Editor's ChoiceCategories
Credit Type
Issuers
Blog

Increase Your Financial IQ Book Review Part 3

By: Brooke Kaelin
01/04/2009

increaseyourfinancialiqEvery Sunday here at Ask Mr. Credit Card we review a personal finance book. This week we are reviewing Increase Your Financial IQ by Robert Kiyosaki. If you missed the first two sections of the review you can read them here:

In this section of the book Kiyosaki takes an in-depth look at the different Financial IQ’s, beginning with number one.

Financial IQ #1: Making More Money

Kiyosaki spends some time detailing his own history here. How he graduated from school, took a job with Standard Oil, and then left that job and took a huge pay cut to voluntarily serve in Vietnam. After spending five years in the military (one in Vietnam) he was honorably discharged.

When Kiyosaki returned home he took a job with Xerox – because he wanted to learn to be a salesman, and they provided excellent training. He took the job even though it meant he would take yet another pay cut. Kyiosaki claims he did this because the education was more valuable than the immediate income.

After working for Xerox for a couple of years, and eventually becoming their top salesperson, Kiyosaki started his own business – selling nylon surfer wallets. He briefly chronicles the rise and eventual fall of this business, and then the struggle of rebuilding it.

He believes that every step of his journey made him smarter, more financially educated, and it set the stage for his current business success with The Rich Dad Company.

Every Goal Has A Process:

As we all know, every worthwhile goal has a process and takes work. For example, to become a medical doctor there is a rigorous process of education and training. Many people dream of becoming a doctor, but the process gets in their way. Let me tell you, my own process was a lot of work!

One of the reasons people lack financial IQ #1: making more money, is because they want the money, not the process. What many people do not realize is that it’s the process that makes them rich, not the money.

One of the many reasons lottery winners or kids who inherit family wealth are soon broke is because they received the money, but didn’t have to go through the process. Many other people fail to become rich because they value a steady paycheck more than the learning process of becoming financially smarter and richer. They are held back by the fear of being poor. It is this very fear that keeps them from taking the chances and solving the problems required to become rich.

Wow. That’s some of the best wisdom I believe I have ever seen in a financial book. It is the process that makes you rich. The learning new things, learning from your mistakes, failing, picking yourself back up and doing it again.

Maybe I’m odd, but I find it comforting to think of being rich as a process – a path that I am already on even if I dive into the gutter from time to time. It’s a path that I choose, and that I have control of. That is a very different thing than ing a lottery ticket each day and hoping you will get rich without the process. It’s also a very different thing from experiencing failure and deciding to stop.

The process Kiyosaki is talking about means that you pick yourself back up no matter what your failures are, and you learn from them, and you apply that new knowledge to your life.

Emotional Intelligence:

At this point it is important to point out that financial intelligence is also emotional intelligence. Warren Buffett, the world’s richest investor, says, “If you cannot control your emotions, you cannot control your money.” The same is true for your process. One of the toughest parts of my process was not quitting when I was depressed, not losing my temper when I was frustrated, and to continue to study when I wanted to run.

Another reason many people fail in their process is they cannot live without instant gratification. The main reason I mentioned the low pay I received at the start of my life was to illustrate the importance of delayed gratification. Many will sacrifice a richer tomorrow for a few bucks today. I did not make much money in my twenties or thirties, but I make millions today.

In fact, I would say that when it comes to money, emotional intelligence is the most important intelligence of all.

Instant gratification does keep you poor! I lived many years in that cycle – getting a little money, ing everything I could think of with it, and then being broke until my next paycheck. It wasn’t until I learned to save, and to wait for what I wanted, that I was really able to break out of those chains.

It too effort, time, and education as well, but mostly it took self control. Which, when you boil it down, is pretty much what this entire chapter is about: Having the self control to learn, persevere, learn from your mistakes and wait for your reward – instead of expecting the same reward without the work or discipline.

Why The Rich Get Richer:

One of the reasons the poor and middle class struggle is that they work for money and a steady paycheck. The problem with working for money is you have to work harder, longer, or charge more to make more money. The problem with physically working harder and longer is that we all have a finite amount of time and energy.

One of the reasons why the rich get richer is that every year they work to build or acquire more assets. Adding more assets does not require working harder or longer. In fact, the higher a person’s financial IQ, the less he or she works while acquiring more and better assets. You see, assets work for the rich by producing passive income.

This core concept is one of the reasons why I love Kiyosaki’s books. He is right – most people work for money – paychecks – not assets.

What he never really does hit on much (but it’s fairly obvious) is that if you are currently earning a paycheck, and have no assets, use that paycheck to your first assets. Rinse and repeat until you no longer need the paycheck. Then you will no longer be working for money. The longer you do this, the more assets you will build, and the more financially secure you will be.

Be A Problem Solver:

In order to grow wealthy, you must come to terms with the fact that problems will never go away. Each time you find a solution to problem, a new one will pop up. The key is to realize that the process of solving those problems makes you rich. And once you start solving not only your own problems, but other’s as well, then the sky’s the limit.

People will pay money for you to solve their problems. For example, I will pay money to my doctor to keep me healthy. I pay money to my housekeep to keep my house tidy. I shop at my local supermarket because my problem is hunger and starvation if I don’t eat. I pay taxes to public servants to provide a well-run government. I put money into the offering plate at church to support my spiritual guidance and education.

