I just hope that he and his administration can bring some real change to Washington that benefits all. But please excuse me if I remain cynical about all politicians.
Tuesday, January 20, 2009
Garbage In, Garbage Out
Congratulations to Mr. Obama for becoming the 44th President of the United States. I mean this genuinely, and with all of my heart. It is a great thing that not only have we come far enough that we can elect someone with a funny name, dark skin, and so many new ideas can be elected to that post.
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
Example:
• 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
• 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
Example:
• 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.
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?
"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."
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.
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.
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