The Hero's Journey to Financial Independence
The Hero’s Journey to Financial Independence is in the Kindle Store
Reply
Category Archives: Tax Strategies
Thinking Outside the Box : Debt Ceiling Edition
Welcome to this edition of “Thinking Outside the Box”.
I have solved the debt ceiling problem and frankly I am surprised that the Tea Party and the White House have not contacted me yet.
Here are a few of my best ideas (yes, there were worse ones):
1. Sell Nebraska, Iowa, Kansas and Missouri to China for 5 Trillion dollars. This new Chinese province situated right in the center of the continental U.S. could be the grand hub for all of our Chinese needs. They could open a Foxconn factory, hire the native population and make Ipads and sell them from fake Apple stores.
2. Hire obese people to hand deliver tweets. Tweets would be printed out on fortune cookie paper, given to a tweet-walker (or tweet-biker) who would use human power to deliver the 140 character (or less) message throughout a nationwide network (except of course, the big new China in the middle, no social media goes in there). This would dramatically reduce healthcare costs and put millions of people to work.
3. Sell the National Parks to Disney. It’s a small world, after all.
4. Open a string of Government Run Social Security Casinos. Require seniors to pick up their S.S. money on site in the form of chips. Odds are always on the house!
Do you have any ideas?
Who owns the U.S. Debt?
In an interesting story over at Business Insider, the owners of the U.S. treasuries are enumerated. I had always assumed that China was the number one purchaser of U.S bonds. It turns out that Uncle Sam is the majority holder. This is just like Japan who owns a majority of Japanese public debt. I learned of the Japanese holding in much the same way I learned of the U.S. percentages, In a time of crisis. The Japanese nuclear disaster highlighted their domestic vulnerability much like the U.S. debt ceiling crisis is shining a bright light on our vulnerability.
While China, Japan and the U.S. make up the top 3 creditors, we hold a lions share of U.S. debt:
The U.S. owes the U.S most
Here is a breakdown of all of the creditors to the U.S. :
Who we owe
source: Business Insider
The Wall Street Journal has a live blog of the debt debate that is worth checking out.
Question: What changes have you made in your personal finances as a result of the ongoing debt debate?
I have reduced my exposure to equities recently and have increased cash. I could miss out on some gain and dividends but the market uncertainty leading up to the artificial debt deadline could precipitate a big correction or crash. Nobody knows.
I do hope they sort this out soon, though, it is really a dangerous political sideshow that is doing grave harm to our reputation around the world.
-WR
| Who? | How Much? |
| Hong Kong | 121.9 |
| Caribbean banking centers | 148.3 |
| Taiwan | 153.4 |
| Brazil | 211.4 |
| OPEC | 229.8 |
| Mutual funds | 300.5 |
| Commercial banks | 301.8 |
| State, local and federal retirement funds | 320.9 |
| Money market mutual funds | 337.7 |
| United Kingdom | 346.5 |
| Private pension funds | 504.7 |
| State and local governments | 506.1 |
| Japan | 912.4 |
| U.S. households | 959.4 |
| China | 1160 |
| The U.S. Treasury | 1630 |
| Social Security trust fund | 2670 |
What Is A U.S. Company?
As we head into the final furlong of the debt debate it may be perplexing that our economy seems to be doing so poorly in terms of housing, joblessness, consumer confidence and myriad other ‘coal mine canaries’. I thought it would be interesting to understand why the stock market seems to be riding so high.
