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Archive for the ‘Ethics’ Category

Live the American dream, fix your problems

Thursday, April 24th, 2008

You wanna live the American dream?  You wanna fix your financial problems? Don’t live beyond your means.

There was such a positive response to our failing article that I decided to follow up on a little more direct and slightly less sarcastic take about living beyond your means.

Here is the US Savings rate historical graph, its a nasty thing to behold:

savings rate

Sadly, what you see above is true for a good portion of us. The U.S. Department of Commerce’s Bureau of Economic Analysis’ statistics suggest that the typical American family sometimes spends all of its cash and then dips into existing cash savings – or borrows cash from others – to keep spending even more. If the government’s personal saving statistics are to be believed (we all know how government statistics go, and many economists believe they are flawed), the typical American family is living beyond its means, choosing to live a lifestyle it truly cannot afford on the income its breadwinners bring home each month.

There is some good news though… your family does not have to live like the typical American family. Your family can choose to be different. You can choose to set aside part of your income each month to build up cash savings. Then, you can invest those savings wisely so that your family can pull ahead of the typical American family over time. After all, why choose to “keep up with the Joneses” materially when you can just as well choose to beat them financially? Is it challenging to do? Sure it is. But, you can do it. You just have to think radically.

Lets get sort of crazy, crazy like a fox, not like Michael Jackson

Let’s think radically for a moment. Would it not be a completely radical idea to do the exact opposite of what the typical American family does with its cash income each month? What would it feel like to save more cash than you spend each month? Think about it. Imagine paying all of your bills out of your monthly cash income yet still having more cash left over than what you just paid out in bills! Can you imagine that? Wouldn’t that be nice?

There is one easy way to do this. Spend a lot less per month! (Gasp)

Hey, I never promised that getting ahead financially was going to be fun, did I? Mentally and financially, cutting back on your monthly expenses is very dull, hard work, especially at the beginning. It requires you to make hard decisions and sacrifices, and to have patience. However, once you get started, your cash savings start to build up. You can then use this accumulation of cash savings to build wealth over time through the commitment of that cash savings to sound, long-term investments. So, the sooner you get started accumulating cash savings, the sooner you can choose to live off the income from your investments instead of the income from your own labor. Or, if you want to, you can choose to continue to work. That is the great thing about doing the opposite of the typical American family: you have greater freedom to choose what you want to do when you want to do it. This is what is meant by achieving financial security and freedom, perhaps the best way to have fun and enjoy life.

Yeah it sucks

I can hear the metaphorical room splitting down the middle. Some of you are cheering for me and others are gathering your weapons to come to my house. For the second group, I can hear you muttering to yourself how difficult and unattractive it would be to get radical: “Cut back significantly on my monthly expenses? Forget that, that sucks” Yes, it would “suck.” Significantly cutting back on your monthly expenses could dramatically alter the lifestyle to which you have become accustomed, perhaps a comfortable lifestyle somewhat beyond your means. You might have to move to a less expensive house or apartment in a different part of town. You might have to sell your current car and buy a less expensive, more fuel-efficient car, carpool with someone else, or take public transportation. You might have to stop eating out at restaurants multiple times a week and just eat self-cooked meals at home and at work. You might have to cancel your overpriced (and overindulged?) cable or satellite TV services. You might have to live without the latest gadgets and gizmos and just stick with the perfectly good technology you already own. You might have to forgo exciting vacations overseas and just take cheap road trips here in the good ol’ U.S.A. You might have to do all of these things until you are living well within your means, living a lifestyle you can afford to live on the income you bring home each month.

Trust me, things could be worse

Yes, downsizing your lifestyle would “suck.” But, do you want to know what “sucks” worse than slashing your monthly expenses so that you can save and invest for the future? I’ll tell you:

-Growing old poor, unable to afford to travel and visit your grandkids living with their parents – your grown children – in another city or state

– Having only meager Social Security or pension checks to live off of in your retirement or in the case of our generation, probably no social security at all.

– Living your final decades on Earth as a potentially unwanted financial burden on your grown children’s families and their own futures

-Having no choice but to work up until the day you die because, over your lifetime, you failed to create any personal wealth that enables you to choose to stop working in your old age

-Dying penniless, leaving behind no legacy of financial security for your family’s future generations

That is what “sucks” worse. And, that is exactly what a good portion of the people you know (some estimates put it as high as two in three Americans!) are going to do.

 

Do something

You do not have to live your lifestyle the way you live it today. Your lifestyle is largely a matter of choice – your choice. With the exception of financial obligations such as government taxes, court orders to garnish your wages, debt payments to creditors, or other payments for which you have a moral, ethical, or legal responsibility to pay, the cash you earn each month is your cash, and you alone choose to whom you hand over your cash each month. In other words, to save or not to save your cash is largely your voluntary choice.

