Wisdom of Rich Dad

To a con artist, cash is king. International scammers have developed a deviously clever way to trick people into sending them cash. The crooks mail out counterfeit checks or money orders and come up with a creative story to get their victims to wire back thousands of dollars.

According to a survey released Wednesday by the Consumer Federation of America (CFA), nearly a third of all adult Americans have been approached with fake check scams and at least 1.3 million have fallen for it.

“They didn’t realize the pitch and the check were both phony until they wired off the money,” says Susan Grant, CFA’s director of consumer protection. She says the average victim gets taken for between $3,000 and $4,000.

Sally Greenberg, executive director of the National Consumers League, puts the yearly loss at $20 to $60 billion a year. Her group runs the Web site fakechecks.org. “These are very persuasive scams that play on people’s vulnerability,” she says.

Here’s another reason so many people get burned by these counterfeit checks: They look legitimate. “They look so real your bank teller can’t always tell it’s a fake,” says Allison Southwick of the Better Business Bureau.

It starts with that bogus check or money order
Why did you get that unexpected check or money order for thousands of dollars? Maybe you’ve won a contest. Maybe you hit the jackpot in a lottery. Maybe it’s payment for a work-at-home job. The storylines are varied, but the con always works the same way. You need to deposit the check and wire off most of the money right away.

“Once it’s wired it’s gone, gone, gone,” Greenberg says.

The CFA survey pinpoints one reason why this scam is so successful. Most people (59 percent of those responding) mistakenly believe that when you deposit a check or money order, your bank confirms that it is good before letting you withdraw the money. Forty percent believed they would not be held responsible if the check or money order turned out to be counterfeit. Wrong!

Many victims tell me they asked their bank if the check “cleared” before they wired the money and were told yes. Here’s the deal: When a bank says a check has cleared, it means you have access to those funds. It does not mean the check is good.

If the check bounces – which could take a few days or many weeks – you are responsible to repay your bank for any of the money you withdrew.

Bogus checks can be used for almost anything. All the bad guys need to do is concoct a story about why they sent you a sizeable check and why you need to cash it and wire them money.

Here are some of the most common fake check scam scenarios:

Prize and lottery scams
“Congratulations!” the letter says. You’ve won a bundle of money in a contest, sweepstakes or foreign lottery – one you never entered. The letter looks official and comes with a check for thousands of dollars. You’re supposed to cash it and wire off the money to pay for outstanding fees or taxes. Don’t do it!

Reality check:
You never have to pay to claim a prize. If you’re asked to wire off any money, it’s a scam.

Mystery shopper scam
You answer an ad and are accepted as a secret shopper. Your first assignment is to evaluate the MoneyGram payment system at a local Wal-Mart store. The letter tells you to cash the enclosed check – usually between $2,500 and $5,000 – keep a couple of hundred dollars for yourself and use the MoneyGram service to wire off the rest. Don’t do it!
Reality check:
Never accept a job that requires you to cash a check and wire money. No legitimate company would ever make you do this.

Overpayment purchase scam
You’re trying to sell something that’s fairly expensive, maybe a car or some furniture. So you place an ad in the newspaper or online. Before long you get an e-mail from an eager buyer who is willing to send you a check for more than the asking price. You’re supposed to wire the extra money to a mover, decorator, shipping company or some other non-existent entity. Don’t do it!

Reality check:
You’re being set up. No legitimate business transaction involves a check for more than the asking price with the requirement that you wire the difference to some person or company.

Other victims
Innocent businesses are also hurt by the fake check scam. Many of these bogus checks use the name, address and bank account number of legitimate companies.

This increases the chance the teller will accept the check. Try to deposit a big check from the El Gordo Lottery and the teller might start asking questions. But a check from Bob’s Auto Supply doesn’t call attention to itself.

“Often businesses don’t even know their checks are being used in these scams until they get angry calls from people who want to know where their prize money is,” says the BBB’s Southwick tells me.

A few months ago, con artists sending out counterfeit Publisher’s Clearinghouse prize notices – along with fake prize checks. Some of those fake checks listed the payer as Alpine Environmental Services of Stanwood, Wash.

