Jason and Sharon discuss the ballooning student loan situation in the U.S. and whether a college education is still as valuable as it once was. Sharon feels that it has to do with a standard, an expectation in our society, and students today can look at alternative ways of attending college to avoid the need for large student loans, such as scholarships or employers who assist with college expenses. The Thrive Time for Teens game deals with this issue, as well as educating youth about investing, real estate, and how to obtain good credit to open doors of opportunity.
A life-long education advocate, Sharon Lechter is the founder of Pay Your Family First, a financial education organization, and YOUTHpreneur, an innovative new way to spark the entrepreneurial spirit in our children. In 2009 Sharon was appointed to the National CPA Financial Literacy Commission as a national spokesperson on the topic of financial literacy. In 2008 Sharon was appointed to the first President’s Advisory Council on Financial Literacy. The Council served both President Bush and President Obama advising them on the need for financial literacy education.

Sharon is an entrepreneur, author, philanthropist, educator, international speaker, licensed CPA and mother. She has been a pioneer in developing new technologies, programs and products to bring education into children’s lives in ways that are innovative, challenging and fun, and remains committed to education – particularly financial literacy. In 1989 she joined forces with the inventor of the first electronic ‘talking book’ and helped him expand the electronic book industry to a multi-million dollar international market. Since 1992, she has dedicated her professional life and directed her entrepreneurial efforts in the creation and distribution of financial education books, games and other experiential learning products. In cooperation with the Women’s Presidents Organization, Sharon has held events across the country to teach young girls financial lessons through interactive games. In 2009 this event launched her new financial literacy board game THRIVE TIME for Teens, an innovative experiential and fun life and money reality game which has gained recognition with coveted awards including the GOLD Mom’s Choice Award, Creative Child Magazine’s 2010 Game of The Year, Dr. Toy’s Best Vacation Product and a five-star rating from WTS Toy Reviews. Recognized as an expert on the topics of financial education for children and entrepreneurship, Sharon has been featured in top national media outlets including CNN, Forbes.com, MSN Money and The Chicago Tribune. Sharon has authored Think and Grow Rich – Three Feet from Gold in cooperation with the Napoleon Hill Foundation and Greg Reid which was released in October 2009 and has ranked as a BusinessWeek and Wall Street Journal best-seller. Sharon’s most recent book project is Outwitting the Devil by Napoleon Hill-a manuscript hidden for over 70 years updated by Lechter for the modern reader. Future projects with the Foundation include Think and Grow Rich titles for Women and Children.

Katie Kieffer is a national columnist and political commentator. Her multimedia website is KatieKieffer.com.  She writes a column for TownHall.com every Monday. Katie has a background in journalism, multimedia entrepreneurship, public speaking and commercial real estate. Due to her diverse experiences, Katie is a popular public speaker for college campuses and professional conferences across the country. Katie is a frequent guest on local and national radio shows to discuss her viewpoints on young professionals. Katie graduated Summa Cum Laude from the University of St. Thomas. As a college freshman, she wrote an opinion column for the St. Paul Pioneer Press. During her sophomore year of college, Katie founded, edited and published a nationally recognized student journal of thought and opinion called the St. Thomas Standard. Katie also developed a comprehensive website for the newspaper so that all of the articles were available online. Katie has over six years of experience in commercial real estate. Before launching into multimedia, Katie worked for NorthMarq Real Estate Services. She chaired a National NAIOP Young Professionals Forum of rising stars in commercial real estate and traveled across the country learning about different geographic business climates and development trends. Katie also chaired the NAIOP Minnesota Developing Leaders and was recognized as NAIOP’s Volunteer of the Year in 2007.

Katie is a LEED Accredited Professional through the U.S. Green Building Council (USGBC). Katie balances conservation and profitability considerations when discussing sustainability. Katie has traveled abroad and she currently researches the needs and challenges that young professionals face across the globe. Katie conducts interviews of both experienced and young professionals and showcases these on her website to inspire other young people to think innovatively, whether they work within a large corporation or are interested in starting their own ventures.

To Kyle, a ‘red paperclip’ is more of a symbolic thing, an idea that you’re ready to launch. A new project about to happen. That spark of insight or inspiration. The most important thing about an idea is to do something with it. Today, Kyle lives in Montreal with his wife and does speaking engagement, photography, art projects, and “Who are These Guys?” to name a few of the projects he has embarked on.

