Robert Kiyosaki Plays Loose With His Math in Financial I.Q.

Robert Kiyosaki, Financial IQ

I’ve been reading Rich Dad’s Increase Your Financial IQ: Get Smarter with Your Money, by Robert Kiyosaki and while I like the general gist of the book (especially the first half), Kiyosaki rubs me wrong way in several places. One of these is in his use of math to support his opinions on real estate.

Much of the second half of the book focuses on real estate as a means to grow wealth, but Kiyosaki does make an important distinction between speculating for growth or flipping a house, and buying property as an investment. In other words, Kiyosaki espouses buying real estate for the purpose of renting it out and creating a cash flow, not hoping for the market to rise and create capital gains. I’m not really interested in becoming a renter, but his approach makes a lot of sense to me, especially with the current economy, housing market and demographic changes.

The problem with Robert Kiyosaki’s math in Financial IQ

Where I have problems is when he gets into things like OPM (Other People’s Money). Here is one of his examples:

• He buys a rental property for $100,000 in cash.
• He is able to rent this property for an annual income of $10,000.
• He has made a 10% return on his investment.

So far, so good. He’s using very simple math and ignoring taxes, repairs, etc.. but that’s fine – he states that in the example. His problem is in his comparison to the same scenario but using OPM. Here’s his example using OPM (i.e. money from the bank – a mortgage):

• He buys a rental property for $100,000.
• He puts $50,000 down and the bank loans him the other $50,000 at 6% interest.
• He is able to rent this property for an annual income of $10,000.
• He has made a 20% return on his investment.

The problem is that he has not made a 20% return on his investment – unless he is a deadbeat and doesn’t pay his mortgage! While it is true that $10,000 in profit would be a 20% return on $50,000 invested he is ignoring the mortgage payment entirely!

Using the Mortgage loan payment calculator at BankRate.com, I plugged in a $50,000 mortgage over 30 years (I’m being generous in giving him a low monthly payment) at 6% (his figure in the book) I determined the monthly mortgage payment to be :

$299.78

This works out to be $3,597.36 annually, which makes his actually profit in the OPM example $6,402.64 not $10,000. That means his return on investment (ROI) in that example is 12.8% not 20%.

Granted, 12.8% is better than 10% but it’s a far cry from 20%!

This makes me wonder about the rest of his examples and stories. What if the mortgage were larger or the rent less? Someone reading this book may think it’s a slam dunk only to find that his property and mortgage alter the numbers to a point where he’s not profitable. Kiyosaki neglects to mention that part of the financial equation altogether.

Still, Robert Kiyosaki’s Financial IQ  book is quite motivating and offers much food for thought and for that alone it is worth the read in my opinion.

Related Posts:

• Want to Build Wealth, and be Secure? Focus on Learning Instead of Earning!
• How to Survive (and Possibly Thrive during) Stagflation.
• The Coming Economic Collapse – How You Can Thrive When Oil Costs $200 a Barrel
• REVIEW: Getting Started in Stocks by Alvin D Hall (the Professor of Wall Street).
• How to Invest in Real Estate Without Buying Property

Quicken Deluxe 2011: Reviewed.

Intuit, the makers of TurboTax, have released this year’s version of their popular personal finance software: Quicken.

Here’s a review of Quicken Deluxe 2011, available in stores and download from Amazon.

The many flavors of Quicken.

I’ve been a fairly heavy user of Quicken for about 6 years now. I’ve only ever used the Deluxe version, though the product comes in many different flavors (Deluxe, Premier, Home & Business, Essentials and now there’s even a Rental Property Manager!). I’ve only ever used the Deluxe version and when I was researching the 2011 version I discovered that the majority of people who buy Quicken buy the Deluxe version anyway. Some 85+% of shoppers buy Quicken Deluxe. So, that made it easy to review since my product choice also happens to be the choice of most shoppers.

But if your situation is more specialized (i.e. you have rental property or a home business) then you may want to investigate the other flavors that Intuit has to offer.

