How to Budget and How it Will Help Your Marriage

Many people dread the idea of developing and living on a budget.  They feel that having to plan how they will spend their money is a drag that will inhibit their lifestyle.  Those who have actually developed and tried using a budget, however, usually discover that by planning their purchases rather than simply letting the money go where it will, they actually feel like they have more money.  You will be surprised by how much money is spent on frivolous things each month and how much wealth you actually have if the dollars are directed with care.
For a couple, preparing a budget can actually have another surprising side effect.  When you talk about how you would like to spend and save the money you have coming in, it causes you to communicate about the things that are important to you.  By fostering communication, it can actually help your marriage.
Certainly not communicating about money can lead to bad relationships.  Many fights in a marriage, some of which eventually lead to divorce, are often about money.  In some cases it is one spouse who runs up a large amount of debt without consulting the other person.  Other times it is an overcontrolling spouse who holds onto the family budget so tightly the other person feels like a child rather than an equal.  In other cases, both individuals spend almost in spite, feeling that their spouse is spending on things and therefore they should too in order to be equal (Congress comes to mind here).
But beyond avoiding a toxic relationship, preparing a budget together does a great deal of good for a relationship because most everything we do involves money.  If one spouse enjoys golfing, it requires money for clubs and green fees.  Likewise, dance classes, lunches out, and vacations all require the spending of money.  Finally, saving and investing for the future requires a certain amount of money be set aside.  By getting together and developing a budget, each spouse is able to communicate what is important for them and make sure that their voice is heard.  If both spouses agree on a plan, they can in turn both work together to achieve their goals.
When approaching the budget, some important rules must be followed:

1.  Every dollar coming in must be assigned a place – either to be spent, saved, or given away.

2.  Each spouse has an equal vote.  This is a meeting of equals.

3.  While one spouse may prepare the budget, both must agree on every item in it.

4.  Once the budget is agreed to, both spouses must follow it.  If for some reason the budget must be changed (for example, if an unexpected expense occurs), both spouses must adjust the budget and agree from where the money is to come.

 A new budget should be prepared each month, although a yearly budget is also helpful in order to determine how much money must be appropriated throughout the year for goals such as retirement savings, repair funds, and college savings accounts.  Adding up the yearly totals also highlights expenses that may be excessive when added up over a 12 month period (for example, a $5 latte each workday adds up to $1300 over a year).  The steps for preparing the budget are as follows:

1.  List all account balances

2.   List income from all sources.  This includes wages, interest from accounts, and other sources.

3.  Begin a list of expenses, starting from those that must be paid (food, clothing, shelter, taxes, insurance, loans).

4.  Assign a certain amount of money each spouse will receive as free money to spend as they wish without questions (for example, $50-$100 per month each).

5.  Add expenses for month-specific activities (vacations, special dinners out, school events, gifts, etc….)

6.  Determine how much money you would like to give and to whom for the month (if you’re a Christian who tithes, you would obviously take 10% automatically each month before any other budgetary steps).

7.  Total these amounts and determine how much is remaining. 

If it is a positive balance:

Look at your yearly goals and determine which to fund.  For example, money can be allocated to items such as home and car repair funds, college funds, IRA contributions, Health Savings Accounts, home and car insurance funds, Christmas savings accounts, and other such flexible investments and expenses.  Keep a tally of savings for each of these goals against your yearly target to ensure progress as the year progresses.  If all items are fully funded for the year, place the money into savings and begin to make extra payments on outstanding loans and invest additional monies as those savings build up.  If there is always a great deal of money left over and you don’t have any remaining loans, consider adding luxuries or additional giving to your budget.

If expenses outweight income:

Determine if expenses can be trimmed for the month or delayed into other months.  If that is not an option, determine how money will be pulled from savings.  If this occurs most months, consider trimming back on your lifestyle as you are spending more than you are making.

Please contact me via vtsioriginal@yahoo.com or leave a comment.

Follow me on Twitter to get news about new articles and find out what I’m investing in.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Photo Credits: Sufi Nawaz, Website http://sufinawaz.com , downloaded from stock.xchng.

