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Robert Kiyosaki, Suze Orman and the Money Merge Account Celebrity Death Match
Posted On August 21, 2010
Robert Kiyosaki, Suze Orman and the Money Merge Account Celebrity Death Match
I seriously think Bob and Suze need to put on the boxing gloves step into the ring together and have it out…
Here you have two extremely popular mainstream, “Pop culture” financial advisor, icons spouting their own versions of “financial freedom” and the “truth about debt”.
They both sit at the opposite ends of the spectrum in their views on money, Debt and investments…
So who is right?…Who is wrong?
Personally I dislike them both….More accurately I dislike both of their methods and advice….But if I had to pick, I probably would sit on the “more conservative” side and go the Suze Orman route.
Although I do think Suze is, most of the time, just spouting a bunch of “good sounding” generalities that seem like common sense.
I think Suze speaks with her certainty, and forceful confidence more as a selling point for all the “Kool-aid” drinkers out there that listens and follows anyone that speaks with enough confidence…
Don’t get me wrong, some of her advice is sound and just plain common sense, but I just think sometimes she speaks about things that she really has little knowledge of especially when it comes to Mortgages and loan programs, and indices that certain loans may be tied to and why that is important….
Suze over compensates and errors on the side of caution to protect her reputation and the “kool-aid” drinkers she markets her wares to…. I can understand this approach, but this does not mean I agree with her advice even 25% of the time.
I can appreciate Suze Ormans tendency to be a little financially conservative but sometimes I think she participates in a little “Financial Fear Mongering” on topics she obviously knows “little” about,…specifically Mortgages.
Robert Kiyosaki on the other hand almost borders on “financial reckless abandon”. He advocates the approach to run up debt to increase cash flow and to use the liquidity from running up debt to make investments.
Mr. Kiyosaki is a believer in the mindset, which a lot of your more traditional Financial planners out there share, that you should always have a mortgage on your home and be taking the tax benefits…
Robert also seems to like the idea of taking an “Option Arm” program and doing the minimum “Neg Am” payment and investing the difference of what you would be paying towards a more traditional type 30 year fixed mortgage.
I can’t even begin to express how much I shudder at the advice Mr. Kiyosaki gives…What is scary is a lot of “mainstream” financial planners agree with him.
Me, well,…I tend to fall more in the middle between Suze and Robert. I believe most people probably fall in this “middle” area.
First, I think you should always focus on completely paying off the mortgage on your primary residence as quickly as you possibly can. Forget about the tax benefits that come from having a Mortgage…Why the heck would you pay a bunch of interest up-front, just so you can write off the interest on your taxes and hope you can get a bigger tax return at the end of the year?…Just does not make sense to me…Why not just remove this complete waste of time from the equation all together and just pay off your mortgage as quickly as you can….Not too mention that the IRS can decide to pull any tax benefit on owning a home at anytime…I just don’t like putting that control in someone else’s hands….How about you?
Second, Why the heck would you take a “Neg Am” mortgage, on your primary residence, make the minimum payment and invest the difference?…Now if you have the strict discipline to be able to invest the difference this might actually work, but at best, the problem still remains, that you are still gambling on the future performance of what the market is going to do that you are investing in.
Do you realize that by “Contract” the most a financial planner can guarantee as a return on your money is 3%? Now do the math, when it comes to doing a “Neg Am” payment and investing the difference and see if this approach is really that good of an idea.
Personally I like to have control and NOT put my “faith” in anything, if I don’t have to, especially when it comes to money and the future security to my family and me…But thats just me…I’ve been called a ‘Control Freak” more than a few times in my life.
This is why I like the “Money Merge Account” (MMA) method of paying off your first mortgage as quickly as possible without affecting your monthly cash flow.
What is an MMA?
The Money Merge Account consists of three major components:
1. Your Existing Primary mortgage
The existing mortgage on your home is the foundation for the Money Merge Account.
2. An Advanced Line of Credit (ALOC same thing as a 2nd position Home equity line of Credit)
The MMA Program uses an advanced equity line of credit as a vehicle or a tool to drive the program. The equity line of credit must have the capacity to operate similar to a primary checking account and be set up with an open-end interest calculation vs. a closed-end interest calculation. Combined with the MMA web-based system, this creates a formula in which the money in your line of credit account generates an interest cancellation on your primary mortgage.
