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!

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!

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!

Investing: How to Lower the Risk, part 3

Investing: How to Lower the Risk, part 3

By Keith Bunn Jr.

April 28, 2013

Good morning! Before we get into part 3 of this series, let's review last week's blog for a bit.

Review

C.D.'s are Certificate of Deposit, and you get them at your local bank. They are low risk accounts and make a horrible rate of return. And if you take your money out early, you have to pay a penalty for early withdrawal.

Money Market accounts are another low risk investment you get with an investment broker. Again, these accounts make a horrible rate of return, but you can normally get them with either check writing privileges or a debit card or both. They also don't  penalize you if you write a check or use the debit card as long as you don't go over a specific amount at any one time. Money Markets are great place to keep your emergency funds. 

Single Stocks: When you buy stock in a company, you are buying a very small piece of the company. The rate of return on these stocks can be high, but also carry high risk with them for the simple fact you are not diversified enough. If the company is profitable, they may issue portions of those profits to you called dividends. I do not recommend single stocks to anyone for that reason, no matter what company the stock is in.

Bonds and Mutual Funds

Bonds are a debt instrument which a company that we loaned money to now owes us that money back plus interest. Typically, bonds have an end date of when they have to be paid off. So in a sense, bonds are nothing more than an I.O.U. They are a high risk investment because they act like a single stock, meaning, 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 companies at one time. In other words, we are being diversified! Which lowers our risk. Now what makes mutual funds even better, is that there are all kinds of different mutual funds out there to choose from. And the name or kind of mutual fund it is, tells you what is inside the mutual fund. here are a few examples. If it is a Bond Mutual Fund, you would be investing in different kinds of bonds. If you bought a fund that had Dove soap or Ben & Jerry's Ice Cream in it for example, those are foreign companies so that fund would be an International Stock Mutual Fund. A fund that had companies in it that are growing like AT&T, Fed Ex, or Micro Soft would be called a Growth Stock Mutual Fund. I think you get the point.

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. This is a good way for those of you out there that like a specific company and want to invest in it, and to lower your risk. Just buy a mutual fund that has that company in it. A good investment broker should be able to help you find that fund.

Questions

1) Have you bought Bonds before? If so, how did they work for you?

2) have you bought Mutual Funds before? If so, how did they work for you?

3) Do you feel confindent in your investments?

4) Do you feel like you are diversified enough?

The main reason I do all 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!

Investing: How to Lower the Risk, part 2

Investing: How to Lower the Risk, part 2

By Keith Bunn Jr.

April 21, 2013

Hi everyone! I hope whenever you are reading this, you are doing well!

In this week's blog, we will discuss the different types of investments you can buy. But first, let's take a moment and review last week's blog.

Review

Remember, there are 3 things you need to have or do when it comes to investing. First, you need knowledge, you need to know all the ins and outs of the investment you're thinking of getting into to the point you can explain it to someone else and they get it. 

Second, you need to be diversified. Don't put all your money in one type of investment. Because if the market goes down and you have the majority of your money invested in one company stock, or investment you have a greater risk of losing all your money. Think of it this way, investing is like manure, keep it all in one place, it stinks. Spread it around, it grows things.

And last, but not least, you need to leave your investments alone. If you're not willing to leave them alone to grow for at least 5 years, you don't need to be investing at all.

Types of Investments

Most people are familiar with a C.D. you can get at your local banks. C.D. is the abbreviation for Certificate of Deposit, which means that you get a certificate when you made a deposit in your bank's special savings account. They are low risk accounts and make a horrible rate of return, especially for the time you have to leave it in there for. And if you take your money out early, you have to pay a penalty for early withdrawal. I don't recommend people getting C.D.'s because of those reasons.

Money Market accounts are another low risk investment you get with an investment broker. You can also get Money Market 'type' accounts at you local banks. Again, these accounts make a horrible rate of return, but what I like about them is that you can normally get them with either check writing privileges or a debit card or both. They also don't  penalize you if you write a check or use the debit card as long as you don't go over a specific amount at any one time. This is a great place to keep your emergency funds just for that reason.

Single Stocks: When you buy stock in a company, you are buying a very small piece of the company. The rate of return on these stocks can be high but can go up and down as the value of the company goes up and down. If the company is profitable, they may issue portions of those profits to you called dividends. These type of investments carry high risk for the simple fact you are not diversified enough. Again, all your eggs are in one basket. I do not recommend single stocks to anyone for that reason, no matter what company the stock is in.

