Friday, November 21, 2008

Keeping an emergency fund while augmenting retirement savings.

• Save up one year's worth of expenses
• Keep fund in interest-bearing account
• Invest yearly interest from account into high-yield aggressive-growth stocks
• Continue every year until retirement
• Sell upon retirement and put into interest-bearing account
• Create cash flow with money based on expected age of death
• Use the annuity to augment retirement savings

• One year's expenses: $25,000
• Kept in money market account: 4%
• Yearly interest earned: $1,000
• Invested in stocks averaging 18%
• Age of beginning investment: 30
• Age of retirement: 65

Amount earned at age 65: $1,816,652
• Invested at 4.5% in money market account

• Two options

1) Create a perpetuity
⁃ Money ($1,816,652) is invested at 4.5% and the yearly interest ($81,749) is drawn out at the end of the year to supplement next year's retirement income. Invested in a separate money market account (at 4%) for general retirement income. Assuming biweekly payments, this method earns you an extra $3,209.93 every two weeks to supplement the primary retirement savings. This creates a near-guaranteed supplemental income for the remainder of the person's life.

2) Create an annuity
⁃ This method requires an assumption of the length of investor's life. Calculations are based on retirement at age 65 and death at age 100. Money ($1,816,652) is invested at the same 4.5% (no need to transfer the supplemental money to the primary money market account) earning a biweekly annuity payment of $3,966.40 until age 100.

Comparisons: Biweekly Payment: Remaining Amount at Age 100:
• Perpetuity $3,209.93 $1,816,652
• Annuity  $3,966.40 ΓΈ

-Difference $756.47 $1,816,652

Wednesday, November 5, 2008

What my facebook friends think about Obama's victory.

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It's cute how people can have so much faith in someone so inexperienced and full of rhetoric.
So, in honor of Obama's nomination, I give you the Ten Cannots William J. H. Boetcker.

"You cannot bring about prosperity by discouraging thrift.
You cannot strengthen the weak by weakening the strong.
You cannot help the poor man by destroying the rich.
You cannot further the brotherhood of man by inciting class hatred.
You cannot build character and courage by taking away man's initiative and independence.
You cannot help small men by tearing down big men.
You cannot lift the wage earner by pulling down the wage payer.
You cannot keep out of trouble by spending more than your income.
You cannot establish security on borrowed money.
You cannot help men permanently by doing for them what they will not do for themselves."

Words of wisdom.

It amazes me how swayed people are by empty rhetoric about hope and change and not by policy, experience, and most of all common sense.

Common sense is a great thing. Too bad our country lacks it. More on that in another post.

Monday, September 29, 2008

Great explanation of the causes of the financial crisis.

I'm a devoted follower of Jason Kearney's blog, Out Here In the Middle. He recently posted a great entry about the big causes of this crisis we have going on these days.

Sunday, September 21, 2008

Social Security.

Obama and McCain are both jackasses. This much is known. But Obama has been caught acting a damn fool again.

"Obama Criticizes McCain on Social Security

DAYTONA BEACH, Fla. — Senator Barack Obama delivered an ominous warning to Florida voters on Saturday, suggesting that Senator John McCain would “gamble with your life savings” by investing Social Security money in private accounts that could be affected by the roiling financial markets.

While Mr. McCain has not called for a full privatization of Social Security, he has supported the concept of allowing individuals to invest part of their payroll taxes in stock and bonds, and he has pledged to consider all options to prevent the program from going insolvent. But the idea has taken on a new air of political vulnerability because of the upheaval on Wall Street, which Mr. Obama sought to seize on as his campaign intensified its efforts in Florida.

“If my opponent had his way, the millions of Floridians who rely on it would’ve had their Social Security tied up in the stock market this week,” Mr. Obama told an audience here. “How do you think that would have made folks feel? Millions would’ve watched as the market tumbled and their nest egg disappeared before their eyes.”"

Let me tell you what Social Security privatization is. It would allow everyone who has a stake in the SS retirement system, i.e. everyone who has a job and pays into it, to control where it goes. Right now SS is invested in government bonds that pay 3.5%. Inflation is around 4%. Is the absurdity of this system showing up yet? The SS trust isn't even matching inflation.

So here's what we do. Either let young people like you and me opt out of the system (not pay anything in, not get anything out later), or let us control where the money that we pay in goes. It's all about personal freedom (something the left likes to think they support more than the right). If you want the old guaranteed way you can still choose to have your funds invested in the same government bonds. If you want something with a higher yield then you get to choose something with a higher yield. There are great mutual funds out there paying over 10% with minimal risk.

But I'll leave you with these facts: Ss is invested at 3.5%, inflation runs around 4%, and the stock market has averaged a little under 11% since its creation. That's an overall average, and yes, there are peaks and valleys. It loses money 1 out of every 4 years, but the overall average is almost 11%.

So tell me what's so horrible about people having a choice how their money is spent?

Saturday, September 20, 2008

Great article.

This is a great article written by Dave Ramsey.

Butt Scratching and Bass Fishing

"A couple of weeks ago, I worked late like I sometimes need to do to run my business. It was a nice Tennessee summer evening, and I was enjoying the drive home. About 7:30, as I pulled to a stop light a few blocks from my office, I noticed a light on in the corner office of a friend’s office building. Through the twilight I could make out my friend’s silhouette as he bent over his desk. Being a fellow entrepreneur, I knew what he was doing.

He was looking over some receivables. Some turkey hadn’t paid him, and he was trying to make his accounts balance so he would have the cash to make it another day. In that instant, I had a flashback to some of the ridiculous statements I’ve been hearing on the talking-head news channels and from some individuals during this political year. And I’ll be honest—I instantly felt the heat of anger flow through my body.

Let me tell you why. You see, my friend who I saw working late—we’ll call him Henry—is a great guy. He’s what you want your son to grow up to be. He loves God, his country, his wife, and his kids. He didn’t have the academic advantage of attending a big-name university. Instead, he started installing heating and air systems as a grunt laborer after he graduated from high school. He was and is a very hard and diligent worker, and before long, the boss taught him the trade. But when he was 24, after 6 years of service, the company he was working for got into financial trouble and laid him off.

Henry still had his tools, so he bought an old pickup to haul around his materials and tools, and suddenly he was in business. He knew about heating and air-conditioning, but not about business, so he made a lot of mistakes.

He persisted. He took accounting and management at the community college to learn about business. He started reading books on business, HVAC, marriage, kids, God, and anything else someone he respected recommended. Today he is one of the best-read men I know. Soon, because of his fabulous service and fair prices, he developed a great reputation, and his little business began to grow.

Henry started 15 years ago, and now he has 17 employees whose families are fed because he does a great job. He is in church on Sunday and seldom misses his kids’ Little League games. Sometimes he has to miss a game because some poor soul has their AC go out in the 96-degree Tennessee summer heat, but Henry makes sure they are served. He is, by all standards, a good man. He is, by all standards, what makes America great.

Henry and I are friends, and so he asked me some financial questions last year. I learned in the process that his personal taxable income last year was $328,000. I smiled with pride for this 70-hour a week guy because he is living the dream.

At the stop light that evening, I also thought of another guy I know—and that is where the anger flash came from. We will call him John. While John does not have the same drive Henry has, I can say that he, too, is a good man.

John also graduated from high school and did not attend a big-name university. He went to work at a local factory 15 years ago. When 5:00pm comes around, John has probably already made it to his car in the parking lot. He comes in 5 minutes late, takes frequent breaks, and leaves 5 minutes early. However, to his credit, he is steady and works hard.

Over the years, due to his steadiness and seniority, he has worked his way up to about $75,000 per year in that same factory. He seldom misses his kid’s ballgames, but most nights you will find him in front of the TV where he has become an expert on “American Idol,” “The Biggest Loser,” and who got thrown off the island. When he is not in front of the TV, he spends a LOT of time and money bass fishing on our local lake. He never works over 40 hours a week and hasn’t read a non-fiction book since high school.