As for the Deluxe version, here’s what it features:

• Money management and budgeting tools that enable you to track your spending and increase your savings.
• Save time categorizing your spending with auto-categorization.
• Download your financial data and manage all your accounts together in one place.
• Helps you stay on top of bills and create a budget.

2011 vs 2010.

What’s new.

One of the nicest features of Quicken since I’ve been using it has been the ability to download your account transactions online – right from the Quicken program itself. They call it “One-Click Update” and if your financial institutes allows for it (i.e. they’ve partnered with Quicken) then you get your transactions automatically downloaded to the correct account in Quicken – retirements accounts, bank accounts, credit card activity, auto loans and more.

This has at times been a draw back for me if my financial institution was small and not partnered with Intuit. With the 2011 version, Quicken Deluxe now automatically downloads transactions from over 12,000 banks, brokerages and other financial institutions–including PayPal.

The “guided setup” wizard has also been revamped, in an attempt to make learning to use the features of Quicken a bit easier too.

Intuit has also worked to increase the integration between Quicken and their other popular product: TurboTax Your financial information in Quicken can be imported into Turbo Tax, making tax time preparation a bit less painful. This ability has been around for a few years now, and I haven’t tried it myself yet. My taxes just haven’t been that complicated to begin with, though I think I may be giving it a try next year.

Perhaps due to pressure from online competitors, Intuit has made Quicken 2011 more “socialable” by integrating Quicken Live Community, an online forum for advice and interaction with other quicken users. This new community forum is integrated seamlessly into the program itself (you can view the online community from right inside Quicken).

Quicken 2011 does a better job of categorizing your spending automatically, and it’s much quicker for situations where you need to enter the category yourself. Often times, simply typing the first few letters of the category is enough to accurately select the proper category. This alone can be a major time saver.

They’ve done a nice job redesigning the cash flow feature, improving the graphing and making it easier to project your future savings or shortfalls.

The layout of the program has been redesigned in an attempt to make commonly used features easier to access. This will likely be helpful for most people, but may be annoying if your most commonly used features don’t match what “most people” commonly use.

They claim that transaction updates for account downloads are faster, though I didn’t see a noticeable difference. That could be dependent on your connection or your institution’s connection speed as well.

System requirements

Here are the system requirements to run Quicken Deluxe 2011:

Processor: 1 GHz
Operating System: Windows XP SP2+, Vista, Windows 7 (32- and 64-bit)
Memory: 1 GB
Hard Disk Space: Up to 450 MB free space; up to 1 GB if .NET not installed
Display: 1024×768 or higher resolution
CD-ROM Drive: Required
Internet: 56 Kbps (broadband recommended for online services)
Printer: Any printer compatible with Windows XP SP2 or later

Additional Software (included in Quicken installer): Microsoft .NET 2.0 or later;
Windows Installer 3.1;
Internet Explorer 6.0 or later

Why buy.

As I write this, you can buy Quicken Deluxe 2011at Amazon for $39.99 (33% off!)

Good personal finance software can help you create a budget and stick to it. It can help you set goals and meet them. After all, if you don’t know where your money is going and you wonder why there isn’t much left of your paycheck at the month’s end, how can you save for the future?

Beside the basics, good personal finance software can help you find extra savings or eliminate expenses you forgot you had. It can help you manage your money more effectively and help to pay off debt quicker or save for the big things like retirement or a new home or a new car.

Is Quicken Deluxe the best personal finance program out there? That depends on how you use it and what you’re using it for.

I honestly can’t tell you how it stacks up against online sites like Mint because quite frankly the idea of putting all of my personally identifiable financial information out on the web frightens me a little. But I know millions of people don’t have a problem with it. That’s your call.

Also, I’ve been using Quicken for years now, and I don’t particularly like the idea of re-entering my information and starting over with a new product.

Bottom line: Quicken Deluxe is a great program if you are looking for personal finance software that is not web-based, or you’re looking to replace Microsoft Money.

Why not to buy.

So those are the reasons you may want to buy Quicken Deluxe. Here are some of the downsides (or why you might not want to buy it).

