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Retirement or Emergency Account - Which Should Be Priority?

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By Bob Brooks

April 22, 2014

In a recent Ask Bob email, I received the following question:

"I am trying to achieve a balance between saving for emergencies and saving for retirement. How do you strike a balance and do you put emphasis over one versus the other?"

We save money for all types of reasons. Probably the top 2 reasons come down to retirement and saving for that unforeseen emergency. Which is more important? Should one be prioritized over another?

Consider the story of Mary:

Mary was a saver. It was a priority and she diligently saved for a number of years. Everything was going great for her retirement account. She was on track to retire when and how she wanted to. Then, reality arrived when her home air conditioning unit went out. She was already cutting it close with the end of the month being days away. Although she was an excellent saver, she had very little in her savings account. What is she going to do?

First and foremost, developing the habit of saving is crucial for positioning yourself for a lifetime of success. However, saving can be counter-productive. All of the saving for the future into accounts you can't touch will do you no good when the short-term emergency arrives.

Funding an emergency account is far more important than allocating your savings towards retirement money you cannot touch now.

After all, if you don't have an emergency account establish, the credit card and debt end up being the only alternative. Build up the emergency account first, then let the future take care of itself.

The future is not as important if you can't take care of the short-term.

 
The Death of Money – An Interview You Will Want To Hear

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By Bob Brooks

April 16, 2014

"What if you would have known what to look for prior to the financial crisis of 2008? What if you would have been prepared? How would have things been different?"

One of the blessings of hosting the Prudent Money Radio show is that I get to interview some very interesting authors. I want to recommend that you listen to this interview that I did with Jim Rickard.

Jim is one of those individuals who has had a front row seat and exposure to information that the everyday person just doesn't get. He is an advisor on international economics and financial threats to the Department of Defense and the U.S. intelligence community. He also has served as facilitator of the first-ever financial was games conducted by the Pentagon.

I first interviewed Jim in 2011 on his book Currency Wars. That book went on to become a national best-seller and translated into 8 languages. Jim's writing and presentational style is not full of sensationalized gloom and doom like you see in so many books. In his book he writes about little known information that paints the picture of the risk that we face as a country.

During that interview, I was surprised that he took the stance of hope that we would climb out of this financial irresponsibility as a country. He was optimistic. Further, he gave very sound reasoning. He was one of the first to ever convert me to that point of view.

Jim's latest book The Death of Money should serve as a wake-up call. Once again, he gives the facts. He tells the reader everything that you need to know about the collapse of the US dollar. He is not the sensational gloom and doom writer and he doesn't have a newsletter to sell you. His writing is very credible.

There is one distinct difference between his two books. In his book Currency Wars he was hopeful. The reason that he wrote the Death of Money is that the hope is gone. He said in the interview that since he wrote the book Currency Wars, we as a country have gone way past the point of no return, and the scenarios that he writes about in the book are likely to occur.

That really got my attention. He even states that he hopes he is wrong. So, the book is a must read and helps the reader understand risk and what to look for. Most importantly, he tells you what you need to know to prepare for it. It is already #1 on the International Economics Best Seller List.

So, as you ponder my recommendation, think about the answer to the question posted above.
What if you would have known what to look for prior to the financial crisis of 2008? What if you would have been prepared? How would have things been different?

Just like Jim's book, there were credible authors warning of the financial crisis before it even happened. Those who took heed were spared. Invest some time at least in the interview. Consider investing time in reading the book. It could be a very in-expensive, money saving decision.

Information on the book – click here

Listen to the Interview – click here

 
Predictions & How To Interpret Them

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By Bob Brooks

April 14, 2014

Predictions, predictions, predictions – everyone on Wall Street has them. Before you get overly anxious or overly optimistic, there are a few things to consider about predictions.

No one really knows

The reality is that no one really knows what is in store for the future. Keep in mind, a good prediction is not a good prediction unless it is delivered confidently and as a matter of fact.

No one will remember

It is a low risk prospect to be a predictor of prosperity or gloom and doom. If you happen to roll the dice and get lucky, then you are all of the sudden a prophet. If not, no one remembers. It is sort of a great gig.

Don't confuse luck with the ability to see the future

If one of those Prophets of Profits does happen to get it right, then he/she will actually start believing that they are a prophet. No, it was more than likely luck that made that forecast rather than skill.