This is America, and there is nothing wrong with either set of choices. Nothing wrong, that is, until the politicians and socialists get involved ...

I have seen several elitist people on the talking-head channels make the statement lately that people making over $250,000 per year have a “moral imperative” to pay more in taxes to take care of the country’s problems. This is not only infuriating—it is economically, spiritually, and morally crazy!

Where in the world do these twits get off saying that Henry should be punished for his diligence? If you are John, where do you get off trying to take Henry’s hard-earned money away from him in the name of your misguided “fairness”? If you want to sit on the lake, drink beer, scratch your butt, and bass fish, that is perfectly fine with me. I am not against any of those activities and have engaged in some of them myself at one time or another. But you HAVE NO RIGHT to talk about “moral imperatives” about what other people have earned due to their diligence. That money is not yours! You want some money? Go earn some! Get up, leave the cave, kill something, and drag it home.

We are in a dangerous place in our country today. A segment of our population has decided that it is the government’s job to provide all of their protection, provision, and prosperity. This segment has figured out that government doesn’t have the money to give them everything they want, so somebody else has to pay for it. That is how the “politics of envy” was born. “Tax the rich” has become the mantra of the left, and this political season it has been falsely dubbed a “moral imperative.”

Ninety percent of America’s millionaires are first-generation rich. They are Henry. To tax them because you think it is a “moral imperative” is legalizing governmental theft from our brightest, most charitable, and most productive citizens.

If I can get a law passed that says you must surrender all your cars to the government because it is the “moral imperative” of anyone who owns cars to support the latest governmental program, that would be a violation of private property rights and simply morally wrong. This new “moral imperative” to redistribute wealth is no different from that. It’s the SAME THING!

Please, America, re-think the politics of envy! You are sowing the seeds of our destruction when you punish the Henrys of our culture.

If you think taxing the populace to support government programs is the best way—and I don’t—then at least tax every single person the same! There are very few Henrys out here who would squawk much about paying a set percentage of their income—if everyone else did, too. But this idea of some butt-scratching bass fisherman saying government should tax his neighbor and not him—just because his neighbor has succeeded—must stop.

So the next time an elitist media talking-head starts telling you it is the moral imperative of our culture to tax my friend Henry, change the channel.

The next time you see someone wealthy who feels guilty and is preaching the politics of envy, change the channel.

The next time you see some celebrity who feels guilt over their income preaching socialism, change the channel.

And the next time you run into a misguided, butt-scratching bass fisherman who says the evil rich people in our culture should have their private property confiscated because that is fair… well just shake your head walk away—and make sure to vote against his candidate. If he and his type win, God help America."

Tuesday, September 16, 2008

Why mortgage tax breaks are bullshit.

I suppose I'm being too harsh. It's not the tax breaks that are bullshit, it's that people will hang on to their mortgage, paying only the minimum, because they think they're smart to "keep the tax break".

Say there's a person who has a good job paying $130,000 (28% tax bracket).

They get a house, put 20% down ($40,000) to avoid PMI, and puts the other $200,000 on a 30-year note at 6.5%.

The mortgage tax break comes in the form of interest deductions. For the amount of interest you pay to the bank in a given fiscal year, you'll get to deduct, or not pay taxes on that amount. In other words, the amount of interest is deducted from your overall earnings.

The interest they'll pay for the first year with this mortgage is $11,861.92. That means that they'll get to deduct $11,861.92 from their overall earnings for that year. With me so far?

Well, normally they'd pay $30,382 in taxes, ending up with $99,618 after federal income taxes.

But they get that tax break, right? So they get to deduct $11,861 from that original $130,000, which, in the 28% tax bracket, will end up saving them $3,321 in federal taxes.

So, because it's so smart to keep your mortgage for as long as you can for the tax break, this person will pay a bank $11,861 in order to avoid paying the government $3,321. Keep in mind that this figure doesn't include home owners insurance, home owners association dues, unexpected repairs, and local and state property taxes.

Does that sounds smart to you?

I mean, the tax break is a nice perk, but it's hardly worth not paying off your mortgage early if you have the means.

Thursday, September 4, 2008

Our great​ count​ry needs​ chang​e.​

I'm not too far right​ to admit​ it. The Unite​d State​s needs​ chang​e.​ The past 8 years​ have been atroc​ious,​ waste​ful,​ and at point​s,​ very bad for our count​ry as a whole​.​ The natio​nal debt has doubl​ed.​ We'​re runni​ng a huge budge​t defic​it this year.​ The econo​my is so close​ to reces​sion it could​ tickl​e it on the ass and make reces​sion giggl​e with glee.​ Infla​tion is on the rise.​ Social security is going to go bankr​upt.​ Our troop​s are too far stret​ched that if we reall​y neede​d to defen​d ourse​lves on the home front​ we'd have to rely on the 5 natio​nal guard​smen that are still​ state​side and vario​us state​ milit​ias.​ The dolla​r'​s value​ is the lowes​t it's been in a long time.​ Peoples'​ incom​es are being​ stret​ched more than ever.​ The price​ of food is up.

So what'​s a count​ry to do? Well,​ it can elect​ change.​ That'​s a good choice.​

So what can be chang​ed?​

The econo​my?​ The presi​dent doesn​'​t contr​ol the econo​my.​ Not even close​.​ He can influ​ence it by signi​ng new laws,​ but that'​s such a small​ influ​ence it's not worth​ count​ing on. Even if he did, the econo​my doesn​'​t need ANY HELP right​ now. The best thing​ we can do is leave​ it the hell alone​.​ No more "​econo​mic stimu​lus packa​ges"​,​ and no more believing every​thing​ that the big media​ says.​ I once heard​ a write​r say "The media​ has corre​ctly predi​cted 2 of the past 36 recessions.​"​ There​'​s a lot of truth​ to that.​ The economic slowdown we're experiencing now isn't Bush's fault. Get over it.

How about​ the deficit?​ Yeah,​ this has got to chang​e.​ But here'​s somet​hing that'​s going​ to blow your mind; the defic​it can be solve​d without raisi​ng taxes​.​ *​gasp*​ I know,​ hard to think​ of, right​?​ We should cut the feder​al budge​t in half.​ This would​ mean no more war, less waste​ful spend​ing,​ and (​here'​s the hard one) decrease the amounts of entitlements given​ out. Entitlements are one of the bigge​st waste​ful spend​ing items​,​ and one of the most abuse​d.​ Another thing that needs to end is corporate welfare. It's estimated that the government loses $92 billion a year because of corporate welfare.

How about​ this social security problem?​ The baby boome​rs are going​ to be retir​ing en masse​ soon.​ Again​,​ the easy fix is to raise​ taxes​.​ Raise​ the payro​ll tax rate,​ get rid of the FICA incom​e cap, and get that sweet​ dolla​'​ rolli​ng in. Obama​ of cours​e has expre​ssed inter​est in doing​ both of those​ thing​s,​ altho​ugh if memor​y serve​s me he's again​st raisi​ng the $​102,​000 cap, which​ is at least​ not too bad. Now for the real solut​ion:​ We need to privatize socia​l secur​ity.​ SS retirement​ benef​its were never​ meant​ to provi​de and actua​l incom​e to retir​ed perso​ns,​ it was meant​ to provide extra​ spend​ing money​ so littl​e old ladie​s could​ buy their​ hard candy​.​ It was meant​ to argument a perso​n'​s life savin​gs.​ But for so many peopl​e it's a crutc​h.​ You know what I say? I say decre​ase benef​its for the baby boome​rs.​ Decre​ase them by at least​ half.​ The baby boome​rs have known​ about​ this probl​em their​ entir​e lives​,​ and they'​ve done absol​utely​ nothing to preve​nt it. Bush tried​ to do somet​hing in 2000 but speci​al inter​ests shut that plan down.​ They don'​t deserve the retirement benef​its.​ They paid into the syste​m,​ but they knew it was broke​n all along​ and did nothi​ng,​ so now our generation is going​ to have to deal with the reper​cussi​ons.​ Give me the form and I'll opt out of the SS retir​ement​ syste​m.​ I'll be the first​ to sign my name,​ relea​sing the gover​nment​ from havin​g to provi​de me anyth​ing durin​g my retir​ement​.​ I'll be the guine​a pig, and I'll show peopl​e that you can provi​de for your own retirement (​just like peopl​e did befor​e Mothe​r Gover​nment​ did in the 30'​s)​.​