1 Comment
by smallivy on February 22, 2012  •  Permalink
Posted in Money and Relationships
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Posted by smallivy on February 22, 2012

http://smallivy.wordpress.com/2012/02/22/how-to-budget-and-how-it-will-help-your-marriage/

Are Stock Prices Lower in States With Higher Taxes?

An interesting question to ask, since taxes affect the returns from stocks, is “Do stocks sell at lower prices in states that have higher taxes?”  This question was posed to me by a reader who was actually using it to make the case that taxes do not affect stock prices.  While he thought the answer was , “No, of course not since there is only one price for a stock”, the answer is actually, “Yes.”  Here is why:
It is true that the current price of a stock is the same everywhere in the country since the stock is traded on the same exchange.  An investor in Texas, which has no income tax, who calls his broker to buy shares of IBM at the market does not pay a higher price than a person in California, which has a high income tax, placing the same order at the same instant.
Individuals (at least those who are sophisticated about their finances) do take taxes into account, however, when making investment decisions.  This means that those in higher tax states are more likely to make investments in assets that are not subject to state income taxes than those who live in low or no income tax states.  The potential return for taxable investments must therefore be greater before those in higher tax states will buy them, in order to offset the loss in earnings due to taxes, than they need to be in lower tax states.  This means that the price, relative to earnings, must be lower such that there is a better potential return.  If the price is too high to provide a reasonable return, the investor in the high tax state will not buy the stock.
Note that another effect of having high taxes in a state is that people who tend to invest will move to states that have lower taxes.  Note the flight of people from California, New York, and other high tax states to states with lower taxes.  Taxes definitely have an effect on investing decisions.

Please leave a comment or write me at vtsioriginal@yahoo.com.

Follow me on Twitter to get news about new articles and find out what I’m investing in.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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by smallivy on February 20, 2012  •  Permalink
Posted in Stock Pricing
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Posted by smallivy on February 20, 2012

http://smallivy.wordpress.com/2012/02/20/are-stock-prices-lower-in-states-with-higher-taxes/

What Poor People Say; What Rich People Say

There is rich person thinking and poor people thinking.  People who use rich people thinking are either wealthy or will become wealthy, given enough time.  People who think like poor people either are broke or will end up broke.  Which way do you think?

Poor People Say:  The cost of living is too much here to ever get ahead.

Rich People Say:  I need to move somewhere cheaper unless I can make up the difference in salary here.

Poor People Say:  I need a new car since they are reliable.

Rich People Say: I can save thousands of dollars on depreciation each year if I buy a 4-year old used car. Most repairs are only a couple of hundred dollars, and cars don’t break that much if you maintain them.

Poor People Say:  How little a down-payment can I make on this house?

Rich People Say:  Can I put at least 20% down on this house and pay it off in 15 years or less?

Poor People Say:  I need to dress to impress.

Rich People Say:  I don’t care what people who keep up with the Jones’ think.

Poor People Say:  Fake it until you make it.

Rich People Say:  When you make it, keep things simple or you’ll lose it.

Poor People Say:  I need a job that will give me security.

Rich People Say:  I need to provide my own security through my skills and actions.

Poor People Say:  They should pay me more.

Rich People Say:  What additional ways can I make money?

Poor People Say:  I’ll repair things myself to save money.

Rich People Say:  I’ll spend extra time doing what I’m good at and get ahead in my career or develop my business and pay someone else to fix things around the house.

Poor People Say:  I need it now

Rich People Say:  I’ll buy it when I can pay cash for it.

Poor People Say:  I can get points on my credit card.

Rich People Say:  I can get a  discount if I pay cash.

Poor People Say:  This credit card has a low-interest rate.

Rich People Say:  These mutual funds pay me a good rate of return.

Poor People Say:  I need a big house.

Rich People Say:  I only need a house that is big enough to fit my needs.  A bigger house just means more maintenance.

Poor People Say:  You’ll always have a car payment.

Rich People Say:  I’d rather ride a bicycle than have a car payment.

Poor People Say:  I need a college loan.

