5 Ways to Stand Above the Competition as a Property Manager

A huge part of being a property manager is learning how to market yourself and your company.

You have to do it twice, after all: once to your client owners, the property owners who allow you to look after their buildings, and once to your client tenants, who live in those buildings. For all that, you’re no “middle man.” Most of the minds sharp enough to succeed at investing in real estate aren’t really the same guys who want to get their hands dirty underneath a sink or spend their time chatting up the old lady with the seven cockatoos to convince her to pay the rent.

You’re the go-between who makes sure everyone gets as much of what they want as they can get.

Unfortunately, it’s rare that either side sees you in such a positive light, so mastering the art of marketing is part and parcel of the job. As you learn about marketing, you learn about a concept called the “USP,” or the Unique Selling Proposition. In short, it means, “What do you do differently than everyone else, and why does it make you better than them?” Or in even more easy terms: how do you stand out from the crowd?

Every business needs to have an idea of what makes them better than their competitors, but not many businesses actually have that idea. If you’re struggling to separate yourself from the crowd, here are four tips you can take to develop something outstanding.

5 Tips to Stand Out From the Crowd

1. Create Something Exclusive

Exclusivity sells — if you can describe to your clients and/or tenants something that you do that very few other people are doing, you create a firm “anchor point’ in their mind to hang their thoughts on.

Everyone is constantly competing for “price” and “customer service,” so you’ll have to come up with something that isn’t part and parcel of either of those.For example, perhaps you could offer the opportunity for tenants to pay their rent via an app or a mobile website. This appeals to tenants because it makes paying easy, and it appeals to clients because it means tenants pay on time more often. It’s also not something that many property managers are doing yet, so it presents the air of exclusivity.

2. Be Who You Are

When you sit down to brainstorm things you can do to stand out from the crowd, don’t try to become something you’re not. Consider your strengths, be authentic to what you (as an individual and as a company) do best, and above all, avoid insincerity.

If you’re not “green” by nature, don’t try to force-start a recycling program in your building. If you’re not tech savvy, skip out on the online rent payment. If you do something that doesn’t come off as genuine, you’ll end up chasing people away.

3. Build Anticipation

Whatever you create, spend the time to brainstorm some ways that you can whet your clients’ and tenants’ anticipation for that program. Oftentimes, the promise of a reveal is more effective of a marketing technique than simply laying out all of the details of a program or service up front.

In this case, you’re focusing mostly on the tenants — your clients tend to be more of the analytical, return-on-investment type who will respond better to a complete understanding of what you’re going to do for them.

4. Keep It Simple

A vast quantity of good ideas fail ultimately because they require too much effort. They sound good on paper, but when it comes time to actually implement some special program, it turns out that it’s more important to keep the normal flow of business flowing. Similarly, if an offering is going to be too challenging for a client and/or tenant to take advantage of easily, they simply won’t, and you might as well have never come up with the idea.

5. Be Consistent & Be Memorable

Very few property owners will hire you when they first encounter your marketing. The simple reason for this is that they’re usually contractually committed to one of your competitors.

So you want to be top of mind when they are thinking about switching companies. The only way to do that is by repeatedly exposing them to your company. They’ll more easily remember you, even with less repetition, if you can be memorable somehow. This is the reason people do crazy things in marketing!

If you can combine simplicity, authenticity, exclusivity, and anticipation consistently, while throwing in something to be memorable, your chances of standing out from your competition increase exponentially. Standing out means more business on both sides of the desk! 

What steps do you take to stand out — as an individual and as a company?

Let us know in the comments!

Source: http://www.biggerpockets.com/renewsblog/2014/09/27/5-ways-to-stand-above-the-competition-as-a-property-manager

It takes money to make money

The rich get richer -- and own more stocks, the Federal Reserve reported today in its triennial report, the Survey of Consumer Finances.

The lengthy report charts the changes in family finances from 2010 to 2013 and not surprisingly most American families did not experience a sea change in their fortunes.

Stock ownership rates did not increase as values rose, according to the report. The number of Americans who own retirement accounts also fell over the past few years, down to 49.2 percent in 2013 from 50.4 percent in 2010. The The median value of the accounts jumped 25 percent during that time.

Here's a few more of the central bank's findings about investing:

• Rates of direct stock ownership fell 1.3 percent from 15.1 percent to 13.8 percent over the time period, though the median value of the stock market gained 26 percent.
• Combining indirect stock ownership rates -- for instance owning stocks in mutual funds -- with the number of people who own stocks directly, paints a similar picture. Direct and indirect holdings of stock fell from a peak of 53.2 percent in 2007 to 48.8 percent in 2013.
• Proving the adage that it takes money to make money, overall stock ownership rates increased 3.9 percent for the top 10 percent of income earners. For the bottom half of earners, the three years between 2010 and 2013 saw already low levels of stock ownership further eroded.

A survey released by Bankrate in April found that Americans are still unsure about the stock market, despite historically low yields on savings accounts and certificates of deposit. Only 22 percent of those polled said they were pushed toward the stock market as a result of low interest rates.

Do you own more stocks or mutual funds now than in 2010?

Source: http://www.bankrate.com/financing/investing/it-takes-money-to-make-money

Saving isn’t enough to retire

Good morning Dinks.  Let me ask you a question, how far away are you from your retirement date?  Some of us may want to spend our lives flourishing in our careers and plan to retire at 65, some people want to work hard and retire early at 55 and some of us save every single penny to take our retirement as soon as possible, maybe even in our 40s.  So which one are you?

Are you saving or planning for retirement?

A lot of the books we read and advice we hear tells us to save, save, save for retirement.  But what if saving isn’t enough.  Well it’s not.  We can’t just blindly save for retirement because money is only a part of retirement.  The truth is retiring – at any age – takes planning and the dollar signs is only one aspect of the plan.

Actually I should say that the amount of money you need in retirement is the final outcome of four other contributing factors.  Before you start saving for retirement you need to know what you want to do, where you want to go and how you want to live when you retire.

Income vs. lifestyle in retirement

The truth is a lot of people don’t see retirement as a planning process, especially older generations.  My parents didn’t.  They worked, supported a family of four and saved whatever extra money they had.  My Dad’s employer offered an employer-sponsored pension plan.  Once his total age plus years of service equalled 85 he could retire with a full pension.  This is the only goal my Dad worked towards his whole life and just as planned he retired at 55 years old and has never looked back.

My Dad didn’t know how much he needed to support his lifestyle in retirement because he didn’t know what he wanted to do, all he knew was that he wanted to retire as soon as he could because he didn’t want to work anymore.  Now my Dad’s lifestyle is based on his income, not the other way around.

Set realistic retirement goals that you can afford

Your retirement goals need to reflect your current income as well as your projected needs during retirement.  This includes things such as where do you want to live, how do you want to live, what do you want to do in your spare time and what type of lifestyle do you want to have during retirement.  Once you determine the type of retirement you want to have you will be able to figure out how much you need to save.