Stash a large chunk of the cash you earn each month into savings – what a radical idea, huh? Well, if the U.S. government’s personal saving statistics are to be believed, saving cash apparently is a radical idea in early 21st century America. Each month, “financial radicals” across America choose to stash a large chunk of their cash income into savings – cash held at the ready to provide financial security and/or to fund sound, long-term investments. These financial radicals demonstrate a strong preference to save and invest for a brighter future than to spend their hard-earned cash on wealth-depleting consumer goods and services in the here and now.

What about you? If you have made the choice to do what it takes to build wealth over the long term, consider living a “crazy” lifestyle. To do so, make whatever lifestyle changes necessary for you to minimize the amount of cash that you voluntarily hand over each and every month to retailers, restaurants, finance companies, entertainment companies, utility companies, grocery stores, and others. Use the cash left over each month to build financial security and freedom for you and your family over the long term. It all starts when you refuse to live a lifestyle you cannot afford on the income you bring home each month.

Expensive cell phone? Cut it. Expensive car? Sell it. Expensive stuff laying around your house that you don’t need/dont use? Sell it and put the money in savings. Eating out every day? Stop. Personal trainer? Motivate yourself (and use resources such as fitnesstitans.com
Buying tons of groceries? Add a garden this summer. Still spending too much on gas? Ride your bike. Cut up your credit cards.

Its a battle, win it. Its the American dream, live it.

Lending Money to friends

Sunday, April 6th, 2008

I have lent probably 10 friends money in my life. Of those I have had 8 pay me back. Thats not necessarily a terrible ratio, and currently all of them over $100 have paid me back except one and I think he does intend to pay me back. The problem is you never know quite when you will get burned so there are a few things to take into consideration before you lend to a friend or family member and a few guidelines to follow while doing so.

Questions:

1) Do I really believe they will pay me back?

2) How badly do they need it and am I the last resort

3) Is it even remotely possible I could lose contact with this person?

If you decide after thinking about those two things that you yes you should lend them money then its time to think about a few guidelines:

1) Give them a time frame to pay you back – dont get taken advantage of

2) Write it down – dont forget about it

Friday Financial Fun links and my technorati rant

Friday, February 29th, 2008

So I find that there are a lot of great articles in the PF world and a lot of terrible, boring ones about topics that are more overplayed than “Crank that” in the clubs.  So here are articles I actually like or found entertaining for the week.  And no its not just link love, because you can bet your ass some of these dudes haven’t/probably won’t ever link back to me (though admittedly there are a lot of my closer associates on the list):

Obtain a copy of your credit report for free at Blogging Away Debt

Mrs MiniDucky is cleaning out her Wallet (just like I did, except probably more thoroughly than me)

This is right up my ally: Stick figures explaining the subprime mortgage crisis at My Money Blog

Mrs Micah and her Cash Register problems 

Patrick has some sweet Salary Negotiation Tactics at Cash Money Life…also check out my Guaranteed way to get a raise

The Honest Dollar has an interesting article on Date-targeted retirement funds (these are offered at my company: I do not use them)

PTM has the first money hack carnival (no, yours truly didn’t submit anything this time around)

Mighty Bargain Hunter has I know whats wrong with my trumpet which I feel obligated to mention since I play a good amount of musical instruments (including trumpet) and I had a similar experience with my trombone.

Lazy Man and Money has a pretty funny article on the worst finance book of all time

JD tackles money social situations (and who HASN’T run into this)

Saving on TV from Free Money Finance

Words of Wisdom from Warren Buffett at five cent nickel and trust me, when Warren Buffet talks, you should listen.

Breaking the cycle from NCN

My Two Dollars has a great article that I like to paraphrase as Take care of your crap 

Lynnae has a good point with Budget Evolution (so true)

Debt free Revolution is finally debt free (in fact she will be doing a guest post coming up sometime here)

Probably one of my favorites of my favorites for the week is Digerati life’s Getting to a mill with small change too bad a million isnt enough 

At blueprint, bad breeds more bad Wow Im a jerk, I don’t even bother to give details, guess you have to read the article

And finally not even personal finance related but I saw this:

Are meme’s helping peoples blogs?  at My investing blog.  Apparently it works.  I have some real reservations about this and my current stance is “@#$% that, I am not artificially inflating my rank, if people like stuff here, they will link here” I do this for the people and to break up the monotony in a topic that is as traditionally dry as a bad white wine, and for emails like:

“Dear Jesse,
This is a wonderful thing that you are doing!  You are really changing lives, mine included…”

Except wait you have to wait for the Monday contest update to see the rest, but that being said I’m occasionally tempted.  My technorati link average compared to my reader count is almost comical.  Over 10-1 visitor count per day compared to link count (last I checked) and my advertising revenue suffers because of it.  For now, I’m sticking to my guns.