Rich People Say:  I need to choose a college I can afford and work while I’m going to stay out of debt.  I can also apply for every small scholarship I can the summer before since few people go for those.

Poor People Say:  I deserve a vacation.

Rich People Say:  I’ll take a vacation I can pay cash for and still put money away.

Poor People Say:  Thank God It’s Friday, Oh No It’s Monday.

Rich People Say:  Oh good it’s Monday, I can get some things done.

Poor People Say:  There is no way.

Rich People Say:  I’ll find a way.

Poor People Say:  I need a house payment for the tax deduction.

Rich People Say:  I’d rather pay the taxes than pay the interest on a home loan.

Poor People Say:  I need to buy some clothes.

Rich People Say:  I need to buy some assets.

Poor People Say:  I’m going to go play some blackjack.

Rich People Say:  I’m going to buy a casino.

Please leave a comment or write me at vtsioriginal@yahoo.com.

Follow me on Twitter to get news about new articles and find out what I’m investing in.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Photo Credits:  Mikhail Popov, http://stockphoto43.com, downloaded from stock.xchng.

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by smallivy on February 19, 2012  •  Permalink
Posted in How the Rich Invest and Handle Money
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Posted by smallivy on February 19, 2012

http://smallivy.wordpress.com/2012/02/19/what-poor-people-say-what-rich-people-say/

Taxes Paid by the Rich

Stories like the one tweeted by Money: http://money.us/ABU6We

bother me.  The reason is that if it is true that the 400 highest earners really are paying less than 15% (and many are paying less than 10%, as stated in the article), it does make one wonder why they are paying a lower rate.  Now granted, they are paying a lot more in taxes, which may justify it some, but still…..

What really bothers me about it though is that it makes no sense.  As far as I know, the dividend rate is a flat 15%, meaning that if you have dividend income, the lowest percentage you could be paying on that income which you actually keep is 15%, so there could not be anyone paying less than 15%.

I wonder if what they are doing is using income before deductions as the “income,” rather than the amount that remains after deductions.  For example, if someone made $100 M, but gave $90 M away, they might be able to deduct the full $90M from their income.  Their taxes, assuming this was all dividend income, would then be ($100M – $10M)*0.15 = $1,500,000.  This means that they paid 15% on their income, after deductions.

If you calculated the rate they paid based on their original income, this would be

$1,500,000/$100,000,000, which equals 1.5%.  That  would seem like a really low rate, but then again only $10M went into the gentleman’s pocket.  The rest was given away.  He therefore only really kept $8.5M, so he really only kept 8.5% of his income, having given away or paid out 91.5% in taxes.

To me, however, the whole point of deductions is to correct income for what really “should” be taxed  (here, “should” is based on whatever society has decided).  For example, if you give a lot of your money away as in the above example, and you give it to charities that provide many of the services that would otherwise be provided by the government, then it makes sense to not count that as income to the individual (since he did not actually receive that money – he gave it away).

My point here is not to start a debate on what should and what should not be considered a reasonable deduction.  My point is that if the calculation used to determine the percentage paid by high earners does compare the taxes paid to the income before deductions are subtracted, that is being really deceptive.  If the wealthy really do pay a lower percentage on their post-deduction income, however, I’d like to know how (Can  anyone explain this one to me?)!

If you think deductions should be eliminated, please lobby to pass that law (I’ll be right behind you, provided it means going to a Fair Tax or something that can reduce the time I spend worrying abut taxes).  While you’re at it, however, you may also want to remove the deductions for mortgage interest, children, college expenses, and medical expenses.  After all, why should those deductions exist if other deductions don’t?

Otherwise, if the wealthy are getting those great deductions by giving a lot of money away, or by doing the things like buying solar panels that the government wants them to do (that’s why they created those deductions int he first place), should we really be griping about the wealthy “not paying their fair share?” I suppose everyone could do the same thing.  Hey – if you give away 50% of your income, you could cut your taxes by 50% at least!  Anyone in the Occupy Camps want to do so?