You will need to save a portion of your current income to help support the lifestyle you want in retirement.  If you set unrealistic retirement goals that you can’t afford to support you will end up not saving anything and that’s not good.  I would love to live on a yacht in the South of France when I turn 55, but that’s just not realistic because my current income won’t allow me to save for such an elaborate retirement goal.

Source:  http://www.dinksfinance.com/2014/09/saving-isnt-enough-retire

How to Think Big to Achieve Big Financial Dreams

I like to think I have been pretty successful in real estate. I have 11 rentals, I’m working on 10 fix-and-flips and I employ a real estate team of 10 that helps me sell over 200 houses a year.

My blog, which discusses my real estate investing and being a real estate agent, is doing great, and I manage to do this without sacrificing time with my family. One reason I have been successful is I don’t worry about the little stuff. I let my team worry about the small things, and I focus on the big things. There are many investors who do much more business than I do and have been much more successful, and I bet they don’t worry about the little stuff either.

How Can I Forget About the Little Stuff When Everything Is on Me?

Most people who are starting out in real estate (or any business) are thinking, I can’t stop worrying about the little stuff because there is no one else to worry about it!

That may be true, but it is never too early to start thinking big and start planning how you will make it big. The people who make it big do not get there on their own. They get there with help — a lot of help. So if you have no one to help you with small tasks or dealing with the small stuff, start planning what you need to do to get to a point where you can get help.

Some things to think about:

• What things do you hate doing now that someone else could easily do?
• How much would it cost to hire someone part-time or a virtual assistant?
• How much time would you save to concentrate on more lucrative business if you had help?
• How much happier would you be if you didn’t have to do the tasks you hate doing?

When You Have Help, Train Them to Do Their Job!

I am guilty of assuming my staff knows exactly what I want without telling them. When you hire someone, you have to take the time to train them. Teach them how you want things done, be very specific and do not assume they know what you want. Once you have trained a staff person to do exactly what you want and you have confirmed they do their job well, you can focus on more important things.

When I have tasks come in to complete BPOs or enter listing agreements, I forward the email on to one of my staff members, and that is it. Much of my job is forwarding emails to the right people and then confirming that things were done. That is why I have time to think about big things (and play golf).

Once You Have Staff in Place, Life Gets Fun

When you have great staff, you can go on vacation, go to work conferences, take a day off with the family and not worry about work. You also have time to plan your life. Too many people get stuck in their day-to-day ruts and never plan for their future. Everyone needs to take time to think about what they really want in life and then make plans for how they will get it.

• How much money do you need to make to cover your expenses, investments and have extra left over for fun stuff?
• Where and when do you want to retire, and how much money will you need?
• What is on your bucket list, and how will you start ticking items off?
• How much time do you need to spend with your family and for leisure activities?

Don’t Be Afraid to Think Big!

Now that you have started making a list of things you want to do and how much money you want to make, review your lists and determine if you are holding yourself back.

• Are you reducing the amount of money you need to make for leisure activities because you don’t believe you could ever make what you really need? I thought $100,000 was a lot of money when I was in college; now $100,000 doesn’t come close to paying my staff every year. The more money I thought I could make, the more I make and the higher my new goals get. Don’t be afraid to think big.
• Are you basing the amount of free time you want on a typical American work schedule? How much time do you need? Don’t worry about what society says you need.
• Do you limit the things on your bucket list because you don’t believe you could ever afford them? I always wanted a Lamborghini until I was about 22. Then I started to concede that normal people could not have cars like that, and I needed to be happy with a decent commuter car. Last year I started to believe that I could own a Lamborghini; this year I bought one. Don’t limit your bucket list to what you think you can afford.

Now That You Have an Awesome List and Are Thinking Big, Take Steps to Make it Happen

A list is great, but it does no good if it makes you sick to your stomach because you think it is all impossible. The first step is to be happy when you look at your list and think how awesome it would be if you accomplished those things. Remember if you don’t accomplish them you are not a failure; in fact it is more impressive to try and not achieve your goals than to be afraid to try. Regrets do not come from trying something and not succeeding. Regrets come from not trying and never knowing if you would have succeeded or not.

The way to take baby steps towards your big goals is to work them backwards.

• How much money do you need to reach your goals?
• How much money would you need each year?
• How much would you need each month?

Then figure out what you would need to do in your current work situation to reach those figures.

• How many products would you have to sell?
• How many people would you need working for you?
• How many investments and of what kind would you need to own?

Then make a list of what you can do right now to start improving your business or work situation.

• Can you hire someone now?
• Can you start advertising more?
• Are there conferences you can attend or more education you can take?
• Is there someone doing what you want to do right now, who you can talk to, to see how they do it?

Now start doing these things immediately.

Conclusion

The trick to thinking big is to remove the limitations you and society have placed on yourself. Don’t be afraid to want to make a lot of money or to want to be a beach bum. Dream what you want to dream and then take the actions necessary to start the wheels turning in the right direction.

What financial steps are you taking to achieve your dreams?

We’d love to hear from you in the comments!

Source: http://www.biggerpockets.com/renewsblog/2014/09/07/how-to-think-big-to-achieve-big-financial-dreams

Why does Warren Buffett avoid technology stocks?

• Warren Buffett prefers to invest in companies which operate in fairly stable and certain environments. Technology sector is the last place to look for certainty.
• He values certainty of returns more than the potentially huge but risky returns.
• He believes predicting the economics of the fast paced technology sector is far beyond his competency, probably a strong reason for his avoidance of the sector.

Warren Buffett has often been in the news for avoiding investments in the technology sector, which has been viewed by many investors as a highly lucrative sector. The Oracle of Omaha has his reasons for this approach. We look into reasons for his avoidance of the hot stocks.

Warren Buffett has historically preferred investments in sectors or companies which are unlikely to experience major changes. In his 1996 letter to shareholders he stated,

“We are searching for operations that we believe are virtually certain to possess enormous competitive strength ten or twenty years from now.  A fast-changing industry environment may offer the chance for huge wins, but it precludes the certainty we seek.”

Warren Buffett loves to have certain but stable returns over potentially huge but risky returns.  In the same letter he also states:

“Obviously many companies in high-tech businesses or embryonic industries will grow much faster in percentage terms than will the inevitables.  But I would rather be certain of a good result than hopeful of a great one.”

It shouldn’t be assumed that Mr. Buffett despises change. He is only averse to change when evaluating as an investor. In his own words:

“Charlie and I welcome change: Fresh ideas, new products, innovative processes and the like cause our country's standard of living to rise, and that's clearly good.  As investors, however, our reaction to a fermenting industry is much like our attitude toward space exploration:  We applaud the endeavor but prefer to skip the ride.”

In his 1999 letter to Shareholder’s Mr. Buffett highlights the fact that he and his partner Charlie prefer to operate within their level of competence and identifying a durable competitive advantage in the technology space is beyond their combined expertise. In Buffett’s words,

“Our problem -- which we can't solve by studying up -- is that we have no insights into which participants in the tech field possess a truly durable competitive advantage. Our lack of tech insights, we should add, does not distress us. After all, there are a great many business areas in which Charlie and I have no special capital-allocation expertise.  If we have a strength, it is in recognizing when we are operating well within our circle of competence and when we are approaching the perimeter. Predicting the long-term economics of companies that operate in fast-changing industries is simply far beyond our perimeter.”

