Robert Kiyosaki, Suze Orman and the Money Merge Account Celebrity Death Match by Keith Gill keithgil

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Robert Kiyosaki, Suze Orman and the Money Merge Account Celebrity Death Match
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Submitted Friday, March 16, 2007
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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 .

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» left by Anonymous (2 years 187 days ago.)

Could change the title to "Buy an MMA from me"
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» left by Anonymous (2 years 168 days ago.)

Watch out for how these are marketed. This guy and others use distorted facts to sell their product
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» left by Silvio from New York (2 years 168 days ago.)

Here's the plain truth. The mortgage industry is set up to profit and pay themselves first. That's why many of these front end interest loaded loans go into default because so many are willing to write BC loans to clients knowing they will not make the payments.
I have found that the people who seem to be critical tend to be the least likely to do much in the way of educating themselves about new products and or techniques entering and ultimately changing the manner in which business gets done.
Face it the MMA and CMG products and presumably many more to follow are a sign of the changing times. These innovative products are going to command a larger share of the market place. Countries such as Australia, The UK , France and other European nations now use accounts similar to the MMA. It's estimated that nearly one third of their homeowners use these types of accounts.
I suggest to anyone interested do your own research into how the products work. Those who cry wolf are the ones who losing business to these new products. That's what I see going on. Forward thinking people will always move on new trends.
But then again what do I care my home is paid off. Silvio Carvana
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» left by Jeanne from Delaware (2 years 110 days ago.)

This guy is criticizing Suze Orman for her so-called ignorance when he doesn't even use proper grammar. Credibility lost!
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» left by Anonymous (2 years 56 days ago.)

Using an MMA takes LONGER, COSTS more, and is MORE difficult than identifing how much you are willing to pay extra towards your mortgage and setting up an automatic bill pay.

Don't be fooled the MMA is just a smoke screen to get you to pay extra principle payments on your mortgage. These guys should be ashamed of themselves.
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» left by Dave Moore from Clever, MO (1 year 87 days ago.)

That's not an accurate statement. The reason I know it's not accurate is because that's what I did during 30 years of being a homeowner (of six different homes during this time). Now I'm 58 years of age and I started using the MMA system 4 moths ago. I will pay off my mortgage much faster than I ever hoped I would when setting up extra payments (of the same amount I'm now using with the MMA) and using automatic bill pay. To be fair, it took me a long time to recognize how the MMA system works to accomplish this, but when I did recognize it a light went off in my head and I regretted not getting into it sooner. I've never really struggled with excess debt, but at the same time I could never get over the hump of being able to pay down my home mortgage, which is the only debt I have had for several years now.
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» left by Anonymous (1 year 355 days ago.)
"you will always have a HELOC" Tell that to the legoins whose HELOC are being cancelled. Equity in your home is not the same thing as cash in the bank. an open equity credit line is not the same thing as cash in the bank, only cash in the bank is the same thing. Always prepare for the worst. Thhis product is crap. You can do it yourself and save the refi fees if you are smart.
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» left by Anonymous (1 year 330 days ago.)
This MMA program doesn't pass the smell test. You can see an unbiased analysis from Scott Burns's column laying out the questionable assumptions that are used to sell it. Read his Dallas Morning News column from October 28 for the other side of the story.
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» left by Dave Moore from Clever, MO (1 year 87 days ago.)

There's a lot of misunderstanding about the MMA system, all of which seems to come from those who know just enough about it to "feel" uncomfortable and suggest that it doesn't pass the "smell" test, but have an insufficient knowledge of how it works to comment with accuracy. One example is when someone comments about how a potential user of the product will be hit with closing costs or other fees for getting a HELOC. I didn't really have to shop around much to find one with zero fees so that's a non issue. Secondly, I've heard a lot about how the interest rates for HELOCs are higher than they are for a 30-year mortgage. That's not always true (I got mine for 2.9% interest for the first year, then 1% below prime after that). But it's really not an issue anyway since interest is calculated on the "average" monthly balance, which means you're never paying more than at most about $14 a month in HELOC interest if you follow the program as I am doing. And if my interest rate was 19% I wouldn't be paying more that $20 a month. I've done the calculations and I know what I'm talking about. I had a 30 yr. mortgage with a current balance of $153,000 I was scheduled to pay off in 27 years. With the MMA system I won't pay it off in 11 years; I'll pay it off in 5 and half years. In 4 months, according to my mortgage statement, I've already paid it down from $153,000 to $134,300. You can think whatever you want. All I know is that at 58 years of age I've never come across anything quite as intriguing as this. It feels pretty good to be headed for retirement without a mortage too.

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» left by calvin (1 year 76 days ago.)

MMA is just prepayment. There is nothing magic. If you make $1000 more than spend each month, following the MMA will do the same as sending that $1000 to your mortgage each month without the HELOC. The HELOC game will save you a buck or two extra a month in interest, but paying $3500 for software to do this is foolish. Not only will it cost you $3500, since that is $3500 that doesn't get applied to your debt, you will pay an additional amount of interest each month until the debt is retired. At 6%, that's about $17/month extra, compounded. If it takes you 20 years to pay down your 30 year mortgage using the UFF's software, it will cost you ~$11,225 more than just sending your leftover income each month to your mortgage. Now getting a HELOC for emergencies is a good idea if you are going to be sending all your money to your mortgage since you'll be house rich and cash poor. But you don't need the software to do this. It's so easy a caveman could do it.

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» left by tony mathews (1 year 76 days ago.)

