Not Making the Income You Want? Maybe You’re Being Selfish.


MushroomsSomehow people who do well in a free enterprise system have been made out to be greedy and selfish people.  We have images of Ebenezer Scrooge, Mr. Burns, JR Ewing, and Gordon Gekko when we think of Capitalists.  We’re always told that corporations are greedy and anything big is bad.  Small businesses are good, unless they do well and then suddenly they’re bad.  The person who makes a good salary or runs a successful business is bad while the minimum wage employee or the guitarist who pays for donations on the street is good.  People who are wealthy should pay high taxes because they are somehow evil, while people who do nothing and make no income should be supported because they are virtuous.

In the area of art, an artist who paints things that appeal to people is considered a sell-out.  A singer who sings popular songs likewise is a sell-out.  Every artist wants to “be true to themselves” and “be true to their art” and complains that people don’t appreciate (and buy) the things they want to produce.  In proclaiming how wonderful Obamacare would be, then-Speaker Nancy Pelosi talked about how it would free people to chase their dreams like play the guitar instead of going to a job each day that provided their health insurance.  Their happiness in what they were doing was more important than spending the day doing something that benefitted other people.

There’s an odd thing about free enterprise, however, that many people miss.  People who are the most successful are not the ones who are greedy, or selfish, or cheaters, or swindlers.  It is the people who are the most selfless,  The ones who give the most of themselves to help others and meet their needs.  It is those who treat others fairly and provide their customers more in value than they receive in payment.  It is the guy who gets up at 6 AM and works until nine or ten at night building a business to take care of some need.  The restaurant that is open nights and weekends when people want to eat.  The drug store that is open 24 hours so that people who are sick at 2 AM can get the medicines they need.

The same goes for employees.  Employees who are always watching the clock and running home right at the end of their shift don’t tend to do as well as those who stay to get the job done.  The ones who “set their hourly rate” by slacking off and wasting time don’t do as well as those who get as much done as they can.  The employees who are cheerful and helpful to customers do better than those who treat customers like a nuisance.

The same is true for artists.  There is no difference between an artist who “paints what they want” and someone who sits and watches football games on TV all day or spends all day fishing or spends all day gardening.  If you are doing things that you like for yourself, you are spending your time on a hobby.  Just as you would not expect someone to be paid for watching football all day (unless they are a sports announcer or a sports writer and thereby do something that someone else wants), you shouldn’t expect to get paid for producing art that no one else wants just because you like to make it.  If you can paint a painting that others like, and maybe matches the couch or fits the room of your customer, you can make some money.  If you are a great musician who can play songs other want to listen to, you can make money.  To make money you need to do something for someone else.  Not just for yourself.

So if you are not making the money you want, think about what you do all day.  Are you being selfish, doing things for yourself, or are you being giving, doing things for other people?  Are you working a shift to get a check, or are you providing your employer with your best efforts to meet her needs?  Are you spending your time doing what you want to do and getting a check from the government in the mail, or are you out meeting the needs of other people?

Be giving of yourself and your time, and wealth will follow.  Your income is in direct proportion to how many people you help during any given day.  The person who provides for the needs of others gets rewarded.  The person who meets the more pressing needs makes more.  The person who meets the needs of a lot of people gets rich.  The person who meets the most pressing needs of the most people gets ultra-wealthy.

Contact me at vtsioriginal@yahoo.com, or leave a comment.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. 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. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Don’t Let Taxes Drive Your Financial Decisions


It is really odd how people let taxes have such a massive impact on their financial decisions.  People will flock to the stores for a sales tax holiday even though they are only saving about 10%, while a 20% off sale won’t draw much interest.  Some stores have caught onto this, saying that they’ll “pay the tax” for purchases knowing that people would think they were getting a great deal.

Shopping just because it is tax-free isn’t the worst financial mistake people make, however.  Here are some other boneheaded decisions many people make to avoid taxes you should avoid.

1.  Keeping the home mortgage to get the tax deduction.  First of all, this only works if you itemize, and for many people the standard deduction is the better deal economically (not to mention the time and hassle it saves when filling out your taxes).  Secondly, most people are only saving 15 to 25 cents on the dollar.  This means you’re paying $10,000 in interest each year to save $1500 to $2500.  If you  think this is a great idea, feel free to just pay off your mortgage and then send $10,000 to me each year.  I’ll happily send back a check for $2500.  Note you could get the same tax break sending $10,000 to charity each year instead of to the bank.

