May 3, 2017

Items in italics are direct quotes from the articles below

The Pew Research Center, a nonprofit think tank in Washington, D.C., released a major report Monday on America’s shrinking middle class. Robert Kiyosaki, the author of personal finance best seller “Rich Dad Poor Dad,” and real-estate investor, says the middle class has it harder now than when he was coming of age. This interview has been condensed for space:

MarketWatch: How do you think our idea and definition of the “middle class” has changed over time?

Robert Kiyosaki: I’m a baby boomer, and I left school in 1969. We had it really easy: plenty of jobs, high-paying jobs. You could put money in the stock market, it went up. Put it in a house, it went up. There was health insurance and retirement plans. That all changed in 1971 when [U.S. President Richard] Nixon took the dollar off the gold standard. Then you had globalization, and jobs started to disappear. That’s putting a tremendous strain on any remaining middle class.

In the article, Robert references “Rise of the Robots” by Martin Ford. This book is about the acceleration of technology and artificial intelligence replacing workers. Robert argues one of the most endangered species is a male that is 50 years old, who is not tech savvy and at the tail end of the baby boom generation. Robert admits that Trump’s administration has good intentions, however he is simply a man. Robert suggests that the way to possibly save the middle class is to take advantage of the huge boom in entrepreneurship. Technology makes it easier for people to start a business at a lower cost, but you need to have core fundamentals. When you start a business you have to be mindful not just of your local market competition but your global competition too. A good friend who’s owend a small business for 20+ years has told me that he’s not successful, he’s a survivor. There is a secret inherent trait you must have to last in business.

Net present value (NPV) is a popular measure of profitability used in corporate budgeting to assess a given project’s potential return on investment (ROI). Because of the time value of the dollar, NPV takes into account the compounding of the discount rate over the duration of the project. (For related reading, see What are the disadvantages of using net present value as an investment criterion?)

The NPV of a project or investment reflects the degree to which cash inflow, or revenue, equals or exceeds the amount of investment capital required to fund it. When assessing multiple projects, businesses use NPV as a way of comparing their relative profitability to ensure that only the most lucrative ventures are pursued. A higher NPV indicates that the project or investment is more profitable.

To calculate NPV, the estimated cash outflow and inflow for each period must be established, as well as the expected discount rate. Though the exact figures can only be known after completion, fair estimates can be made by looking at the performance of similar projects or investments.

Due to the importance of the content of this article, I’ve included more quotes than usual.

Assume a company wants to analyze the predicted profitability of a project that requires an initial outlay of $10,000. Over the course of three years, the project is expected to generate revenues of $2,000, $7,000 and $11,000, respectively. The anticipated discount rate is 4.5%. At first glance, it seems the returns are nearly double the investment. However, a dollar earned in three years is not as valuable as a dollar earned today, so the company’s accountant calculates the NPV as follows to determine profitability while accounting for the discounted time value of the projected revenues.

Manual Calculation:

NPV = {$2,000/(1+.045)^1} + {$7,000/(1+.045)^2} + {$11,000/(1+.045)^3} – $10,000

= $1,913.88 + $6,410.11 + $9,639.26 – $10,000

= $7,963.25

Excel Calculation:

Time is your most valuable of your assets. You shouldn’t waste it. This simple calculation will give you an idea if an investment is worth your time. However knowing the owner, the management team, the vision, and the mission will give you a better insight into a business’s intrinsic value. There are some things that the numbers will not tell you. Also remember that even though the numbers don’t lie, they can be fabricated too. If you have the luxury of sitting down with a business owner then ask questions and hear his soul.

If you need are interested in creating a budget, then contact me for a financial checkup in the contact me section. Also, learn more about the self-lending principle in the mustard seed section.

For this week, I’ve included THIS DREAM HAUNTS ME – 2017 MOTIVATION from Basquiat Picasso YouTube channel.

“If you think you know it all, you’re a fool for sure; real survivors learn wisdom from others.”

