Wisdom of Rich Dad

Have you heard? The government is giving away free money! It’s all part of the Obama stimulus package. These government grants can be used for anything: buy a car, purchase a home, start a business or pay your credit card bills. Even take a vacation. And here’s the best part – because this is a grant, you never have to repay the money.

How do I know this? It’s all over the web. Just search “stimulus” or “government grants” and see what comes up. You’ll find site after site that promises to show you how to get your share of the “billions of dollars which go unclaimed each year.”

Con artists are creating phony web sites with names like PresidentObamaGrants.com and FederalGovernmentGrantSolutions.com. “They’re advertising them on search engines like Google and on social networking sites like Facebook. They’re also promoting them in chat rooms,” says Susan Grant, director of consumer protection at the Consumer Federation of America.

The scammers even create bogus blogs, to tout and drive traffic to their sites. I clicked on OfficialStimulusPayments.com which took me to “Jessica’s Money Blog.” Jessica, who does not give her last name, wants everyone to know how she got a $12,000 check from the government to start her own $5,000 a month business. She claims she learned how to get this free money from a site called GrantsForYou.com and she urges readers to get their share of the loot.

“Don’t fall for it,” warns Eileen Harrington, acting director of the Federal Trade Commission’s Bureau of Consumer Protection. “There is no money in the stimulus package to send out individual checks to people.”

The Grant University gets a failing grade
The Better Business Bureau has received hundreds of complaints from people across the country who took the bait. Instead of a grant, these victims got unexpected charges on their credit or debit card accounts.

In the past year, about 350 people complained to the BBB about a web site called The Grant University run by a company located in Draper, Utah. Tracie Oberlies is one of them. “I think they’re scam artists,” she says.

Oberlies wanted to buy a small farm in her hometown of Lugoff, S.C. She hoped the Grant University would help her get the money. The web site offers a 7-day trial membership for just $1.98. It gives you access to the company’s site plus a disc called “The Grant Professor.” Oberlies was unable to log on to the site, even when her disc arrived – 11 days after her order.

She called the company to cancel “and they kept giving me the runaround.” They told her it was too late to cancel and they would not refund the first month’s membership fee of $69.95 they had billed to her credit card.

In her complaint to the BBB Oberlies writes, “I have contacted them a minimum of ten different occasions and they continuously hang up on me and refuse to allow me to speak with a supervisor.” Eventually Oberlies got her money back, but only after she told the company she was going to go to the news media with her story.

The BBB gives The Grant University an “F” rating, its lowest grade. Jane Driggs, president of the BBB in Salt Lake City tells me that rating is based on the volume of complaints and the failure to resolve many of them.

“They are preying on people who really think they are going to get the free money,” Driggs says. “And there is no free money.”

Just the tip of the iceberg
A company in Las Vegas called The Grant Instructor has generated even more complaints – 450 so far. The BBB says the company, which also has an “F” grade, runs at least two dozen sites with names such as: American Grant Club, Get My Grant, Grant Dollars, Grants Are Easy, Grant Resource Center and Your American Grant.

Christopher Gaffer of Mankato, Minn. stumbled onto one of their sites called “The Grant Search.” Gaffer is on the board of a non-profit group in Mankato that helps provide affordable housing. Part of their funding comes from grants. Gaffer went online to look for new funding opportunities.

The initial cost was just $1.95 for seven days access to the Grant Search database. Gaffer paid but never got his access code. Seven days later, he found a charge for $49.50 on his credit card for “a recurring monthly membership.” Gaffer tried to contact the company but could not find a phone number or e-mail address. “It was a nightmare,” he says.

After complaining to the BBB and waiting a long time, Gaffer got a partial refund of $24.50. “It’s a scam,” he says. And he wants others to learn from his mistake.

I contacted both The Grant University and The Grant Search and did not receive a response to my request for a comment.

The bottom line
The Federal government does give out billions of dollars in grant money every year. Most of these grants either help students pay for college or are for clearly defined reasons, such as research or charitable work.

No one has to pay to get a list of government grants or to apply for one. More importantly, no company can “guarantee” you’ll receive grant money. You’ll find all the information you need at free government web sites, such as: http://www.grants.gov/, http://www.studentaid.ed.gov/, http://www.govbenefits.gov/ and http://www.sba.gov/.