Rarely, will someone get lucky twice

There is a reason that a person is rarely lucky twice with forecasting. After they get it correct (lucky) the one time, then they form a bias, get over confident, and see everything through the lens of their forecast. This diminishes the effect of their decision making. I have seen this numerous times.

The number of their predictions increases as they continue to get it wrong

If you predict something long enough, you eventually get it right. In 2008, ex-mutual fund manager Bill Miller thought that financial stocks were the place to be. Unfortunately, it was at the wrong time. He held onto those stocks all of the way to the bottom of the financial meltdown in 2008, and lost a high percentage of money. Just the other day, he said on CNBC "that the conditions for a bad market just don't exist.".....much like that in 2008 I guess.

They are selling you something you need

Marc Faber was on CNBC the other day predicting a stock market crash worse than 1987. Mr. Faber is editor and publisher of the Gloom and Doom Report. No, I can't make this stuff up. Typically these guys will make these gloom and doom forecasts because they are selling the newsletter that is going to fix the problem.

There are a few great forecasters who are doing so because of knowledge and skill. However, most of them have an agenda.

 
Want To Know Where The Stock Market Is Going? Watch This...

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By Bob Brooks

April 10, 2104

"I am just afraid that the stock market is going to experience large losses."
In talking to people, I hear this a lot. There is a warranted concern that the stock market is setting up for a big decline. Any investor who went through this experience in 2008 certainly doesn't want to experience it again. So, is there anything that an investor can watch that would give a potential early warning signal?

There is one thing I am watching, and I feel it can be predictive in nature. I wanted to write about it. I really want to encourage you to spend some time reading this (it might be a little long) piece. I want to encourage you to share with your friends. The Dow Jones Industrial Average is in what is referred to as a Megaphone Pattern. Before I go any further, anyone can understand this pattern and what it means. So, please stick with me.

This is a picture of the Dow Jones Industrial Average. The two blue lines form a picture that looks like a megaphone. This is where you get the name of the pattern. Point 1 occurred in 2000. Between point 1 and point 2, we had the technology crash. Between point 2 and 3, we had a 5 year bull market. Between point 3 and point 4, we had the financial crisis and stock market crash. Between point 4 and point 5, we had another 5 year bull market. Will we now fall from point 5 to point 6?

Megaphone 1.png

There is precedent for this pattern because we saw the same thing happen in the 70's.

Megaphone 2

This is a 90 year chart of the Dow Jones Industrial Average. You can see the current stock market up at the top right-hand part of the chart, and then you can see the exact same pattern during the 70's in the middle of the chart. Look what happened between point 5 and point 6. The stock market declined -45%. Today, that decline would be much larger.

Of course, the Dow Jones could go much higher from here and invalidate the pattern. I just find it curious that the stock market has run into trouble ever since it rose to point 5. Is it predicting something?

Only time will tell – If you are interested, I wrote a more extensive piece for my clients. If you send me an email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it I will be happy to send it.

This is something to watch. Just remember, there are plenty of ways to protect against risk. Make sure you understand your options. If you want to talk more about your options, please let me know at the above email, or feel free to call me at 972-386-0384.

 
Get Your Free Copy of Rich Dad, Poor Dad

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By Bob Brooks

April 8, 2014

This is the top selling personal finance book of all time and it can be yours for free! This offer is for one week only.

The Rich Dad Poor Dad personal finance book has sold more than 32 million copies in more than 40 languages in more than 40 countries around the world and now it's available for FREE download!

Take control of your financial future today and download your copy of Rich Dad Poor Dad here: www.richdad.com.

In this eBook, Rich Dad Poor Dad will:
• Explode the myth that you need to earn a high income to become rich
• Challenge the belief that your house is an asset
• Show parents why they can't rely on the school system to teach their kids about money
• Define once and for all an asset vs. a liability
• Teach you what to teach your kids about money for their future financial success

"The road to financial independence has not changed since I first wrote this book more than a decade ago," said Robert Kiyosaki, author Rich Dad Poor Dad. "The rich continue to get rich the same way they always have – by understanding how money works and making their money work for them. My hope is that by offering the lessons of Rich Dad Poor Dad FREE, even more people can enjoy the benefits of living financially independent lives and pass those lessons on to their children and grandchildren."

Rich Dad Poor Dad is available for free download now through April 13, 2014 here: www.richdad.com.

 
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