Wisdom of Rich Dad

f you have financial knowledge, people who know you might view you as a very valuable commodity – a free money manager. All too often, the person asking you to invest his or her money is the person who knows a little something about investing – just enough to get into trouble. If you’re nailing double-digit returns this year, why couldn’t you repeat the performance year after year, right?

The Problems with Investing for Others
You may think that investing for someone else is just a way of helping out a friend, but the thing is, when you start investing for other people, particularly your friends, you enter a world of complications that you might not have foreseen when you started out.

Legal Matters
Managing a friend’s money is a sticky business and if you go through with it you may be breaking the law. Investment professionals must be registered with the Securities and Exchange Commission or have a federal license. They are heavily regulated by the government and by trade organizations like the National Association of Securities Dealers, for the protection of consumers. If you invest for a friend for compensation, you could be breaking laws that are in place to protect investors from people who aren’t qualified to have discretionary control over others’ accounts.

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1. Don’t automatically buy from the company store.Two-thirds of cell phones are bought at carrier stores, but our reporting suggests prices there can be higher than at warehouse stores, mass merchandisers such as Walmart, and electronics stores such as RadioShack. In fact, a carrier’s walk-in stores can be even pricier than the company’s own website.

When we shopped for two dozen smart phones we recommended at 12 retailers in the San Francisco Bay area last October, the carrier stores for AT&T, Sprint, T-Mobile, and Verizon had the highest prices for more than three-quarters of the phones. We’ve found phones to be especially inexpensive at Costco. But you may not find the exact model you want there—or at any retailer for that matter. All retailers don’t sell phones for all carriers, and all models might not be available everywhere.

2. Consider a low-priced carrier. It’s not easy to compare carriers’ plans across or even within carriers, because their buckets of minutes, messages, and megabytes differ. But you can find competing plans that are similar enough to give you an idea of their relative value.

When we compared 100 plans to similar alternatives in 21 matchups covering the full spectrum of plans, both prepaid and standard, Consumer Cellular came out on top. It had the best deal most often—in more than one out of three cases. The next-best deals, in order, were from T-Mobile, Sprint, Metro PCS, Net10, Straight Talk, T-Mobile prepaid, and U.S. Cellular.

With savings that usually ranged from $10 to $40 a month over pricier rivals such as Verizon and AT&T, some of those carriers not surprisingly received higher reader marks for value in our service Ratings. But not every high-scoring carrier had the best prices, and you may not find many, if any, of the hottest smart phones in the model lineup of smaller and prepaid carriers.

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Credit cards can help make a breeze out of holiday shopping. A few missteps, though, and that breeze can turn into a storm of financial headaches.

Here are six credit slip-ups to avoid this holiday season, along with patch-up advice for the sadder and wiser shoppers among us.

Mistake No. 1: You now own a half-dozen retail credit cards.

Signing up for an in-store credit card to save 20 percent or even 30 percent on purchases that day is tempting. It’s also trouble, says David C. Jones, president of the Association of Independent Consumer Counseling Agencies, a nonprofit trade group based in Fairfax, Va. Sign up for a new card too many times in too short a period, and it can hurt your credit. “And in a lot of cases the interest rates are ridiculous,” Jones says.

Holiday help: Take a pass and make do with the credit you already have. Or if you absolutely must get a new retail card, get just one — instead of signing up for one in every store you visit.

Mistake No. 2: You’re tempted by delayed-interest offers.

A popular offer this time of year is “no interest until 2013,” especially on big-ticket items such as appliances and furniture. So even if you don’t need a new California king mattress and storage headboard to go with it, you buy.

Holiday help: Read the fine print before you sign. Retailers “aren’t in business to lose money,” Jones points out. “The truth of the matter is these offers are very carefully calculated.” Either the interest rate is built into the cost of the item, or interest accrues during the “free” period, and you pay it at the end of the free period. “It’s wonderful to use credit to get things you need right away,” Jones notes, “but it’s much better if you pay cash.”

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HOMEOWNERSHIP has always been considered the pinnacle of success. It is the dream of every Filipino.  After all, a home is considered one’s pride and joy, and nothing less than owning his own castle is acceptable. No argument here. But the question is, “When is the best time to own one?”