Has Warren Buffett’s stay out of the technology sector impacted the returns of his investments? Well let’s look at the numbers over the last two decades.  The chart below compares the 20 year CAGR of the S&P 500, Berkshire Hathway’s (NYSE:BRK.A) book value per share and Berkshire Hathway’s Market value per share.

20 year CAGR in S&P 500 and Berkshire Hathaway share price and book value

Berkshire’s book value per share has grown at a CAGR of 14.6% over the last 20 years (1993-2013) while the Market price per share has grown at a CAGR of 12.7%. This growth has solidly beaten the S&P 500’s 20 year CAGR of 7.1%. It is clearly seen that Buffett’s decision to stay away from the technology world hasn’t hindered the performance of his investments. And what is the secret of the Oracle of Omaha?

Warren Buffett has this great quality which investors often call ‘Discipline.’ It is clearly evident in his avoidance of the technology sector, even during the boom of late 1990’s, when every other person was investing to set up a business which had something to do with internet. Though in hindsight Buffett had the last laugh, non-entry into what appeared to be a highly lucrative sector is a proof of the Oracle’s discipline. There are notable exceptions in the technology world, where stocks like Apple & Google have created tremendous value and returns for shareholders. Apple stock price has grown at a 10 year CAGR of 36.7% while Google stock has grown at a 10 year CAGR of 27%. While critics could view these as Buffett’s big misses, we view it as a proof of his disciplined approach to investing. Sticking to your rules is hard to do and that is something every wannabe successful investor needs to learn from the Oracle of Omaha.

In conclusion, Warren Buffett side stepped the tech boom for the following reasons: Buffett was uncomfortable investing in companies operating in rapidly changing environments; He could never find the competitive edge in any technology companies that he felt was durable; and as he admitted, forecasting the long term business economics of internet companies was beyond his competency.

We at Amigobulls live in the exciting world of technology stocks. While we salute the Oracle of Omaha for his discipline and wisdom, we will continue to make our humble attempts to apply his principles in the technology sector and pick value stocks from this sector. We invite our readers to let us know their experiences with technology stocks. Happy investing with Amigobulls.

Source: http://amigobulls.com/articles/why-does-warren-buffett-avoid-technology-stocks

The Importance of Being a Genuine Person In Real Estate

Real Estate investing is a numbers game. For anyone that has ever thought about purchasing just one property, all it takes is a few quick calculations and you’ll begin to see the dollar signs $$$.

It’s pretty simple math too. I don’t know anyone that doesn’t enjoy cashing checks each month and really feeling their investments pay off. Just like with any investment vehicle, you need to weigh the risk and the more money you invest the higher the potential return!

People ask me all the time “How do you find such great deals? I also want to buy similar properties.” For this I ask “What are you looking to achieve and what is your end goal?” I mean, if all you want is a check each month there are many other investment opportunities that can provide just that. So many see Real Estate investing as an easy alternative to other financial products, for anyone who thinks this, I give a word of caution.

Warning!

Yes, it is simple math. Yes, you can make a lot of money.

Yes, it is the best thing I have ever done in my life and so rewarding AND I have made a lot of money. I emphatically ask: Do you like people? Not just people, but strangers? Are you committed to developing long term relationships? Do you enjoy being fully responsible (well mostly) for the conditions in which another family will be living? Would you get yourself out of bed at 2am to go fix someone else’s broken toilet only to find that they caused the problem and not even get a “Thank you”?

I have met so many investors that got into Real Estate only looking at the numbers and completely ignoring the people factor. Folks, people are responsible for making those numbers work. They pay each month so we can feel good about cashing the checks. Many of the great deals I find come from those same investors that didn’t think about building relationships with their tenants and where only focused on the figures. They couldn’t stand the interpersonal aspect side of the business. They provided little communication and where unresponsive to maintenance issues because they just didn’t care about the tenants, only the “return.”

When you have a property and accept a tenant you are assisting those individuals to provide for their basic need; shelter. Now don’t get me wrong, this IS a business and if they stop paying, you need to be firm and find the best solution for all parties. You’ll need to check your emotions at the door for some of the similar heart wrenching personal issues I have dealt with over the years, but even at those times you can only do so much.

In Conclusion

I have learned that the majority of people respect themselves and are prideful of their residence, even if they don’t own it, they pay up every month as long as you keep your end of the bargain. Part of that agreement is being able to communicate with them, at times help them out, and even sparing a few moments to share a laugh.

In Real Estate, you’re not required to be friends however, you are rewarded if you’re friendly! Above all, YOU MUST LIKE PEOPLE to build a sound and sustainable investment portfolio. A property is just a building, the people pay the rent.

Are you a people person? Do you focus on building trust and relationships?

I’d like to hear your comments below and thanks for reading!

Source: http://www.biggerpockets.com/renewsblog/2014/08/22/importance-genuine-person-real-estate

2 hours to make websites generate over $5,000 a month on autopilot...

It’s always refreshing to see new strategies to make money online. However, the majority of the time I’m pretty disappointed with the results.

When I was recommended to buy Google Sniper 2.0, I thought it would be another system that just left me disappointed, but the proof and success stories tipped me to buy it. A quick Google search for testimonials and by watching the sales video it was clear that this system has worked wonders for other people, and it’s actually generated the most online success stories than any other system/course to date. It was a no brainer to give it a shot personally.

At the time in my Internet marketing journey, I was pretty lost as to what road to head down. Google Sniper 2.0 really outlays the basics, from picking a niche, choosing keywords, buying a domain to setting up a wordpress website which will generate passive income online. It’s an extensive guide, but it’s easy to pick up (the walkthrough videos by George help also).

I studied the strategy pretty extensively to start with, and created my first “Sniper” site the next day. I was pretty excited due to the success stories, but still had that common doubt that it would be another blowout. I made my first bit of commission two weeks later after setting up the site completely. It wasn’t a huge amount but it was something, and that was the trigger to skim through the course once more to see if I could improve my site in anyway. The site in question started to generate me a tidy amount of commission, and still generates on average $375 a month (on autopilot).

As I’ve been recommended many times before, “if something works duplicate it...” And that’s what I did. I now have about 10 sniper sites, all generating commission each month. Each site differs in the amount of money I’m making, but I can’t squabble as I’m on the hunt for more...

The best thing about this course is alongside earning a nice income each month from this system on autopilot with no traffic generation, it’s also an extensive guide into niche research, finding products to promote and how to set up your own website. Yes, it may need to be read through a few times, but believe me... It’s worth it.

Check out Google Sniper 2.0 here

Network marketing 101: How much time does it take to build a successful business?