One more warning: Some grant scams come in the form of an e-mail offering you the chance to get free money. These are phishing scams sent by identity thieves who hope to steal your personal information. NEVER respond to one of these emails.

by Carolyn Bigda and Paul J. Lim

In a world turned upside down, you must re-examine some basic assumptions. A good place to start: understanding the true nature of risk.

Rule No. 1: Risk

Old thinking: If you can stomach the ups and downs that come with risk, you’ll be rewarded.

New rule: Risk isn’t about your stomach. It’s about making or missing an important goal.

You know you have to consider risk. But what is risk? Many of us have learned to think of risk as synonymous with volatility. For years, what came down reliably bounced back even higher. You could easily conclude that risk tolerance was just a matter of taste. As long as you had the fortitude to see the occasional loss on your 401(k) statement and not panic, you would capture superior returns over time.

What to do: You shouldn’t run from risky investments just because they lost money – that train has left the station. But the old buy-on-the-dips advice isn’t quite right either. This bear market’s lesson is that how much risk you can take is a matter of how much you can lose and still meet your basic goals. That may mean scaling back on stocks, even if you miss some of the next market rebound.

Rule No. 2: Cash

Old thinking: Keep enough money in ultrasafe accounts to cover life’s emergencies, but no more.

New rule: Relying more on cash can rescue you in an “asset emergency.”

For most of your career you’ll want to set aside about six months’ worth of living expenses in the bank. That money covers the mortgage and puts food on the table should you lose your job. The fact that you’ll earn only about 2% is beside the point. You can’t take the risk.

The simultaneous crash in stocks and houses has taught us that we need to redefine “emergency.”Rande Spiegelman, vice president of financial planning for the Schwab Center for Financial Research, recommends looking at the next one to three years and adding up any big-ticket stuff you see coming: tuition, a wedding, a down payment on a house. Once you have your total, aim to hold that much in a cash account or a low-risk investment such as a high-quality short-term bond fund.

What to do: It’s not easy to build cash savings and a retirement fund at the same time. If you have to make choices, build up that emergency fund first because you can’t expect to lean on your home equity or stocks if you lose your job. And see if you have some flexibility on the big-ticket obligations. Maybe you plan for a state school rather than a private college, or downsize the wedding. If all your assets are in a 401(k), move some of that balance to low-risk investment options as you build your cash funds. That will preserve more to tap via a 401(k) loan in a pinch. Not a terrific option, but it can beat the alternatives.
In the years just before and after retirement, cash becomes even more important. You don’t want to sell stocks during a bear market to buy groceries. Aim for two to four years’ worth of living expenses in low-risk assets as you near retirement.

Rule No. 3: Human capital

Old thinking: The longer your time horizon, the more stocks you should own.

New rule: Time isn’t everything. You must also consider your earnings potential.

Read the rest of this entry »

In his Rich Dad book series, Robert Kiyosaki trumpets the benefits of investing, especially those of real estate investing. Those include tax benefits, and the ability to have your money go to work for you without your lifting a finger. It sounds wonderful, doesn’t it? The idea that you can turn a dollar into two just by placing it in what can seem like a magical realm can seem very enticing.

In order to actually turn a good idea into money in your bank account, however, you have to know a little something about how the magic works. It is a good idea, for instance, to take apart this term “real estate.” Just what is real estate, and what are the types of real estate investing that are open to you?

“Real estate” is a term that refers to a piece of land and everything that sits on it, usually meaning structures. In terms of investment, its value is affected by local market conditions more than global conditions. There are several different ways to invest in real estate.

Real Estate Investment Trusts (REITs) allow you to make money by investing in real estate, either by owning the properties themselves or by owning the mortgages on them, or to do a combination of both. The benefits of this type of investing are high yields and tax considerations. This is also a highly liquid type of investing, which means that it is easily converted to cash.

In a real estate partnership, you are pairing with (who or what?) in order to make money from existing structures or to build new ones. You can even make money off the sheer appreciation of undeveloped land itself. This is a good bet because of high growth potential and tax benefits (shelter).

The rental of vacation property is pretty self-explanatory. Your vacation property is one that is used for recreational purposes and is not your primary residence. (Define primary residence.)