The troop​s?​ Bring​ 'em home.​ Iraq wants​ a timet​able,​ so give it to them.​ I belie​ve we alrea​dy have one. 2011.​ That'​s good.​

Infla​tion?​ Let'​s stop the Feder​al Reser​ve from infla​ting our money​ suppl​y.​ When the "​mortg​age crisi​s"​ hit, they lower​ed inter​est rates​ and pumpe​d money​ into the syste​m.​ This decre​ased the value​ of the dolla​r,​ made it easy to get credi​t,​ and punis​hed inves​tors,​ inclu​ding the elder​ly who are tryin​g to provi​de stead​y incom​e with CDs, money​ marke​t accou​nts,​ and high-​inter​est savin​gs accou​nts.​ When the Fed lower​ed rates​,​ my savin​gs accou​nt rate went from 1.5% to .​25%​.​ We have a lot of money​ in a money​ marke​t accou​nt and we'​re only getti​ng 1.​98%​,​ when a year ago we would​'​ve been getti​ng 4-​5%​.​ Lower​ing rates​ rewar​ds debt and punis​hes inves​tors.​

Also,​ to clear​ somet​hing up, there​ was never​ a "​mortg​age crisi​s"​,​ there​ was a sub-​prime​ mortg​age crisi​s.​ There​ WAS NOT a rise in the numbe​r of forec​losur​es for tradi​tiona​l mortg​ages,​ just for sub-​prime​,​ adjus​table​-​rate,​ strai​ght from hell mortg​ages.​ The peopl​e being​ forec​losed​ on weren​'​t all defen​seles​s peopl​e '​just tryin​g to make it, most were dumb shits​ who thoug​ht they could​ cash-​flow a heavi​ly lever​aged inves​tment​ prope​rty,​ or peopl​e who bough​t into the whole​ "​house​-​flipp​ing"​ fad. The rest of them were peopl​e who bough​t way too much house​ than they could​ affor​d.​ These​ peopl​e DID NOT deser​ve a bail-​out.​

So what'​s a count​ry to do? Elect​ the hotsh​ot first​ term senat​or who'​s barel​y on the Senat​e floor​,​ will push a socia​list agend​a,​ raise​ taxes​,​ incre​ase spend​ing and entit​lemen​ts,​ and will almos​t certa​inly be picke​d as prom king?​ No, that would​ be awful​ for the count​ry.​ So we shoul​d elect​ the elder​ly,​ forge​tful,​ often​ be-​frazz​led veter​an of Congr​ess?​ Well,​ he's done a lot to fight​ waste​ful gover​nment​ spend​ing,​ but he still​ has many probl​ems.​

So, you proba​bly could​ guess​,​ I'll be votin​g for McCai​n,​ albei​t begru​dging​ly.​

But why am I voting for him? Tax polic​ies.

I'm in college for one reason and one reason only: to make myself marketable enough to get a good job. You never go to college to make less money. ​

McCain wants​ to creat​e an alter​nativ​e flat tax syste​m and let Ameri​cans choos​e which​ syste​m to use (old or new) depen​ding on which​ saves​ them the most money​.

He wants to get rid of the AMT, which is sucking more and more money out of the middle-class every year. ​

He wants​ to lower​ the corpo​rate incom​e tax which​ will do much more to keep busin​esses​ here in our count​ry than any of Obama's tax-breaks (remember how much I hate corporate welfare?).​

He wants​ to keep the capit​al gains​ rates​ low, unlik​e Obama​ who wants​ to raise​ it, seemi​ngly based​ on gener​al princ​iple since​ it's been prove​n that feder​al reven​ue goes down when the CG rates​ are raise​d.​ How does this affect you? When you start working and saving for retirement you'll feel the crunch of the CG tax.

Say you invest $10,000 and you're able to get 8% average for 15 years. You make extra payments into the investment every month to the tune of $200. At the end of the 15 years you'll have an investment worth $102,738. You would have paid in a total of $46,000, making your earned interest $56,738. If you're in the 28% tax-bracket you'll pay 15% of your investment's gain to the government (all in the name of 'fairness'). So you'll only end up with $94,227, losing out $8,510 to the government. Plus you have to factor in inflation, which is about 4% every year. If Obama is able to raise the capital gains tax to something around the short-term rate of 28%, you'll end up paying $15,886 to the government (because you make too much damn money you greedy capitalist pig). You'll only end up with $86,851, not including 4% inflation. Factor in inflation and you'll end up with about $61,541, which would make your overall earning for the investment around 2.27%, which is only slightly more than our shitty money market is doing.

He also wants​ to kill the estat​e tax, which​ after​ a 2010 hiatu​s will go back up to the old rate of the feder​al gov'​t takin​g 55% of all estat​es worth​ over $​1,​000,​000,​ which​ will kill an ungod​ly amoun​t of small​ busin​ess.​ (so if you have a large​ estat​e and you'​re about​ to die, hold off until​ 2010,​ but don'​t live into 2011)​.​

He's defin​itely​ not a perfe​ct candi​date but I'm a fisca​l voter​ and since​ Ron Paul dropp​ed out, McCai​n gets my vote.​

Obama ​'​s only plan is to tax the rich.​ Which​ bring​s me to my next bitch​-​about​-​town:​ Why tax the rich?​ Yeah they can affor​d to pay more,​ but they shoul​dn'​t have to. It's not fair.​ It's not moral​ly fair,​ it's not ethic​ally fair,​ it creates a large disincentive to earn, and it's economically inefficient. ​

90% of Ameri​can milli​onair​es are first​ gener​ation​.​ That means​ they left the cave,​ kille​d it, and broug​ht it home.​ They didn'​t have help from daddy​,​ or daddy​'​s conta​cts,​ they didn'​t have any speci​al hand up, and a good porti​on of them came from poor house​holds​.​

The avera​ge milli​onair​e is a small​ busin​ess owner​ (​keep in mind that most emplo​yers in Ameri​ca are small​ busin​esses​)​,​ most drive​ cars that aren'​t flash​y, but rather are a few years​ old and well-kept, and the vast major​ity live in very reaso​nable​ house​s.​

Did I menti​on that most alrea​dy donat​e a subst​antia​l amoun​t of their​ incom​e?​

Our count​ry needs​ more self-​relia​nce,​ witho​ut the false​ sense​ of entit​lemen​t and the '​gimme​ gimme​'​ attit​ude.​ The progressive-left,​ welfa​re,​ and class​ warfa​re have turne​d us into a bunch​ of whiny​ babie​s.​ Redis​tribu​tion of wealt​h is inefficient, and most importantly un-​Ameri​ca.​

Back to Obama​'​s tax-​polic​ies.​

It reall​y is a shame​.​ Ameri​ca was found​ed as a place​ of equal​ity,​ where​ someo​ne can come and make milli​ons.​ We are the great​est count​ry in the world​,​ and "​progr​essiv​e"​ inter​est will stop at nothi​ng to turn us into a quasi​-​Europ​ean welfa​re state​.​ Those​ are some prett​y harsh​ words​, but somebody has to say them.

