Sunday, May 26, 2013

The Rich get Richer and the Poor get Poorer



The Rich get Richer and the Poor get Poorer

By Keith Bunn Jr.
May 26, 2013

Are the Rich getting Richer?

Have you heard the old saying, "The Rich get Richer and the Poor get Poorer"? Who hasn't, right? Do you think that saying is true? Do you think that those wealthy families got their money just by hoarding it and passing it down to their children and so on? That maybe true for some but not all of them. Some of the wealthiest families in this country  are first generation rich and they have had to work very hard to get the wealth they have today. So why does it seem that the wealthy family kids have a ton of money themselves later on in life? Well, I'm sure some of them do get some money as an inheritance, but for the most part they have money because they were taught how to handle by their parents, and it is those lessons that have made them rich also, not the money being handed over from one generation to the next.

The Giving Pledge

Some of these wealthy families have even decided to teach their kids and grand kids that they have to make their own way in the world like their parents did. That the family wealth was the parent's money, not theirs'. In fact, years ago in an interview with Oprah Winfrey, writer/director George Lucas stated when asked about his 3 children and the billions he's worth, he said he told them, "I'm rich, you're not" that they had to make their own way through life like he did. 
And he's not the only one who thinks like that. The two wealthiest men in this country, Warren Buffet and Bill Gates, have started what is called The Giving Pledge. They have been reaching out to what started to be the wealthiest families in this country, but has now gone global and asked them to donate a majority of their net worth while still alive or upon their death, to a charity they get to pick. 
Now you would think that if the wealth were like what everyone thinks of them, (cold and uncaring  you would think those rich people would go tell Warren Buffet and Bill Gates what they could do with that pledge, but believe it or not, they have gotten positive results. In fact, at last count 114 wealth families have signed the pledge committing to give away anywhere from half to all of their net worth. Some of those who have signed are New York Mayor Michael Bloomberg, entertainment executive Barry Diller, Oracle co-founder Larry Ellison, energy tycoon T. Boone Pickens, media mogul Ted Turner, David Rockefeller, film director George Lucas and investor Ronald Perelman, just to name a few.
When asked why he signed it, Mayor Bloomberg said, "It didn't make sense to leave everything to his children and have them go through life as members of "the lucky sperm club." he continued by saying, "You don’t want to leave them so much money that it ruins their lives," Bloomberg said. "You want kids who can look back and say, 'Yeah my family helped me but I did something on my own.'" Even the two founder who have a combined net worth of $90 billion have signed the pledge. Warren Buffet himself has promised 99% of his net worth to be given away.

Closing Thoughts

It may seem that wealthy people are nothing but cold and uncaring and do nothing but hoard their money and just pass it on to the next generation, but the truth is that those families have worked very hard to get that wealth and it is those lessons of working hard, live on less than you make, save/invest and giving to others they are passing on to their children and grandchildren, not just money itself.
The problem is, some of the not so privileged have never learned some or all of those lessons, so they couldn't pass them on to their children and grandchildren, so all they see the wealthy as is "Lucky" and in my opinion, is why the rich seem to get richer and the poor seem to get poorer. But the truth is, as with most things, those lessons can be learned like everything else and at any age too.

Questions

1) Do you think the rich are getting richer and the poor are getting poorer? 

2) What are your thoughts about the Giving Pledge? Good idea or not?

3) Do you think its a good idea to teach our kids how to work hard, live on less than you make, save/invest and giving to others? Why or why not?

The reason I do this is to give people hope and to try to inspire others. To make them think about their finances, whether they are young or old, so they can win financially.
If you have any questions for me about my posts or about your finances, you can call me at (616) 454-2046 or e-mail me at cavuscoaching@gmail.com. You can also find more money news, facts and ideas, on my Facebook and/or Twitter pages. I'd be grateful if you followed me. Thank you!


Monday, May 20, 2013

Investing: How to Lower the Risk, part 5



Investing: How to Lower the Risk, part 5

By Keith Bunn Jr.
May 20, 2013

Good morning. Sorry it has taken so long getting this blog out. I had a procedure done to remove some kidney stones from my left kidney and it has taken a while to get back up and running so to speak.
Like I mentioned at the end of the last blog, I will be going over the types of investments that are just horrible and should never be bought. But first, let's review...

