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Monthly Archives: September 2008

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Man Listens to Kiyosaki, Looses Big Time

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Saw this posting earlier today on Craigslist. Evidently this poster followed Kiyosaki’s advice and invested $130,000 in silver. Now his investment is down to $58,000. Poor guy.

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I had < CaReFulInVEstOR > 09/16 00:31:12

$130,000 saved up and I have follwed Robert Kiyosaki (Rich Dad) and he said Silver was going to run and the market wasn’t a safe place

so In Feb of this year, I put it all into silver at $21 an ounce. It dropped to $16.50 an ounce in March. I lost $30,000 in that move so I sold it out since I couldn’t take the losses

Then everything started getting crazy and I read more artacles that said there was a silver shortage and put my $100,000 in to silver at around $19 an ounce in July.

It is now around $11 and I only have $58,000 left and I don’t know what to do.

I lost over half my money just this year in silver. It was my life savings. I owe $160,000 on my house and that money was everything I saved up so now I have nothing.

Bank Ratings

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A friend of mine contacted me, as many of your are, concerned with whether she was at risk for her bank folding. She banks with Wachovia. She had recently requested a student loan through them, and faced on hassle in getting the final check, so she was wondering if there was a cash flow issue going on.

I decided to look into how banks are rated and how to research whether or not you are at risk.

First, the FDIC, while it ensures banks, it won’t provide any information on solvency or risk of banks. I guess they don’t want to be the wants to fink and pay out when a bank sinks.

Bankrate.com is one of the places to research how your specific bank rates. There are too many to go over all banks, but I did research some of the top national banks. Here are links to get you right to credit unions or banks/thrifts, and find your bank.

The rating system is done by two measurements:
Bankrate.com Rating: On a 1 to 5 scale with five as the best
Safe & Sound® CAEL® (Capitalization, Asset quality, Earnings and Liquidity): With the opposite rating of 5 to 1; One being the best.

Basically banks fell into two categories, some doing okay, and some doing terribly. I couldn’t find any bank at higher that a 3 and 3 rating.

Here are the banks that look like they are still hanging in there:

ING Direct – who all of my money is with – rated 3 stars and 3 on the Safe & Sound. This was the highest rating I could find on any bank, so at least that is better than my initial impression.

Wachovia – 3 Stars and 3 on the Safe & Sound

Bank of American – 3 Stars and 3 on the Safe & Sound

PNC – 3 Stars and 3 on the Safe & Sound

Umpqua Bank – 3 Stars and 3 on the Safe & Sound
(since we hold some shares, I also looked at them)

Here are the banks that are clearly having issues:

Wells Fargo – 4 stars but 2 on the Safe & Sound® CAEL – These ratings are on par with Lehman Brothers and WaMu, so I’d be watching out for them.

Chevy Chase, a bank local to DC, was rated at 4 stars and 2 on the Safe & Sound scale – also not looking pretty.

Washington Mutual had two different entries, with very different ratings, there wasn’t a national option like the others:

WASHINGTON MUTUAL BANK FSB PARK CITY, Utah – 4 Stars and 2 Rating (good rating that is scary for where it is at)

WASHINGTON MUTUAL BANK HENDERSON, Nevada – 1 Star and 5 Rating (as bad as it gets)

Lehman Brothers were on par with WaMu’s FSB rating of 4 stars but 2 on the Safe & Sound® CAEL

Here is where things get interesting, a rating among the best but still facing issues:

AIG – 3 Stars and 3 on the Safe & Sound – This one is this scary part, as AIG has been in the news for facing troubles. If their rating is still up there with the best I could find, we have a problem Houston.

Given the current bank crisis, it does make sense to pay attention to where you are banking with. Make sure that you are comfortable with their rating and hold them accountable to for continuing their good service. If customers don’t do it, who will?

Best,

Miel

Is Your Personal Information Your Property?

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Folks,

Today is a crunch day at the University of Maryland, so I wanted to repost a think piece we did on the role of corporate vs. individual property as it pertains to a persons individual information.
Last June, The American Telephone and Telegraph company (AT&T) recently declared consumer information to be corporate property. The announcement didn’t get a lot of coverage, but the intellectual precedent it sets is exceptionally important.

By consumer information, typically its understood to mean marketing information like buying or voting habits, or personal identification info such as social security numbers, addresses, etc. Whats key about this is, by declaring this information to be corporate property, AT&T is claiming the right to use, buy or sell personal information as if it were thing like a house or car. In this case, its important understand that property is rarely about the actual piece of property (e.g. real estate, car, stereo, idea, etc.), but more about who has the right to do what with it.

There are two fundamental reasons why a shift to corporate ownership of personal information is problematic for consumers.

1) Its unamerican: Fundamentally, America is a individualist democratic nation. We decide our governments based on the principle of one person, one vote. Also, the basis of much of America’s contract law is derived from the philosophy that contracts can only be entered into between freely consenting individuals who clearly understand their rights and obligations.
The main point here is that allowing a corporation to declare ownership of consumer data is inconsistent with our political and legal traditions of rights vested in sovereign individuals.