Progr ​essiv​e taxat​ion does nothi​ng but reinf​orce the thoug​ht that we'​re all diffe​rent.​ The whole​ idea of progr​essiv​e taxat​ion is based​ on nothi​ng more than fisca​l jealo​usy.​ Suppo​rters​ say that "​every​one,​ despi​te how much they make,​ must have a tax burde​n that hits them as much as the botto​m brack​et is it". In other​ words​,​ a perso​n makin​g $​200,​000 must be hit as hard by incom​e taxes​ as a perso​n makin​g $​15,​000.​ That'​s hardl​y the reaso​n why they suppo​rt it (in Ameri​ca at least​)​.​

It's all about​ fisca​l jealo​usy.​ The idea that "if I can'​t have it, no one can"​.​ It's an asini​ne thoug​ht proce​ss.​ The liber​al,​ democ​rats,​ and so calle​d progr​essiv​es can'​t stand​ that some peopl​e make more money​ than other​ peopl​e.​ But that's not even the real reason, or at least the main one. All the progressives that are hawking the idea of a European-esque socialist utopia are just doing it for the votes. Who do you think there are more of, the wealthy or the poor? Who do you think is going to rely on Mother Government more, the wealthy or the poor? Who has the greatest numbers at the polling booth, the wealthy or the poor?

I crack up when they point​ out that "the vast major​ity of the wealt​hy peopl​e eithe​r didn'​t work for their​ money​ or they had a treme​ndous​ amoun​t of help from their​ daddy​'​s conne​ction​s.​"​ Never​ mind the fact that almos​t 90% of milli​onair​es in the U.S. are first​ gener​ation​,​ meani​ng they built​ that wealt​h witho​ut daddy​'​s help.​

Wealt​h build​ing takes​ a certa​in kind of perso​n, and if you're not willing to control your habits you'll never build wealth.​ The typic​al milli​onair​e drive​s a 3-4 year-​old car, inves​ts,​ has a good amoun​t of self-​disci​pline​,​ has a house​hold budge​t,​ they didn'​t get rich quick​,​ they don'​t gambl​e or play the lotte​ry,​ and they don'​t buy mansi​ons that could​ hold 303 eleph​ants.​

Peopl​e who are jealo​us about​ not being​ rich are usual​ly the ones who play the lotte​ry,​ buy as much house​ as they can barel​y affor​d,​ buy new cars every 3 years,​ and go out to eat way too often​ to show peopl​e that they have money​.​ Most actua​l milli​onair​es aren'​t conce​rned about​ letti​ng peopl​e know about​ their​ wealt​h.​

Speak​ing of un-​Ameri​can acts,​ let'​s talk about​ the oil compa​nies.​

Take, ​ for examp​le,​ Obama's plan for a windf​all profi​ts tax on the largest domestic oil companies. Ask your parents how that whole idea went down in the 70's. He also bitches about the subsidies (Which I'm also against, but for a much different reason. We wouldn't need subsidies if we lowered our horrendously high corporate income tax rate). The argum​ent about​ the oil compa​ny tax break​s is such a nonse​nsica​l argum​ent on his part.​ If he think​s that takin​g away tax subsi​dies is going​ to lower​ price​s for consu​mers then he needs​ to go back to colle​ge and take a coupl​e of econo​mic cours​es.​

The oil compa​nies aren'​t makin​g out like bandi​ts like every​one seems​ to think​ they are. There profit margin is fairly low for as large of a business as it is. Exxon Mobile posted the biggest profit ever made in the history of man last quarter. The left see it as too much, but nobody seems to realize that Exxon Mobile is the largest company on the planet, dwarfing even Wal-Mart (which is the second largest).

It's also impor​tant to reali​ze that only about​ 1% of domes​tic oil compa​ny stock​ is owned​ by their​ rich CEOs.​ Rough​ly 50% of domes​tic oil compa​nies stock​ is owned​ by indiv​idual​ inves​tors (​i.​e.​,​ peopl​e like me who inves​t on Scott​rade becau​se we know the gover​nment​ isn'​t going​ to take care of our retir​ement​,​ nor do we want it to). The other​ rough​ly 40-​49%​ of oil stock​ in Ameri​ca resides in 401(​k)​s and pensi​on funds​.​ These​ are the same 401(​k)​s and pensi​ons that milli​ons and milli​ons of Ameri​cans are relyi​ng on for their​ retir​ement​,​ inclu​ding teach​ers,​ firem​en,​ and polic​e offic​ers.​

Takin​g away from oil compa​nies'​ botto​m lines​ will drive​ gas price​s up and drive​ their​ stock​ prices down,​ along​ with milli​on of Ameri​can'​s retir​ement​s.​ If one was twist​ed enoug​h one might​ concl​ude that Barac​k Obama​ is wanti​ng to make peopl​e more relia​nt on gover​nment​ help by reduc​ing peopl​es'​ indiv​idual​ retir​ement​s.​ I don'​t buy into this,​ but I've heard​ peopl​e say simil​ar thing​s.​

Anywh​o,​ Obama's plan is a horri​ble one.​ But I think​ most impor​tantl​y,​ it goes again​st every​thing​ Ameri​ca was creat​ed for. In socia​list-​Europ​e it may be okay for the gover​nment​s to dicta​te what a "​reaso​nable​ profi​t"​ for compa​nies to make is, but Ameri​ca was found​ed by brill​iant men on capit​alist​ princ​iples​.​ Windf​all profi​t taxes​ are un-​Ameri​can and will raise​ price​s for the consumer.​

What about Obama's federal income tax plan? Well, it's going to indirectly increase the tax burden on the middle-class.

"But Micha​el,​ Obama​'​s plan will LOWER​ taxes​ for 95% of Ameri​cans!​!​!​ You don'​t know what you'​re talki​ng about​!​"​

An Obama​ presi​dency​ would​ be HORRIBLE for the middl​e-​class​.​

Sure, ​ his tax plan lower​s FEDER​AL INCOM​E TAXES​ for middl​e-​class​ earne​rs,​ but the effec​ts of his tax plan will creat​e many tax-​incre​ases in other​ areas​.​ He's expre​ssed inter​est in raisi​ng the gas tax, energ​y taxes​,​ a quasi​-​tax on the Ameri​can peopl​e in the form of highe​r gas price​s cause​d by not drill​ing our reser​ves to their​ fulle​st poten​tial,​ capit​al gains​ tax, FICA taxes​,​ estat​e taxes​,​ and incom​e taxes​.​.​.​

The list goes on. So, yeah,​ the middl​e-​class​ famil​ies who get the tax cuts will have to deal with all of these​,​ effec​tivel​y negat​ing their​ tax cut.

There​ are many reasons why Barack Obama shouldn't be our next president, but I think the issue of our money and financial security are paramount.

Hope I rustled some feathers. It seems to anger people when I point out that Obama is not the Second Coming.


Saturday, August 16, 2008

The importance of starting early.

This is a political blog, but I find that peoples' security is just as important as my whining about a certain Marxist Democratic candidate and a certain wimpy Republican candidate. I intend to show that you can retire in comfort without the help of Mother Government.

This is a spreadsheet about how much a Roth IRA can make you if you set it up correctly and have the self-control to actually save your money instead of blow it on stupid things.


This spreadsheet doesn't take into account that at age 50 you are able to save $1000 more per year than people below the age of 50. I was trying to make the scenario fairly conservative in its expectations. It als0 doesn't include other such investments that you'll undoubtedly make such as non-sheltered stocks and mutual funds and you're house's equity. It's also is very conservative in that normally a person around 50 years of age will be able to pay much more than $1500 into investments every month.

I know my pushiness about all things finance gets old, but if you want to retire in style (or at least moderate comfort) you'll need to start early and be diligent.

Sunday, June 1, 2008

Income inequality rising, and the bullshit that ensues.

I've been a devoted follower and cynic of the Progressive Intelligence and Opinion blog for many months now. There are many things that we disagree on, and a few things that agree on. This post is about one of the things we disagree on. Really disagree on. His new post, "Mindblowing inequality isn't just unfair but inefficient!"