This million-dollar question is best answered by learning from the example of my mother.

For the longest time, we have only been renting. In fact, mom never experienced what it is like to own her home. Not for the lack of searching though. For the past 20 years, we have been scouting all potential and feasible properties but without success. I personally stopped counting after we hit 50 houses; and that was years ago. Several times we came close to buying one, but there was always a variable that won’t make the sale push through.

Proponents of homeownership would have argued that we are just throwing away good money month after month because of renting. We’re making others rich while we are not building any equity for ourselves.

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While personal reasons for going into business may vary, profit should be one of the goals for your new venture. What if it isn’t? Then it needs to quickly move up your list of reasons, or you may find it difficult, if not impossible, to succeed.

The late Jim Rohn, one of my favorite business mentors whose rags-to-riches story inspired millions, once said that success is a “numbers game,” and nowhere is this more true than in generating a profit.

So whether you’re uncomfortable with the idea of profit or you accept it as your company’s objective, here are three simple guidelines to establish a profit orientation both in your mindset and your operations:

1. Adopt a “for profit” mindset and accept the fact you need profit to survive.
This is easier said than done, but it can be achieved if you’re open to examining your beliefs about money, wealth and profit and committed to changing your point of view.

Jim Rohn also pointed out that while some religious teachings may promote the idea that it’s hard for a rich person to get into heaven, they don’t say it’s impossible. That’s an important distinction that may help shift your own perspective on wealth.

Also, consider that business is among the few games around that let anyone play regardless of social status, education or age, and that can produce substantial personal wealth in 10 years or less. Not a bad return if you look at business ownership as one of the best long-term investments you can make in yourself.

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As good as dividends have been for investors in Canada, in quarters ahead there could be grounds for further rejoicing. The pace of dividend hikes is picking up, corporate cash balances have climbed to Olympian heights, and dividend-payout ratios have room to climb.

So far in 2012 nearly a third of dividend announcements have raised payments to investors. That’s the highest rate since 2006, according to a CIBC World Markets Inc. report by economist Peter Buchanan. The trend has been up since the second quarter of 2009, when only 5% of dividend announcements specified higher payments.

The capacity to raise dividends keeps on expanding. Cash balances on corporate balance sheets recently surpassed $500 million in Canada, an amount equal to about 30% of Gross Domestic Product (GDP). Normally, corporate cash balances are about 10% of GDP.

The pressure to share the wealth is mounting. Not only are shareholders pushing for greater distributions but so are groups seeking economic growth, jobs, and reductions in government deficits. Even business-friendly Prime Minister Harper may be getting into the act: the federal budget due in late March mayimpose penalties on CEOs who hoard cash.

As executives and Boards of Directors feel the heat, it wouldn’t be surprising to see them dipping more into their cash coffers to raise dividends. They could also allocate more to share buybacks, additionally boosting shareholder value. Capital expenditures will also likely be ramped up, generating cost savings and revenue growth that contribute to shareholder value over the longer term.

According to CIBC World Markets, the dividend-payout ratio for companies in the S&P/TSX Composite Index stands at 41% (based on average earnings over the last four quarters). Considering the historical median is 45%, there would seem to be room for this ratio to grow.

In fact, there is some possibility the payout ratio could rise substantially above the historical norm, if comparable (commodity-based) stock markets are any guide. Notably, the companies in Australia’s main stock market index, the S&P/ASX 200, pay out 65% of their earnings in dividends.

In Canada, the utilities, industrials, and materials sectors have the most room for dividend increases. Their payout ratios are the lowest relative to their respective historical averages. Energy, consumer-discretionary and telecom sectors have the least room.

From 2010 to 2011, corporate profits in Canada rose 15% to $208 billion, further augmenting cash reserves. As a percentage of corporate assets, cash currently stands at 7%, up substantially from 4% a decade ago (financial companies excluded).

The materials and energy sectors have been mainly responsible for the growing cash piles. CIBC World Markets says an in-house study found that companies with twice normal cash balances had a 7% chance of raising their dividend in a quarter, compared to 4% for companies with payout ratios 25% or more below their norm.