by Ed Horrell » Sat Mar 23, 2013 06:54 am
We show agents how to use values, such as kindness, in their daily work. Consumers want to do business with companies who differentiate themselves from their competition.
Please enjoy this complimentary white paper on starting a Kindness Revolution in your city.
Please enjoy this complimentary white paper on starting a Kindness Revolution in your city.
Posted: Mon Mar 25, 2013 05:37 am Post Subject:
EdHorrell! Good initiative I believe. Insurance agents should have some sympathy toward their clients. This undoubtedly serves the interests on both end. Good to see such an initiative. Hope the "Kindness Revolution" literally bring some revolution.
Posted: Mon Mar 25, 2013 11:25 am Post Subject:
Owning a home is a keystone of wealth - both financial affluence and emotional security.
LOL! Just ask those millions of "homeowners" who have been foreclosed out of their homes in the past 4 - 5 years how much affluence and emotional security they have. An utterly absurd statement.Posted: Mon Mar 25, 2013 11:30 am Post Subject:
Hi Max! Suze is supposed to be before the Canon! :D
Posted: Mon Mar 25, 2013 11:46 am Post Subject:
Yeah, well, on this point Suze Orman is wrong. There are hundreds of thousands (perhaps millions) of people who cannot sleep at night worrying about when they are going to lose their homes. That is not a measure of affluence, or a sign of emotional security.
When your opinions are based on a limited number of resources, it's easy to be misled. While I may not like his politics, Rush Limbaugh is correct that most persons in America are uninformed on most topics that directly impact their lives, poltically, socially, and economically -- they believe the limited information they obtain via Twitter, Facebook, and other social media which is not authenticated.
Posted: Mon Mar 25, 2013 01:11 pm Post Subject:
Rush Limbaugh is correct that most persons in America are uninformed on most topics that directly impact their lives, poltically, socially, and economically -- they believe the limited information they obtain via Twitter, Facebook, and other social media which is not authenticated.
While I don't believe that Suze is wrong since she used the term "Owning", I agree to this one. :)
Posted: Tue Mar 26, 2013 03:53 pm Post Subject:
she used the term "Owning"
And how many "homeowners" do not have mortgages in order to qualify as "owning" a home? Until there is no mortgage, Suze's completely wrong about that.
And once a mortgage is paid off, the home a person uses as their primary residence remains a LIABILITY and not an ASSET. If you haven't read Rich Dad, Poor Dad or Cash Flow Quadrant both of which were written by Robert Kiyosaki, I wouldn't expect you to fully understand or appreciate that concept either.
So continue to drink the Suze Orman Kool-Aid about the "keystone of wealth". Like the real stuff you mix with sugar, it's full of empty calories.
Posted: Wed Mar 27, 2013 04:10 am Post Subject:
Until there is no mortgage,....
This is perhaps not going to happen. At least, not in near future.
And once a mortgage is paid off, the home a person uses as their primary residence remains a LIABILITY and not an ASSET.
I did not get this. In what sense?
If you haven't read Rich Dad, Poor Dad or Cash Flow Quadrant both of which were written by Robert Kiyosaki, I wouldn't expect you to fully understand or appreciate that concept either.
Nope! Wasn't fortunate enough. Perhaps, that's why not getting the concept. Anyway, I'll try to catch with it.
Posted: Wed Mar 27, 2013 04:57 am Post Subject:
And once a mortgage is paid off, the home a person uses as their primary residence remains a LIABILITY and not an ASSET.
Most people misunderstand the concept of home ownership. Lenders and real estate agents want people to believe their home is their single biggest asset. But it is not an asset, when you understand Kiyosaki's premise, which is nothing more than a true telling of the big picture of economics..Investors own assets. Sometimes they perform well, sometimes they don't. When an asset is performing, it puts $1 or more in your pocket. When it doesn't perform, you've already taken the money out of your pocket, so it still retains some value, but it adversely affects your net worth.
A personal residence, under most circumstances, never puts money in your pocket as long as you live in it. It always takes money out. And anything that takes $1 or more out of your pocket is a liability.
To prove this, when you look at the bank's "balance sheet" (a statement of assets and liabilities), savings and checking account deposits are "liabilities", because a customer can take the money out at almost any time -- and the bank must have the capital on hand to cover the withdrawal (if it doesn't, it must either borrow it or sell assets to cover the loss). But loans and mortgages are "assets" of the bank, because they represent money expected to come in. Sometimes those loans don't perform, and the non-performing asset creates a drag on the corporation's net worth.