(Never mind the fact that "mindblowing" isn't one word)

From what I've read about him he was born in the U.S., grew up in Germany, and moved back here, fully indoctrinated with that good ol' European socialist attitude.

He's had many-a post about the travesty of income inequality. With this blog, I'll show that not only are most claims of income inequality and wealth distribution grossly overstated, but that rich people being rich doesn't cause poor people to be poor.
Imagine that.

Here are some income distribution facts from the U.S. Census Bureau.

Household Income Group % of Total Income Income Range
Lowest 20%------3.4%------$0-18,500
Second 20%------8.7%------$18,500-34,738
Third 20%--------14.7%-----$34,738-55,331
Fourth 20%------23.2%-----$55,331-88,030
Highest 20%-----50.1%-----$88,030 and up

The top 20% has roughly 14 times the total share of money than the bottom 20%. For a comparison, in 1971, the top 20% had only 11 times the share of total money than the bottom 20%.

But why is this? Is the same old saying "The rich get richer and the poor get poorer" true? Well, while a rich person has more money to invest (more on savings amounts later), and thus more of an opportunity to invest and earn more interest than someone at the bottom, income inequality has not risen by that much over the course of the 33 years in question.

The overstating of income inequality in our country is due in large part to two factors:

1. Measurements of inequality don't take into account in-kind transfers (medical assistance, food stamps, etc.).

2. The inequality expressed was taken from one point in time.

There are other things that come into play, such as immigrants and mindsets.

The steady increase in income inequality in recent decades is due largely to increased immigration. Between 1970 and 2000, foreign-born population in our great country increased from 9.6 million to 31.1 million. The percentage of the U.S. population that is foreign-born increased from 4.7% in 1970 to 11.1% in 2000.

Immigrants' median annual income is about 15% lower than native-born Americans. This is why the gap between the top and bottom groups has increased.

However, income is even more equally distributed after taking out taxes and in-kind (food stamps, medical assistance, etc.) transfer payments. The current measure of inequality is skewed by this lack of inclusion.

Higher incomes pay a higher percentage of their income in federal taxes, but in-kind transfers are received disproportionately by lower income households.

Another way that inequality is overstated is that the distribution of money income expressed above overstates the actual degree of income inequality by focusing on income distribution at one point in time.

A large chunk of the people in the lowest 20% of households are young people at the start of their careers. Most of these young people will move into higher income groups as their careers progress and they develop more human capital (developed ability that increases a person's productivity).

If career incomes were compared or if incomes were compared for households at the same career stage the gap between the highest and lowest would be much smaller.

Wealth distribution is also overstated. This is caused by the measure of wealth distribution comparing different people at different career stages. Comparing the wealth of a 60-year-old to the wealth of a 25-year-old overstates the inequality.

Wealth distribution is also overstated because human capital is NOT included in measuring wealth. For most people, their human capital is the most valuable asset owned. An example would be a 25-year-old recent Harvard Law School grad may have very little accumulated wealth in terms of physical assets, but the Harvard Law degree is very valuable human capital.

These are the causes of the continuing income inequality, which people might find interesting.

1. Natural ability: Some people are born with skills in math, music, or athletics. A person with a high level of marketable natural ability may earn a higher income than a person with a lower level of natural ability.

2. Human capital: Mean earning increase as education levels rise, but, again, a degree in chemical engineering and a degree in elementary education will have different earning potential in the marketplace.

3. Work and leisure choices: Contrary to popular belief rich people don't just sit back and make money off the backs of hardworking proletarians. Most people who've accumulated much wealth and have high earning potential have worked incredibly hard for it.

4. Risk taking: People differ in their willingness to take risks. An example would be that self-employed entrepreneurs make up a disproportionately large share of society's millionaires, but they also make up a disproportionately large share of those filling for bankruptcy.

5. Employment discrimination: This occurs when employees make hiring, promotion, and pay decisions based on factors unrelated to employee productivity.

6. Luck: A person can have good luck (winning the lottery) or bad luck (suffering a debilitating illness). Most people experience a mix of good and bad luck.

There will always be poverty, because honestly a lot of it has to do with how impoverished people think. They don't seek out wealth, but rather they tend to think that wealth shows up on its own. Wealth doesn't just come up and bite you on the butt, contrary to popular belief it seems.

Wealthy people aren't born trust fund babies 100% of the time; in fact it's quite the contrary. 90% of all millionaires in the U.S. are first generation, which means they left the cave, killed it, and brought it home. Their thought processes are different from people living in perpetual poverty. If you wants some more information about what the typical millionaire is really like check out Thomas J. Stanley's books The Millionaire Next Door and The Millionaire Mind.

Poverty isn't the fault of government and it's certainly not the fault of rich people. The majority of the problem rests with the people. The government and the already-wealthy are just easy targets.

The wealthy also differ in their savings rate. The average millionaire focuses on saving, investing, and building wealth, and not on spending their money on frivolous items. It is much easier for the wealthy to save money, as they need only save a small percentage of income rather than the larger chunk that must be saved by people with lesser incomes.

So again, don't buy into the fact that millionaires are automatically evil. Most are self-made, first generation, good-hearted people who live in modest houses, drive used cars, and take the time to learn about wise investing.

I'll leave you with this: Making rich people poorer doesn't make poor people richer.

So take your God damned socialism back to the Old World, buddy.

Monday, April 14, 2008

Obama's Answer

A quickie here.

I'm watching CNN's "Compassion Forum" and Barack Obama and he was asked what he would do to reduce poverty in our great country.

Before he even opened his mouth I knew where he would go with his answer.

He talked briefly about the banking industry, but quickly went on to the tax code.

He talked about how people at the bottom pay too much and how George Bush's "tax cuts for the rich" were hurting the lower and middle classes. Now, for now we'll forget that Bush's tax cuts lowered not only the top rate from 39.5% to 35%, but also lowered the bottom rate from 15% to 10%.

Let's forget all of that for a second. How does giving people at the top tax cuts hurt poor people? Other than decreased government revenue, how is that directly affecting people at the bottom? It doesn't. The reason that tax breaks for the rich haven't worked in the past three decades was because the revenue cuts weren't met with cuts in government spending.

Let's just make this clear: Making the rich poorer does not make the poor richer.

I just had to get that off of my chest.

Wednesday, April 2, 2008

People make stupid decisions.

It's a fact of life that people are inevitably going to make stupid decisions. Kids do it, teens do it, adults do it, and seniors do it. Republicans do it, Democrats do it, Socialists do it (a lot),
and independents do it. Every race does it, every religion does it, every government does it, and every meteorologist does it. There is no way around making stupid decisions.

But the mistakes I'm talking about today were made by people who are on the news all the time and yet are never named. They are the people that are facing foreclosure because they got into a house they couldn't afford.

Now before I get the liberal smack down argument that the predatory mortgage lenders are at fault, let me say that I halfway agree. The mortgage companies are like a good portions of Americans; they think about the short term, not the long term.

The problem that many people are facing these days with their homes is a big one, and apparently one that the government thinks they need to solve. More on that later.

***Let me make it clear that the "crisis" only pertains to sub-prime mortgages. Foreclosures are up for people who borrowed sub-prime loans, but not for regular, traditional mortgages.***

I've heard many arguments about who's at fault for the sub-prime mortgage crisis. The lenders, the government, the Fed, and I've even heard the nation's rich people are to blame because they make the people who don't have as much money envy them.

Like I said above, the blame partially resides with the unethical lenders, who in order to make a quick buck lent money to people who couldn't afford the payments or the principal. But the main blame resides with the people who borrowed the money.

They weren't forced to borrow the money, they were just mislead by what we many call the "right" of all Americans to own homes.

Owning a home isn't a right in America, it's a privilege for those who earn it and can afford it.

We've become a nation of "gimmees" and takers. A good portion of the population it seems thinks that everything needs to be handed to them by the government and that rich people should foot the bill for their wants. I, of course, am completely against this way of thinking.