When the bank realized Alpine’s account number had been stolen it locked up the company’s accounts. The company’s manager, Dennis Dutoit, tells me he could not pay any bills for three days until everything was straightened out. “It created a major mess,” he says.

The bottom line
It’s not very hard to protect yourself from these fake check scams. In fact, Carmen Christopher, an attorney with the Federal Trade Commission, was able to sum it up in one sentence. “If you get a check that requires you to wire money – don’t do it!”

Almost everywhere you go, you can hear parents say: “I want to start teaching my kids about money while they’re young, so that maybe they’ll grow up and avoid making the same mistakes I did, maybe they’ll be both wealthy and grateful.” It makes sense that teaching kids about money is on almost every parent’s mind.

There are several money gurus for adults (Robert Kiyosaki – “Rich Dad, Poor Dad,” David Ramsey – “Total Money Makeover”, David Bach – “Automatic Millionaire,” to name a few). Of course, most parents with young children who are learning from these gurus eventually get around to wanting to impart this new-found wisdom to their children while they’re still young.

Also, there’s the huge number of conscientious parents who are in debt and who are on a path of getting rid of their debt. And then, there’s the self-aware parents who have become introduced to, and may be continuing on the path of, replacing a poverty-focused mentality with an abundance mentality (e.g. The Secret, Law of Attraction, and various faith-based and secular abundance teachings).

Of course, America is very well-poised to finally leave the poverty mentality of The Great Depression, as the third or fourth generation is being born now. Finally, Americans are extricating themselves, bit by bit, piece by piece, of the deeply embedded beliefs and language of The Great Depression, which are negative and counter-productive to building financial wealth.

Maybe you read “Rich Dad, Poor Dad,” and a light bulb went off about how you look at money, and now you are at a loss of how to teach your children about money. Maybe you don’t yet know how money works or what ROI means, and don’t have the time to go through a long learning curve, but want to capture the opportunity to teach your kids about money now while they’re young.

Here are 7 key points that you must know when teaching your kids about money:

1. Financial Wealth is created when your money makes money (rather than you making money).

2. ROI means Return On Investment. It is your Return On Investment – that is, the money that your invested money makes for you – that defines your wealth (rather than your earnings or your capital gains). For more teaching on this topic, read or listen to “Rich Dad, Poor Dad,” and/or play “Cash Flow 101,” to learn about getting off of the Rat Race.

3. Thinking that you’ll get out of debt and become wealthy when you work harder, get a raise, make more money, have greater commissions, or make some landmark profits in your stock trading account, are just lies that the 20st Century American society has created. Wealthy parents know differently. Wealth is created by ROI, which comes from having your money make more money for you.

4. Giving is part of gaining. When you have Returns On Investments, it’s important to keep the flow of money circulating – by more investments, more spending and more donating (charitable giving).

5. Good children’s banks have 4 parts – Investing, Donating, Spending, Long-term Savings (to buy Christmas/holiday gifts, birthday gifts, Father’s/Mother’s Day gifts, etc.), and properly take care of money (rather than scrunching up bills and jamming them into a tiny slot). Why 4 parts and not 3? Try dividing up Grandma’s $20 bill birthday gift to little Jimmy by 3.

6. Allowance only works if you have a complete plan to teach wealth habits to your children. Allowance alone, without more, won’t do it. Allowance and chores are a dangerous combination. Gratitude in children doesn’t depend on whether kids have to do chores in order to get an allowance – it depends on a lot of important things, but not that.

7. Children actually ignore you when you start talking to them about money (a.k.a. trying to teach them). Children learn by doing. Children get strong wealth habits by doing the same thing over and over and over – in an interesting and creative way.

If your family’s plan for teaching your children about money is lacking in any of these 7 areas, fear not. There are lots of resources on the web and in bookstores to help you get your children on a good financial wealth path.

Find the one that works for you, with your style and where you’re at in life. Now you’re armed with these 7 essential points to evaluate which tools will be best for you to teach wealth habits to your children, even if you’re not (yet) wealthy.

