Do you have the Rich Dad mentality?

This is the second in a series of articles based on the groundbreaking best-seller "Rich Dad, Poor Dad" written by Robert Kiyosaki. As stated in the first article, the book compares the mindset of Kiyosaki's father-who held several degrees and an important position in the government, but struggled financially--, with the mindset of his best friend's father-who never even finished high school but left his son a financial empire. In his book, Kiyosaki explains that the mindset held by each of these two men, his "poor dad" and his "rich dad", was largely responsible for each man's financial destiny.

The following quote by T. Harv Eker, author of "Secrets of the Millionaire Mind", refers to the concept of a rich person's mindset: "Rich people have a way of thinking that is different from poor and middle class people. They think differently about money, wealth, themselves, other people, and life." Kiyosaki expounds this same principle in "Rich Dad, Poor Dad".

Below you will find seven mayor differences between the "poor dad" and the "rich dad" mentality:

1. The "poor dad" mentality states that your wealth depends on your family of origin. That is, to be rich you have to be born rich. "Rich dad" espoused the view that being rich or poor is something that you learn. You can learn to think in ways that will support you, and you can raise your financial IQ by reading books on finance, talking to financially successful people, and attending seminars and lectures. When you have the right belief system and the necessary knowledge on how to create, build, and protect wealth, you will become rich even if you were not born into a wealthy family.

2. "Rich dad" taught Kiyosaki that he should get a job to learn and to acquire the necessary skills so that he could go on to start his own business. "Poor dad" saw his job as his source of income for life. While "rich dad" taught Kiyosaki to strive to become financially independent, "poor dad" taught him to depend on his employer for his financial well being.

3. When faced with an opportunity, "rich dad" would ask himself: "How can I afford this?" This forced his mind to think and to come up with creative solutions to be able to take advantage of the opportunity that had presented itself. Instead, when presented with an opportunity, "poor dad" would dismiss it by saying: "It's too bad I can't afford this."

4. While "poor dad" stressed scholastic education, "rich dad" always stressed financial education.

5. For "rich dad" the main cause of poverty or financial struggle was self-inflicted fear and ignorance. "Poor dad" blamed the economy and the job market. That is, "rich dad" always took responsibility for himself and felt that he created his circumstances, while "poor dad" often felt like a victim of the outside world.

6. As for risk taking, "rich dad" taught Kiyosaki to learn to manage risk. "Poor dad" taught him that when it came to money, risk was something that should be avoided and to always play it safe.

7. "Rich dad" taught Kiyosaki that failing was simply part of the process and that he should learn from his mistakes and move on. "Poor dad" attached great stigma to failure and was therefore afraid of making mistakes.

Study the seven examples above in order to begin to develop a clear concept of the difference between a rich and a poor mindset. You can find out more on how rich people think by reading books such as those found in the "Rich Dad, Poor Dad" series and by talking to people who have succeeded financially.

Written by Marelisa Fábrega who blogs at http://abundance-blog.marelisa-online.com Article Source: http://EzineArticles.com/?expert=Marelisa_Fabrega

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Is $1 Million Enough to Retire?

by Emily Brandon

Thursday, June 18, 2009

Whether it is five or 25 years away, many of us share the same nagging question about retirement. How much money will I really need? Geri Pell, a senior financial adviser for Ameriprise, says the answer depends on where you live and what type of retirement lifestyle you hope to have. U.S. News asked Pell for some strategies to help figure out your retirement needs. Excerpts:

How do you know if you're saving enough for retirement?

Most people don't know. The only way you can know is by figuring out what kind of retirement you want and how much money you will need. Many people are feeling very out of control and people have more doubts and more fears. Sitting down and making decisions and developing a plan takes so much stress away from people.

What needs to be factored into your calculation?

One of the things that is very useful to do is figure out what you are going to spend in retirement. Consider what kind of lifestyle you want in retirement, inflation, what your risk tolerance will be now and in retirement, what rate of return you might assume on your assets, and how long you will work. Also, do you have a pension? How much will you get from Social Security? Will you take on a second job or do some consulting?

How do you figure out what your risk tolerance is?

The big overall question about risk tolerance is, for you personally; would you rather sleep comfortably every night and at the end of 20 years have a 5 percent rate of return or have some bumps in the road and possibly get an 8 percent rate of return that is not guaranteed? People will answer that question differently depending on what cycle the market is in. It's almost like a doctor diagnosing what your real health condition is. If we get it right you will be a good investor. There is an enormous amount of psychology involved. We've all come to understand how wide the market swings can be. If you know that an 80/20 mix can go down 40 percent and you can't live with that, maybe you have to switch to a different mix. And then you need to understand that you are limiting the up side as well.

What span of time should you estimate you will live?

I usually start off using 95. You get a lot of different reactions from people, but life spans are expanding. If you plan for 80 and live until 87 you can't come back to me and say I ran out of money. You need to plan for longer than you think you will live.

What percentage of your salary should you aim to save?

If you have children in college or in private school you might aim to save 10 percent of your income. But in the time when the kids are out of the house and before you retire you may want to bump that up to between 20 and 25 percent. It really depends on your situation. You should always save in your 401(k) at least up to the company match. You certainly need to be saving enough money to have a cash reserve for emergencies.

Is $1 million enough to retire comfortably?

For a modest retirement in most places in the country that may be enough money, but it probably would not be enough money in San Francisco or Los Angeles or New York City. For example, $1 million could produce about $40,000 a year. And then if you get $20,000 from Social Security that would be $60,000 without any other income. There are people in retirement who spend only $3,000 a month because they don't have a mortgage, they have a low cost of living, and they go to the early bird specials. If before you retire you are earning $200,000, then you might have to downsize a little bit.

How can you keep your nest egg safe after you retire?

The most important thing is to get your emotions under control and not make decisions based on emotions. When the market is going up people can't wait to throw money in and when it's down people pull their money out. In life there are things we can influence and things we can't do anything about. What I tell clients is that there are only four things you can control about your financial picture: how much you spend, how much you earn to an extent, your emotions, and what you do with the money that you have. You can't control the market, but you can control the decisions you make about the money that you have.

What should a baby boomer who wants to retire soon do to get back on track?

You have to think about what is more important, retiring soon or retiring well. It may not be realistic for you to retire at 58 with the lifestyle that you want and make it to 95. Now you have less money than you thought and maybe not even much job security. Some of us baby boomers all grew up with really unrealistic expectations of when we were going to retire, and we planned in a way that didn't bear fruit. But what if I told you, you could still go to Hawaii, but you can't stay at a luxury hotel? Most people say, "I can do that." You have to adjust your expectations. Or you may have to work until 62 even though we planned for 57. Let's reframe what we are going to do. Everyone around you is also going to be spending less money. The day of the $14 cosmopolitan is over. And who felt comfortable doing that anyway?

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