Intuit has made the unfortunate choice to include advertisements in their product for their partners as well as other Intuit products. Advertising for your other products is nothing new, but the way in which Intuit does this in their Quicken products can become tiresome, at best. It is possible to ignore the banner-ad style product placement for Quicken Loans, Free Credit Reports and the like but it’s frustrating to have to do so in a retail product.

If you’re a Quicken 2010 or even a Quicken 2009 user you may not want to upgrade just yet. Many of the improvements are relatively minor and may not be worth the full price of the 2011 version.

Related Posts:

• MyFasterPC Review (Why It’s Not Worth the Money).
• Buying Life Insurance Online With Accuqoute (Review).
• Looking For The Best Rates On CDs, Checking And Savings Account?
• Find a Better Bank with FindABetterBank.com
• REVIEW: Stock Investing For Dummies, by Paul Mladjenovic.

Goodbye Bank of America!

I’m ditching my BofA credit card!

Some astute readers will know that I typically only have good things to say about my Bank of America Upromise card.

Not anymore.

My wife and I have had this Upromise rewards card for about 6 years and make a habit of paying the credit card balance in full every month. The reward is a monthly contribution to our 529 college plan for our children. Basically, 1% of our monthly expenses get contributed to the fund. It’s not going to make or break the college fund, but every little bit helps.

As it is so easy to do with many habits, we let this one slip.

Over the Thanksgiving holiday we carried a balance for one month -one month, no late payments. We paid the balance in full for December.

Imagine my surprise when I received our credit card statement for the month of December – the month after we paid the balance in full, mind you – and saw a finance charge for $45!

I naturally assumed this was a billing mistake caused by the due date of the previous statement being on a holiday (New year’s day) and that one call to customer support would set things right.

Wrong.

It turns out I’m a victim of “Residual Interest”, which is a clever way for credit card companies to stick you with 2 interest payments when you carry a balance for a month even when pay your card balance “in full.”

I asked the very pleasant BofA support rep if this was a new change as I had never heard of or had to pay residual interest in the past. She assured me it’s common practice and part of my card agreement. ( I looked and could not find it.)

Fair enough.

I mean, it’s clearly legal for them to do, despite all the wonders of the Credit CARD Act of 2009, this is apparently one of the egregious acts not eliminated by the CARD Act. But It’s also perfectly legal for me to take my business elsewhere – and that’s what I’m doing.

So, goodbye Bank of America! I’ll be taking my purchasing habits to a new rewards card.

I wish it didn’t have to end like this, but it’s your choice not mine and at the risk of sounding arrogant – you chose poorly.

Related Posts:

• I’m Collateral Damage In My Bank’s War With the Fed!

MyFasterPC Review (Why It’s Not Worth the Money).

I don’t usually do software reviews, but software development is my day job and I know a lot of people are looking to save time and money by keeping their old PCs (or even newer PCs!) in top running condition. I’ve been seeing a lot of commercials for MyFasterPC.com and I was wondering if it was really worth the money, or even possibly an outright scam. So I tried it out, and here’s what I found…

The pitch.

The commercial is not the usual late-night infomercial types. In fact, you can watch one of their commercials here.. There are quite a number of fly-by-night operations just looking to sell you useless software, often for a subscription fee. This doesn’t appear to be one of those services. However, it also probably isn’t worth the money either. More on that later.

The claim of MyFasterPC is to remove unwanted spyware, malware and viruses and also de-clutter your PC by removing files that are no longer needed. They also offer some general maintenance and optimization features.

The program.

When you visit the website, you are prompted to “download now” to “get your free trial”. This sent a few yellow flags, if not red flags, up in my mind. “Free trial” usually means you’re going to get roped into some sort of subscription or at the very least a purchase after the trial expires.

After you download and install the trial application, you are greeted with this welcome message:

“Clean, optimize and speed up” my PC? Sounds great! Let’s go!

After clicking continue however, I was greeted with this seemingly friendly message to “help us find unwanted items”, but when I read further I saw it was a confirmation to send anonymous information to the website.

