Wisdom of Rich Dad

When I was young, my poor dad said, “You need to go to a good college to get a good education and get a good job.”

My rich dad said, “You rarely get a good education at a ‘good’ college.” He also said, “It’s much better to create good jobs as an entrepreneur than to get a good job and be an employee.”

I applied for college like my poor dad wanted, and was accepted into the United States Merchant Marine Academy in Kings Port, New York. The academy is a highly selective school, accepting only 275 students per academic year and requiring a letter of recommendation from a U.S. Senator or Representative. At the time, first-year graduates from the Academy were making $70,000 or more per year—that was a lot of money in the 1970s.

Though my poor dad was the Head of Education for the State of Hawaii, I was a poor student with subpar grades. I’m not sure how I got into the US Merchant Marine Academy, but I did.

I don’t regret my time at the Academy. The academics were rigorous. I had great professors. And because the Academy was a military school, I learned much needed leadership skills and developed a strong sense of pride and discipline that I didn’t have as a teenager. Those skills have served me well throughout life.

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Since the lesson still hasn’t sunk in for many Americans, I’ll repeat here: Your house is not an asset. It’s a liability. Very simply, an asset is something that puts money in your pocket. A liability is something that takes money out of your pocket. The reason people are confused and think that a home is an asset is because from the 1970′s through the early 2000′s they were able to pull money out of their house in the form of loans, like a real estate ATM.

As The New York Times article states: “The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming.”

The problem is that wealth wasn’t generated. Only debt. People didn’t sell their homes to pay for things like college educations and vacations; they borrowed against them. In the process they bought into the illusion that they were tapping an asset when in reality they were growing a liability by taking on more and more bad debt.

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Black Friday has been a long-held tradition by bargain hunters who will line up on November 26^th to start their shopping ahead of the Christmas season. In recent years the dynamic of the Black Friday deal has changed, hitting the web and becoming nearly month-long event for many stores, especially those that provide electronics.

Sites like Deal News have released this year’s predictions as to what the best deals will be. Last year, they were more than 80% accurate, which gives some high hopes for this season. They are also deals that will be likely to start around the second half of this month.

But when it comes down to the actual deals, are they worth the hassle of shopping around? Are the discounts really that drastic? In a word, yes.

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When 18-year-old Robert White decided to jumpstart his retirement plan, he invested his life savings of $25,000 into an aggressive mutual fund.

Little did he know that just five years later, he would make a complete 180 and join the ranks of a new group of young investors who have become so risk averse by the wild market swings that they’d rather park their money in safety zones, like CDs or Treasurys.

Today, only 22% of investors under the age of 35 say they’re willing to take on a substantial level of risk, according to the Investment Company Institute. Compare that with 2001, when that same group outpaced every other age bracket.

“We’re coming off a series of financial crises that hit this young generation at points in their lives where external events shape strong opinions,” said Christopher Geczy, adjunct associate professor of finance at University of Pennsylvania’s Wharton School.

When White’s fund began to slip with the broader market in 2008, he yanked his savings, now at $35,0000, and put the money into a short-term certificate of deposit with an annual return rate of 4%.

“It’s almost embarrassing to talk to anyone about my portfolio because I know how stupid it is to normally keep my portfolio in cash,” said White, now a 23-year-old graduate of Northern Arizona University.

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You hear it all of the time, “age is nothing but a number”, but what does age do to your ability to make financial decisions? As droves of baby boomers approach retirement, they will be making increasingly important decisions regarding their finances. Read on to learn how aging can affect your ability to make financial decisions, some of the behavioral traits that older investors exhibit when making decisions, and some tips on how to avoid the possible financial pitfalls associated with aging.

The Age of Financial Treason?
According to the study “The Age of Reason: Financial Decisions Over the Life-Cycle with Implications for Regulation”, the average person’s peak financial decision making age is around 53 years old. The authors of this study surveyed the life-cycle patterns of financial mistakes using a database that measures ten different types of credit behavior. The financial mistakes noted included suboptimal use of credit card balance transfer offers, misestimating the value of one’s house, and excess interest rates and fee payments. The study found that middle-aged adults make fewer financial mistakes than younger and older adults.

According to the study, our ability to make sound financial decisions increases sharply in our 20s and 30s, levels off and peaks in our 50s, then begins to fall sharply in our 70s and 80s – the so called “inverted U”. The learning curve associated with gaining financial knowledge is believed to be the reason for the rise in our early years, while declining cognitive function is believed to be the reason for the drop in our later years.

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One of the best ways to grow is to find a mentor. This may sound like it is difficult but it is easier than most leaders think. There are plenty of people who could serve as mentors. The reality is that they are just waiting to be asked. The problem is that most business leaders only think of approaching other business people for mentoring. The truth is that they are cutting out a vast array of assistance that they could find.

Mentoring is simply teaching another person from personal or learned experience. Finding a mentor means to find someone who knows something about leadership that could apply to a business setting. There are many ways to accomplish mentoring. The following is a short list of possibilities that business leaders may not normally consider.

Find a colleague

The first task is to begin asking questions to people who are in a similar area of expertise. Find someone who has worked longer or harder and start finding something from them to learn. One of the best ways to learn something is start asking good questions. The longer people fail to ask questions, the longer they remain in the dark. Knowledge is the first step to growing as a leader.

Find a long distance mentor

The second way to find a mentor is to listen to audio tapes or watch video tapes. The reality is that a person does not have to be known on a personal level to be a mentor. The long distance mentor is often the most used form of business mentoring. Select a leader who can be trusted to give sound advice from a background of personal experience. There are a wide variety of leadership teachers out there that can be tapped for mentoring.

Find a leader with a different background

The third way to find a mentor is to look outside the realm of expertise for people. There are a variety of individuals who are leaders outside of the business community. There are leaders in the civic realm who manage towns and villages. There are individuals who are leaders within nonprofit organizations that use various leadership skills on a daily basis. There are teachers in the local schools who lead in the classrooms. There are individuals who work in public service for police, fire and medical services who might be able to give excellent leadership suggestions. These people are leaders and they have something unique to share.

Take some time to think about people within the personal circle that could become a form of mentor. Be willing to take the next step and start finding something to learn from another leader. There are many people who could teach about leadership. The setting does not have to be formal. Invite the potential mentor to lunch and ask about learning something new. The reality is that when leaders glean from one another, both will come away better and stronger leaders.