Wisdom of Rich Dad

~ Robert Kiysoaki ~

The Fed kicks off a two-day meeting that will determine the fate of the $600 billion QE2, the second round of quantitative easing, i.e. printing money, and set the policy course for the Fed over the next few months.

By way of reminder, quantitative easing is when the Fed bolsters its balance sheet by buying treasuries to keep interest rates low. It’s the equivalent of you or I printing dollars to pay off our credit cards. The thinking behind the plan is that by keeping interest rates low, businesses and investors will borrow more money (which is also a form of printing money) and make more purchases.

The result of quantitative easing is always inflation since the Fed printing more and more money, and each dollar printed devalues the dollars already in print.

If you’ve been paying attention to the facts, inflation is already happening across the world. For instance, last year I said that buying silver under $20 an ounce would be a good investment. Since then, it has skyrocketed to $45 an ounce. Gold is also up significantly—as is oil, food, and interest rates for consumer loans.

Yet, Ben Bernanke and the Fed continue to say that inflation is not a problem. This week will be interesting because while the rest of the world is worried about inflation and tightening their policies to counteract inflation, there is every indication that the Fed will continue with loose fiscal policies that promote inflation.

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~ Robert Kiyosaki ~

I wrote a post about the Standard & Poor’s negative outlook on the US debt (“Downgraded”). In that post I stated:

In the coming months, the ability or inability of the US government to get the financial house in order will determine the fate of many people’s fortunes. If the US credit rating is downgraded from AAA, the result will be catastrophic for the economy. Most likely, stocks, bonds, and mutual funds would tumble; and commodities like gold and silver would skyrocket. Additionally, borrowing costs for both the US and the US consumer would climb sharply, causing another housing crisis.

Greece, the European Union nation at the center of last year’s European debt crisis, received some bad news: the S&P downgraded their credit rating from double B minus to single B, making their rating worse than many developing nations.

This sparked a sell-off of bonds across a number of European countries and drove the Euro down to its lowest level in nearly a month. That’s the power of a credit downgrade.

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If you are behind on your mortgage payments because you lost your job, you may be able to get up to $50,000 in help from the government.

But act quickly.

This week, HUD announced a new interest-free government loan program for homeowners who are on the verge of foreclosure. It’s called the Emergency Homeowners’ Loan Program (EHLP), but homeowners don’t have to repay the money if they stay current on their mortgage payments for five years after they receive the assistance.

HUD received about $1 billion for this program and expects it will be able to help up to 30,000 distressed borrowers, with an average loan of about $35,000.

Those who qualify for the loan will receive assistance to pay a portion of their monthly mortgage for up to two years, or up to $50,000, whichever comes first. The deadline to apply for the program is July 22.

To be eligible for the program, you must meet the following conditions:

• Involuntary unemployment or underemployment through no fault of your own
• A minimum 15 percent reduction in income
• You must be at least three months delinquent on your mortgage payments and at risk of foreclosure as of June 1, 2011. You must have a letter from your mortgage company verifying these conditions.
• A reasonable likelihood to resume full monthly mortgage payments by the end of the program’s second year;
• Income must be less than 120 percent of the area median income

To learn more about the program and get a pre-screening application go to www.FindEHLP.org or call
855-346-3345

The EHLP program will be offered in 32 states: Alaska, Arkansas, Colorado, Connecticut, Delaware, Hawaii, Idaho, Iowa, Kansas, Louisiana, Maine, Massachusetts, Minnesota, Missouri, Montana, Nebraska, New Hampshire, Maryland, New Mexico, New York, North Dakota, Oklahoma, Pennsylvania, South Dakota, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and Wyoming, plus Puerto Rico.

If your state is not included here it’s because your state already has a similar program, called the Hardest-Hit. The government allocated $7.6 billion for that program to help homeowners in states that have been hit the hardest by foreclosure and unemployment crisis. Florida is one of those states and received about $1 billion for the program. But I’ve heard the majority of the people who apply are rejected because they don’t meet the requirements.

I’m curious to know how helpful EHLP is really going to be, considering most of these foreclosure prevention programs have been a disaster.

Sometimes we are not as diversified as we think we are. To see what your portfolio actually looks like, rather than just what you want it to look like, you might find it useful to use a free Morningstar tool called the Instant X-Ray. The Instant X-Ray is easy to use.

Simply enter your holdings, include how much is in each holding and the Instant X-Ray sorts through their data and gives you a read on just how diversified you are.

Insight Into Your Portfolio’s Current Holdings

The process only takes a few minutes. For people who have investments in a couple of different places (Individual Retirement Account, 401(k), accounts) the tool allows you to aggregate your holdings in one spot and get an overall read on how well you’re meeting your diversification plan.

It doesn’t tell you how your holdings typically behave in relation to one another, so it’s not a guide to how effectively diversified your portfolio is, but it’s an interesting snap shot of what you own.

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Who wouldn’t want to be worth a million dollars? Many of us dream of achieving this goal, more often than not for the sake of the freedom financial stability would bring. So how can we get there? The answers are actually much easier than you might expect. Here are several easy steps to get you into the millionaires’ club. (With a little discipline and the help of some powerful savings vehicles, anyone can hit this mark.)

1. Only Marry Once
According to “The Millionaire Next Door” by Thomas J. Stanley, Ph.D and William D. Danko, Ph.D, the average millionaire is married with three children. The wives of these millionaires are good budgeters and most often described as even more frugal than their husbands. Interestingly, according to Stanley and Danko’s survey, half of these wives do no work outside the home and of those who do, they are most likely teachers.

One upside of only marrying once is avoiding the costs of divorce and of subsequent weddings. The cost of a divorce depends on many factors including income, attorney fees, court fees, and the assets a couple has and how they are divided. The average wedding cost in the United States in 2010, according to The Wedding Report.com, was $24,070.

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~ Kim Kiyosaki ~

Before you turn over your down payment on an investment property or write a check for $2,000 in stocks, it’s a good idea to know what exactly you’re investing for. It surprises me how many people, many of whom have already purchased investments, don’t understand this one basic concept of investing. If you learn this single fundamental, you’ll be ahead of the game.

Two Things Count
With any investment, there are generally two things you invest for: capital gains or cash flow.

Capital gains is the profit you make on the sale of an investment. For example, you buy a house for $100,000. You put a little money into fixing up the property. You then sell the property for $150,000. Your profit on that sale is called capital gains. The same applies to stocks. You purchase shares of a stock at $25 per share. The stock price goes to $35 per share. Your profit when you sell is your capital gains. A capital gain is only realized when you actually sell the investment. Of course, if you sell the investment and lose money, you have a capital loss.

Cash flow is money that comes in on a regular basis from an investment you hold on to. Let’s go back to that $100,000 house. Instead of fixing it up and selling it, you fix it up and rent it out for $1,000 per month. Each month you collect your rent and pay the expenses, such as repairs, taxes and insurance, and the mortgage. If you’ve managed the property well, at the end of each month you’ll have a profit–or positive cash flow–that goes into your pocket. Some stocks deliver cash flow in the form of dividends. Or maybe you’ve invested in a friend’s startup and she agrees to pay you 12 percent per year on the money you invested with her. That’s also cash flow.

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