Review

Real Estate is a great investment, however it is the least liquid or the hardest to get any money out of it if you need to. When buying investment property, the best way to do it is to buy it slowly and use cash to buy it out right. The reason for buying investment properties with cash is because if you don't have a tenant in there paying rent, you're not freaking about how you're going to make that monthly mortgage payment. Another way you make money buying investment property, is at the purchase, meaning you buy the property at a GREAT deal.

Annuities are nothing more than a savings account at an insurance agency. The payments you recieve from an annuity usually happens after you retire. When the money is paid out to you, it is then taxed, making this type of investment a taxed deferred arrangement. There are 2 different types of Annuities, there are Fixed Annuities (which really aren't fixed) and Variable Annuities. Fixed annuities guarantees a certain rate of return which is around 5%. These are a horrible investment long term because inflation has averaged around about 4%. Variable Annuities typically have a better rate of return because of the mutual funds that are inside of them, but the rates do vary from time to time just like all mutual funds do. 

Investments You Should Never Buy

Commodities and Futures 
For those of you that don't know, commodities are things like wheat, oranges, crude oil, and precious metals like gold and silver, just to name a few. Commodities are extremely risky because you never know what will come a long and cause the prices to either go way up or way down. I mean, commodities can be effected by weather, global events, or even good old fashion Fear.

Futures 
Futures are even more risky than commodities. Futures are expensive to get into for one thing, but they are truly an all or nothing game of chance. Futures are where you predict what something like a commodity is going to be worth on a certain day. If you're right, you win big, but if you're wrong, you lose all your money. It truly is an all or nothing deal!

Day Trading 
Day Trading is where you buy a particular stock at the beginning of the day and then sell it at the end of the day hoping that what you bought made some money by the time you sold it. Again, this is putting all your eggs in one basket. The funny thing is, A LOT of people do this and absolutely lose their shirts. Some even go into debt or get another mortgage on their home because they have a 'system' that they think will make them win. Lives have been TOTALLY destroyed by day trading. Don't do it!

Viaticals 
Viaticals are where someone sells you a position on their life insurance policy because they are dying and they want to have some money to do something before they die. To give you an example; someone sells you the primary position on their $100,000 life insurance policy for $10,000. When that person dies, you get your $10,000 back, plus you also get $90,000 in profit. 
Not only is this sick and morbid, it is a horrible idea, because with today's technology and medicines, we have no idea when someone is going to die. That person could be cured of what was making them sick and live another 20 years, we don't know.

Precious Metals
I know we kind of talked about this already, but this is a topic where common sense goes right out the window. Many people believe that if our economy completely fails, we will then be using gold and silver to buy stuff we need to survive and that is just not true. Ask all those people who survived hurricane Katrina. Those areas affected by the hurricane, were locally failed economies in every sense of the word.  Ask them if they used gold and silver to get the things they needed to survive. Chance are they would say, "no". Why? Because during times like that, those economies automatically go to a barter system.
Another thing to think about is why the cost of gold and silver is so high right now? What causes the price to go up or down? I mean, other than jewelry and some electronic uses we really don't have a use for them. In fact, the price of precious metals are driven by our emotions, nothing more. Think about it, when the Great Recession hit and the Real Estate bubble popped, people were freaking out thinking our economy was going to crash. That was when gold prices shot up like a rocket. Because of fear! At least when stocks, bonds, and mutual funds go up and down in value, there is a mathematical reason for it. There isn't one for precious metals.

Questions

1) Have you ever bought any of these types of investments? If so, what did you like or dislike about them?

2) Have you bought precious metals because someone told you that you would need it when the economy crashes?

3) Knowing what you know now, would you buy any of these types of investments if someone told you they were good for your investing portfolio?