Rental property is another almost self-explanatory concept, as we have all done business with landlords at some point in our lives. However, there may be a difference between residential and business rental property.

You may also invest in raw, or undeveloped, land.

It is a good idea to learn about each type of real estate investment to determine which yields the greatest benefits, determined by your particular needs. Kiyosaki named tax benefits as a good reason to become a real estate investor. After all, money you keep in your pocket is just as good as money earned.

If you are particularly interested in pursuing real estate investment because of tax benefits, you may even wish to become a real estate professional, as the IRS allows people who spend at least 750 hours a year to have nearly unlimited tax deductions. If you are not considered a professional, and your salary is high, that can actually cost you deductions on your real estate. You must have the time to participate in your real estate activities yourself, even if you have hired another real estate professional, to qualify for all tax benefits.

By Janet Bodnar

It’s a challenge for adults to create a financial Web site for kids that offers age-appropriate information and is entertaining enough to hold their attention. To mark National Financial Literacy Month, I’d like to mention a few that are worth a look.

For elementary-age kids. Meet the “Centsables” (www.centsables.com). They’re six super-hero friends — named, fittingly, Franklin, Jackson, Grant, Hamilton, Penny and Suzie B. — who live in Centsinnati and can “grow to gargantuan height, run like the wind, and control the elements.” And they do it all in the service of giving kids super money-management skills. Mark DiPippa, president of Norm Hill Entertainment and creator of the project, has ambitious plans to produce it as an animated TV series.

For now, kids can enjoy the Centsables online in a series of games and comic books. The target audience — children ages 6 to 11 — can probably handle the activity pages and comic books on their own. Younger children may need a hand from parents to navigate the lessons, which include “How kids earn money” and “Taking stock of the market.”

For middle- and high-school students. CareerForward is a free, innovative online program developed by the Michigan Department of Education, Michigan Virtual University and Microsoft’s Partners in Learning unit.

The curriculum is designed to take about 20 hours to complete and may be directed by a teacher (Michigan requires all students to have at least one online learning experience before they graduate), a volunteer or an interested parent.

CareerForward isn’t focused exclusively on financial education. But there’s a unit on managing money, including lessons in budgeting and a salary calculator for future jobs.

What I like about the program is that it gets kids thinking about what they’d like to do beyond high school — the education and skills they’ll need to earn a living in the global workplace. And that, after all, will determine how much money they’ll have to manage and what their standard of living will be.

For college students. Though not an interactive Web site per se, the “Playbook for Life” guide may be downloaded or ordered at www.playbook.thehartford.com. Originally developed by The Hartford insurance company in conjunction with the NCAA, the idea was to educate student athletes about the importance of financial planning.

But the lessons are equally valuable for all college students and young adults, with sections on purchasing a house, buying (and maintaining) a car, saving for retirement, buying insurance and paying taxes.

And when your kids are ready to go out on their own, there’s a lot of useful information at Kiplinger.com in the Starting Out section.

Competency in managing money appears to be a skill that doesn’t come naturally to eve ryone. Unless a person is exposed to the practice of money management, he/she is less likely to understand how it works and its long-term benefits. It is easy to develop poor spending and financial habits resulting in significant negative consequences such as a poor credit rating, denial of credit, rejection for a checking account and bankruptcy, to name a few. Early financial literacy is the best way to pre vent such consequences.

Financial institutions have a vested interest in supporting or providing financial literacy programs. Rrlative to cost, financial literacy provides both immediate and long-term returns. The most obvious is brand recognition and market share. Financial literacy offers an excellent opportunity to personalize ones institution among consumers who have myriad options in selecting financial service providers. Consumers who understand the merits of responsibly managing their financial resources are more likely to effectively and profitably utilize the services of a traditional financial institution.

Financial literacy is a good way to teach consumers about the benefits of having a relationship with a financial institution. Among these are economical access to funds and credit, the ability to establish a positive financial history, consumer protection and perhaps most important, a higher propensity towards savings, which increases net worth. Financial literacy can also break the cycle of poverty, which is often associated with the unbanked. Individuals who have experience handling a bank account and an awareness of other effective money management/asset building techniques are more likely to pass these on to their children.

Providing financial literacy training is not a one-size-fits-all effort . Financial literacy is most clearly divided into four categories: early intervention, basic literacy, credit rehabilitation and long-term planning or asset building.