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by smallivy on February 18, 2012  •  Permalink
Posted in Investing
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Posted by smallivy on February 18, 2012

http://smallivy.wordpress.com/2012/02/18/taxes-paid-by-the-rich/

It’s Time to Confuse Target

I do not have a Facebook account.  I feel that it is creepy for people I barely know to know a lot about me.  This is especially true in the world with cheap computer hardware capable of storing a lot of information and accessing it quickly.  There are various websites that compile the information you leave about yourself on the web.  A robber who knows you just bought a new TV from a conversation in a chatroom can read that you are on vacation from a Facebook post, or just know when you’re at work, and head over to your house to rob you.  Now your stalker can even get a picture of your house from Google maps and know you have a big bush hiding the front door, usually from a  link on your online phone listing.

I have also always been reluctant to get the store discount cards and fill out surveys.  I rarely send back the registration cards for products and software I buy, despite the warnings that doing so will deny me future benefits and information.  I worry that companies are building up a dossier on me that will be used for marketing, and later by a shady government group to tax me for the poor decisions I have made.  The Ding Dong tax is coming – just you wait!

I’m not paranoid, they’re just out to get me.  They’re out to get you too.  No, really!  There is now proof.  Recently it has been disclosed that Target Store tries to determine which customers are pregnant so that it can market brands to them.  They have found that if they can hook people while they’re all full of hormones and emotional over a new baby, they can get customers for life.

Other stores try to do this too.  If Target waits until you actually have the baby and the news becomes public record, they have found out that they are too late since there will be a lot of companies also marketing to you for your business.  They want to predict when you (or your wife) is in the second trimester and start hitting you up then.  To do this, they actually build up a file on each person who shops at, or even just contacts their customer service, and watches for telltale signs of a pregnancy.

So what if you’re like me and don’t want Target to be sending you coupons for diapers before you even tell your parents?  What if you don’t want to get coupons for laxatives just because you picked up some prune juice at the store?

Maybe you could try to limit the amount of information you put out there.  You could forego the sales prices and not get the shopper cards.  Maybe you could avoid the surveys.  Maybe you could never give your right name on a comment card.  Unfortunately this will not stop stores like Target that save your actual buying history in order to find the patterns in your spending.

The best way to thwart pattern recognition programs is not to limit information release, because they will always build up a dossier as you leak info little by little over time.  What you need to do is to put out a lot of information – some of it bad.  Make it impossible for them to sort out the good information from the bad.

Fill out every survey you can get your hands on.  Sometimes make $500,000 per year.  Other time, make $20,000.  Sometimes have a mansion in Malibu.  Other times, live with your mom in Wisconsin.  (Note, don’t take any loan offers that come because you say you’re a millionaire – that would be fraud.)

You must do this with your shopping too.  Some companies have learned that you may lie on surveys, but when you spend your money you must be serious.  If you own a cat, throw in a bag of dog food once in a while into your cart.  If you are underweight, buy a few cases of Slim Fast every now and then.  Buy some baby clothes and lingerie together, just to make them wonder what you’re up to.  Get a subscription to Guns and Ammo and Field and Stream, but then also become a member of PETA.  If you’re  a forty-year-old guy, get a subscription to Seventeen and Cosmo.   Keep them guessing.

If you really want to flood their file servers, swap shopping lists with your neighbors every so often.  Not only will you help keep your privacy from marketers, you can learn somethings about those who live around you.  If you are an 18 year-old college student, maybe see if the 90-year old lady down the street would like you to pick up some things for her at the store.  Be sure to put it all on your shoppers card.

Let’s start a movement to set marketing back 50 years.  Together, we can have all of our in boxes full and our privacy intact.

Like this post or strongly disagree?  Please, Please, Please, Please leave a comment or write me at vtsioriginal@yahoo.com.

Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Photo Credits: Steven Goodwin,  http://www.7rains.com , downloaded from stock.xchng.

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by smallivy on February 17, 2012  •  Permalink
Posted in Fun Stuff, Marketing
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Posted by smallivy on February 17, 2012

http://smallivy.wordpress.com/2012/02/17/its-time-to-confuse-target/

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