When I started my network marketing business in 2009, I had hardly any “extra time” left in my schedule. I was working 40+ hours per week in a cubicle for my public relations job and I was also engaged to be married, so we were planning our wedding. The last thing I thought I had time for was a side business.

What I realized, however, was that most successful network marketers started their networking careers alongside another full-time gig. The beauty of network marketing is that it’s a very social business. You might also call it “lifestyle marketing” because a lot of the “work” takes place throughout your normal day – as you strike up a conversation in line at the bank, as you’re reconnecting with a former co-worker over lunch, while you’re speaking with another parent at your child’s soccer game.

If you can find 5-10 hours or so per week of social time in your schedule, then you absolutely have time to build a successful network marketing business. It’s not so much about the hours of time you put towards it, but how you spend that time. For example, you will have WAY more success spending 5 hours per week meeting people over lunch or reconnecting over the phone than you would spending 10 hours per week organizing your office or replying to emails.

The core of success in the network marketing industry is engaging in conversation with people and sharing about your business/product. You get paid for presenting and sharing, NOT for racking up hours on a timesheet.

If you’re new to network marketing, focus on the windows of time you have in your schedule and maximize those with revenue producing activity. And also keep in mind, this is NOT an overnight success business. Just like the athletes you see competing in the Olympics, there’s a TON of behind the scenes preparation (and often failure) that takes place!

Taking on any new skill set or career path is going to require learning. Most people don’t achieve success in network marketing because they quit too soon. Robert Kiyosaki (author of Rich Dad, Poor Dad) says to give your network marketing business a minimum of 5 years before you quit. Of course, there are exceptions to every rule. Some network marketers will skyrocket within 1-2 years and others it may take 6-8 years…the key is consistency and remembering that everyone’s journey is different.

Network marketing has positively impacted my life in so many ways. It’s allowed me to pursue a calling that I’m crazy passionate about and not be “stuck in a job”.

Success will be defined differently by each person you speak with. Some desire an extra $200 per month alongside another career they love. Others desire $3,500 per month to replace a job that no longer fulfills them. Others are seeking $20,000 per month so they can give generously and change the lives of those around them.

Whatever your definition of success is…you can find it in network marketing.

Whatever your schedule looks like…you can find the time to be successful in this industry. Decide, do and don’t quit.  

Source: http://kristadial.com/2014/07/network-marketing-101-much-time-take-build-successful-business

3 money lessons your child should learn before college

College is an exciting time. New classes, a new atmosphere, and seemingly limitless possibilities. But with that new-ness, there can also be a lot of fear. In addition to worrying about their ability to handle the course load and thrive without their parents and friends, many students wonder if they will be okay financially.

College costs a lot of money. So before you send your child off to school, make sure they are prepared to make good financial decisions that will allow them to have a bright financial future. Here are three money lessons your child needs to learn the summer before college.

Savings is more than “rainy day”

Most people would agree it is a good idea to save money, but not everyone agrees why. Before your child heads off to college, it’s important to talk about what a savings fund really does for you.

Some people believe you only need to save for a “rainy day,” and therefore only need a limited amount of money in your savings account.

Others believe a person’s savings account should go above and beyond the basics, to provide security and to enable you to take on exciting, once-in-a-lifetime opportunities.

That’s just the conversation you need to have with your soon-to-be college student.

Ask your child to think of their current financial situations, with and without savings. What if they were offered a job or vacation opportunity right now in a desirable foreign country? Would they have the funds to make it happen? Would they be able to say “yes,” or would their lack of savings tie them to their current job or location?

The sooner your child begins to see his savings account as more than a “rainy day fund,” the sooner he will take saving money seriously.

Learning the value of an hour

Hourly jobs are staples of the college experience, so encourage your child to get a jump on it with an hourly summer job before he departs for college. This is a great way to meet new people while taking an active role in his or her finances. It’s also a great way for a college student to learn the value of an hour.

Everyone has the same amount of time in a day, even though some people make a lot more money than others. Use this example to teach your child about diversifying their income with passive income.  Also help them understand how developing a diversified set of skills / interests is important to wage growth and long-term employment prospects.

Passive income is recurring income you earn for work that you have already done. For instance, authors earning money from books they have written is passive income. Earning royalties for a product or idea you create is also a way to earn passive income.  Investing, though, is probably the most common form of passive income.

Over time, earnings from passive income can greatly outrun earnings from hourly jobs, allowing people to enjoy a higher quality of life and a better financial situation in retirement. So teach your child this lesson, and encourage them to prioritize working on ways they can reap the rewards of passive income.

It is also important for people to have a diverse set of skills / interests, because you never know if what is lucrative one year will be lucrative the next. For instance, knowing a great deal about how to make a typewriter work was a good idea in the 1970s, because it made life easier if you worked with a typewriter. But nowadays, not so much.

Help your child experience the difference between hourly work, diversifying their skills, and passive income to motivate them to build wealth early on.

Budgeting and buying low-cost

When children first head to college, it is common for them to discover large box stores that try to sell college necessities to them. From couches and mini-refrigerators to cutlery and coffee machines, students can end up with a large total just purchasing the bare necessities.

But your child does not have to pay the big tab when it comes time to prepare for college life.

Teach your child that new is not always worth the price tag, when a used item would do the same thing. Consider checking out yard sales, Craigslist, and thrift shops to compare prices for new versus used items.

While doing this, a fun game you can play is to teach your child the difference between purchasing new and used items in terms of how much money they save. Have your child shop and compare the prices of new and used items. Challenge them to find the items they want at the cheapest costs possible.

Then, have your child subtract the difference between the average cost of a new item and the lowest price they could find. After your child makes their purchases, reward your child with the difference in price, and tell them to use the money as a beginning to their savings.

Getting off to a good start with 3 basic money lessons

College is an exciting, scary, expensive time. So make your child’s college experience a worthwhile investment before they ever set foot on campus. Teach your child these three money lessons before you drop them off, so you will know you have set them on a path toward financial responsibility and success.

Source: http://blog.wealthminder.com/goals/education/3-money-lessons-child-learn-college

4 Ways Income Investors May Get it Wrong

For decades, there has been a grand debate afoot in the investing world between “total return” and “income” investors. The truly educated don't worry about it much because they realize there isn't a lot to it. Your goal should be to avoid an extremist or absolutist position on the matter.

Income investing

The basic idea behind income investing is that you only spend the income from your investments. Seems like a great idea, right? It's easy to know when you have enough to retire—when the income from your investments replaces the income from your job (or at least your living expenses). Plus, you know you'll never run out of money if you're only spending the income.

Unfortunately, if you become an extremist in this camp, you may get burned by several issues. There are really 4 ways that income investors get it wrong when compared to a "total return" investor.

1. Income investors are likely to underspend

Safe withdrawal rate studies, such as the Trinity Study, have demonstrated it is quite safe (although not perfectly safe) for you to spend about 4% of a traditional portfolio each year and expect your portfolio to keep up with inflation throughout a 30-year retirement.

