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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Many people, perhaps inspired by the books and seminars of financial guru Robert Kiyosaki, are attracted to real properties as an investment. But dealing with tenants and city hall can be a source of aggravation, as highlighted by the current furor over unpaid water bills in Ontario.

Some landlords include the water bill in the rent. Others charge it directly to their tenants to provide an incentive to use water economically. Whenever a delinquency in payments arises, many landlords in Ontario are finding that their municipality has recently transferred responsibility for collection from the water utility to them. They have to retrieve the money themselves or have it added to their tax bill.

Kayla Andrade of Cambridge, Ont. knows the aggravation only too well. She is a young mother of two children, and a landlord with tenants whose delinquent accounts have driven up her taxes.  “Just because I am called a landlord does not mean I am rich—I am just getting by,” she says.

Numerous other landlords in Ontario are finding themselves in similar straits, and a groundswell of protest seems to be building. Andrade, in fact, is circulating a petition that calls on the Ontario Government to end the transfer of water bills to landlords.

Compared to water utilities, small-scale landlords like Andrade have less recourse for collecting unpaid water services, says Rachelle Berube, owner of a property management firm and blogger at Landlord Rescue. A utility can ask for deposits in advance, engage collection agencies, cut off service and sue the tenant.  “The landlord has to wait until the tenant moves out and then take them to small claims court at their own expense,” adds Berube. “And small claims can take a year to get your money back.”

“You’re at risk from the tenants, and the laws are heavily pro-tenant,” she continues. “This is why there is little decent affordable rental housing—it’s just too damn risky.”

It might be supposed that landlords can recoup their losses by raising rents on tenants in other units, or on future occupants of the unit in arrears. But this makes their accommodations less competitive on the market, which can result in longer vacancies and a failure to break even.

Many local taxpayers may prefer that landlords be held responsible in order to avoid having the water bills put on their tax rolls. However, by making the ownership of rental properties even more uneconomical, the stock of affordable rental housing will be at risk of shrinking further. And this could lead to greater spending by local governments in the areas of social housing and related services.

Conservation issues may come into play, as well. Passing the tab to someone less able to collect on overdue payments could mean that the problem of unpaid water usage and over-consumption will grow steadily larger over the years to come—not a socially desirable outcome, it would seem.

Does the little guy stand any chance anymore? Is anyone looking out for us?

Probably not. The world has become pretty unfriendly to entrepreneurs and self employed people so we have to take care of ourselves. Just keep your eyes wide open when it comes to the management of your financial resources. Understand how the game really plays.

Most financial representatives, whether stock brokers, money managers, financial consultants or otherwise, work for organizations known as broker/dealers. Broker/dealers, as the name implies, sometimes act as brokers and sometimes, they act as direct dealers (owning a position) in securities. These organizations are licensed by the Federal Government (the Securities and Exchange Commission, or SEC) to sell securities, collect money from customers, and execute transactions. Because they receive commissions, they can have a conflict of interest with their customers, but when they act as dealers, the problem is even worse.

Very frequently, broker/dealers, especially the big Wall Street wire houses will acquire positions in securities. You`ve seen movies where the sales managers get on the “horn” and tell the brokers which stocks to move that day. There would be extra commissions if they move those stocks. Brokerage firm sometimes take positions in securities for many legitimate reasons, and when those positions need to be moved, the natural buyers are the clients of the firm. Those buys are not necessarily the best buys for the clients and those buys are certainly not being made for the clients` benefit. Unfortunately, they`re frequently made to benefit the broker and his broker/dealer.

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~ Kim Kiyosaki

When it comes to financial freedom, or any kind of success for that matter, the one force that brings good fortune is you.

Many women count on marrying rich to be financially-free such as Eddie Murphy’s ex-wife and Anna Nichole Smith who married an oil-mogul 62-years her senior. Others hope to win the lottery like Amanda Clayton, the woman in Michigan who continued to collect food stamps even though she won a million dollars in the lottery.

These news stories can make you think it’s possible to get rich with a little luck, but don’t ignore the truth behind these fairytales. After all, Anna Nicole Smith’s life did not have a happy ending, Eddie Murphy’s wife lost all her money, and people were so angry at Amanda Clayton for continuing to receive food stamps that she received a lot of negative buzz online and Michigan authorities took away her food stamp privileges. Plus, Amanda used her winnings to immediately buy a new car and a new home to live in – liabilities that will take cash out of her pocket.

Relying on others is not the way to become financially-free. And it’s certainly not what the founders of International Women’s Day had in mind when they created the holiday we celebrated last week.

Are you hoping that Prince Charming or that winning lottery ticket will show up some day? Even worse, are you ignoring your financial situation and your future?

Wake up Sleeping Beauty!

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There is much more to life than making money. But it’s safe to say that earning more money can significantly change the course of your life–especially if it’s $1 million or more.

If you’re wondering how to become a millionaire (and who isn’t?), the answer is that most of them are self-made men and women. It’s certainly possible to break $1 million mark working at a corporate job, but as most employees can tell you, you often have little say in who gets promoted ahead of you. Not to mention that a big corporate payoff usually takes decades of work. You won’t find many millionaires under 35 at Fortune 500 companies.

Entrepreneurs, on the other hand, can take control of their circumstances and create opportunities for earning more money. And they can do it much faster than their corporate counterparts. How can you do the same?

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We all know that it is important to make sure that your child learns important financial lessons that can help him or her later in life. However, it can be difficult to figure out how to help your child relate to money in a meaningful way. After all, a five-year-old isn’t going to grasp the concept of interest. However, there ways to help your child relate to money in ways that are age appropriate, and it’s important that you begin teaching the value of money as soon as possible.

Many Children are Visual Learners

In many cases, children need to be able to see how something works. Many children are visual learners; those under the age of eight or nine might have an especially difficult time with abstract money concepts. Visual representations can help. A jar that allows children to see the way money grows can help them see (and experience the excitement of) the value of saving. My son still likes to see how money stacks up in his jar.

You can also make visualizations of goals. When my son was saving up for a specific toy, we made a chart, with squares representing each week of allowance (after church donations and savings were taken out, of course). At the end of the row of squares was a picture of the toy, cut from an advertisement. He loved coloring in the squares, and seeing how quickly he could get his new toy.

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