The reason I do this is to give people hope and to try to inspire others. To make them think about their finances, whether they are young or old, so they can win financially.
If you have any questions for me about my posts or about your finances, you can call me at (616) 454-2046 or e-mail me at cavuscoaching@gmail.com. You can also find more money news, facts and ideas, on my Facebook and/or Twitter pages. I'd be grateful if you followed me. Thank you!




Sunday, May 5, 2013

Investing: How to Lower the Risk, part 4



Investing: How to Lower the Risk, part 4

By Keith Bunn Jr.
May 5, 2013


Good morning. I hope all is well with you on this fine May morning! 
This week's blog, we are going to talk about Real Estate as an investment and Annuities. But first, let's review last week's blog.

Review

Bonds are nothing more than an I.O.U. They are a high risk investment because they act like a single stock. Bonds have an end date of when they have to be paid off. Their ability to pay you back is based on their performance. So I don't recommend bonds.

Mutual Funds are where investors like you and I, pool our money together to invest into 90 to 200 companies. Professional portfolio managers manage the pool or fund and our return comes as the value of the fund increases. Simple put, in just one mutual fund, you and I could be investing anywhere between 90 to 200 different companies at one time. In other words, we are being diversified! Which lowers our risk. The thing I like about mutual funds is that there are all kinds of funds out there and each one of them have tons of companies inside them that make you diversified. Because if some of those companies inside the fund goes down in value, the others maybe going up, making up the difference. 

Real Estate and Annuities

I'm going to be perfectly transparent with you all. I don't know a lot about these topics and almost didn't write about them, but these 2 topics are apart of investing and are worth mentioning. So I will share what I know.

Real Estate, for the most part, is a great investment, however it is the least liquid or the hardest to get any money out of it if you need to, and if you buy investment property with debt and you have to sell it quick, you may not get any money out of it at all. In other words, you lost your investment.
When buying investment property, the best way to do it is to buy it slowly and use cash to buy it out right. Now I know most of you out there don't think anyone can buy a house out right, but if you think about it, if you were debt free including your home, why couldn't you buy a home out right? It would take a while to save up for it, but it can be done. And the more investment properties you buy that way the easier it will be to buy more because of the income the properties you already have will be bringing in. The main reason for buying investment properties with cash is because if you don't have a tenant in there paying rent, you're not freaking about how you're going to make that monthly mortgage payment.
Have you ever heard the phrase, "The money is made at the purchase"? Well that is another way you make money buying investment property, at the purchase, meaning you buy the property at a GREAT deal. Can you get deals like that all the time? No, it takes a lot of patience, but when you do get those deals, you'll be glad you did.

Annuities are nothing more than a savings account at an insurance agency  You sign a contract with the insurance company and it is designed to make payments to you at specified intervals. These payments usually happens after you retire. When the money is paid out to you, it is then taxed, making this type of investment a taxed deferred arrangement. 
There are 2 different types of Annuities, there are Fixed Annuities (which really aren't fixed) and Variable Annuities.
Fixed annuities guarantees a certain rate of return which is around 5%. These are a horrible investment long term because inflation has averaged around about 4%. So you're not really making much money in the end.
Variable Annuities typically have a better rate of return because of the mutual funds that are inside the them, but the rates do vary from time to time just like all mutual funds do. 
If I were to pick either one of these types of annuities, I would pick the variable annuity, but as I have said many times, I don't do ANY investing with an insurance company. I just like to keep things clean and simple. Insurance with an insurance company and investing with an investment broker, but that's just me.

Next week, I will go over what types of investments that are just horrible and should never be bought.

Questions

1) Have you ever bought or do you know someone who has bought a home or investment property with cash?

2) Do you think it is possable to buy investment property with cash? Why or why not?

3) Have you ever bought an annuity before? If so, which one did you buy?

The reason I do this is to give people hope and to try to inspire others. To make them think about their finances, whether they are young or old, so they can win financially.
If you have any questions for me about my posts or about your finances, you can call me at (616) 454-2046 or e-mail me at cavuscoaching@gmail.com. You can also find more money news, facts and ideas, on my Facebook and/or Twitter pages. I'd be grateful if you followed me. Thank you!