However, these days most traditional investments have a yield much less than 4%. The Vanguard Total Stock Market Fund yields just 1.8% and the Total Bond Market Fund is only slightly higher at 2.1%. CDs, "high-yield" savings accounts, short-term bond funds and most muni and Treasury bond funds are even worse. Even value stocks and REITs have yields much less than that.

If you're only going to be spending the yield on these investments, you're going to be spending much less than 4% per year. That means you will need to do one of 3 things: have a higher savings rate, work longer, or spend less in retirement. Since you are spending less, you are also likely to leave a lot more money behind at death.

In short, you'll spend less than you could have if you were willing to spend some principal.

2. Income investors may not hold the best portfolio

An income investor is far more likely than a total return investor to chase yield, since every little bit of extra yield increases his or her lifestyle. However, there are many investments with a high yield whose total return may not be what you would hope. The classic example is junk bonds, and the junkiest of junk bonds these days are peer-to-peer loans.

A portfolio of peer-to-peer loans may yield 20%, while only having a total return of 10% due to a high rate of default. If you're spending 20%, that portfolio isn't going to last long. That doesn't mean there isn't room for higher yielding investments in your portfolio, but you want to make sure you are holding a diversified portfolio with excellent long-term, risk-adjusted returns. Such a portfolio almost surely will include some assets that have a low-yield.

Never forget that a yield of 8% is not the same as a total return of 8%. While it feels good to have an 8% dividend in hand, if the investment actually lost 25% in value, you’re not making much progress financially.

Investment real estate is a particularly attractive asset class for income investors because a significant portion of the return comes from income, often 5% to 7% of a 7% to 10% return. This yield is much higher than anything available in the "paper market" outside of low-quality bonds.

While income property can form a significant portion of your portfolio, a portfolio of 100% real estate doesn't pass the sniff test when it comes to diversification. In addition, real estate possesses significant downsides as an asset class including significant maintenance and transaction costs, aspects of a second job, and an inefficient market requiring expertise and experience to get solid returns.

3. Income investors may pay too much in taxes

As a general rule, income tends not to be very tax efficient. There are exceptions, of course, as muni bonds are usually federal, and sometimes state, income tax free and some of the income from real estate can be shielded by depreciation, especially early on in the life of a property.

Bond dividends, REIT dividends, and CD interest is taxed at your regular marginal tax rates instead of the lower dividend and capital gains rates available with stocks. To make matters worse, you have to pay those taxes even if you didn't really want to spend that income yet. There is no way to defer the income until you actually want it in the future.

However, a total return investor can often "declare his own dividend" by selling some of his investment—for instance, a few shares of stock. The tax bill on that money (which spends just as well as CD interest) may be very low when you consider the ability to sell high-basis shares, harvest tax losses, and take advantage of the lower long-term capital gains rates, especially in the lower brackets.

4. Income investors may get burned by inflation

 
Higher yielding investments, such as CDs and bonds, tend not to keep up with inflation nearly as well as traditional lower yielding investments such as stocks.

If you focus too much just on income, you may forget that your real opponent in the investing game is your personal rate of inflation. If your income is steady, or only increasing slowly, and your expenses are increasing at a moderate rate, it won't take long before you will be faced with an unsavory choice: cut your lifestyle or sell your investments.

A total return investor spending 4% of his portfolio each year has an inflation adjustment built in to his plan. An income investor needs not only to make sure his investment income is greater than his spending, but also needs to make sure it will stay that way as the years go by.

The solution

 
Rather than focusing only on your investment yield, first build a reasonable, diversified, low-cost portfolio without considering the yield. Then, when it comes time to spend from that portfolio, use a combination of income and tax-efficient selling of assets to fund your retirement-spending needs.

Avoid an extreme position on income in order to develop a successful investing plan.

 

Source: http://www.hcplive.com/physicians-money-digest/personal-finance/Dahle-4-Ways-Income-Investors-May-Get-it-Wrong

The Power of Your Network in Real Estate

I was chatting with Chris Winterhalter, a successful apartment building investor and active participant in the Bigger Pockets forums.

He talked about some of the advances he made in his investing career, and many of them were tied to people he met. In fact, he met his current business partner at a real estate investing conference. That partner owned a commercial construction company and wanted to expand into apartment buildings. Chris was a wholesaler/flipper and wanted to get into apartments. A perfect match.

This conversation made me reflect on what networking has accomplished in my career but also made me think about what I could be better.

We Can Accomplish More with Others, Then We Can Accomplish on Our Own!

I had an apartment building under contract, due diligence was completed, the appraisal was completed and we were 14 days away from closing.

Everything looked good. Until I got a call from the loan underwriter who informed me that the local bank I was working with changed their mind about the deal. “The loan committee didn’t like the area the building was in”, was all he said.

Wow, really ?!? Two weeks before closing?

Fortunately I had been working with 4 other lenders, got them to present me with term sheets, and picked the best one. The second best one looked pretty good at this point! Sure enough, that bank jumped on it, we transferred the appraisal and they closed on it in 23 days.

I would have been stuck had I not been networking with other brokers.

The Power of Your Network

While I get the majority of deal flow from commercial real estate brokers, occasionally I get one from someone in my network.

One time I got a smaller building through a wholesaler from whom I had previously bought houses to flip. He knew another wholesaler who had this build under contract and was looking to sell the contract. The deal didn’t work out, but it looked promising for a while.

I do better when I have mentors. They give me confidence I didn’t have before. They might say “buying a 100 unit isn’t so bad. So you need to raise $1M, so what? It’s not that hard, I know you can do it!” Even if they don’t directly help, they’re confidence in me lets me expand my own comfort zone so that I, too, start believing I can do it.

I can Improve with My Networking

My friend Jonathan is my model in what it means to be a good networker: he’s constantly introducing people to each other.

He spends time with people, he calls them regularly. He asks you what you’re looking for and then keeps his eyes for something that could help you. He doesn’t ask “what’s in it for me?” but “what can I do to help you?”

I’m outgoing enough, but I’m not intentional enough with networking. I need to be more like Jonathan and find ways I can help others in my sphere of influence each and every day.

The lesson here is that we need to be more intentional with our networking. Put it on your list each week. Make that phone call, schedule that lunch, follow up with conversations, attend that investment meeting. Then figure out how you can help people achieve what they’re striving for.

What do you do to network with others? What can you do better?

Be sure to leave your comments below!

Source:  http://www.biggerpockets.com/renewsblog/2014/08/11/power-network-real-estate

Indecision Costs

More money has been lost to indecision than was ever lost to making the wrong decision. The economy and the housing market have caused some people to take a “wait and see” position that could cost them in lost opportunities as well as almost certain higher costs in the future.
To illustrate what the opportunity cost might be, let’s compare what the value of the down payment two years from now would be if it was invested in a certificate of deposit, the stock market or used to purchase a home today.
A 3.5% down payment on a $175,000 home is $6,125.00. If it was invested in a CD that would earn 2%, a person would have $6,372 in two years. The earnings would be taxed as ordinary income tax rates. It wouldn’t earn much but it would be safe and secure.
The same amount would grow to $7,013 in the stock market if you picked the right stock or fund and it yielded 7%. The earnings would be taxed at the long term capital gains rate. The return could be greater but so is the risk involved.
If this person were to purchase a home today that appreciated 2% in value over the next two years, the equity in the home would grow to $18,769 due to value going up and the unpaid balance going down.