2.  Limiting retirement investments based on IRA and 401K limits.   If you are starting at age 20, putting away money up to the limits on an IRA will provide more than enough income in retirement, let alone maxing out your 401k account contributions.  If you are starting at 45 or 55, however, it may not be enough.  Figure out how much you’ll need in retirement based on your income needs, figure out how much you need to invest to get there using an investment calculator, and then put away extra money in a taxable account once you max out your IRA and 401k contributions if needed.  A good rule-or-thumb is that you’ll need at least 25 times your expected yearly income requirements, plus a half million dollars for medical expenses.  For a $50,000 per year income, that’s $1.75 M to $2 M.  Put away $3 M and you’ll be able to take more risks and increase your income to buy some luxuries.

 3.  Buying municipal bonds for the tax savings.  Sometimes it does make sense for some individuals to buy municipal bonds.  For example, if you are in the top tax bracket and are buying bonds for interest income, you might do better after taxes with municipal bonds than you will with corporate bonds, even with the lower interest payments.  If you don’t need the income, however, it is foolish to buy municipal bonds when they are tax-free instead of buying equities (stocks) since over long periods of time you’ll make five times the rate of return with equities than you will from municipal bonds, even with the tax savings.

So don’t always look for the tax break.  Sometimes it is worth paying the taxes.

Contact me at vtsioriginal@yahoo.com, or leave a comment.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. 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. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Things You Wouldn’t Need to Do with the Fair Tax


OLYMPUS DIGITAL CAMERAPromoters of the Fair Tax point to things like the ability to collect your entire paycheck instead of having a portion withdrawn for taxes before you see it.  They also talk about how under-the-counter businesses would pay their fair share, instead of getting money tax-free as they do now, since they would be buying things too.  Even drug dealers and prostitutes would be contributing to the tax base, lowering taxes for everyone.   Still interest has been limited, largely I believe because people don’t realize just how much of a timesaver it would be for everyone.

In a nutshell, the Fair Tax is a sales tax on new goods that would replace the income tax, Social Security Taxes, and all other Federal taxes.  You would still see state income taxes if you are foolish enough to live in a state that has them (I’m talking about you, California), but there would be no federal taxes.  There would also be no corporate income taxes, which means that groups like Burger King would not be fleeing the country for places with lower taxes like Canada.  Instead, businesses would be flocking here because they would not need to waste lots of money on tax planning and tax avoidance.

To prevent being regressive, meaning that poor people wouldn’t end up paying a greater percentage of their income than rich people, there would be a prebate where everyone would get a check from the government to cover a portion of the taxes.  For example, give a $10,000 per year prebate out to everyone with a 20% Fair Tax and no one who makes less than $50,000 per year would pay any taxes, even if they spent their entire paycheck on stuff that was subject to the Fair Tax.

A lot of the advantages of the Fair Tax go beyond getting your whole paycheck each month.  The Fair Tax greatly simplifies accounting and record keeping since you would not need to prove to the IRS what you made and what you spent on deductible items.  What would you not need to do if there were a Fair Tax instead of an Income Tax?  Let me list them:

1.  You would not need to give you Social Security number for a job, a bank account, or any other purpose, because there would be no Social Security numbers.  Credit card companies would actually need to do their jobs and verify your identity instead of relying on a number.

2.  You would not need to turn in a W-4 listing dependants, because there would be no withholding of taxes from your paycheck.

3.  You would not need to keep a receipt from the doctor’s office, because there would be no need to prove medical deductions.  You could throw them out.

4.  There would be no need to keep charitable donation receipts, because you would not need to claim them on your taxes.  Worried about losing the deduction?  Don’t be – you’ll be taking home more money, leaving you free to give or keep as you desire.  Your “charity” would not even need to be  officially recognized by the IRS.

5.  Conservative and Liberal groups would not need to submit any paperwork to the IRS for approval, because there would be no taxes on any contributions they received.

6.   You would not need to fill out paperwork for home energy improvements to get a tax deduction.  Politicians would just make such items exempt from the Fair Tax or reduce the Fair Tax on them if they wanted to keep using the tax system to drive behaviors.

7.  Seniors wouldn’t need to worry about paying income taxes on the Social Security benefits if they made too much money before retirement age and were taking benefits early, because there would be no income taxes.

8.  You would not need to fill out tax forms in April, because there would be no income tax and the IRS would never bother you unless you ran a business that collected the Fair Tax.  The IRS could be cut by 95% or more.  There go the Star Trek skits.

9.  You would not need to worry about contributing to medical savings accounts, retirement accounts, and college savings accounts before a certain date each year. You could start whatever accounts you wanted and fund them as you wish, because there would be no income taxes on the earnings.  You could also withdraw the money as needed because there would be no penalties to pay.

10.  You could give as much money as you wanted to your children or whomever else you wanted at any time because you would not need to pay estate or gift taxes.

So, what will you do with all of the time you’ll be saving by not needing to fill out tax forms, not needing to fill out  employment forms, and not needing to keep and organize receipts?

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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.