Theresa A. Markham, Esq. is the author of The Kids’ Bank Book: How to Teach Wise Money Management to Your Children with Fun, Ease, Smiles and Laughter, and offers the Book and other info about raising wealthy kids at www.KidsBankBook.com. She donates 10% of The Kids’ Bank Book net profits to Champ House.

President Barack Obama’s campaign theme was “Change.” We’ve all seen plenty of change in the past year, specifically economically and financially. Much of this change most people would label as negative. If you take into account the banking crisis, the growing numbers of people facing unemployment, the double-digit losses in so many 401(k)s and retirement plans, and the number of cities and states whose budgets are upside-down, then it does paint a pretty dismal picture.

And some—those hoping the government will save them or those who are not willing to change what isn’t working—will face a very rough road ahead. No doubt most of us will have to do many things differently, regarding our money, our investments and our businesses, in order to not only survive but to thrive in this economic climate.

That being said, and being the optimist that I am, I have to look and ask, “Where’s the upside in all of this?” And I do believe that there is not just one diamond in this rough, but there are three positive gems that could manifest out of this turmoil.

1) A Wake-up Call for the World Sometimes things have to get bad before we take action. This time in history could very well be our fi nancial and economic wake-up call. There are many pieces of this puzzle that are broken, and it will take more than a new president, new rules for Wall Street and a few crooks going to jail to fix it all.

This is undoubtedly a global problem, and it will take resources from around the world to turn this one around. I trust this is a wake-up call for our political, business and financial leaders that real and tough changes have to be made, now.

There is an even more important wake-up call for the individual, if you’re willing to tell yourself the truth. That wake-up call is this: You can no longer be clueless about your money. It is the realization that turning your money over to the so-called fi nancial experts isn’t working. It is the light bulb that goes off when you see you have an absolute need for real financial education. No more disguising a sales pitch for sound fi nancial advice. No more taking the advice from fi nancial advisors who don’t practice what they preach, who tell you what to do but don’t do it themselves. And no more allowing ourselves to be ignorant enough to blindly follow their recommendations.

Fortunately, the message is spreading. Peter Applebome, a talented journalist, recently wrote in an article for The New York Times titled, “Contemplating the Boobs We Were,” “…a yearend toast to us all—the boobs and easy marks who from time immemorial have mastered the art of buying high and selling low, investing in bubbles as transparent as an open window….”

He goes on to say, “…is there anything we can learn from this latest round of financial catastrophe?… So, here’s a revolutionary idea: Maybe it’s time we even start thinking about ways to teach [people about money].”

Applebome ends with this: “One lesson of this year is that these days, no one, not even the most fi nancially secure, can afford to be stupid.”

What a novel idea—teaching people about money. I’ll be that optimist who says that maybe this is the wake-up call to the masses really taking hold. Is the general public fi nally recognizing the vital need for true fi nancial education? That would be a breakthrough and a positive result from this economic breakdown.

Sometimes it takes a wake-up call to bring us to our senses. I optimistically trust that these cataclysmic events unfolding will serve as one giant wake-up call so that we as individuals become aware, educated and in control of our money. And in the bigger picture, that the same holds true for our cities, states and nations. Ignorance is not bliss; it’s foolish, expensive and painful.

2) Adversity as a Gift
Most of us are taught, beginning in kindergarten, that mistakes are bad. How often did you hear, “Don’t make a mistake!” In reality, the way we learn is by making mistakes. A mistake simply shows you something you didn’t know. Once you make the mistake, then you know it. Think about the fi rst time you touched a hot stove (the mistake). From making that mistake, you learned that if you touch a hot stove you get burned. A mistake isn’t bad; it’s there to teach you something.

In the economic times ahead, most people will encounter adversities at one point or another. Most people view adversity the same way they view mistakes: They see it as bad and something they want to avoid. It’s time for a new outlook.

Donald Trump gave me an insight about success that I will not forget. He said that the No. 1 key to being a successful entrepreneur or businessperson is how you respond to adversity. When faced with a hardship, do you crumble and quit, or do you stand up, take action and push through? When confronting a tough problem, do you take it on, learn from it and grow, or do you let the problem beat you down?