Source: http://www.newhopehomesforsale.org/indecision-costs

Protecting your real estate assets

Estate planning and asset protection go hand in hand. After all, planning for the distribution of wealth is useless if you have no wealth to distribute.

But, asset protection for real estate is particularly challenging, because it’s the only asset that can’t be moved. Many asset protection strategies involve relocating assets to domestic or foreign jurisdictions that offer greater creditor protection. But unlike other assets — such as cash, bank and brokerage accounts, stocks and bonds, cars, boats, jewelry, art and other collectibles — real estate can’t be removed from the jurisdiction in which it’s located. Let’s take a closer look at several strategies for protecting your real estate assets.

Giving gifts

One of the most effective ways to protect real estate from creditors is to give it to your children or other family members, either outright or via a trust. Doing so places the real estate beyond the reach of your creditors and may also reduce your estate tax liability. The disadvantage of this strategy, however, is that you’ll lose all economic interest in and control over the real estate.

Further, although transferring assets may protect you from your creditors, the assets would now be subject to the claims against the person or entity to whom the assets were transferred. Keep in mind that gifting real estate — as well as the other asset protection strategies discussed later — won’t protect you from your existing creditors if a transfer constitutes a “fraudulent conveyance.” A fraudulent conveyance is a transfer of property made with the intent to hinder, delay or defraud creditors. The best way to avoid a fraudulent conveyance claim is to transfer property as early as possible, before any creditor claims arise.

Protecting your home

There are three strategies that can protect your home against creditors:

Tenancy by the entirety. About half the states allow married couples to hold title to their principal residence as tenants by the entirety. Similar to joint tenancy, tenancy by the entirety also protects the residence during the marriage against claims by a creditor of one of the spouses. It doesn’t protect the residence against a couple’s joint liabilities.

Homestead exemptions. A few states offer unlimited homestead exemptions, which protect a principal residence from creditors regardless of whether it’s owned by a couple or a single person.

Qualified personal residence trust (QPRT). A QPRT allows you to transfer a principal residence or vacation home to an irrevocable trust — thereby placing it beyond the reach of creditors. Unlike an outright gift or transfer to a regular trust, however, you retain the right to live in the home during the trust term. At the end of the term, the property is transferred to your children or other beneficiaries. QPRTs can also be used to reduce gift and estate taxes.

Protecting other real estate

For business and investment real estate, an effective asset protection strategy is to transfer title to a limited liability company (LLC) or limited partnership (LP). So long as the transfer isn’t a fraudulent conveyance and the LLC or LP is structured and operated properly, the entity shields the real estate from creditors’ claims.

A creditor with a judgment against an individual owner (a member or limited partner) can’t satisfy that judgment against the entity’s assets. Generally (but not in all cases), the creditor’s only remedy is to seek a “charging order,” which permits the creditor to intercept any distributions made by the LLC or LP to the debtor. So long as the entity doesn’t distribute the real estate or other assets to the debtor, the creditor’s efforts to collect are frustrated.

Plan early

If you’re exposed to significant liability risks — either personally or professionally — it’s a good idea to have an asset protection plan. And the earlier you implement your plan, the more likely it is to succeed.

Source: http://www.jdsupra.com/legalnews/protecting-your-real-estate-assets-03666

Cash is not an investment

If you have an expectation of growth in your investment, forget cash! I am referring to cash investments such as money market accounts, interest bearing checking accounts, savings and certificates of deposits. It is merely a parking space for short term savings! Investing is expending money with the expectation of achieving a profit or material result by putting it into financial schemes, shares, or property or by using it to develop a commercial venture. Where is your cash?


Savings accounts

I am not suggesting to stop saving! Saving was my strategy to success. Savings is the portion of disposable income not spent on consumption of consumer goods, but accumulated or invested directly in capital equipment or in paying off a home mortgage or indirectly through purchase of securities. More simply, money put aside for the purpose of future use. Most financial bloggers are always suggesting emergency savings for those unplanned or unexpected expenses.
Emergency savings usually is six (6) to eighteen (18 months of expenses. If I use fifty (50) thousand dollars as average earnings, your emergency funds should range anywhere from twenty (20) thousand dollars to sixty (60) thousand dollars in emergency savings. That is a lot of money to keep accessible for an emergency. Do you really need all of it to be accessible? The key word is accessible! How much do you really need accessible and how much could be working for you in the stock market or elsewhere?
How much money do you really need for emergencies?  The rest could be laddered in CD’s and eventually in longer term investments. My savings (cash/interest checking account) is just a few hundred dollars. More specifically, the portion of my earnings not set aside for my monthly expenses. My emergency funds are minimized because of a great deal of planning and access to laddered assets. I can use my credit cards for sudden expenses which will give me thirty (30) or more days to solve the problem.

Rethink your savings! 

Most rich people have their money working for them all the time. I want to have my money working too. I can use my (low interest rate) line of credit so I do not incur (14-188% interest) credit card. Last, I can sell stock to take care of the emergency. There are enough safety nets that I feel comfortable with this strategy. In addition, part of my budgeting process is planning for emergencies. Most emergencies are known if planned properly. If you drive an old car, you should expect unplanned repairs.
As you accumulate more and more assets, you need to do the planning to protect them. It may be insurance, savings or planning. In business, we call this risk management. Risk management is the forecasting and evaluation of financial risks together with the identification of procedures to avoid or minimize their impact. I often apply business strategies to my personal finances because it makes sense! I do not want my business or my personal finances to go bankrupt!

What can you do?

Where should you put your savings? Your first step is to figure out how much you need accessible immediately or within thirty (30) to forty (40) days. It is sort of the planning you should do when you figure out how much life insurance you need. If I died suddenly, my wife would need sufficient money to pay the mortgage and other expenses until she received the insurance check. The same planning is necessary for your emergency savings number.
The rest of your savings will have different priorities or maturity dates. You may need two (2) or three (3) thousand dollars in a savings account, but access to much more over time for those unplanned emergencies. What are your circumstances? Do you have a lot of assets or access to cash if you need it? Is your job/career stable? Is your debt low or under control? If you lost your job tomorrow, do you have a plan or are you one paycheck away from bankruptcy? These answers determine what you do!
Similar to any savings you may need in five (5) year or less, you should be more conservative with the investments. For example, I would not invest fifty (50) thousand dollars in a volatile stock or fund because I want to be assured I will have those funds in five (5) years. I would hold these investments in a brokerage account where there are no penalties for withdrawal early. The exact choice of investment is based on your personal risk tolerance and need priority.
If you have several layers of safety, a secure job and a solid plan, you still want to assess the investment risks. I set up a brokerage account seventeen (17) years ago and never needed to liquidate the investment. In the meantime, it has more than quadrupled in value. The stock market is not the only choice, but certainly the most liquid. You can sell your stock and have cash within just a few days. Homes, businesses, collectibles, etc are not as liquid.