At the age of 16, defiant and hardheaded, Eric decided to leave home and drop out of school, choosing to live on the streets of Detroit. By divine intervention at age 17, Eric met a pastor who saw him a young man with tremendous unrealized potential. As a result, their mentoring relationship was born which led Eric to complete his GED and to prepare for college. Determined not to be another statistic, Eric enrolled at Oakwood University where he began reading every thing he could get his hands on. Understanding the struggle of the streets, he realized what his purpose in life was to become, so he reached back to his fellow drug dealers and helped many of them get their GED’s, go to college and incorporate the strategies and self-improvement exercises he learned in order to assist them in developing their own life plans. In so doing, he provided them with a much-needed positive option to the life of crime and illiteracy they then led. While in college, Eric started Break The Cycle I Dare You, (BTC) a non profit youth development and special event organization that focuses on developing programs for youth who have made bad choices and most often have had family, social, and academic struggles along with the lack of a father figure in their lives. Today BTC has developed and produced many supportive community-based programs and conferences across the country. They provide youth and teachers alike with activities, self-improvement exercises and motivational strategies to help them reach their highest potential in life. Eric now serves as the Chairman of the Organization.

He obtained his Masters degree in 2005 and is currently pursuing his PhD in Education Administration at Michigan State University and serves as Senior Pastor of A Place of Change Ministries, Lansing Michigan. He also serves as a consultant at Michigan State where he has developed The Advantage Program, an undergraduate retention program targeting academically high-risk students of color. In addition to his work with the Advantage at Michigan State, he also serves as a consultant for several collegiate athletic programs across the country. In this role, he provides assistants to student-athletes having academic and social challenges as it relates to successfully transitioning from high-risk schools and communities to a collegiate environment. Eric’s representation of the merits of higher education, coupled with his knowledge of the pains of the street, inspires young people to break bad habits and reach for new levels of personal and spiritual achievement. Eric has lived a life of challenges and triumph but has found a way to break the cycle.

A Chicago native, at the age of 18, Walsh has amassed great wealth as well as created a personal brand that surpasses most seasoned marketing experts.  As CEO of iSocial Academy, Walsh has created what he calls “iHit17” which is a “17-minute Social Media Hit List”, that allows you to build and easily maintain your personal brand and Social Media network. Austin started his career by developing local bands MySpace pages in the Chicago area, bringing in 200 to 1200 attendants—all without spending a dime and using social media outlets like Facebook, Twitter and YouTube.  After many successful events, Austin’s father’s colleagues took notice and asked him to do the same for them—create a Facebook page that not only increases their followers but also brings in revenue.  The great thing about his concept is that your followers are people who actually want to receive information from you—unlike a mailing list.

Sean is a wunderkind – with the strength and determination to succeed at whatever he does. A young entrepreneur, he was raised in rural poverty and has lifted himself to wealth in the millions through his service, import, and real estate portfolios. The intensity, commitment, and preparation that Sean demonstrates provide practical starting points for anyone who wishes to become wealthy. Though still in his late 30’s, Sean has become successful in business many times over, with accomplishments such as SBA’s Young Entrepreneur of the Year, and the San Francisco Bay Area’s Most Successful Under-40 Recognition. He has sufficient self-awareness and analytical abilities to clearly describe the principles and practices that have contributed to his success, so that others can follow where he has led.

Todd Babbitt grew up in the Washington, D.C. area, in an average middle-class family. He attained the majority of his wealth through real estate, and a smaller portion from the stock market. Nothing he did was complicated or beyond the understanding of an average person. Today, Todd lives the good life in Naples, Florida, with his wife and daughter. He continues to build his net worth through various investments.

Such was the case with Frank Corbin at http://jasonhartmanfoundation.org/articles/young-wealth-show/. When Frank was very young, he had a “hunger”, as he put it, to become wealthy. After moving from Ghana to New York City, he watched his mother constantly struggle to pay the bills. Frank was determined not to get into this same situation. Frank was determined to become wealthy and eliminate money as an issue in his life. As a teenager, Frank worked many different jobs. After graduating from high school, he attended DeVry Institue in Toronto – which loaded him up with student loans and other debts.