When personal finance blogs go bad…and why capital gains tax is your enemy

Friday, February 1st, 2008

I recently read an article on Advanced Personal Finance and though I have been reading him for quite a while and I like a lot of his articles, I wanted to pull my hair our when I read his article on Phantom Capital Gains. For a quick background on what he was talking about I will paste his first paragraph as he does a good job of explaining it:

Phantom capital gains
The term ‘phantom capital gains’ refers to the fact that when you sell appreciated assets (e.g. stocks), you pay capital gains tax based on your basis (the price you paid for them whenever you bought them). Since then inflation has likely eroded the buying power of the dollar. So now that you’re selling them, the cash proceeds you receive are worth less in ‘real’ terms. You must pay taxes on any gains, regardless of that gain’s real buying power. With me so far?

Rudy Giuliani and other anti-tax advocates think people should not be taxed on the full nominal amount of those capital gains. In Giuliani’s plan, the capital gains that are subject to taxation would be indexed for inflation.

Great explanation, I love it and I actually did not know that was part of Giuliana’s plan. So I read on.

…So who would benefit from an indexing of capital gains to inflation? Drum roll please. Not surprisingly, the wealthy will be the overwhelming winners if a plan like Giuliani’s becomes law. Doing something like this is the opposite of progress, to me. It increases rather than decreases wealth inequality.”

Uh oh. Though I find it admirable that APF personally wants to help people with less invested in the market than himself, I find it immoral to take more away from people who are planning for the future and have taken control of their financial life.

Capital Gains taxes drag the economy down

More and more people are realizing that social security is not something to bank on and are investing in their future themselves. Aside from that, one of the great things about America is that generating wealth is available to anyone, its not just the rich investing in the stock market anymore. Though you can debate the morality of the top 1% holding so much wealth, it makes no sense to do something just to punish them that might also hurt the middle class. Those that take the time to manage their finances WILL come out ahead. And if you are reading this right now, that is YOU. Remember there is nothing immoral about increasing your wealth, eliminating your debt, and taking advantage of the country you live in.

The long short of it is: capital gains is your enemy here…and not just for those reasons.

Reducing Capital Gains taxes would bolster the economy by encouraging invest­ment in promising enterprises and by making div­idend payments to stockholders more attractive to companies. Dividend payouts allow companies to reward shareholders in a way other than just trying to focus on increasing the stock price.

Something wicked this way comes…

Tuesday, July 10th, 2007

As much as possible I try to keep politics out of this blog because for the most part I try to reach out to every audience.  I think everyone has a right to be informed financial matters, and for the most part politics have nothing to do with it.  However once in a while, something comes up that absolutely frightening.  Something that has the ability to absolutely destroy our financial freedom in this country, to destroy any hope you have of retirement.  Here is a quote from Nancy Pelosi:

When questioned about recent stock market highs she responded “Only the rich benefit from these record highs. Working Americans, welfare recipients, the unemployed and minorities are not sharing in these obscene record highs”.

“There is no question these windfall profits and income created by the Bush administration need to be taxed at 100% rate and those dollars redistributed to the poor and working class”.

And that my friends, is one of the scariest quotes I have ever seen from someone in a position of power in the United States. Social Security WILL run out before most of us retire.  In fact, it will be, by definition, bankrupt by the year 2042.  What does that leave us with?  Our Roth IRAs and 401ks.  For anyone currently under the age of 60, we are at least partially banking on our retirement savings growing in the stock market.  Even if you don’t care at all about politics, at least pay attention to this because this has the potential to ruin your retirement.  It doesn’t matter what party is trying dig into your pockets, this is something to fight back on.

 You and I, as a working americans, DO share in these record highs.   

Why do you want to be rich personal story

Monday, April 16th, 2007

When I wrote about having enough money to support your family a few weeks ago, little did I realize how much of an immediate example I would have in my life.  Several weeks ago my grandma who has had cancer for quite a while now fell ill again and had to go to the hospital.  After a few days in the hospital the results came back: the cancer had spread to her bones and there was nothing realistically that could be done anymore.

For the last few weeks of her life she was able to be home surrounded by family until she died on April 4.  This was made possible by paying for hospice.  I hesitated to post on this, but the simple fact is, I want to have enough money to pay for the best medical care, or if it comes down to it in the end, home care, possible for my family. 

Five reasons why getting rich is NOT immoral

Thursday, March 22nd, 2007

Along the same lines as “Why do you want to get rich?” is the question of “is it immoral to get rich?”

Quite simply it is not. If you can’t figure it out for yourself, maybe you don’t deserve to get rich, but I will help you out anyway. Here are some reasons that it is not immoral to get rich.

1) The market does not care if you invest in it. It couldn’t care less. If you are not making money then you are wasting your opportunity, and someone else IS getting rich.

2) If you do not like a companie’s ethics, then don’t buy their stock. It’s that simple. Hell, buy their competitor’s stock!

3) Charity. Get rich, and donate your money to charity. Is helping thousands of people with food donations….or better yet spending millions to help people setup systems to feed themselves immoral? I think not.

4) Volunteer. The less you have to work, the more you can volunteer.

5) Being rich does not mean being greedy.

I might add more later, and there is a lot more to dive into but I am sick of hearing about people talking about “living in poverty” as if its the only way to be a good person. Give me a break.