I'm going to stop here for this week's blog just so I don't make it too long. I will pick this up again next week with Bonds and Mutual Funds.

Questions

1) Have you ever owned one or more of these type of investments? If so, how did it go for you?

2) Do you keep your emergency fund in any of these type of investments?

The main reason I do all 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!

Investing: How to Lower the Risk, part 1

Investing: How to Lower the Risk, part 1

By Keith Bunn Jr.

April 14, 2013

Knowledge and Diversification

I learned a few weeks back that a family member lost a lot of money in their investments during the Great Recession. I don't know all the facts and figures of it all, but from what I was told, it sounded like they were not diversified enough in the market. 

You see, when it comes to investing, if you want to lower the risk of losing your money, you need two things on your side, knowledge and diversification. First, you need knowledge, meaning you need to know all the ins and outs of the investment you're thinking of getting into to the point you can explain it to someone else and they get it. When you have that kind of knowledge, you will know what kinds of investments are too risky for you. Second, you need to be diversified. Diversified simply means to spread around. Have you ever heard the old saying, "Don't put all your eggs in one basket."? Essentially, that's what diversification means. Don't put all your money in one type of investment. Simply because if the market goes down and you have the majority of your money invested in one company stock, you have a greater risk of losing all your money. Now if your investments are spread around several different types of investments and the market goes down, you will more than likely still lose some money. But while some of your investments may have dropped quite a bit, others may have dropped slightly or stayed the same and you didn't lose your shirt in the market.

Leave it Alone!

There is one more thing you need to know, and need to do if you're going to start investing that is just as important as having knowledge and diversification and that is you need to leave your investments alone. You have to think long term when it comes to investing. You have to understand that the market goes up and down like a yo-yo and if you pull your money out because you freaked out when the market went down then you're just throwing money out the window.

In part 2, I will go over with you the different types of investments you can get into. Which ones are good and which ones aren't (in my opinion that is. LOL)

Questions

1) It is important to have knowledge and diversification in your workplace retirement plans as well. Do you feel you have sufficient knowledge and diversification in those plans as well as in the open market?

2) When the market took a big hit during the Great Recession, did you freak out and pulled your money out of the market or did you remain calm and keep it in?

The main reason I'm doing all 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. For more money news, facts and ideas follow me on Facebook, or Twitter. Thank you!

Dream a Little Dream

Dream a Little Dream

By Keith Bunn Jr.

March 31, 2013

the Opportunity Costs

Years ago, if I had money in my pocket and I saw something I wanted, I bought it. No questions asked. I never thought of the other things that my money could go towards, the opportunity costs. And by doing that, I have harmed the future for myself and my family. It took me far too many years to figure that out. 

"Children do what feels good. Adults devise a plan and follow it." This is a phrase Dave Ramsey says, as well as my other financial coaching friends, and it is absolutely true. We all need to have more patience when it comes to our spending overall. Some are naturally good at it, others, like myself, have to work on it on almost a daily basis.

Dream

I still go to the stores and go down the aisles that interest me, but instead of just grabbing the stuff I want, I remind myself that we have a bigger goal to keep, and that's mine and my family's future. My wife and I are not spring chickens anymore and we have to start think about how we are going to make it in our golden years. One of the ways to prepare for that is to become debt free while we're still able to work. Watching how much we spend and what we spend on is another way. We also have to have a back up plan in place, a.k.a. an emergency fund to catch us when 'life' trips us and we financially stumble. And finally, we have to save for retirement. We have to do this for ourselves, because our government sure isn't going to help us.

So in the mean time, when I go down those aisles, I just dream how cool it would be to have that thingy and not buy it. I also dream how cool it would be to be debt free and financially secure in our golden years and that normally wins between the two dreams. 

In a way, not buying the things I want now is like my self imposed punishment for not paying attention, not being patient and disciplined with my finances at a younger age. I know that doesn't sound very cool, but  if you think about it, either I do it to myself now when I'm able to do something about it and maybe fix it, or 'life' will do it for me when I'm not able to do anything about it and I'm just stuck.

Questions

1) Do you dream about what you can have now or what you could have in the future?

2) Are you preparing for the future?

3) Financially, do you struggle with being patient and disciplined? If so, what are you doing to become more patient and disciplined?

The main reason I'm doing all 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. For more money news, facts and ideas, follow me on Facebook, or Twitter. Thank you!