I don't see why people think that the government needs to intervene with everything. People think they need to stop the recession and that they need to stop the mass foreclosure. I just can't help but wonder why. Why is it the government's responsibility to help people that made stupid decisions? IT'S NOT! It's that simple.

I'm sure if you ask around you can find many people age 25 and older who got themselves into deep trouble and had their parents refuse to help them., and I guarantee you that whatever that experience was it made them stronger, more responsible, and more apt to deal with their problems themselves instead of relying on other people to bail them out. There should be more accountability with people that make stupid decisions.

I know it sounds mean, but people need to face the consequences of their actions, and if that involves losing their house and having to start from scratch then so be it. It will make them stronger, more appreciative of things they have, and much smarter about how they go about it the next time around.

I think that Americans' collective idea that we
deserve everything is partially to blame for this problem of buying things we know we can't afford. That's why the average American has around $9,000 in unsecured credit card debt.

We Americans have lost sight of the old way of doing things. We used to buy frugally. We used to pay for things with cash only. Hell, people used to save up and buy houses with cash! Imagine how many people would make fun of you if you did that today.

"Well that's stupid! Why are you doing
that? You'll lose your tax break! C'mon, lemme show you how it's done..."

America, here's a piece of advice that a very smart and responsible man once told me: Don't take money advice from broke people.

Okay, so Dave Ramsey didn't say that just to me, but it's a good message nonetheless.

Just because you work hard doesn't mean that you deserve a house. You deserve it when you can afford it. And if you do make a stupid decision, you should deal with the consequences, not have the government bail you out.

Here's a little example of how one decision in your life can either make it great or make it regrettable.

In an economics class I heard the story of a 22 year old whose dad recently passed away. His son was the sole beneficiary of his $250,000 life insurance policy. Now what do you think would happen if you received $250,000 when you were 22?

He had two paths in front of him.

Path 1:

He could keep his job and continue school and take out$30,000 to pay for the rest of his college education.

250,000 - 30,000= 220,000

He could move out of his apartment and put a half-price down payment on a nice $150,000 house.

220,000 - 75,000 = 145,000

He could put $15,000 in a money market account or CD ladder as an emergency fund, reinvesting the interest.

145,000 - 15,000 = 130,000

He could then invest the remaining $130,000 in safe, growth stock mutual funds at a very realistic average of 12% until he retires at the age of 65.

130,000 x (1.12)^43 = 16,994,888

That's $16,994,888 that he'll have when he retires. If he continues school, gets his degree, at age 24 and finds a good job he could contribute $400 a month into mutual funds until he retires.

((400 x (1.01)^(41 x 12)) - 1)/.01 = 5,307,809

5,307,809 + 16,994,888 = 22,302,697

He would have $22,302,697 at age 65 before taxes just for making good decisions.

Unfortunately he didn't choose that path.

Path 2:

He chose this path.

He took the $250,000 and right off bought a $60,000 Ford Mustang Shelby GT500.

250,000 - 60,000 = 190,000

He then bought a $175,000 house.

190,000 - 175,000 = 15,000

Then, by the time he was done buying video games, booze, computers, and iPods, he only had about $1,000.

But don't worry. He did what he thought was the smart thing to do and put the rest of the money in his savings account with a 1% APY. So in 43 years he'll have $1,043.92. Boy, that's smart.

My point is that we all make stupid decisions. Whether it's turning what was meant to be a blessing into a bunch of useless things or buying a house that you can't afford, you shouldn't expect the government to bail you out for your stupid decisions.

Friday, March 14, 2008


I found this funny little quiz on another blog. But it originally came from here.

1) "We're going to take things away from you on behalf of the common good."

A. Karl Marx
B. Adolph Hitler
C. Joseph Stalin
D. None of the above

2) "It's time for a new beginning, for an end to government of the few, by the few, and for the few...and to replace it with shared responsibility for shared prosperity."

A. Lenin
B. Mussolini
C. Idi Amin
D. None of the Above

3) "(We)...can't just let business as usual go on, and that means something has to be taken away from some people."

A. Nikita Khrushev
B. Jose f Goebbels
C. Boris Yeltsin
D. None of the above

4) "We have to build a political consensus and that requires people to give up a little bit of their order to create this common ground."

A. Mao Tse Dung
B. Hugo Chavez
C. Kim Jong Il
D. None of the above

5) "I certainly think the free-market has failed."

A. Karl Marx
B. Lenin
C. Molotov
D. None of the above

6) "I think it's time to send a clear message to what has become the most profitable sector in (the) entire economy that they are being watched."

A. Pinochet
B. Milosevic
C. Saddam Hussein
D. None of the above


(1) D. None of the above. Statement was made by Hillary Clinton 6/29/2004
(2) D. None of the above. Statement was made by Hillary Clinton 5/29/2007
(3) D. None of the above. Statement was made by Hillary Clinton 6/4/2007
(4) D. None of the above. Statement was made by Hillary Clinton 6/4/2007
(5) D. None of the above. Statement was made by Hillary Clinton 6/4/2007
(6) D. None of the above. Statement was made by Hillary Clinton 9/2/2005

I couldn't help but laugh at how true it is. Of course most of her supporters will say those quotes were taken out of context, and they were, but the tone of the entire speech reflects the quotes perfectly.

"It's time for a new beginning, for an end to government of the few, by the few, and for the few, time to reject the idea of an "on your own"society and to replace it with shared responsibility for shared prosperity. I prefer a "we're all in it together" society. I believe our government can once again work for all Americans. It can promote the great American tradition of opportunity for all and special privileges for none." -Hillary Clinton May 29th, 2007

Expect a new post about income inequality and the reason it's increased within the next few days. Cheers.

Monday, March 3, 2008

Aren't politics odd?

They are, and they're endlessly fascinating for me. I find it a bit amusing how people have voted so far in the primaries.

The conservatives haven't elected a conservative, and the liberals have gone incredibly far to the left (straight into socialist territory).

I ponder to myself why the Democrats would be fighting it out to elect a candidate so far to the left. Could it be that Obama and Clinton are the farthest away from the evil right, so they must be good? Maybe. Have the Democrats stopped thinking clearly and started to bow down for European-type socialism? Possibly. But I think that the real problem here is the left's hard on for pointless rhetoric. The right has this problem too, but it's not as bad as what we've seen lately with the Democrats.

Buzzwords like "hope" and "change" have become big, well, issues for the Democrats. This is all well and good, but shouldn't there be a little more substance in their campaigns? Promises of universal healthcare, getting the troops out of Iraq, their version of "fiscal responsibly" (which is their way of saying they'll be spending just as much as the current administration, but in different, much more popular areas).

It troubles me that in one of the early Democratic debates all of the candidates were asked a simple question: Raise your hand if balancing the federal budget is going to be one of your top priorities. I believe only two people raised their hands, and they weren't Obama or Clinton.

I'm a libertarian with very conservative fiscal views and some fairly liberal social views. Here's how my tiny little brain works:

1. Universal healthcare won't work

2. We need out of Iraq. Not because the strategy is not working, but because we can't afford it.

3. We need to cut spending. I'm talking CUTTING spending. The defense budget is obscene. We can protect our great country in a much more fiscally responsible fashion.

4. Pay our soldiers more and stop sending the National Guard troops overseas. Our troops risk their lives, come home, and are refused healthcare? This is shameful.

5. Stop socialism. I know that socialism has become a buzz-word that's not paid attention to, but we need to take a look at ourselves and think about why we're supporting socialist candidates. I'm not against all socialist programs. I love the postal service! They always get my Car & Driver to me on time. But that's about where I draw the line.

6. No more redistribution of wealth. I know that CEOs get paid too much, but unless you're a stockholder of that CEO's company, it's none of your business.

What's mine is mine. What's yours is yours. What's theirs is not ours. What's ours is not theirs.