My Wife makes a lot of money because she solves a big problem; the problem of quality housing at an affordable price. The more she works to solve this problem, the more money she makes. I work hard to solve the problem of the need for financial education.

Simply put there are trillions of ways to make more money because there are trillions of, if not infinite, problems to solve. The question is, which problems do you want to solve? The more problems you solve, the richer you will become.

Many people want to get paid for doing nothing, and are unwilling to solve any problems. Or they want to be paid more than the problem they are solving is worth.

This is a very pragmatic approach, isn’t it? It’s very true. If we find a way to solve a problem, or fill a need – not just for ourselves, but for others too – then we can certainly become rich by doing it. Especially when Kiyosaki’s other tenets are put into play – learning from our mistakes, not giving up, and not working for money but rather, for assets.

Kiyosaki On Capitalism:

I included this section here at the end of the review because it made me laugh:

I am a capitlist, not a laborer….Many think of capitalists as pigs. And many are greedy pigs. Yet there are capitalists who do a lot of good, such as provide health care, food, transportation, energy and communications to the world.

As a capitalist who does my best to make the world a better place, my problem is with people who want to be paid for doing nothing, or paid more to do less. In my opinion, a person who wants to be paid more and do less, or nothing, is also a greedy pig.

Here’s to capitalism 🙂

I hope you enjoyed this section of the review. If you’d like to read future personal finance book reviews, be sure to grab our RSS feed – it’s free and it will deliver our articles straight to your feed reader or email.

Next week we’ll take a look at the next section of Rich Dad’s Increase Your Financial IQ. Thanks for reading!

Have you read this book? Do you have a personal finance book you’d like to see us review? Leave a comment below!

Keep Reading:

Tough Negotiations With Credit Card Companies

By: Brooke Kaelin
01/02/2009

One of our readers, Karen, recently left this comment:

I opted to pull out my 401k early to pay off debt. In doing so I’m losing about half of my retirement money. There are taxes and penalty fees for early withdrawal, not to mention the loss I took in the stock market. Bottom line is if I pay off all that I owe in credit card debt and loans, I will be broke. I had to quit my job to pull out my 401k, so the credit card debt has gone up due to late fees and over limit fees. I want to negotiate a fair amount with the lenders so I can pay them off. Is this a goal I can likely achieve?

Thanks for your question Karen!

I am sorry that you had to pull out your 401(k) money. Paying off all of your debt and loans is an excellent goal though, and it will put you in a much better financial position. To answer your question, yes, you can definitely negotiate with your lenders (All your lenders, not just your credit card companies) to get late, over the limit and any other fees removed. Especially if you are willing to pay the accounts in full.

In order to do this, you will need to get your paperwork in order first. Pull together the names, addresses and phone numbers of all your lenders. Make sure you have the current total owed as well. Then, all you have to do is give them a call. There are five key things to remember when negotiating with your lenders:

  • Be Polite – After all, you are asking them to do you a favor by removing fees. The nicer you are, the more likely the person on the other end of the phone will be willing to help you.
  • Be Persistent – Always remember that this is your money, not theirs. You re the one that has to “keep at them” until you get what you want. If the person you are speaking to says they cannot help you, ask them who can, and more importantly, ask them what they are allowed to do for you.
  • Speak with a manager – If may be very necessary for you to speak with a manager in order to get your fees removed or your totals reduced. Don’t be afraid to politely ask for one, and just deal with them instead of a normal representative.
  • Call Back If Necessary – This goes along with being persistent. Not all managers or representatives are going to be willing to help you. I wish I could say differently, but it’s the truth, from my own experience. If you are talking to someone who refuses to help you no matter how polite you are, or what you do, then simply hang up, wait a while and call back. Do not make a payment until you have reached terms that both you and your lenders can agree on.
  • Get It In Writing – As with any type of debt settlement, make sure that you get the new agreement in writing. Have them fax you a copy of the revised total, or an agreement that states you will pay the account in full once the fees are removed. If you do not get these types of thing sin writing your lenders could come back at a later date and claim that you still owe them money. Worse yet, you could see that remaining debt (that they were supposed to remove from your account) sold to a collections company at a later date – all without your knowledge.

    • We also had another reader with a similar question about debt negotiations. Andrew left this comment:

    I lost my business in April of this year and things are starting to catch up. I spoke to Chase on my business card and they agreed to cut my payments in half as well as my interest rate for a year, which helps a lot.

    Bank of America however will not do anything. I called and asked to negotiate a payment plan but they said they would refer us to a non-profit for credit counseling. This is after they did a pull on my credit which i did not authorize. I do not want to go to a non-profit credit counseling. If Chase can help me with payments why can’t BofA help me out too? Should I keep calling or requesting to talk to someone else there? Any advice on how to approach the difficult nature of BofA. Who should I ask for? What else should I say? Should I wait for it to go to collections to negotiate with them? or at least threaten them with, “Im paying Chase first before I pay you, since they are helping me”? Please help…

    Details:

    Payment is about 450 and was requesting half. I am one month late now. I told them next month will be hard as well and that I lost my business in April this year. Interest rate is 30% with a balance a little over 12k.