United First Financial – Jubilee – MMA – Money Merge Account

United First Financial has developed a web based software system that makes some interesting and intriguing claims:

“Pay off your mortgage in one-half to one-third the time with little or no change to your lifestyle”

It’s a claim that is on the United First Financial (UFF) web site, it’s a claim that the majority of the UFF agents make, it’s impressive, but it’s a lie.

The software program utilizes a Home Equity Line of Credit (HELOC) and tells clients to use it as a checking account. The client is to deposit all paychecks directly into this account and pay all bills out of the account. The software tells the client exactly when to pay a bill, and when to send huge pre-payments towards their mortgage.

UFF claims by using this HELOC account like a checking account you can save tens of thousands of dollars and save years off your mortgage. When following the program, all of the discretionary income filters through the HELOC and goes right to the mortgage. This is not mentioned in the UFF agents “pitch.”

Instead, the agents attribute the savings to the HELOC or Money Merge Account (MMA). Agents claim that by leveraging your paycheck, you can save tens of thousands of dollars and years off your mortgage. What the agents don’t tell you that it is the huge pre-payments to the existing mortgage from the HELOC that creates the savings. Because HELOCS have a higher APR, you have to pay back these huge pre-payments at a higher interest rate (APR) then you normally would if you simply pre-paid the mortgage directly, without the software.

In order for the United First Financial software to work, you would have to drastically change your spending habits. No going to the movies, spending money on designer clothes, going out to dinner, etc. IF THAT IS NOT LIFE CHANGING, I DON’T KNOW WHAT IS!

The HELOC can save you pennies when operated correctly, but would never be enough to justify the software cost ($3500). The reason why the UFF owners created the system around using the money merge account (HELOC) is because it confuses the clients. Not to mention the creators are mortgage brokers who collect commission on new HELOC accounts.

The agents of this product, either deceptively or unknowingly, attribute the savings of interest to the HELOC shuffle (again, this only saves pennies). The ONLY reason people buy the software is because they believe the HELOC is saving them HUNDREDS OF THOUSANDS in interest – this just is not true and I really wish it was, but it is not! The “clients” don't realize that their extra money is indirectly going to their mortgage. They believe that the software does something that it does not because many of the agents do not know the truth themselves.

In the real world I believe the HELOC would be too tempting to many people and would cause them to get deeper into debt. I have asked agents how this software outperforms other tools that anyone can use for free or for maybe 2% of the cost of UFF, to this day I have no reply.

Agents argue that the software has value because it is a motivational tool, they claim that clients are motivated to get out of debt when they see how much they can save by sending more money towards their mortgage. The agents only make this “motivation” argument AFTER questioned on the validity of their claims about the actual amount of HELOC savings. The "clients" that fall for this scam do not buy the software as a motivational tool, and that is about the only value the software has. Anyone could replicate this motivation by using a free mortgage calculator to figure out how much they save by not buying something, and instead send that money towards their mortgage.

Using a calculator is easier then logging onto a website and inputting the appropriate field. Calculators are free on the web, and very cheap in many stores.

In several mathematical scenarios United First Financials software comes out behind a free system that people have been using for decades. The do-it-yourself method takes less time than using the software and is easier. Instead of sending $3500 to United First Financial, simply add up your income, subtract your expenses, and then use the leftover money to pay your mortgage each month.

The major argument that agents use against this do-it-yourself approach is that sending all your additional money to your mortgage leaves you vulnerable in an emergency situation.

This can very easily be avoided by opening a HELOC, independent of UFF and only using it for emergencies.

Agents also claim that people just don’t do it themselves. The make claims that 95% of Americans are drowning in debt and at least their software points them in the right direction.

The problem with that statement is that the software gets them MORE in debt. $3500 for a software program that can be replicated with a free calculator and a sheet of paper is not revolutionary, though the agents also make that claim. Budget software ranges from free to $100 for the fancy programs (Microsoft Money, Quicken, etc).

If the UFF software truly did what its agents say, UFF wouldn’t need agents. You would see the UFF software in every retail store across America (Circuit City, Best Buy, Wal-Mart). The problem is that it doesn’t, that’s why UFF uses a Direct Sales approach, retail stores don’t want to ruin their name by selling scam software.

In mathematical scenarios comparing do-it-yourself to UFF, do-it-yourself has always come out ahead, sometimes as much as paying off the mortgage 6 months sooner and saving $20,000 more than UFF.

WHY DO-IT-YOURSELF IS BETTER, EASYER AND CHEAPER THEN UFF:

1. You don’t have to log onto a web site and plug in all your information, taking up to an hour each month. Agents claim that Americans don’t have the time to do-it-themselves. What? Doing it yourself might take 5 minutes a month, much easier then logging on to the website and filling out all the fields.

2. You don’t have to give $3500 to an agent for useless software.

3. UFF agents claim you get life-long support on the software. Do-it-yourself does not require software and only requires a calculator and your bank statement – no support needed.

4. UFF agents will often try to recruit you into their multi-level-marketing company. This can lead to embarrassment when your friends and family find out that it is a scam and that you have been scammed. Do-it-yourself will never scam you or your friends and family!

5. UFF agents claims that Americans can’t do it themselves as effectively. This is another lie, because of the software cost, UFF can’t beat out doing it yourself.

6. UFF agents claim Americans are not smart enough to do it themselves. Again false, to do it yourself you do not even need to know any math as long as you have a calculator! Although simple addition and subtraction is all that is needed to do it yourself. (Income-Expenses=additional payment to mortgage).

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