But a balance sheet is a combination of both assets and liabilities. If the mortgage is an asset to the bank, it is a liability to the borrower. Those two things balance each other in the world of economics.
When there is no mortgage, the homeowner has no loan liability, and the bank has no mortgage asset, and the world remains in balance. Except that the expenses of home ownership do not end when a mortgage is paid off. There are still utilities, property taxes, insurance, maintenance, and repairs . . . all of which continue to take money out of your pocket.
If you move out of the home and rent it to someone else, that person's rent should cover all of your continuing expenses related to the property. At the end of every month, if you have $1 left in your pocket out of the rent that was paid on the 1st, you are "wealthy" because you have a performing asset. You could be a multimillionaire if you had 999,999 other properties each of which put $1 in your pocket at the end of each month.
That will never happen as a homeowner living in the home, unless you can rent out one or more bedrooms for enough to cover all your monthly expenses of home ownership. That's not always a possibility.
So as long as a person lives in the home they think they "own" they are living in a liability, not an asset. It's not an easy concept to accept, because it runs counter to everything the financial services world tells us is true about owning a home. Including Suze Orman on some occasions.
That's not to say that people shouldn't own homes. Far from it. But if you read Ric Edelman's stuff, in the early 2000s he was strongly promoting the concept, "Borrow as much as you can possibly afford when it comes to buying a home." Why? "Because you'll get a big tax deduction for the interest, and real estate appreciates at a rate of about 10% per year, so your home will increase in value faster than the loan interest, and you'll be able to refinance at a lower rate in the future."
Then along came 2008 and the house of cards crumbled. Edelman rarely talks about his past "strategy" today. He is shamed by it. But he still likes to promote what a great financial adviser he is.
Posted: Wed Mar 27, 2013 05:43 am Post Subject:
Thanks for the explanation Max. I did never think in this way. :)
Posted: Wed Mar 27, 2013 01:43 pm Post Subject:
Get and read Rich Dad, Poor Dad, then get and read Cash Flow Quadrant. They will help you immensely to gain a true understanding of the relationship between assets and liabilities and the difference between being an employee and an investor.
Kiyosaki initially became wealthy through real estate, which is not the best path for some folks. He became much more wealthy after writing these books.
It doesn't matter what type of investor one chooses to become -- real estate, stocks & bonds, precious metals, commodites, etc -- the basic rule applies to them all: your investment must put at least $1 in your pocket each month after all your expenses of owning the investment have been accounted for. When you do that consistently, you are wealthy. Your money is working for you, not the other way around..To increase your wealth, you simply need to do more of the same.
Home ownership is a luxury, not an investment. It does not put $1 in your pocket at the end of every month. Many folks pat themselves on the back for buying a home, making mortgage payments for a number of years, and selling the home for more money than they "paid" for it -- thinking only of their purchase price. But if they were to do the actual accounting . . . taking into consideration every penny spent on mortgage payments, improvements, repairs, maintenance, taxes, and insurance, the vast majority would see that they ended up with little or nothing to show for it at the time of sale. Many actually suffer a loss over all that time.
Comparing purchase price vs selling price is only one way to measure an investment -- we call that capital gain (or loss). Most fail to consider the expenses that accure in between those two events, and the net effect on capital formation (or deterioration). The typical homeowner thinks, "I paid $250,000 for it five years ago, and I sold it for $450,00. I made $200,000!" and completely overlooks the $12,000 the real estate agent takes, the tens of thousands that may have been paid in property taxes in those years, the $100,000 or so in mortgage payments, the thousands paid for insurance, maintenance, repairs, improvements, etc.
Subtracting just the mortgage payments, property taxes and insurance, and real estate commission reduces the $200,000 "profit" by more than $120,000 -- perhaps several thousand more than that (here in Southern California, property taxes on a $250,000 home would be about $3,000 per year or more). Add several thousand for new carpets, drapes, paint/wallpaper, some new kitchen cabinets and countertops, landscaping changes, and now we're easily up to $175,000, probably much more than that.
200,000 - 175,000 = 25,000 / 5 = 5,000 / 5 = 1,000 / 250,000 = 0.4% annual rate of return. You can actually do better than that in a bank savings account. And that doesn't even begin to account for the loss of purchasing power due to inflation.
Homeownership is the keystone to financial security? LOL.
Starting with $10,000, and adding $1700 per month for 60 months, a 6% municipal bond fund would grow to more than $130,000, and about $109,000 adjusted for inflation. Add another 5 years of contributions, and the account value is over $295,000, with an inflation adjusted value of about $204,000. That's a keystone to financial security. And it's too conservative for persons 25 to 35 years of age.
Add your comment