2) It unfairly advantages consumers: There are two likely outcomes from AT&T’s declaration. 1. AT&T will sell personal information to others for marketing purposes. 2. AT&T will provide the information to the federal government for the purposes of anti-terrorism investigations.

The merits of both of these can be debated. However, in the first place, I do not understand why AT&T should not have to pay a fee to consumers whose information has been sold. For example, in order to live in someones house, one normally pays rent to that person. In order to use someones personal information, shouldn’t a corporation have to pay a fee to use that information? Declaring personal information as corporate property unfairly takes money out of the hands of consumers.

Thanks,

James

Enjoy the Balancing Act

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The post is a follow up on James’ post the other day reminding of about the importance of determining what is necessity and what is luxury.

As we all know, finance is largely a balancing act. Hopefully we learn to balance things in the favor of living within our means.

This means that basically all of our financial purchases are a trade off. We can chose to spend more on this, and less on that. Also, if we choose to spend more than we have, we choose to live with stress and hassle of life in the red. This trade off doesn’t have to be torture!

People have differing opinions as to whether it is better to enjoy the little things in life, or spend more consciously and save for bigger dreams and goals. I think this is a personal choice as to which works better for you.

For me, I would most often prefer to skip chewing gum and daily lattes in favor of putting away for our retirement or a vacation. For you this may be very different.

My advice: Do what works for you – but enjoy it, savor it! Whether you choose the latte, the ski holiday, or saving for retirement, make the most of it.

  • If you are saving for a big goal, enjoy the process of doing so by tracking your progress.
  • If you can’t kick the latte habit – then make it the best part of your day.
  • Make saving for retirement fun by dreaming about what you’ll enjoy during that time.
  • Applaud yourself for making small sacrifices for big dreams.

What ever you do, I recommend avoiding the following:

  • Let the guilt of purchases outweigh the enjoyment.
  • Forget what’s important to you.
  • Forget to have fun along the way.
  • Go on autopilot spending.
  • Be so frugal that you forget to enjoy life.

Remember, you control your own financial life. Your choices do affect each other. If you aren’t happy with where you are at, then access how to rebalance and fine tune until your finances work for you.

Enjoy,

Miel

Lechter vs Kiyosaki Lawsuit Settled

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Hi All,

Isn’t this interesting! Evidently Robert Kiyosaki of Rich Dad, Poor Dad fame has settled his lawsuit with co-author Sharon Lechter.

The article had this to say:

“Lechter had alleged that the Kiyosakis had enriched themselves, diverted assets and wasted money in a business that she claimed to have helped build from scratch. Lechter also had claimed that she “often rewrote large sections” of books she and Robert Kiyosaki co-authored.“

The article is at The Arizona Republic.

Going Back To Checks

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Hi All,

It may be possible to limit your spending by changing how you monitor it.

I stopped keeping a check registry about a year and a half ago, and as a result my spending has been a lot higher. Just this week I overdrew my bank balance by ten bucks. As a result I got dinged with a $31.00 fee. Fortunately the bank was willing to wave the fee, but this processes has clinched it. I’m going back to keeping track of my expenses using an old fashioned check registry. Hopefully, this will put a lid on my cash outflow.

Thanks,

James

Understanding Marginal Tax Rates

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Taxation. While many people find the topic of income taxes to be dull and uninteresting, understanding how they work can have a powerful impact on your bottom line.

So this posting addresses income tax rates, specifically federal income tax rates. First, some definitions.

Marginal Tax Rates: The sad truth is that not all dollars are taxed equally. The marginal tax rate is the rate you pay on your last or highest dollar of income.

Taxable Income: The amount of your income on which you actually pay taxes.

In 2008 your tax amount is defined by the highest dollar amount of your taxable income. Here is how this works: if your filing status is single and you earned $45,000 then your taxes would be in the $32,550 to $78,850 bracket (see table below). This means your tax would be $4,481 plus 25% of the difference between the lowest rung of the bracket and your taxable income. These numbers look a bit different from previous years so here are the calculations. Your tax is (your income – lower value of marginal tax rate* percentage you owe). In this example, ($45,000 – $32,550) *.25 or ~ $3,112.5. Add the $4,481 to $3,112.5 and your bill to Uncle Sam is $7,593.5. Voila.

As per the IRS, the 2008 rates are:


Why Should You Care?

One word: money. For most people, federal income taxes are their single largest expenditure. The key to reducing your tax payment is to reduce your taxable income. For the table above, its clear that if you reduce your taxable income to a lower bracket, you pay less. For example, if your taxable income is lowered from over to under $32,550 you’ll only have to cough up 15%, not 25% – a big difference.

The best way to reduce your taxable income is take advantage of existing opportunities such as maxing out your 401k, contributing to an IRA, taking your mortgage interest deductions, etc. You might also consider itemizing, trading consumer debt for mortgage debt or increasing the amount of charitable contributions and expenses you incur.

Best,

James

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