures can’t slow down, not yet. Go to google and type in mortgage resets. You will see graphs that will show you the largest mortgage product ever sold – the 5/1 Adjustable Rate Mortgage(ARM), and when these loans will adjust. These loans were primarily written in 2006 and 2007, right at the end of the real estate bubble, and will be resetting over the next 2 years. This will cause another HUGE drop in real estate values, as the number of foreclosures will sky higher, and at a more rapid pace than current.

Good News??

There is good news…

When markets bubble and then pop, the money doesn’t disappear, it just flows into another asset class. It moves.. The money is going somewhere, so where is it going? Well, take a look at the value of gold, or silver. Go to Google, and type in “gold spot.” Examine the value of gold as it has climbed over the past week, month, year, 5 years, or further. Then check out the same for silver. Since forever, gold and silver have always been used for exchange, hence making it the real money of the world. Until the rich figure out where they can put their money to make more money, they are holding it in the form of real money, gold and silver. It’s catching on quick, think of how many places you see driving to work and back that say, “WE BUY GOLD.” It is the next major bubble, but we’re still early to the trend. Gold just went over $1,300 an ounce today, but we will see gold hit $13,000 per ounce, and in the not too far future.

Assets are cheap. Real estate, businesses, etc. Now is a good time to gather as many assets as you can, that will reward you as the economy turns around. Buy investments for what they will provide you in cash flow, do not worry about selling for a profit. That is speculation. Whatever you grow your asset and sell it for later should be the gravy. Now is an excellent time to pickup businesses for cheap, cut out the expenses, make the systems more efficient, and get the asset as profitable as possible. Now is an amazing time to buy real estate that will cash flow for you as well.(Rental income exceeding the loan you are paying to own the property.)


The recession is not over. We are in a new economy, the old one is not coming back. We are in a shift from the industrial era to the information age. In this new economy, knowledge is money. You can print your own money just like the the Fed does. Financial IQ is the way out of the paycheck chasing. Get real, get right, and get assets! Financial knowledge, is the greatest asset you have, so acquire as much of it as you can!