    Thanks

    Andrew

    Thanks Andrew, for your question. They steps you are going to need to take are similar to the ones for Nancy above. There are two differences though. Since you are not going to be paying your balance off in full, you do not have quite as much room to negotiate with your lenders. However, being a month past due actually gives you as much or more room to negotiate. This is because the collection departments at ever major credit card company have a lot more authority to alter your account.

    So, that said, what should you do?

    Definitely call Bank of America back. Do not let the account site without contact – take the initiative, and keep calling them as many times as you need to until they are willing to set up a reasonable payment plan.

    Make sure that you speak with a manager (politely). Request that all possible fees be removed from the account, and ask them what you need to do to set up a payment arrangement with them. Tell them you are handling your credit accounts yourself, and that you will not be going through a credit counselor. Make sure they know that if they want to resolve the account and get a payment from you that they need to deal with you, and you alone.

    It’s a pretty standard procedure for most collection departments to set up payment arrangements, so I do not anticipate that you will have any trouble. If you do, and they give you trouble like they did before, just hang up and call back to reach a different rep. Or, wait about eight hours and call back to reach a different manager. Explain your circumstances, tell them what you can afford to pay them, and then make a payment that day.

    It is important to be ready to make a payment before you call otherwise, they may not be willing to negotiate with you at all.

    I hope that this answered your question. If you run into any more trouble, or have questions about anything else, please leave us another question and we will do what we can to help you out.

    Thanks!
    Mr. CC

    Do you have a question about credit cards? You can get our opinion, as well as the reader’s opinions and experiences by posting in our forums!

    My Letter To American Express

    By: Jason Steele
    12/31/2008

    In my last post, I shared with you my unpleasant experience with American’s Express’s “Financial Review” process. Here is the letter I will be sending to them:

    My Letter To American Express

    Tuesday, December 23, 2008

    Dear Sir/Madame,

    On December 3d, 2008, I received a call from Mr. Chris xxxxx with the financial review team. The call was extremely difficult to hear, both due to the poor connection as well as the heavily accented language of Mr. xxxxx. Frankly, it seemed more like a fraudulent attempt to obtain personal information than a legitimate communication from American Express. I was then startled to find out that my American Express accounts had been abruptly suspended.

    I hold multiple American Express Cards, and was recently approved for additional cards that I will be using for business and travel expenses. As I am sure your records will confirm, I have always paid my balances in full and on time.

    The actions by American Express were outrageous on many levels:

    1. All of my credit cards were suspended without notice. Had I been out of town or out of the country, this would have been a major inconvenience and possibly a crisis.

    2. Although I faxed the requested forms to American Express promptly, it took several weeks to restore my accounts. My original fax on December 5th contained my wife’s social security number, but not her name. Several days later, I was told of the error, and that only I could correct it. I re-faxed the form on the 9th. It then took two weeks, and another call to Mr. xxxxx to follow up, for my accounts to be restored.

    3. Due to this issue, I was unable to achieve the $30,000 in annual spending necessary on my Starwood American Express card to be awarded Starwood Gold Status for 2009. This is a very valuable elite status, and one of the very reasons that I have been an active user of my Starwood card.

    4. Throughout this entire ordeal, I kept receiving marketing material encouraging me to activate and use my American Express cards. It was as if American Express was mocking me.

    I recently applied for and received cards for business and travel. It was shortly after that, that my accounts were suspended. If American Express did not want to extent me those cards, then they should have just denied them rather than approve them and suspend all of my accounts. I have been a loyal card holder who has consistently kept my obligations to American Express. I no longer feel that American Express can be trusted to uphold theirs.

    Thank you for your attention to this matter,

    Sincerely,

    Jason D. Steele
    Credit Blogger for AskMrCreditCard.com

    5 Credit Card Practices To Adopt In 2009

    By: Brooke Kaelin

    2009 is going to be a great year! Some people are for New Year’s Resolutions, some people are against them. Whatever your stance on beginning-of-the-year resolutions, the credit card practices below will all see you through 2009 and beyond.

    Resolution #1: Pay off your credit cards

    Carrying a balance on your credit cards really is the wrong way to use credit – even though it’s very common. When you carry a balance and pay interest to the credit card companies, you lose most of the major benefits of having a credit card to begin with.

    If you want to pay off your credit cards this year, make sure you try calling your credit card companies first. Customer service, or collection’s managers can remove fees and interest off of your card for you if you ask. It never hurts to have your balances reduced before you pay them off!

  • Should You Pay Your Credit Card Bill Late? The Answer May Surprise You

    • Resolution #2: Check Your Credit Report and Dispute Bad Information

    It’s time consuming, and more than a little boring to sift through your credit files and check for inaccuracies. But! It is well worth it. Any negative information that you can remove from your credit reports will raise your credit score. In the long run, having a higher credit score will help you the next time you need to apply for credit – whether that’s another credit card, a home, or a vehicle.

    When you are ready to take this step check out our step-by-step walk through. It makes the process of disputing items on your credit report easy.