Adversity has the power to build your character and strengthen your spirit. It also has the power to weaken you and cause you to contract. It’s all a matter of how you react to the situation. I have faced many tough times in my life, and although it was hell at the time, I can honestly say that each time I pushed through it I became stronger, smarter, more confi dent and more successful. For me, adversity is a great teacher.

One of my all-time favorite books is As a Man Thinketh by James Allen, published in 1902. The message throughout the book is that your thoughts create your reality. It’s a very small and simple book. One of the most memorable lines in the book for me was this: Circumstance does not make the man; it reveals him to himself.

I interpret this to mean that how you handle the different situations in your life—good, bad and indifferent—determines the quality of your character. It reveals who you are.

So how you and I respond to these unfolding economic times will be very revealing and, ideally, enlightening.

3) Opportunity Comes Knocking
The third benefit this financial dilemma presents is the abundance of opportunities surfacing. The only question is, do you know what to look for to take advantage of them?

Real estate prices are coming down—opportunity. Business needs are changing—opportunity. Stock prices are correcting—opportunity. Innovation and creativity will rule— opportunity. Small business is growing—opportunity. Etc., etc., etc.

Are you focusing on the potential opportunities ahead, or are you cutting back, clipping coupons and reverting to survival mode? In my opinion, this is the best time to get educated and to start seeking out the opportunities—opportunities that not only allow you to survive, but to thrive and prosper in the years ahead.

As Charles Dickens wrote, “It was the best of times. It was the worst of times.”

May these be your best of times.

Kim Kiyosaki is co-founder of the Rich Dad Company, a speaker and best-selling author of Rich Woman.

Watch the video interview and read the feature article in TIME Magazine as Robert answers “10 Questions” from readers.  From Conspiracy of The Rich to how to find a rich dad, Robert answers your toughest questions as only he can.

It’s graduation season, and time for commencement speakers to offer a few words of wisdom. The class of 2009 has had more than its share of challenges. It began college in one of the most competitive pools ever and is graduating into one of the worst economies in decades.

But it’s not the first to face these challenges. We asked several prominent individuals about the best and worst financial advice they received—and their guidance for this year’s grads.

David Bach, author of the best-selling FinishRich books:

Mr. Bach says one of the most important financial decisions of his life was buying a home with a friend shortly after college. “It made me a financial adult in my early 20s,” he says. He had to get a crash course in mortgages, taxes and insurance.

Best advice: To buy the house and work hard. Working hard in your 20s and 30s could determine how successful you are later in life.

Worst advice: Selling the house too soon before home values soared in California.

Advice to grads: Mr. Bach graduated in 1990 when the economy was horrible and “California was a mess.” Don’t give up if you’re not finding a job. Ask someone for an informational interview. At the meeting, get three more names of professionals to meet. That’s how he eventually landed a job.

Paula Deen, restaurant owner, author and Food ­Network host:

Ms. Deen learned about life and Southern cooking from her grandmother. Years later, she launched a catering business with $200 and her family recipes. The catering evolved into restaurants, cookbooks, television shows and even furniture.

Best advice: A lot of great advice, she says, came from her aunt and uncle. Among other things, her uncle told her not to complain about paying taxes because “if you’re paying taxes you’re making a living.”

Worst advice: To not repay a note she had co-signed. (She didn’t take the advice.)

Advice to grads: Get all the experience you can and be persistent.

Robert Kiyosaki, businessman and author of the best-selling “Rich Dad, Poor Dad” books:

Mr. Kiyosaki writes and speaks about his rich and poor dads, “both of whom were good men.” He bases his poor dad on his own father, who was highly educated but not business savvy, and his rich dad on his best friend’s father, a successful commercial real-estate investor.

Best advice: From his rich dad, who recognized that Robert had the potential to be a successful business owner. He told him to learn how to make sales if he wanted to be a successful entrepreneur.

Worst advice: From his poor dad, who told him to take the safe path and “to go to school and get a job” when he returned from serving as a pilot in Vietnam. He didn’t recognize that Robert would “never be a corporate guy.”