In addition to his studies at DeVry, Frank also purchased every real estate course and real estate investment book he could get his hands on. As a result, Frank became convinced that purchasing and holding real estate was the easiest and quickest way to become wealthy.

At the age of 21, Frank purchased his first property – a $241,000 home in Toronto which he picked up for no money down, received $20,000 at closing and the property ended up providing him with $900 per month of positive cash flow. One year later, Frank had attained 4 more properties and was financially free.

After 15 years of buying properties, Frank became bored. He needed a new challenge. Frank saw people struggling financially. He couldn’t understand why people weren’t doing what he was able to do so easily. So he went about creating a course, the Remic Wealth Institute, which teaches his methods for finding and investing in real estate. While putting together the courses within Remic Wealth Institute, Frank identified another need people had that he new he could satisfy – obtaining credit despite having a poor credit history. “The 8 Strategies to Highly Effective Credit” was thus born.

Introduction

Life as a young adult can be very confusing and chaotic.  In the midst of completing your formal education and beginning a career, there is a constant level of uncertainty concerning what will transpire in the future.  At the Jason Hartman Foundation, we are specifically concerned with helping young adults develop the necessary skills for financial success.  These principals are encapsulated in the three C’s of Financial Success; Credit, Capital, and Competency.  These principals serve as the fundamental building blocks not only for financial literacy, but for creating long-term success.

The 3 C’s of Financial Success (Credit, Capital, Competency)

The achievement of long term financial success will require the development of three key attributes.  The first is Credit, which will be necessary for obtaining loans, lines of credit, and can even have an impact on your insurance rates and employment prospects.  The second is Capital, which is the money to invest in future opportunities.  The final and most important factor is Competency or financial literacy.  The first two C’s can be developed over a few years, but competency and financial literacy must become a lifelong endeavor if you wish to achieve long-term success.

The First C – Credit

Credit represents your ability to borrow from banks and financial institutions at attractive interest rates.  Most people only pay attention to their credit for the purposes of buying a home, but there are many more important roles that your credit score plays.  One of these roles is to influence your insurance rates.  Insurance companies frequently use credit scores as a proxy for the risk profile of customers, since there is a higher correlation between customers with poor credit engaging in risky behavior than customers with good credit.  Furthermore, some employers will also pull the credit score of applicants to gauge the extent to which they are responsible with their finances.

Then we get to the ‘real’ advantage of strong credit . . . namely the fact that it allows you to purchase leveraged investment properties with an interest rate that is fixed for three decades.  The reason that this is such an advantage is because leverage allows you to control a much greater asset base than can be purchased with cash alone, and a fixed rate mortgage protects you against price inflation in the future.  With that being said, let’s take a look at how leverage and inflation work.

The way that leverage produces benefits can be demonstrated with some relatively straightforward arithmetic.  Let’s suppose that you purchase an investment property worth $100,000 with cash.  If the value of that property increases by 10%, you will have earned $10,000 on the $100,000 that you initially invested.  Now let’s say that you purchased the same $100,000 property with $20,000 (20%) down and $80,000 borrowed from the bank.  If the value increases by the same $10,000 (10%), but you only have $20,000 invested which means that your return on investment jumps from 10% to 50%!

There is a very important thing to keep in mind with leverage though, and that is the impact of large negative cash flow or price disruptions.  When properties are bought for speculation, and not rented out to tenants for income, it means that the owner of the property must ‘float’ the interest payments until the property can be sold.  If market values decline, and the property is no longer worth what you paid for it things can get very sticky.  Consider what would happen if you purchased a $100,000 property with 100% financing and the value went down by 10%.  Not only are you on the hook for your monthly mortgage payments, but you owe $10,000 more on the mortgage than your property is worth!  One of the best ways to mitigate these risks is to choose investments that generate cash flow to cover your mortgage payments.  This will give you the flexibility to ‘wait out’ declines in market value while the tenants pay for your mortgage with their rent revenue and you can choose to sell when values are high instead of being forced to sell when values are depressed.