  • How to Dispute An Item On Your Credit Report

    • Resolution #3: Check Your Credit Score

    This step is not free, but it is essential. Once you have paid your credit card balances off, and challenged the bad information on your credit report, then it is time to check your credit score and see where you stand. Whether your score is high or low, you need to know where you stand because it will affect your actions in the future.

    If your credit score is 700 or below just keep making your payments on time, and keep the balances on your credit cards low throughout the year. By the end of 2009, you will see your score skyrocket!

    The easiest way to check your credit score is to go to MyFico.com

    Resolution #4: Understand Your Credit Score

    The more you know about how your credit score is computed, the easier it will be for you to raise your score and keep it high. There are many factors that impact your credit score. How much debt you have, how often you make your payments on time, which types of credit you use (home loan, car loan, credit cards, student loans), as well as how much money you charge on your credit cards each month and how old your credit accounts are. It can be a lot to take in, and even harder to understand how to raise your credit score.

    For an explanation of exactly how your FICO score is computed, and how to predictably raise your credit score check out these articles:

  • The FICOďż˝ Score Breakdown
  • How to Raise Your Credit Score In 7 Easy Steps

    • Resolution #5: Take Advantage of Reward and Cash Back Credit Cards

    If your credit score is 700 or above, and you do not already have cash back or reward credit cards, you can consider applying for them. As long as you do not carry a balance on your credit cards then you can take advantage of the many, many rewards programs out there.

    Certain credit cards offer rewards for travelers (like air miles), may offer cash back on your purchases – which is like getting a very small perpetual discount on everything you . Yet other programs offer free gas credits, or money for college. Whatever your needs or favorite things are chances are there is a reward credit card out there that will benefit you. Remember though, that reward credit cards typically have a slightly higher interest rate than some other credit cards. So, if you carry a balance on them at all you are going to negate any rewards that you would have earned.

    For more information on the types of reward credit cards out there, you can read our reviews of the different cards.

  • Cash Back Credit Card Reviews
  • Travel Rewards Credit Card Reviews
  • Reviews of Credit Cards That Give Airline Miles

    • That pretty much wraps up the safe and suggested methods of managing credit. If you do these things your credit score will go up, and remain high. You will also be getting the full advantage of having and using credit through your reward cards.

    How about you? Do you have any New Year’s Resolutions? Leave Us A Comment Below!

    My Experience With Amex’s Financial Review

    By: Jason Steele
    12/29/2008

    It should not have come as a shock. I had read about it in FlyerTalk. I had opened up some new business and reward cards for the sign up bonuses. I had seen the stories of Amex’s financial problems.

    It Was Still A Shock

    One day I get a very garbled, almost innaudible recording on my home answering machine, claiming to from American Express. A short time later, I get a call on my cell phone, from the same person. Not only does this person speak with a thick foreign accent, Asian, I think, but it is like he is wispering though a tube. I immediately think that this is a fraudulent attempt to get me to turn over personal information. When the caller invites me to call the number on the back of my card, and ask for his extension, I do so. If that wasn’t enough to convince me this was for real, all of my American Express cards suddenly stopped working.

    What Do They Want

    In my case, they wanted me to fill out and fax to them an IRS form 4506-T. This would give them access to my tax returns for last year. Supposedly, there is a financial review clause somewhere in the fine print of your cardholder agreement that says that they may request such info.

    Their Process Stinks

    Once you realize that the barely discernable foreign speaker calling you actually does represent American Express, and your cards don’t work, you realize that this is a terrible possition to be in. Fortunately, I have backup Visa and Mastercards, but the rewards I earn there are not as valuable to me. Automatic payments can be disrupted, not to mention travel plans.

    How Long Does It Take?

    They claimed they would have this all resolved within a week, but it ended up taking three. First, I sent the form back with my wife’s social security number, but not her name. Amex, figuring that her name was top secret while her Social was not, called me back a few days later to tell me to fax the form in again, with her name, that they have in their records, printed on the form. From then, we patiently waited another two weeks. Finally, I called to follow up, and what a coincidence, they had made a decision.

    The Verdict

    As a customer of theirs for years, who has always paid his bill on time and in full, somehow they saw fit to retain me as customer. It only took them three weeks to reach that conclusion.

    What’s Going On?

    At some point in this process, I got a supervisor on the phone and gave him a piece of my mind. The supervisor was sympathetic, and explained that these Financial Reviews were completely computer driven and out of his control. All he could do was promise to process my paperwork quickly.

    What’s The Problem

    Some people object to the Financial Review on a matter of principal. They do not think that Amex has the right to such personal information. I disagree. When I applied for their card, I stated my income, and they are welcome to verify it. The part I object to is how they do it. First I applied for their Starwood Business card and their Delta Skymiles cards. Then they approved me and sent me the cards. Finally they cut off my account and sent me to the Financial Review team. If they didn’t want me to have the cards, they should not have approved them. If they had asked me for supporting documentation before extending me further credit, that would have been reasonable. Ironically, this whole time I am getting letters in the mail telling me to activate my cards and spend more money!

    What To Do When It’s Your Turn

    First, despite their rudeness and continued mailings encouraging you to use your now suspended account, don’t take it personally. Amex is suffering financially, not you. A computer is making the call on this, not a human. Like a bleak science fiction movie, the machines are in control, and there is nothing that the humans can do other than comply.