How hard is that to understand? You're not entitled to my income, no matter how superfluous it is. You have no constitutional right to it, you have no moral right to it. If I chose to donate my money to worthy causes, that's my business. If I want to give my children my fortune, that's my business. If I want to give my family a large gift, that's my business. If I want to spend ludicrous amounts of my money buying expensive things for myself while other people can't afford to go to college, as big of a jerk as it makes me sound, that's MY BUSINESS.

It's none of your business, you're not entitled to my money, and your high taxes on income, both personal and corporate are hurting America. Oh snap, I said it.

Why is it that companies are moving their workforce to other countries? Yes, it is partly because of cheap labor, but I'd venture to guess that the main reason companies decide to make the switch is because the place in which they're moving has a much lower corporate income tax than America's. If we, I don't know, cut the corporate income tax rates they might be inclined to stay here despite the lack of cheap labor.

But back to the question I raised earlier.

Why is that the two parties are electing people who harbor views that are either very extreme (obama and Clinton) or very soft (McCain). McCain's views are not exactly the most conservative.

So why are we electing these people?

Comment and tell me what your opinions are.

By the way, I'm still rooting for Ron Paul. It's a shame he's been panned by the media powers to be.

Wednesday, February 13, 2008

Tax the rich!!!

Tax the rich!!!

This is the battle-cry of the two remaining Democratic presidential candidates. Sounds good right?

I mean, think about it. Those damn richers make so much, and they're all evil. Every cent of their fortune is somehow stolen from us folks at the bottom. We need retribution! They make too much! They don't deserve it! KILL!

This little ditty is sung in many-a middle-class home. Should we blame them for thinking this way? No. I mean growing up I was always told that life isn't fair, and it isn't. But should we really be taxing the rich on general principle? I don't think so. There are so many loopholes in our much-too-extensive tax code for the rich. You know what I say? Stop bitching about it and fix it! I see the loopholes as a sort of built in, accidental anti-socialism device. But there is a serious injustice that the rich pay less than a lot of middle-class families do.

But what to do... What to do...

In a perfect world we wouldn't have the government taxing our money that we earn. But Ron Paul has no chance, so we can forget this.

How about the FairTax? I personally don't like it.

Taxes on consumption are regressive, but this is remedied by a tax pre-bate, making it a fairly progressive structure. It would most likely fall of near the top of the ladder and the middle-class would end up paying a bulk of the taxes.

The real reason I don't like it is admittedly a little selfish. I'm in college and due to student loans my net worth is in the red. I don't want to have to pay a 23% premium on my various retail purchases at this point in my life. Or ever really.

So what about the flat tax? A 10% federal flat tax on every earner's income. How about we sweeten the deal? Let's let everyone with an income lower than $35,000 pay no federal income taxes.

$0-$35,000: 0%

But wait, there's more. How about in the $35,000 to $80,000 bracket we only put that up to 5%

$0-$35,000: 0%
$35,001-$80,000: 5%

It gets better. Everything above $80,000 is taxed at 10%. No matter if you make $90,000 to $1.2 million.

Okay, so it's not a flat-tax anymore, but it's a nice compromise. Well hell, it's the only progressive tax I'd ever endorse.

What's that? You say it's not fair that someone can make more money than you and pay the same taxes? Suck it up and innovate. Work that brain of yours, find a way to better the world and make yourself a profit.

If you want to make millions but the corporate ladder is just too big, then quit your whining and do something productive. Don't just be jealous at the CEOs who make $38 million a year.

You say they're overpaid? Yeah they are. Why don't you buy some stock in the company and go to some stockholder conferences and express your concern.

Before we all cry out "tax the rich more" we need to be looking at all of the problems.

- The government needs to spend less. Yeah, this means cutting back on unnecessary programs, which includes a lot of wasteful social programs.

Before you go calling me a horrible person without a heart let me say this: I'm not against social programs for the truly needy, the truly disabled, or the truly sick. Medicare, Medicaid, Disability; I'm not against these. My father paid into the system his entire life and became medically disabled (the real kind, not the 'I slipped in Wal-Mart' kind). He's on disability. Anybody who pays into the system and can truly not work is entitled to the money they were forced to pay in. Medicare and Medicaid need to be managed more efficiently. Social security needs to be partially privatized. We need to stop electing people who are hemorrhaging our tax dollars away on pet projects and unnecessary wars.

- We need to stop with the jealousy.

It's an epidemic in this country. I'm a dirt poor 21 year old who's financing his college education. Have an image of me yet? Well, let me alter it. I've started up two business since I was 15. I detailed cars before I could drive. If you had never seen one of the cars I worked over you had never seen a clean car. I would rock the toothbrush and q-tips for hours to earn my money. I'm now a photographer who works very hard for my money. I spend hours fine tuning images so that families can have memories for years and years, and I earn every penny.

-We need to lower the income tax for corporations.

I know, it hurts me even to type it. But if we don't do something about companies moving over seas for the tax benefits we're going to be in deep trouble. I'm not talking about subsidies, I'm talking about the income tax rates on a federal level.

- We need to stop with the double taxation.

Retired people who are collecting on social security shouldn't have to pay taxes on their benefits even if they are still earning income after they retire.

- Don't start wars unless Congress votes for it.

Hopefully we can stop electing morons to run our country before we have to do this again.

- We need to scrap the party systems and vote for people.

Too much loyalty comes from political parties. Loyalty isn't a bad thing, but when people vote for their parties' candidate even when they completely disagree with their views it's going overboard. The two party system rips America apart and creates an environment that makes it very difficult to get important things done.


If you don't understand this one, go stick your head in a toilet, because that's where it belongs.

- We need less political correctness.

It's ridiculous and a waste of brain power to whine about somethign that's not PC.

- We need a more transparent government.

I hate to quote a trendy movie, but people shouldn't fear their governments, governments should fear their people. All the secrecy in the government is aimed at creating fear in order to incite mass loyalty.

- Let gay people have the same benefits as straight couples.

Whether you call it a marriage or a civil union, that's fine, but love is love, and if two HUMANS commit to each other for the rest of their lives then they deserve to have the same benefits as more politically correct couples.

- We need to respect peoples' private property and other personal rights.

Eminent domain needs to be struck down by the high courts. Just because a condo-complex will bring more tax revenue to a city than the row of small houses that sit on the land now doesn't give the city the right to seize the land and sell it to condo developers for a reduced price.

- Stop whining about people with guns.

I don't like guns, but I really don't trust the police to protect me. Strengthening gun control is fine, but radical liberals wanting all guns to be seized or destroyed need to realize that guns are here to stay, like it or not. Taking away guns from everybody isn't really taking away guns from everybody. Anybody worth their weight in cheesecloth can figure out that it wouldn't do a damn thing about guns within the gang, drug dealing, and general crime rings. It would just leave honest people defenseless.

- Stop worshiping celebrities.

Good God please stop caring about Paris Hilton's bajingo.

- Go to church

Any church. If not for the faith aspect, then for the therapeutic aspect. You don't have to believe in it to enjoy it.

There are many more reasons, but it 1:26 in the morning and I'm working on getting rid of a migraine.

But when it all comes down to it, as depressing as it is, change will not happen anytime soon (No matter what Barack Obama says).

The rich are always going to get richer, the politicians are always going to be greedy and corrupt, celebrities are always going to attract unnecessary attention, liberals are always going to hate conservatives, conservatives are always going to hate liberals, Rush Limbaugh is always going to be a fat artard, the government will always over-spend, people are always going to be jealous of people who have what they want, governments are always going to infringe on personal rights and be secretive, and people will always laugh at racial jokes in private but will always decry them in public.

What shall we do? You tell me. Leave a comment with your thoughts.

Monday, February 4, 2008

Invest young or have fun and do it later?

I have many friends, but only two or three that actually invest. I see this as a major problem. This is directed towards my friends and other young people that aren't investing.