Advice to grads: “If you’re going to be an entrepreneur, find a successful one who will teach you.”

John W. Rogers Jr., chairman and CEO of Ariel Investments:

Mr. Rogers, who graduated from Princeton, launched Ariel Investments in 1983 when he was 24.

Best advice:“To come home to Chicago.” A lot of friends went to New York but he returned home. “My family knew people who could open doors,” he says. “Friends and family became my first clients.”

Worst advice: “I was getting a lot of advice to go to law school. That would have been unnecessary. I wasn’t interested in it, and I was eager to get started as an investor.”

Advice to grads: “You want to be known as the best teammate in whatever organization you join. Look out for your teammates every step of the way. Be a good listener, teammate and friend, and live up to the commitments you make. Whatever you promise you’re going to do, you’ve got to do that.”

Mary L. Schapiro, chairman of the U.S. Securities and Exchange Commission:

Ms. Schapiro is the first woman to serve as the agency’s permanent chairman.

Best advice: From her parents: “Be careful abut getting into debt.”

Worst advice: When she got out of law school, friends advised her to delay saving until her salary was higher. “That ignores the value of saving even small amounts over a long time,” she says. “It also ignores the importance of getting into the habit of saving.”

Advice to grads: “Live within your means.” People need to know how to manage debt so don’t borrow without understanding the implications of the debt and how you’ll repay it.
 
Carrie Schwab-Pomerantz, ­president of the Charles Schwab Foundation:

Ms Schwab-Pomerantz learned a lot about investing and saving from her famous father, Charles Schwab.

Best advice: “Live frugally and save for a rainy day.” “Saving for a rainy day is in my DNA,” she says. “I’m also judicious about credit cards. I’ve always had one or two cards and use them for convenience, not to extend my income.”

Worst advice: “Buy any mutual fund.” Fortunately, she didn’t listen. She opened an IRA and built a diverse portfolio.

Advice to grads: “Live off 90% of your income.” Save the other 10%, first as a cash cushion. “When you’re young you don’t need all the bells and whistles in life,” she says.

–Ms. Mincer is a Dow Jones Newswires reporter in Jersey City, N.J. She can be reached at jilian.mincer@dowjones.com.

In these difficult economic times, everyone is seeking a better way to manage their personal finances. And at a time when even the newly elected president can’t be separated from his wireless device, two undergraduates from Rensselaer Polytechnic Institute have developed an open source solution that combines smart personal financial management with your smartphone.

The computer science students, who are part of the Rensselaer Center for Open Software (RCOS), have developed an application for Apple Inc.’s popular iPhone that allows users to log, track, and manage their personal spending.

The application is called Vault, and it is available for free to anyone around the world seeking a better way to manage their money. The code used to develop the software is open source, which means that there are no restrictions on distribution or modification.

Developers Amit Kumar and Devin Ross, juniors majoring in computer science, describe the application as “Quicken for the iPhone.” It seeks to replace the check register at the front of personal checkbooks, a financial relic that students like Kumar and Ross have never even owned.

“People are always carrying their phone everywhere already,” Ross said. “We saw the potential to centralize a task that many people could use daily.”

The software has a place to add expenses in different categories. Some categories, such as groceries, are automatically programmed in the system, while other categories can be added by the user. The application then logs the transaction and modifies the user’s account balance. The application also uses GPS to locate the closest bank branch, and then allows users to directly link to their bank’s Web site or place a call to the bank.

According to Kumar and Ross, one of the main benefits of the system is that no personal account information needs to be logged into the application. This protects the user from identity theft if the phone is stolen.

“Creating this application gave us really direct work experience that most undergraduates don’t get,” Kumar said. “It was the first opportunity that we had to go beyond just learning how to create good code to learning how to create a great user interface and build the code around that.”

Vault is currently available for free download from the iTunes Store. The project source is located on http://code.google.com/p/rpiiphone/source/browse/ and the development blog can be found at http://rpiiphoneproject.wordpress.com/ .

Source: Rensselaer Polytechnic Institute