    Next, fill out the form and send it in. Amex knows where I live, where I shop, and where I travel to. They also know what I claimed my income to be when I applied for the card. What is the problem with them knowing what I told the IRS when I paid my taxes?

    Finally, reconsider your relationship with Amex. I don’t condone them treating their customers this way. I am expecting some very lucrative rewards from transfering my Starpoints to Delta as part of their major promotion that has since been withdrawn. Between my Starpoints transfers and my sign up bonuses, I should go from 0 to 300,000 SkyMiles in just a couple months. If it wasn’t for that, I might have just told them to get lost.

    Tomorrow, I will share with you my letter of complaint to Amex’s executive customer service.

    The Carnival of Debt Reduction #169

    By: Mr Credit Card

    Welcome to the Carnival of Debt Reduction at AskMrCreditCard.com! If you are new here, please pickup our free RSS feed, and check out some of the excellent articles below!

    We all know that carrying debt financially is a bad thing. Some types of debts are better than others, but all debt is money owed! So, I hope that you enjoy these simple tips than can immediately help you to reduce your debt.

    justsaynotocreditcardfees

    Just Say No To Credit Card Fees

    The biggest secret in the credit industry is deceptively simple. All you have to do to get your late, over the limit, membership or application fees removed is just ask a manager. If you are carrying a balance on any of your credit cards, and there are fees within that balance, don’t pay them. Get them removed instead.

    The easiest way to reduce your debt is to call your credit card companies (or anyone that you owe for that matter!) and ask them to remove any fees that they have placed on your account. It’s simple, easy, and could literally save you hundreds of dollars with a single phone call.

    For more on how to do this, you can check out our article “Should You Pay Your Credit Card Bill Late? The Answer May Surprise You“.


    repairyourcredit
    Repair Your Credit

    If you have a poor credit score, your options are limited. Taking the time to dispute items on your credit report, and getting on a regular payment schedule will raise your credit rating. The higher your credit rating is, the more refinancing options, or balance transfer options are available to you. Investing a little time in repairing your credit can sometimes save you hundreds of thousands of dollars in interest over your lifetime.

    For quick and easy ways to raise your credit score, you can read “How to Raise Your Credit Score In 7 Easy Steps“.

    snowflaskorsnowball

    Debt Snowflake, or Snowball?

    Whether you into Dave Ramesy’s “debt snowball” method or not – the important thing is paying down your debt! If you are planning to refinance anything, or get a loan in the next few years, you may want to consider an alternate approach.

    If you have revolving debt (on credit cards) consider paying down the credit card with the balance that is closest to the limit – instead of the one with the highest interest rate, or the smallest balance. Doing this will maximize the impact to your credit score, and put you in a better position to finance things in the future.

    For more on how your credit score is calculated, check out our article “The FICOďż˝ Score Breakdown“.




    checkyourmortgage

    Give Your Mortgage A Checkup

    Whether you choose to pay down your debt via a consolidation loan, or you simply refinance your existing mortgage, owning your home gives you lots of options. Be careful, and check out all of the fine print for any new loans. Make sure that the deal relly does benefit you after all of the fees and interest are factored in.





    sweatthesmallstuff

    Sweat The Small Stuff

    Are you paying too much for car insurance? More than you have to for groceries? The easiest way to pay down your debt quickly is to trim up your monthly budget. This will give you more money to put towards your debt, and you will get things paid down faster. Once your debt is paid down, you can consider living on the trimmed budget, and investing the excess.

    Increase Your Financial IQ Book Review Part 2

    By: Brooke Kaelin
    12/28/2008

    increaseyourfinancialiqEvery Sunday here at Ask Mr. Credit Card we review a personal finance book. This review of Increase Your Financial IQ by Robert Kiyosaki is a continuation. If you missed the first part of the review, you can check it out here.

    The Five Financial IQ’s

    According to Kiyosaki, the five necessary Financial IQ’s are:

    Right off the bat it is interesting to me that frugality is not mentioned here. That’s one of the things that I love most about Kioysaki – his entire viewpoint revolves around how to get what you want – not how to avoid getting what you want, or how to learn to do without it. Sometimes we all have to do without things, but even in Rich Dad Poor Dad Kiyosaki talked about the major difference between wealthy and poor people’s thought processes. Wealthy people figure out how to get what they need (or want) and poor people figure out how to avoid having to get it, or how to do without it. The difference is in the focus.

    Since I really do believe that our minds work according to our focus – this is huge. If we tell our mind to figure out how to get by without something (or many things!) it will. If we tell our mind that it needs to figure out how we can have more money, etc. it will do that too. In general, I believe that we are all excellent problem solvers – we just need to be more careful about the type of problems we choose to have our minds solve!

    Financial Intelligence Vs. Financial IQ:

    Most of us know that a person with a mental IQ of 130 is supposedly smarter than a person with an IQ of 95. The same parallels can be drawn with Financial IQ. You can be the equivalent of a genius when it comes to academic intelligence, but the equivalent of a moron when it comes to financial intelligence.

    Well, this is undeniably true – I can draw a hundred examples from my own life that prove this point. I believe that what Kiyosaki is getting at is that our financial successes or failures are not a measure of our intelligence, but rather, our wisdom.