What do the following organizations have in common?
| 3M |
| Alcoa |
| American Express |
| AT&T |
| Bank of America |
| Boeing |
| Caterpillar |
| Chevron Corporation |
| Cisco Systems |
| Coca-Cola |
| DuPont |
| ExxonMobil |
| General Electric |
| Hewlett-Packard |
| The Home Depot |
| Intel |
| IBM |
| Johnson & Johnson |
| JPMorgan Chase |
| Kraft Foods |
| McDonald’s |
| Merck |
| Microsoft |
| Pfizer |
| Procter & Gamble |
| Travelers |
| United Technologies Corporation |
| Verizon Communications |
| Wal-Mart |
| Walt Disney |
If you answered that they are all American companies you’d be right, technically. There is a slight problem with these companies in particular though. They happen to be the 30 companies that make up the Dow Jones Industrial Average. When newsies say “The Dow is up” or “The Dow is down” what they are saying is the average price of these 30 companies stock has gone up or down. (The actual calculation is slightly more complicated, it is the sum of the prices of all 30 stocks divided by the ‘Dow Divisor‘, a magic number used to take into account company changes such as stock splits or spinoff companies but the effect is the same.)
So what’s the problem?
When you read or hear something like this: “U.S. blue-chip stocks are riding high and the Dow Jones Industrial Average finished its best month of the year.” You’d be inclined to infer that the health of the U.S. Economy is somehow tied to the Dow. You’d be wrong. While all of the companies are technically American organizations, many of them are actually multinationals with a majority of employees and sales abroad.
Things that make you say MMM
When a company such as 3M (Originally called the Minnesota Mining and Manufacturing company. You can’t get more apple pie and baseball than that) has only 34% of sales in the U.S you could say, “Hey, great. They are selling stuff on the global market.” When you come to find out that only 33% of their employees are in the U.S. then you might start to wonder if they should really qualify as an American company at all, much less be listed prominently on the DOW.
Caution:Rant
Perhaps this is why the DOW is sky high yet people can’t find jobs or buy houses around the country. Incidentally, how does the U.S. Federal Reserve lending $45 billion to european banks help U.S. citizens? Many bankers and the people inside our own Fed are increasingly proving to be dirty, despicable people. Banks got a big bailout yet won’t lend to small businesses or American people. Maybe we shoulda let them fail.
/Rant
Which other companies on that list should perhaps not be there?
What should we use instead to measure the overall health of American enterprise?
When Tim Geithner says “We’re almost out of runway” it might be time to be very concerned.
please let me know what you think.
Personal Finance Roundup
Here are some interesting tidbits from around the web-o-sphere. Regardless of your political persuasion, this is a powerful video:
And here are a few excellent personal finance posts:
The Simple Dollar has Ten Pieces of Inspiration
Money Saving Mom shows us how to Tweet and get 5 bucks worth of Amazon Video
What Can Harry Potter teach us about personal finance? Wise Bread has the scoop.
Worthwild Financial Snapshot: Cinco de Mayo Edition
Happy Cinco de Mayo!
First, Let me dazzle you with my Margarita Recipe:
2 Ounces of freshly Squeezed lime juice (Pulpy is good)
1 oz triple sec
2 oz tequila ( Get a bottle of Dos Gusanos, or Two Worm Tequila and share with a friend)
Ice, Kosher salt and a few wide rimmed glasses.
Ok, Now that’s better. Let’s do a Worthwild Roundup. Here are a few stories and articles I found worthwild this week:
1. SCORE blog: Successful Entrepreneurs Share Stories.
My favorite line: Self-employed individuals have a certain entrepreneurial spirit that’s hard to describe. But, you can see it in his or her facial expressions and hear it in their voices. Once you catch the bug, it is hard to think of anything other than launching your business. How true
2. Budgets Are Sexy: Help a Reader- pay off student loans or start saving
My Advice?: Get moving on building an (at least) 6 month contingency fund. This is not a matter of current need, local situation or any other fleeting reason. It is a matter of philosophy. Building and maintaining a contingency fund forces you to make tough value choices and build enormously powerful lifelong habits. You’ll realize that having this critical safety net allows you to make better choices about almost everything else in your financial life. Try to refinance your student loans to lower rates + longer term. One thing different about student loan debt than most other forms is that *hopefully* your earning power will climb over time.