Introduction at the earliest stage can often eliminate the need for corrective intervention at later stages. Given the breadth and variety of materials available, it may be useful to first determine your institution’s purpose and objectives for undertaking financial literacy training. This will assist you in specifying the audience you would like to reach and in identifying the most appropriate materials.

Download Guide to Financial Literacy Resources

PDF format, 526KB, 32Pages.

My grandmother recently, and reluctantly, asked if I could give her some money.

There’s no question my wife, Amy, and I will give her the funds; she raised me and is, by and large, the woman I consider my mom. She has always been kind to Amy. If we have the discretionary cash that can make my grandmother’s life happy, shouldn’t we hand it over?

Yet the request has caused us a lot of angst.

Part of our concern is where this will lead. Although my grandmother isn’t asking for a lot of money — just a few hundred dollars — when you open your wallet to family members, the first time is rarely the last. We don’t want to get in the position of becoming my grandmother’s ATM.

But it’s more than that. Amy and I have worked hard to earn this money, and it’s frustrating to have somebody want to tap into our account. What’s more, my grandmother will no doubt use the money for things that we’d never buy ourselves. We don’t want to feel like suckers for funding a lifestyle that we might consider indulgent.

So that leads us to the question we’ve been grappling with: When providing financial assistance to a family member, is it fair to say the money comes with constraints on how it is spent? Or, is financial assistance an exercise in unconditional love?

* * *

Let me say it at the outset: I don’t believe children bear an obligation to their parents as a cost of having been raised by those parents. Bringing a child into the world is a parent’s choice, not the child’s. Thus, the obligations that do exist run from parent to child, not in reverse.

That said, I certainly feel a desire to assist my grandmother out of a sense of love and caring. She also has always been careful with money — in terms of both spending and saving. And she and my grandfather obviously weren’t my birth parents, but they did choose to raise me.

Still, loving and understanding don’t necessarily erase the questions that inevitably arise when family members seek funding. In particular: Why do you need this money? And how are you spending the money you do have?

If you, the giver, don’t agree with how the person spends his or her money, do you have a right to impose your restrictions? Do you have a right to tell someone to change his or her spending habits in order to get any money from you?

One of my longtime friends, who’s providing financial support for her two sisters, says no.

She’s helping one sister pay off thousands of dollars of credit-card debt. “I’ve talked to her about managing her money,” my friend says, “and the need to stop relying on credit, but I would never tell her how to spend her money.”

With the other sister, my friend is paying more than $200 a month for cable and Internet access, cellphone charges and a cleaning service. She’s also considering sending her a few hundred dollars each month for spending money, again with no stipulations about how the cash is spent.

In both cases, my friend says that the offerings are acts of love, and that while she may not necessarily agree with how the money is ultimately spent, each sister “obviously has different spending priorities.” Moreover, she adds, using that money to shop, go to lunch or spend on a friend “are really positive things in a personal life, and I would never deny my sisters that just because their choices may not mirror my own spending priorities.”

“Giving money,” she concludes, “doesn’t give me the right to impose my views on how it’s spent.”

* * *

I admit that I am not as reflexively selfless as my friend. When my grandmother asked for money, I immediately started thinking about her spending that I consider wasteful. She regularly pays for brunch for herself and friends, and frequently hosts parties for friends. If she didn’t do these things, I thought, she wouldn’t need my money. And while I don’t mind paying for my grandmother’s brunch, I don’t particularly want to treat her friends.

But as I talked to a friend about it, I realized that a grandson’s idea of waste is a grandmother’s idea of pleasure. Who am I to consider her parties wasteful, any more than somebody else might consider my dining out or trips to a casino wasteful? Unless the spending is egregious, it seems unfair to impose my standards on someone else’s life.

On top of that, giving her the money with the stipulation that she only use it on herself would rob her of a big piece of her happiness. And what’s the point of giving her money if it only reminds her of what she cannot do?

So, after much thought, here’s where I am: I can’t deny that the dollars I will give to my grandmother will be tossed away on expenses that will make me cringe. I can’t deny that if the money requests continue, things might change.

But for the moment, at least, my grandmother’s happiness wins out. I will give her the money and say nothing.

Jeff Opdyke covers personal finance for The Wall Street Journal.