    Everyone has the intellectual capacity to understand their finances. Not everyone has the wisdom. Wisdom comes from deciding internally what is right, and taking those steps over and over again. Wisdom is hard to quantify, but it is largely based on experience. If you mess up, you learn from the experience and move on –that is wisdom. You do not start out already “knowing” everything you need to know and being perfect at it. Even if you read a thousand personal finance books, it won’t replace the wisdom you gain by actually having the experience.

    Financial IQ #1: Making More Money

    Most of us have enough financial intelligence to make money. The more money you make, the higher your financial IQ #1. In other words, a person who earns $1 million a year has an measurably higher financial IQ #1 than a person who earns $30,000 a year. And, if two people each make $1 million dollars a year, and one pays less in taxes than the other, that person has a higher financial IQ because he or she is closer to achieving financial integrity by utilizing financial IQ #2 – Protecting your money.

    You know, I just want to say that these five financial intelligences that Kiyosaki explains – they just drive home to me the importance of reading personal finance and self-development materials. I’m sure most of us can come to the conclusion that we need to make more money all on our own!

    However, sometimes, having all of the answers laid out, spelled out -simply, can make all the difference. It might have taken me years to put all of these steps together, in detail on my own. I have no doubt that I would have, but why trudge through a thought process when someone else, (arguably an expert), has already done it?

    Common sense, yes. Always obvious….no. Not for everyone. Myself included.

    Financial IQ#2: Protecting Your Money

    A simple truth is that the world is out to take your money. But not all who take your money are crooks or outlaws. One of the biggest financial predators of our money is taxes. Governments take out money legally.

    If a person has a low financial IQ #2, he or she will pay more in taxes. An example of financial IQ #2 is someone who pays 20% taxes vs. someone who pays 35% in taxes. The person who pays less in taxes has a measurably higher Financial IQ.

    I’ll admit that as I began to invest in stocks, and to make money, I did not always pay attention to the finer points of tax law. However, the more successful I became, the more I began to realize that yes, I really do want to pay as little in taxes as possible. At that point, I really had the choice of hiring someone else to handle my taxes for me, or learning to do them myself. As a temporary measure, I hired someone else. However, I am still in the process of learning. That is Kiyosaki’s biggest point – don’t let the government take more than you have to, and learn the “hows” and “whys” of the law so that you don’t break it.

    This is an especially important point that I would really like to talk to the non-fans of Kiyosaki about (please leave me a comment!) I have heard many of his tactics cited as borderline illegal. Which ones are you referring to? How and why do you disagree? I would love to have your opinion!

    Financial IQ #3: Budgeting Your Money

    Budgeting your money requires a lot of financial intelligence. Many people budget money like a poor person, rather than like a rich person. Many people earn a lot of money, but fail to keep much money. Simply because they budget poorly. For example, a person who earns and spends $70,000 a year has a lower financial IQ #3 than a person who earns $30,000 and is able to live well on $25,000 and invest $5,000. Being able to live well and still invest no matter how much you make requires a high level of financial intelligence. Having a surplus is something you have to actively budget for.

    Budgeting is a bear. I’d like to use a different word, but this is a business blog! There is no way around it. It is absolutely, 100% necessary. If you do not know where your money goes or when, or how you will never, never, never get off the ground financially. I didn’t get settled into budgeting until I bought YNAB. Once I found what worked for me, I stuck with it.

    If you are not already using a regular budget, please pick it up as a New Year’s resolution, and run with it. The difference you will see in your stress level, and your finances, will be well worth the time and monetary investment that ing a budgeting program and learning to use it will take. Use a piece of paper, or a spreadsheet if you need to – budgeting does not have to be expensive. It just has to be done regularly if you want to be successful financially.

    Financial IQ #4:Leveraging Your Money

    After a person budgets a surplus, the next financial challenge is to leverage their surplus of money. Most people save their financial surplus in a bank. This was a smart idea before 1971 – before the US dollar became a currency. Also, after 1974, workers needed to save for their own retirement. Millions of workers did not know what to invest in, so they invested their financial surplus in a well-diversified portfolio of mutual funds, hoping this would leverage their money.

    While savings and a diversified mutual fund portfolio are a form of leverage, there are better ways to leverage your money. If a person is truthful, he or she has to admit it doesn’t require much financial intelligence to save money and invest in mutual funds. You can train a monkey to save money and invest in mutual funds. That is why the returns of those investment vehicles are historically low.

    Financial IQ #4 is measured in return on investment. For example, the person who earns 50% on his or her money has a higher financial IQ #4 than someone who earns 5%. And, someone who earns 50% tax-free on his or her money has a higher financial IQ than a person who earns 5% and pays 35% on taxes on that 5% return.

    Kiyosaki promises, later in this book to highlight some of the ways that he leverages his money. I am really looking forward to that since none of his previous books have really shed any light on that subject. If he does dish the dirt on these “Low risk – high reward” tactics – I will definitely share them with you!

    Financial IQ #5: Improving Your Financial Information

    There is a bit of wisdom that goes, “You need to learn to walk before you can run.” This is true with financial intelligence. Before people can earn how to earn exceptionally high returns on their money they need to learn to walk; that is, to learn the basics and the fundamentals of financial intelligence.