Proverbs 28:26 MSG‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬

March 15, 2017

America’s Gilded Age in the late nineteenth century was famous for industrialists who amassed unimaginable wealth — such as John D. Rockefeller, Andrew Carnegie, and Cornelius Vanderbilt – and also for the era’s startling poverty. The U.S. is seeing something like that today. The booming stock market, up three-fold since the financial crisis, is no source of excitement for risk-averse small investors and savers, particularly retirees who expected to live off interest income. From 2008 through 2015, U.S. savers lost nearly $1 trillion of income from the cratering of yields on bank deposits and bonds, according to research by insurance company Swiss Re cited by the Wall Street Journal. And that’s even after adjusting for the benefit from paying lower rates on personal debt. Back in 2007 one-year CD yields were close to 4%, and currently one-year CD yields are less than 1%. Many retirees who were dependent upon these higher rates are being forced to find spare to part time work just to make ends meet. Some are moving into the stock market in the hopes of higher yields, and some can’t pay their bills. Time is a valuable tool, and to take advantage of compounding interest, a person must start early and often. A person should constantly be investing in his financial education and at the same time continue to create value for the sake of generating income and or security. I do recommend teaching yourself the self-lending principle as a means of breaking free from the cycle of consumer debt. When you buy assets, buy assets that are passive income producing that can be turned into a system and scaled. Without being creative, I argue a person could become a victim of the wealth gap that today’s current retirees are experiencing. That wealth gap is highlighted by the disparity between the pay of CEOs and their workers, which grew even wider in 2016, according to a study by consulting firm Compensation Advisory Partners, as cited in a Bloomberg story. The study looked at 42 U.S. public companies, a relatively small sampling, but it nonetheless is sure to spark debate. It found a 5.5% median pay hike for their CEOs, roughly double the 2.8% rise for the year in hourly pay for non-farm private sector workers, according to the U.S. Bureau of Labor Statistics. There is an income gap between workers and CEOs, so it’s important to work your job but also mind your business. What is your business? Your life. Every penny that comes into your bank account is your responsibility. Make your money work for you without you having to always work for it.—-it-will-talk-to-your-soul-2017-02-28

Robert Kiyosaki has an unusual reading recommendation for would-be entrepreneurs — one that even the most devoted fans of the “Rich Dad, Poor Dad” author might not see coming. It tells the story of a knight about to meet his death in battle. It’s written by a Hollywood movie star. For Kiyosaki, it’s become a treasured read. “Believe it or not I read a lot of spiritual books. One of the best is ‘Rules for a Knight’ by Ethan Hawke,” Kiyosaki said during a January interview, when asked if there were any books he would recommend for MarketWatch readers. “It’s so well written, talks to your soul,” he said of the book. “All my friends are entrepreneurs and they all get copies of it.” This books takes the form of a letter from a knight written to his children right before battle, and it outlines the rules for being a knight. That may not sound like fertile material for learning the secret to success in the 21st century business world, but the knight’s rules do have an aura of entrepreneurial mantra about them. The rule for humility begins, “Never announce that you are a knight, simply behave as one,” while the rule for gratitude states, “For all that has been, a knight says, ‘Thank you.’ For all that is to come, a knight says, ‘Yes!’ ” Robert Kiyosaki states that he only operates at the highest of spiritual values and seeks to do business with people with similar values. Values such as integrity, and honor are words with significant meaning. Personally, I look for a person with strong spiritual values such as transparency, integrity, and consistency. Another book he recommends is “The Untethered Soul,” by Michael A. Singe. If you prefer your reading to be more firmly rooted in the worlds of business and finance, Kiyosaki suggested two books on economics in MarketWatch’s live interview with him in August, which you can read more about here. Robert Kiyosaki’s “Rich Dad Poor Dad” is coming upon its 20th anniversary, and it is a good introduction into looking at money differently. This book was personally recommended by my good friend. His mentoring and this book helped shape in part how I look at finances. If you read that book, then you must read his second book “Cashflow Quadrant”. If you don’t enjoy reading, then I suggest the audio book version or even the short summary clips you can find on YouTube. However, reading is essential to being able to see into how a writer thinks and it’s not the same as a quick edited version. I’ve found that when I’m struggling to read a book, I read something I enjoy reading and then pick up and read from the book I’m struggling with. Block out a time even if you have to set an alarm for it to make the time to read. Your brain is a muscle and it needs a work out from time to time.

Items in italics are direct quotes from the articles above

If you need are interested in creating a budget, then contact me for a financial checkup in the contact me section. Also, learn more about the self-lending principle in the mustard seed section.

For this week, I’ve included The Wisdom – Bruce Lee from the Absolute Motivation YouTube channel.

“If you think you know it all, you’re a fool for sure; real survivors learn wisdom from others.” – Proverbs 28:26 MSG‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