Now let’s think about inflation for a bit.  The way that inflation comes about is when the government expands the supply of money in circulation faster than the rate of productivity growth for goods and services.  What happens in this scenario is that the amount of ‘money’ circulating goes up while the amount of products and services stays the same or goes down . . .  more money chasing less goods can only result in higher prices.  When the prices for goods and services go up, it frequently results in higher interest rates as investors become unwilling to purchase bonds at rates of low rates of interest that are being eroded by inflation.  When you take out a fixed-rate mortgage on an investment property and inflation strikes, it results in higher home values, higher rents that your tenants pay to you, but exactly the same mortgage payment that you pay to the bank!

The Second C – Capital

When talking about business and investments, the term ‘capital’ is used to describe the money, equipment, or other tools that are used to produce products and services.  In the context of personal investment, capital represents the amount of money that you have available to purchase assets that can generate cash flow and appreciate in value.  There is an old cliché that states “It takes money to make money” and in many situations, it is very accurate.  Any investment you make will require some form of capital.  In some cases it will be your money, in other cases it will be money that you have borrowed, in many cases it will be your time, and in certain situations it will be funds from investors.  Banks and investors typically want you to have some of your own money at risk so that they know you have a vested interest in success.

So what is the best way to build-up capital?  If your surname is something like Rockefeller, Vanderbilt, Hilton, Carnegie, or Kennedy then capital may not be much of a problem.  However, for the other 95% of us out there we will need to figure out ways to build capital on our own.  The most straightforward way to build a base of investment capital is to save a portion of your salary (frequently 10%) and place it into a separate account that will be used exclusively for investment.  Another thing that many people do is use the equity in their home for investing.  Taking out a line of credit on your house may give you the necessary capital to begin an investment program after you have become educated in different investment options and strategies.  A third option for building capital can be to borrow it from friends and family or take on partners.  This is frequently the most tenuous of strategies, since partnerships can be difficult to manage.  Jason Hartman is fond of saying that the hardest ship to sail is a partnership.  In the end, this is for you, the investor to figure out.  Each person needs to find the solutions and strategies that are best suited to their situation.

Another thing that many people frequently ask is how much capital they need to accumulate.  The answer to this question is highly dependent on the type of investments you will be undertaking.  In many cases, packaged investments with low capital requirements such as mutual funds tend to offer relatively average returns.  Conversely, investment ‘deals’ such as foreclosure rehabilitation may require more capital and will definitely require more expertise.  It is also important to bear in mind that some phenomenal deals require very minimal capital and some deals with large dollar requirements can be big losers.  Ultimately, it is your responsibility as the investor to evaluate which investment opportunities are best suited for your level of expertise, experience, and capitalization.

The Third C – Competency

The third and most important of the three C’s is competency, or your financial literacy.  In practical terms, this represents the most valuable capital that anybody can possess . . . namely the brain sitting behind their eyes and between their ears.  Credit and Capital are necessary tools, but they have no inherent wisdom, no soul, and no creative intelligence.  Both of these ingredients require a competent person to build them into investments that produce things people value.  The person who builds these deals could very well be you.

Another way to communicate the notion of competency is financial literacy.  Specifically, the knowledge of how financial products and processes work.  Becoming educated in the workings of investment and finances allows you to make intelligent decisions.  It will allow you to quickly determine what kinds of deals represent the best opportunity and which are too risky or generate returns that are too low for serious consideration.  It will help to guide your everyday decisions toward financial success.  Financial literacy helps to significantly limit your risk of failure.  This does not necessarily mean that you will never lose . . . investments involve risk, and sometime luck aligns against you.  What it does mean is that you will be investing with full awareness of the risks and rewards so that intelligent decisions can be made.
Thus, the most import concept to internalize is that one should become educated before engaging in an investment program.  Deals come and go, but the knowledge necessary to assemble and execute deals is crucial to successful investing over the long-term.  Practically speaking, this means that you will probably be doing a lot of studying, research, and reading before initiating your first investment.  Sometimes it can be difficult to be patient while absorbing the necessary education, but always remember that there are two components to success . . . knowledge and action.  Knowledge without action becomes nothing more than expensive ‘infotainment.’  Action without knowledge is extremely risky, and likely to produce spectacular problems.  Those who realize financial success build their knowledge base, and then act on it.