Final thoughts

I tried to offer a different perspective on a long standing personal finance rule. I hope I am stimulating thinking and discussion. I have spent a lifetime trying to reach my financial goals. I managed to achieve it early (38 years old) and now I want to share my strategies and insight to help others achieve it too. Rich successful people keep their money working and growing. What are you doing with your savings? Do you consider cash an investment?

Source: http://www.krantcents.com/cash-is-not-an-investment

How Not To Die Full Of Regrets

If you ask anyone what they want in life, chances are they will tell you one of the following things:

• More money
• Peace/happiness
• Better physical and emotional relationships
• A sense of purpose
• More freedom
• Passion for life
• Better health
• More energy
• Control over their time

These are all wonderful things and in a perfect world, we would have them all. How many of you can say that you wouldn’t like more of any one of them? Of course you do.
Everything on that list can change your life significantly for the better. So why aren’t we doing them?
We all want these things, but don’t think we need them. I beg to differ. Wanting is never going to bring us happiness. Wanting is for the lazy. If we make the decision that we need these things in our lives, amazing things will happen.
For example, if we needed $10,000 for an operation that would save the life of our child, we would find the money. Regardless if we were flat broke and $50,000 in debt, we would get that money. Why? Because we needed it.
You might be thinking “nobody is going to die if I don’t have freedom over my time or I don’t have a sense of purpose” but you’re wrong.
We are dying. Each and every hour we spend wallowing in mediocrity and in the servitude of someone else, we are dying. What’s worse is that it’s not a quick and painless death. No, it’s a 40 or 50 year painstakingly slow death that slowly transforms your mind and body into the living dead.
Our society has taught us that this is not only OK, but is the way things should be done. We should find a job and work our way up the ranks. We should allow others to control our financial futures. We should spend 40+ years working a job whether we actually like it or not.
That’s being responsible. That’s taking care of your family. That’s providing security.

That’s bullshit!

Working a shit job your entire life does not do anyone any good, especially you! Being unhappy for years on end because you’re “stuck” in a job you hate is no way to live.

The Age of Opportunity

There is no (good) reason that in this day and age that anyone needs to feel hopeless in their search for more meaning, passion, and excitement in their lives. I don’t care if we are in the middle of another Great Depression, there is always a way to make money doing something you have a burning passion for.
We have more resources, tools, and opportunity at our fingertips than at any other time in history. Yet, we are still sitting on our asses and waiting for things to change. The waiting game will cost you a lot more that you think.
It very may well cost you your life.
How many times have you put something important off because it was too hard? “I’ll do it tomorrow” you say. Well, tomorrow never comes.
Life will not give you a second chance. You have to make your life work for you, not the other way around.

Don’t Die Full of Regrets

If you enjoy your job and are happy with your current path, then great, I’m happy for you. I’m talking to the tens of millions of people who aren’t; the ones who celebrate TGIF, dread Sunday nights, and have to punch a clock for someone else every day.
If you subscribe to the theory that this is how life is supposed to be and “work” is not supposed to be enjoyable, that why they call it “work”, I have news for you.
It’s not. Not by a long shot.
Whether or not you agree with me is inconsequential. It’s a stone cold fact that the majority of people will piss away their lives working meaningless and unfulfilling jobs and it’s a travesty.
Do you envision yourself in your final years to be wishing you had done so many other things with your life? Of course not.
You believe that you’ll have lived a good life and will die with few regrets. We all want to believe that will be the case, but the sad fact is that we will die with some major regrets.
But you don’t have to…

Fear is Stopping You

The reason people die with significant regrets is because they lived in fear.
The only thing between living the life you want and living the life you have is fear. And it’s OK to be afraid, but if it controls you, it has won.
Fear has many faces:

• The fear of criticism
• The fear of failure and
• The fear of the unknown
• The fear of change
• The fear of dying
• The fear of living up to our potential
• The fear of poverty
• The fear of being alone

This list could go on in perpetuity. There are so many things that you allow yourself to hold you back and in order for you to move forward, you must face them.

Belief is the First Step

In order to make any change in your life, you must first believe it’s possible. The human mind is an incredibly powerful tool. Of course belief alone will not get you anywhere because it has to be followed up with action.
Because you are conditioned from a young age to believe that the best path in life is the one most traveled, many of you cannot comprehend the idea of living a life completely on your terms.
What if you could do something that lit you up inside and get paid well for it? What if you could feel confident and in complete control of your life? What if you wake up every morning with a sense of purpose and full of vibrant energy?
You can.
The only thing holding yourself back is you.
What are your fears? What’s really holding you back from living the life you want?

Source: http://www.pickthebrain.com/blog/how-not-to-die-full-of-regrets

Building Wealth Across the Generations

Families are awesome, especially when they can work together toward common goals. In fact, the ability for generations to work together can be a true wealth-producing machine. It requires a very long-term view, excellent family dynamics, and a little bit of education and “starter wealth,” but if done properly, can be far more powerful than any other personal finance concept. If generations are willing to “cover” each other, they can increase their ability to take risk, decrease their need for expensive insurance-based solutions, and decrease interest paid. Let me give you a few examples.

Youth BackStopping Retirement Savings

In decades past, there was no such thing as retirement. People worked until they no longer could, and then their kids took care of them until they died. Or until they took them out on the ice to die. Or whatever. Now that it is apparently a sin to rely on your children, people put a lot more effort into supporting themselves in their retirement years. But because they have to be self-sufficient, they cannot afford to take risks that they otherwise could. Instead of investing in risky assets with a high expected return, like stocks or real estate, the elderly are forced to diversify into bonds, CDs, and immediate annuities to ensure they don’t run out of money. However, if their children could provide the “insurance” against them running out of money, the elderly could not only have a higher withdrawal rate, but could also afford to take more market risk with their portfolio. How do the kids provide that insurance? Simply by being willing to let the elderly live with them or help with their living expenses from their current earnings. Another way to help would be by allowing the elderly to delay taking Social Security until age 70 by helping with living expenses until that time.

Paying For College/Homes

Now, let’s look at a way the older generation can help the younger generation. One of life’s most expensive decades is the 20s. You have very little earning ability but lots of needs including an automobile, a college education, perhaps a wedding, and most importantly, a first home. Due to a lack of cash and earning ability, young people end up borrowing a great deal of money for these things, and not always at the best possible terms. The more of this stuff that the older generation can pay for, the better off the family as a whole will be. In fact, it’s even possible that the debt for one generation could be the income for another. There are IRS rules about how much interest must be charged, but when combined with gifting allowances, it’s relatively easy to provide excellent terms on family loans.
Imagine being debt-free at 30. No student loans. No car loans. No credit card loans. No mortgage. You come into your peak earnings years and can immediately start saving for retirement and your own children’s college. Instead of the family paying interest, the family is earning interest.