Consider this:

Most of my friends on myspace are a year or two above or below my age and a good portion of them have a job.

So what are you making? How much do you work?

I'll assume you work for $7.00 an hour, 28 hours a week. That's $196 per week before taxes. You get paid once every two weeks. We now have $392 before taxes. Last time I was working I had 17% taken out of my paycheck.

392(1-.17) = 325.36

So if you're getting $325 every two weeks what do you have to pay?

I'll take these two into consideration. I wouldn't expect a 20 year old living with their parents to pay much more.

Gas: ~$30 per week ($60 for two weeks)
Phone: ~$50 per month ($25 allotted every two weeks)

So that's $85 that needs to be taken out of every pay check. That leaves you with $240. If you're like me you like a beer with dinner, so that's about $10 a week. You'll need fast-food allotments; $25 for two weeks. You'll also need blow money; $60.

This leaves you with $135 from every paycheck.

Now I have no idea what your spending habits are, this is just a rough estimation.

Say you took that $135 and put the $35 into a savings account (to have emergency money on hand) and the remaining $100 into a growth stock mutual fund.

So every paycheck you'd be building your savings account with emergency money and you'd be funding a retirement account.

So what can $100 turn into if it's not spent on pointless things? Well, let's see:

Say we put the $200 a month (from two paychecks) of investing money into a mutual fund that averages 8% (a pretty conservative fund considering the overall average of the market has been almost 11% since it was created).

Let's fit this into the future value of an annuity equation.

$200 a month at 8% interest for, oh, let's say, 10 years.

200 being the monthly payment, .006666666667 being the interest rate (8%) adjusted in monthly increments, 120 being the amount of months in 10 years.

200 x ((1+.006666666667)^120-1)/.006666666667 = 36589.21

That comes out to $36,589.21 you'll have in 10 years.

$24,000 in principal, which means your $200 a month has earned $12,589 in 10 years. That might not seem like much, but it's a very conservative estimate considering your income will most likely grow considerably throughout those 10 years, enabling you to put more into the investment.

Say after the ten years you've kept to your guns and not gone into debt for silly things like TVs and other toys, and have managed to stay away from new cars (the number one mistake that college graduates make is buying the new car right when they get a job because they "deserve it") and you want to start investing more heavily into your future.

Now we're going to be hitting the market more aggressively.

$1200 a month into a mutual fund averaging 10% for 10 more years. We use the same formula.

1200 x ((1+.008333333333)^120-1)/.008333333333 = 245813.97


Now include your previous investment that's been sitting in that same 8% fund for the past 10 years.

245,814 + (36589(1.08)^10) = $324,807

So you're 40 years old, have no debt other than a mortgage (unless you've managed to pay that down also!) and you've got a bitchin' emergency fund and $324,807 sitting there gathering that good ol' compound interest.

So you get a nice promotion and you keep sticking to your guns. You move all of your investments into that 10% fund and keep adding $2200 a month for 10 more years.

(324807(1.1)^10) + (2200 x (((1+.008333333333)^120-1)/.008333333333) = 1,293,124

That $1,293,124 at the ripe old age of 50.

You want to have $1.2 million when you're 50? We should all be so lucky. And if you want to retire at 60 and you let that $1.2 million compound at 10% for ten more years, you'll have $3,354,030. Without even adding anything for the last 10 years!

If you kept adding $2200 a month you'd have $3,804,688!

(If you upped the monthly payments to $3000 you'd have $3,968,565!)

Now let's tally up the amount you put into the investment.

The total principal if you invest for 10 years at $200 a month, 10 years at $1200 a month, and 20 more years at $2200 a month.

You would have put in a total of $432,000. That's an interest amount of almost $3.4 million dollars, all because you decided to start early and live like no one else so later you could live like no one else.

Say you plan on living to the age of 95. You've got a solid 35 years left. After you retire you could draw out $120,000 a year.

After today's capital gains tax (fancy way to say the government is stealing from your investment gains) of 15% you'll have approximately $102,000 before other federal, state and local taxes.

But the great thing is you could take out quite a bit more and still have your large nest-egg compounding in a safer, more conservative fund. There'll be plenty of money for you to live on, your healthcare, your funeral, and a little left over for donating or to give to your family.

My point is, Social Security isn't going to take care of you. You're going to have to start retiring sooner or later, and if it's later it'll be much harder to catch up. Buying stupid shit like new cars and other things is not going to help you in the long run.

Sunday, January 13, 2008

Tax structures?

Taxes suck. We can all agree on this. That's why I'm supporting Ron Paul for president, but that's another post.

America currently levies a progressive tax on all citizens.

The marginal tax rates in our country range from 10% to 35%.

The more money you make, the higher the tax bracket you are in, the higher the percentage of your income the government steals.

There are tons of arguments for and against the progressive tax structure (as well as whether or not the idea of an income tax is constitutionally allowed). Some of the arguments in favor of a progressive tax structure are generally rooted on the liberal side of the political spectrum.

I'm a frequent reader of the "Progressive Intelligence and Opinion" blog. Its author describes himself as a center-left liberal. He argues for more taxes for the rich and has repeatedly rallied against supply-side economic theory. Needless to say that I disagree with him.

I don't argue that supply-side economic theory will solve all the problems, but it's still better than Keynesian theory.

Back to tax structures.

There are (basically) five different options.

1. Progressive tax structure: With this tax structure the rich pay a larger percentage of their income to the government. The more you make, the more you pay.

2. Regressive tax structure: This is the opposite of a progressive tax structure. The more money you make the lower the percentage of your income you pay to the government.

3. Flat tax structure: With this tax structure everyone pays the same percentage of their income no matter how much they make.

4. National Sales Tax (FairTax proposal): This would get rid of the national income tax altogether and put a 23% (with the FairTax proposal) national sales tax on retail items.

5. No sales tax or income tax: Self explanatory.

While we would all love #5, there's basically no change of this happening (unless Ron Paul somehow wins the election) anytime soon.

Proponents argue that #4 is a more efficient way to redistribute wealth than the progressive system.

The most we can hope for is either #4 or #3. Let's face it, the politicians and bureaucrats love spending our money, so they're not going to try too hard to reform the system.

Liberals and socialists argue that the progressive tax system is essential for ensuring that everyone is hit equally hard by the tax burden. They also argue that it is essential that we tax the rich more heavily to fund social programs for those who are impoverished. Universal healthcare is a hot-button issue these days and is most likely going to make its way into America. The liberals plan on raising taxes for the highest tax brackets in order to fund it.

On a side not, my personal opinion is that universal healthcare won't work. There's no doubt that something needs to be done about the healthcare situation in this country, but universal coverage, raising taxes, and increasing the size of the government aren't the answers. Look at America in contrast to the rest of the world. We have lots of land, so we don't allocate it efficiently. We overuse most of our resources. We use too much energy. We waste money with big government. What do yo think will happen when everyone has 'free' coverage? The resource ('free' healthcare) will be overused. That's just our nature. Without co-pays we'll be going all of the time. Now I don't think that waiting room wait times would be increased by hours like some opponents say, but they would most likely increase, especially in the short term. If we can somehow fix the healthcare problem and stop enlarging the government life would be a whole lot better.

Why should the rich be taxed more heavily than the poor? It seems that they are taxed on general principle, a form of "fiscal jealousy".

Wouldn't it be nice to get a big raise at work and not have it ruined by the government taxing you more.

The progressive tax is unfair and it punishes productivity. Just based on the actual cost of implementing such a tax (think of how much money the IRS hemorrhages) it's a bad idea.

Center-left liberal's recent post on this issue is an interesting read, but still doesn't justify the wasteful system. Instead of babying those who don't do enough to provide for themselves (I'm not talking about the people who genuinely need help; we as the richest nation in the world should help them) we should be ensuring that if they do better themselves they won't be paying a higher tax rate as they increase their productivity. This means more incentive for productivity.

Just my thoughts on the subject.