3. MMA software
The online MMA system makes a connection between your bank account, the advanced line of credit and your primary mortgage. Each time you deposit income into your account, it registers as a decrease to your mortgage balance. By decreasing your mortgage balance you now lower the balance in which interest accrues. By decreasing the balance in which interest accrues, you increase the portion of your monthly payment which is credited toward your principal pay down. The algorithms in the proprietary MMA system are systematically programmed to create the highest interest savings possible in the least amount of time.
In short, an MMA is basically getting a smaller second position “Home Equity Line Of Credit” or HELOC on your home and use this HELOC as you would use your regular checking account by cycling your income through it (direct deposits and what not). Since HELOCs use “open ended” interest calculations you can use this to your advantage by canceling the interest on the “Closed-ended” interest calculations on your current “first” mortgage and making some accelerated and “compounded” principle pay-downs in the process.
A HELOCs payment is also based on an “Interest Only” calculation on what ever the average daily balance is of the Line of credit. It is assumed if you are cycling your income through this line of credit not only is the HELOC payment automatically made for you but the amount of interest that is charged is minimal because you are constantly keeping the total drawn amount on the line at a very low level. Compare this concept to a fixed second mortgage and see what you come up with…Go ahead do the math.
You always will have access to your income and cash flow based on the HELOC being an open ended line of Credit that you can draw upon at anytime.
You get the best of both worlds using this approach. You get to pay off the biggest debt you will probably ever have (your home) in less than half the time and you still have access to your cash to invest as you would like to so you do not miss any great investment opportunity that may come along.
Using a “Money Merge Account” (MMA) as a financial planning tool gives you back control. It is a known as opposed to an unknown, which is the territory that most “traditional” Financial planners roam.
Now using the MMA concept does take some discipline. It does you NO justice to constantly run up the MMA account on frivolous purchases that you would not normally make if you did not have the MMA.
Your Home is NOT a credit card and an MMA should NOT be the vehicle to treat your home like a credit card. But, with this being said, I challenge you to compare this level of discipline that is required to effectively use the MMA against the discipline that is required using a “Neg am” option ARM type payment loan and investing the difference which is spouted by Mr. Kiyosaki and some of your more main stream financial planners.
Now, because I personally like the MMA concept this is where I diverge from not only from Robert Kiyosaki but Suze Orman as well.
Hell, I remember Suze Orman spouting here usual “fear mongering” about the dangers of “Home Equity Lines of Credit” HELOCs saying that if you miss a payment on a HELOC you will lose your home. Jeesh, that’s a little bit of an exaggeration.
The problem people run into when they use HELOCs is that they tend to treat them like a credit card secured by their home. This is the absolute wrong approach and is nothing what the MMA method advocates.
So back to the original question…Who is right who is wrong?…
If you’d ask me I would say Both Robert and Suze are wrong because they are not understanding the “wide scope” implication of what they preach to the masses.
I would also say there are certain financial concepts that both are unaware of that they might actually both agree with.
Not everyone will fit into any “cookie cutter” financial plan. A lot of it comes down to style, comfort levels, discipline, and personal financial tolerance…in essence “Different Strokes for Different Folks…”
My only point is not to believe anyone “blindly” just because they may be popular or speak with confidence. Investigate for yourself what may be the BEST course of action for you based on your own personal financial situation and goals…
In the mean time I will see if I can arrange that Celebrity death match between Robert and Suze, You interested in buying tickets to watch?….. 😉
Keith Gill is a Successful Certifed Mortgage Consultant and Loan Officer for a major mortgage bank. If you would like to Contact Keith or learn more about the “Money Merge Account” method of paying off your current 30 Year Mortgage in less then ten years just got to http://www.LoanAcceleration.net.
This is a snippet of what Robert Kiyosaki was teaching at a symposium, interesting stuff. For anyone interested you really should go and read that book called ‘Finanical IQ) Video Rating: 4 / 5