Taking Advantage of the Step-up In Basis

One of the greatest gifts from the IRS is the step-up in basis that your heirs get on your assets upon your death. A great deal of estate planning can be done around this simple rule. Many times, if two (or three) generations work together, a family can avoid realizing a capital gain and allow that step-up to occur. For example, if grandpa needs some money, and the only way to get it is to sell the family farm, but that sale will generate a $2 Million capital gain, it would be far better for the kids to provide grandpa the money he needs out of their own earnings or savings and wait for him to keel over to sell the farm. More money for everyone. The same thing can be done with stock portfolios, the family home, or the lake cabin.

Gifting Rules

The gifting rule is a fantastic way to avoid paying estate taxes. In fact, it seems silly for anybody beyond the ridiculously wealthy to ever pay federal estate taxes when it is so easy to avoid them. Imagine an elderly couple with an estate tax problem (a growing portfolio > $10 Million). They want to pass as much of that portfolio on to their heirs as possible. Well, how much can they pass each year? They can pass $14K each to each of their heirs. So let’s assume they have 4 married children, each of whom has 4 married children each of whom has 4 unmarried children. That’s a total of 104 heirs. $14K*2*104= $2.9 Million per year that can be legally moved from the portfolio to the heirs, estate and income tax free.

What About the Generation Skipping Tax?

If you keep the annual gifts to $14K or less, the estate tax exemption ($5.34M per person in 2014) also applies to generation skipping taxes. Just use annual gifts to reduce the size of the estate. In general, if there is no estate tax due, there should be no generation skipping tax due. However, keep in mind the portability of the estate tax exemption between spouses does not extend to the generation skipping tax, so if a couple is in the $5-10M range, meet with an estate planning attorney in your state for some special planning.

Stretch Roth IRAs

One of the greatest gifts you can be left is a Roth IRA. It’s even better if that gift is left to someone quite young because the required minimum distributions are based on the age of the heir. It’s possible for a Roth IRA to allow tax-free compounding for over 150 years if done properly. In order to maximize family wealth, it’s best to leave these valuable assets to the youngest person possible. While a stretch traditional IRA isn’t quite as nice (since taxes are due on the withdrawals) it can still allow tax-protected growth for many additional decades if left to the right heir.

Paying for Education

Just like it’s best for the high earner to claim his college student as a dependent on his taxes, so is it best for the tax deductions to be concentrated in those who are earning the most. Education credits are far more valuable that way. Thus, the rich generation should pay the tuition bill. If they’re not able to truly cover it, the younger generation can gift them the difference. Likewise, parents may not be able to max out 529 contributions upon the birth of a child, but the grandparents might be able to- extending the period of time that assets grow in a tax protected way. Result- less taxes for everyone.

Estate Planning

There are many other great ways to pass money from the older to younger generations, including irrevocable trusts, spendthrift trusts etc. It would be an estate planner’s dream to have multiple generations of people who all get along with each other walk into his office and ask him how best they can maximize their assets by working together.

Asset Protection

Assets can also be protected from creditors by moving them from those with the highest risk to those with lower risks. Many docs already do something similar by titling the cars, boat, and house in their spouse’s name.  Why don’t more people do this? Because they don’t trust each other. Overcome that hurdle and all kinds of things are possible.

Reduced Insurance Costs

The faster the next generation becomes wealthy, the sooner they can stop paying for unneeded disability and life insurance. Longevity insurance and long-term care insurance premiums can also be saved, further building family wealth.

Teaching financial principles

The most important thing that multiple generations can do in order to maximize family wealth is to pass along the knowledge and values that allowed that wealth to accumulate in the first place. Most of us enter our 20s armed only with the financial knowledge taught to us by our parents’ examples. Dedicated time spent teaching financial principles, both by example and more formal methods, can pay incredible dividends. Teach your children to work, earn, save, invest, spend, and give wisely and you will have done much to increase and protect the family nest egg. If each generation views themselves as stewards of the family wealth, charged with preserving and growing it for the next generation, only good can come of it.
What do you think? What has your family done to maximize wealth through the generations? Comment below!

Source: http://whitecoatinvestor.com/building-wealth-across-the-generations

5 Tips For Avoiding Investment Bubbles

Investment bubbles have become a regular part of the landscape in recent years. For investors, that means that avoiding boom-and-bust cycles has become an essential survival skill.

Why so many bubbles?

The collapse of Japan’s market in the early 1990s. Various emerging market crises later in that decade. The dot-com bust. The bursting of the real estate market bubble, followed by the financial crisis. More recently, speculative peaks and plunges in oil and gold prices.

Why does this keep happening? After all, we are in the information age — shouldn’t investors be better informed than ever before? Not really. They certainly have more information, but more is not always better. The Internet and the 24-hour news media often fan the flames of hype and help it spread.

Meanwhile, international investing allows capital from around the world to flow into hot areas, so bubbles are less contained within national borders. Finally, the low-interest-rate environment of recent years is a contributor. With bank rates near zero, and Treasury yields not much better, investors are desperate for alternatives. Desperation often leads to mistakes.

Government intervention: help or harm?

Speaking of low interest rates, they are an example of how government intervention may do more harm than good when it comes to managing boom-and-bust cycles. The Federal Reserve has responded to a crisis of excessive borrowing by lowering interest rates to encourage even more borrowing, and in the process has driven interest-starved investors into more speculative asset classes. Meanwhile, lawmakers actively encouraged subprime lending and the deregulation of banking.

To a large extent, the government is eager to keep the party going for the time being, which means helping to make some bubbles bigger.

Minimizing the impact

So — bubbles are a recurring threat, and the government is not going to save you from them. What then do you do?

Here are five ways you can minimize the impact of bubbles.

1. Don’t mind missing the party. The music always sounds good, until the police raid the joint. If something feels wrong, don’t join in just because it looks like everyone else is having fun.
2. Focus on your objectives. Don’t get sucked into playing someone else’s game. If you focus on investing to meet your needs and circumstances, you will be less inclined to follow the crowd.
3. Diversify. It is one of the most basic of investment principles, but one that people abandon too readily. If you spread your investments out sufficiently, you will minimize the impact of any one bubble bursting.
4. Use a sell discipline. When you buy something, have a target price at which you plan to sell. That way, if you are fortunate to see your investment go up, you won’t get drawn into holding on just because it seems to be getting more popular.
5. Rebalance. This will help you execute tactics 3 and 4: As individual investments or asset classes rise, periodically trim them back to keep them in line with your planned mix. That way, a bubble won’t inflate an investment to the point at which it has an oversized impact on your portfolio.

Speculative bubbles are so ubiquitous, and their reach so widespread, that it would be unrealistic to talk about avoiding bubbles altogether. However, with some disciplined investing, you can minimize the impact and avoid disastrous damage to your portfolio.

Source: http://www.forbes.com/sites/moneybuilder/2014/08/04/5-tips-for-avoiding-investment-bubbles