    One of the reasons so many people struggle with financial IQ #4 (Leveraging Your Money) is because they are taught to turn their money over to financial “experts” such as their banker, and their mutual fund manager. The problem with turning your money over to financial experts is that you fail to learn, you fail to increase your financial intelligence, and fail to become your own financial expert. If someone else manages your money and solves your financial problems, you can’t increase your financial intelligence. Actually, you are rewarding other people for theirs instead – with your money!

    It is especially important, as you move through your own financial journey, to only take advice from people who really do know what they are doing. Personally, I am a fan of Kiyosaki – not everyone is. If his advice doesn’t work for you, definitely find someone who is out there teaching that resonates with you a little better. Just check their qualifications, and take the advice with a grain of salt. As much as I like Kiyosaki, I do not into all of his arguments. I believe his basic premises are sound – especially when it comes to patterns of thought, and attitudes about money. The devil’s in the details though, and Kiyosaki doesn’t always come completely clean in the wash.

    I just try to remember that I must make the final judgment about where, and how my money is managed. Not my advisors, not my family, not personal finance authors, not a golf caddy with a hot stock tip. Just me. It’s my money – who else knows better than me what I need to do with it?

    One last quote from the book that I really got a kick out of. This book was written in 2007 and published in March of 2008 – just after the financial sector first began hitting the fan:

    The reason I write, create financial products, and emphasize the importance of the five financial intelligences is because I believe the US and the world are in for an economic upheaval as we have never seen. There have been too many financial problems that have gone unsolved. Instead of using financial intelligence to solve them, we have thrown funny money at them. We have used old ideas to solve modern problems. Using old ideas to solve new problems only creates bigger and newer problems. This is why I believe the five financial intelligences are important. If you develop these 5 financial intelligences, you will have a better chance of doing well in a rapidly changing world. You will be better able to solve your own problems and increase your financial intelligence.

    I wonder what Kiyosaki thinks about the way our government is handing the financial crisis? What do YOU think?

    That’s it for this week’s review. Please check back next Sunday for the next section of the review. If you don’t want to miss it, you can grab our free RSS feed and get it delivered straight to you. Thanks for reading!

    Keep Reading:

    No Excuse For Rudeness

    By: Jason Steele
    12/25/2008

    I went to college in Delaware, where many banks and credit card issuers are located. Many of my friends there had part time jobs working as customer service representatives. Every time I talked to a customer service representative, I like to imagine it is one of my college friends.

    One time, back in the day before no call lists, my parents received a telemarketing call about a credit card. Out of curiosity, they asked where the caller was located. They were located in Delaware. My parents proudly informed them that their son would be attending the University of Delaware this fall. Although they never applied for the credit card, they did have a lengthy discussion about the various dormitory and meal options that we were sorting through at the time.

    Put Things In Perspective

    People have jobs. They represent companies who you do business with. The company may be bad, their policies may be bad, but that doesn’t mean the person you happened to be speaking with is bad. I always try to keep this in mind when I am dealing with customer service representatives from credit card companies or other companies. No matter how poorly a company treats you, it is never ok to be disrespectful to someone who is just doing their job.

    It Should Go Both Ways

    Amazingly, such courtesy and respect does not always go both ways. Recently, I phoned Chase in order to cancel my United Mileage Plus credit card. At first, the representative asked me if I would answer a few questions about my cancellation. I said yes, but they must be brief. The conversation went like this:

    Him: Why are you canceling the card?

    Me: I don’t need it as I am tired of doing business with United Airlines.

    Him: Well, we can offer you other cards that are linked with other reward programs.

    Me: I really just want to close the card.

    Him: Since you told me that your problem was with United Airlines, and I can offer you rewards that have nothing to do with United.

    Me: I just have too many credit cards at this time and I would like to cancel.

    Him: Can I just tell you about our other reward cards?

    Me: No thank you, I would just like to cancel.

    Him: I would just like to tell you about the other offerings we have.

    Me: I would just like to cancel.

    Him: I am sorry you won’t let me tell you about our other reward card offerings.

    Me: I would just like to cancel my card.

    Him: We can cancel your card and give you a different card with the same account.

    Me: No, just cancel my account.

    Him: Your account has been cancelled. click

    He actually hung up on me! I was as polite as possible, yet the guy just kept on pushing. I understand that they have to make offers to retain me as a customer, but enough is enough. I must have told him “no thanks, just close the account” about ten times before he rudely hung up.

    I know being a customer service representative is a very tough job, but perhaps it is time for this particular guy to move on.

    Why would I want to do business with Chase in the future when closing an account leaves such a bad taste in one’s mouth?

    T’was The Night Before Christmas – Bailout Style

    By: Connie Brooks
    12/24/2008

    christmas

    T’was the night before Christmas, and all through the states
    Not a creature was spending – we’re all in dire straits.
    The coffers were hung by the chimney with care,
    In hopes that a bailout soon would be there.

    GM and Chrysler nestled all snug in their beds,
    While billions of dollars danced in their heads.
    And ma with her nickel, and I with my dime,
    Coughed them right up as the banks stood in line.