This is OK.

Many sites and products collect this kind of information, and as long as it truly is anonymous there is nothing wrong with it.

So what kind of information are they collecting?

According to the website, it’s the following:

• Installed applications
• Hard drive size
• Processor type
• Windows version
• Memory capacity
• Programs set to run at startup
• Browser add-ons
• Services

Having over a decade in the computer software industry working with the Windows operating system, I can tell you that every item in the list above is not only relevant but in some cases essential to optimizing and de-cluttering a Windows PC. However, it’s not essential that the information be collected – unless they are trying to improve future versions and they want to get an idea of what the majority of their customers have.

The result.

After selecting to Continue, the application ran for a few minutes then displayed this results window:

I should tell you that I ran this on a plain-Jane Windows XP test machine, with minimal programs installed. So why did it find so many issues if it was a clean installation?

Disk space.
Well, the short answer is that simply browsing an hour or so on the Internet can create enough temporary Internet files to account for the 182.48MB to clean entry, as would the download and install of the MyFasterPC.com application itself, since that was downloaded and run from the browser.

Optimizations.
Windows usually ships with the least common denominator of settings, meaning that certain settings are enabled or disabled simply because most PCs fit that configuration. This inevitably leads to a number of settings that could be turned on or off for any given Windows installation based on hardware and other factors that would result in better performance. Frankly, I’m surprised it only found 3 that could be optimized.

Registry issues.
Registry “issues” is a broad term. Many optimization programs count items that appear in a program’s “Recently Used” menu as unnecessary and hence are added to the “registry issues” bag. Other times it can be references to programs that no longer exist.

Disk defrag.
Lastly, disk defragmentation is almost always recommended by these kinds of programs, since most hard drive go without being defragged for ever. The problem with this is that Windows already has defrag software built into it.

This list of issues seemed reasonable, so I clicked “Repair Issues.” That’s when my suspicions were confirmed.

The upsell.

While the MyFasterPC trial software was able to repair a number of the issues, there were many more that required the upgrade.

This is pretty much what I expected when I set out on this test. I figured that it was either loosely disguised spyware masquerading as a repair and optimization program, or it would eventually lead to a heavy-handed upsell to the “full version.”

Just out of curiosity, I clicked the upgrade button and the program brought up the purchase page of their website. They seem to offer 3 options and the full version runs $29.95 (regularly $39.95).

Conclusion.

Cleaning and optimizing your PC is absolutely worth doing for most older machines, or machines that have had programs installed and uninstalled recently, but in my opinion MyFasterPC is not the answer. I don’t think there’s anything under-handed going on here, and MyFasterPC.com does not appear to be a scam. I’m just not sure it’s worth the money either. It seems to be a little light on delivering the goods for the price.

You can get similar programs for free (see below) or name-brand software that does more for about the same price – for example, Norton 360

Still, for some users who may not be computer savvy or want to be MyFasterPC may not be all that bad.

A cheaper alternative.

Being a father of 3 with a wife who is a stay at home mom, I’m always looking to cut costs where I can – and free is my kind of price point.

Here are 3 Free alternatives to MyFasterPC.com that don’t take a degree in computer science to use:

CCleaner . This handy tool essentially does what MyFasterPC does in terms of de-cluttering and optimizing, but also provides greater control. It too removes Windows temp files, temporary Internet files, browser cookies, and much much more. It also finds and repairs registry errors.

Avast! antivirus . Avast is an excellent -and free! – antivirus program that will keep your PC free of spyware, malware and viruses, which sill lead to less need to repair your PC.

Comodo Firewall. A firewall program is as essential as an antivirus these days. Comodo is an excellent alternative to the premium applications offered by the big name vendors.

Related Posts:

• Want to Build Wealth, and be Secure? Focus on Learning Instead of Earning!
• Save Money with Free Software.
• Minimalism vs. Simplicity – Are You Missing the Point?
• Alternatives To Pet Insurance (Tips For Doing Without Pet Insurance).
• Is Pet Insurance Worth The Cost?