    When up from Wall Street there arose such a clatter,
    I called up my broker – asked what was the matter?
    Away went our savings they flew like a flash,
    So I ran to my mattress – “Quick, stash all our cash!”

    I cried into the night, with a single loud roar
    “The economy’s a problem too big to ignore!”
    When, what to my wondering eyes should appear,
    But a great big ‘ol sleigh, and eight greedy reindeer.

    With a little old driver, so lively and fulsome,
    I knew in a moment it must be H. Paulson.
    More rapid than eagles his cronies they came,
    And he whistled, and shouted, and called them by name!

    “Now Fannie! Now Freddie! Now, Bancorp and Citi!
    On, Rahm! On, Pelosi! on Levin, and Bernanke!
    To the top of the Hill! to the top of the wall!
    Now take away! Take away! Take away all!”

    As dry leaves that before the wild hurricane fly,
    When they meet with an obstacle, mount to the sky.
    So up to my roof top the coursers they flew,
    With the sleigh full of debt, and H. Paulson too.

    And then, in a twinkling, I heard on the roof
    The pounding and stomping of each greedy hoof.
    As I drew in my head, and was turning around,
    Down the chimney H. Paulson came with a bound.

    He was wearing the constitution, from his head to his foot,
    And it was rumpled, and tarnished, with ashes and soot.
    A bundle of debt he had flung on his back –
    Billions in pork barrels he had tucked in his pack.

    Tax breaks for arrows, and tax breaks for rum!
    We can’t stop now – ‘Tis too good to be done!
    His droll little mouth was drawn up in a sneer,
    Yet his mouth kept on saying “There’s nothing to fear!”

    But my savings have plummeted, my retirement is gone!
    My home’s in foreclosure, I’ll work for a song!
    But Paulson just smiled, and said with a jibe
    “All must contribute, if we are to survive!”

    He was greedy and mean, a right evil old elf,
    And I cowered when I saw him, in spite of myself!
    A wink of his eye and a twist of his head,
    Soon gave me to know I’d rather be dead.

    He spoke not a word, but went straight to his work,
    He emptied my wallet, then turned with a jerk.
    He gave me the finger from my head to my toes,
    And giving a nod, up the chimney he rose!

    He sprang to his sleigh, to the senate he whistled,
    And away they all flew like the down of a thistle.
    But I heard him exclaim, ‘ere he drove out of sight,
    “Happy bailout to all, and to all a good-night!”






    * * *


    ** Merry Christmas, and Happy Holidays everyone! Just wanted to include a note that stated that this poem in no way represents the thoughts and opinions of the entire staff here at Ask Mr. Credit Card. This is just the author, Connie Brooks, poking bit of fun at the state of the nation. Hope it gave you a smile.

    Merry Christmas Eve!

    Paying Off Your Credit Cards

    By: Christina
    12/23/2008

    One of our readers, Jackie, sent us this question:

    I have about $15,000 in credit card deb. I have been paying the min payment required for the past couple of year. I pay interest rates of 9% to 20% on multiple cards. I just came into some money (enough that will allow me to pay off all of these balances) Should I just write a check for the balance or should I call and try to widdle the balance down? is this even possible? i don’t want to just write a check for the balance if I can negotiate some how with them Thanks for your time.

    Thanks for your question Jackie!

    You will definitely want to do some negotiation before you pay your balance in full! At the very least, call each of your credit card companies and request the following things in return for paying in full:

    You will probably have to talk to a manager in order to get some of these things done, but they are all possible. Just remember that if you get an unhelpful, or rude rep, (or even a rude manager) hang up and call back later. It might take you a little bit of time to get these things done too, but the money you will save should more than cover the time investment.

    Since you are planning to pay in full you actually have a huge amount of leverage with your credit card companies. Definitely use it to your advantage!

    Thank you so much for your question. Good luck in your negotiations!




    One of our readers, Eva, also had this question:

    Can I transfer my cards to another persons name since this person is using my cards under my name?

    Thanks for your question Eva. Typically you can not transfer your credit cards into another person’s name, but it doesn’t hurt to call your credit card company and ask anyway.

    I say that it’s not typical because in order for the credit card companies to put the cards into that person’s name, they will have to run their credit report, and get them to sign the account holder agreement. Generally most companies prefer to just open up new account with that person if they are eligible.

    If the person using your credit card has poor credit, then you can bet your credit card company would rather have the debt in your name – since you are the one the card was issued to, you are liable for the debt even if someone else uses the credit card. If you have good credit, they will feel confident that you will pay the debt back if the other person defaults.

    Alternately, you can get the person signed up as an authorized user. Being an authorized user officially gives them permission to use your credit card, and it will being to show up on their credit report and raise their score.

    Definitely remember that if the person is having trouble getting a credit card of their own, their best bet would be to get a secured credit card. There are many advantages to secured cards – you get your deposit back eventually, they have an extremely high approval rate (even with bankruptcy), they almost always report each month to all three credit bureaus, and they have better interest rates than unsecured bad credit credit cards.

    Thanks for your question!

    Have a question for us? Leave a comment below!

    Keep Reading:

    Privacy Policy Terms and Conditions About Me Disclosure Contact Me

    Newsletter Sign Up

    Name

    Email