3. Consumerist: I am so glad to see an American company be so profitable, Wait! What? http://con.st/10018507
4. Deal Seeking Mom: Lots of coupons going on!
5. Get Rich Slowly: Pack Smart To Save Money
Great article. My personal tips are to pack sandwiches, water and a bag of veggies for long road trips and picnic instead of restaurant. You get on the road quicker and can spend the time walking and stretching your legs (instead of sitting in a booth at a Shoneys). You save a ton of cash, too!
I posited my opinion on who should get the Bin Laden bounty
Let me know what you think.
SCORE!
Are you an Entrepreneur? Have you been bitten by the bug of free enterprise?
The official statistics about your chances in a new business venture can seem daunting. 90% of new businesses fail in the first year, right?
Not true. According to the Census Bureau new ventures have a 70% chance of survival for their first 2 years and a 50% are still be operating at 5 years. Quite a different picture than I was shown years ago.
There are tons of factors relating to the success or failure of a seedling enterprise. The Entrepreneurs Spirit, defined loosely as ones drive to succeed at just about any cost is a major factor. You need a lot of tenacity to overcome the obstacles inherent in starting ans running a small business. Carving your own way is not easy.
A major contributing factor in the success of any business is the quality of the coaching the principal players receive. To that end there is one resource that is available to all yet utilized by a relative few.
Have you ever eaten a Jelly Belly? Do you have a Vera Bradley? (If confused by this question ask your wife and/or daughter to translate)
Did you even know that there were Sears franchises?
What all 3 of these small businesses have in common is the fact that they reached out to SCORE for help.
SCORE, Counselors to Americas Small Business, offers free and confidential small business advice for entrepreneurs. They offer advice and guidance from hundreds of offices nationwide. The volunteers bring with them many years of experience and wisdom that budding entrepreneurs can learn quite a bit from.
From the upcoming launch of score’s new website I found a perfect example of SCORE’s mission and what working with them can mean to entrepreneurs:
“To respond proactively and positively to the current economic crisis, SCORE has challenged itself to achieve a stretch goal of harnessing America’s entrepreneurial spirit to help grow a million small businesses in the next five years, one business at a time.”
Want to know more? Check out what can SCORE do for me?
If you have volunteered for SCORE or have utilized the resources they have to offer, please share with a comment.
-WR
Lower Your Taxes – Big Time 2011-2012 Edition Review
Book Review
Lower Your Taxes: Big Time 2011-2012
There are two tax codes at work in America. One tax code for the workers and another for the business owners.
Can you guess which one is better?
I had the pleasure to see Sandy Botkin speak live several years ago. At the time, several of the tax strategies he advised were not useful to me. I earned so little from my job that my tax burden was almost nil. Additionally, I was just starting out in business and could not see the value in fussing over taxes so much. Taxes were something I would deal with later, after I made my money.
Sanford Botkin once trained IRS agents and it was during his employ at the IRS that he discovered that most people were overpaying their taxes. This is not surprising. The fear of retribution from the feds coupled with the incomprehensible tax code creates a toxic soup no sane person is willing to sip. This is Sandy’s battle-cry. Don’t let the IRS’s policies bully you into overpaying. Pay what you owe but no more.
He founded the Tax Reduction Institute in Maryland and started to teach these strategies to business people and real estate professionals. I saw him speak at a Seminar in Washington D.C. General Norman Schwartzkopf and Sanford Botkin were the ones I truly remember from that day. Schwarzkopf because he was a magnificent speaker and inspiring leader. Botkin because he was funny, smart and what he said made sense. I left the seminar and promptly forgot about the whole matter. My meager income incurred so little tax it was not even worth the hassle. Taxes would just have to take a back seat to the other more pressing things in my life. (like rent, food and other niceties)
A few years later I picked up the first edition of “Lower Your Taxes: Big Time” and started to put the ideas into play. It makes a difference.
I think everyone should consider starting and operating their own business. Tax benefits aside, the act of crystallizing my own ideas into a product or service that is 100% my own holds it own value. Entrepreneurial activities and pursuits help me understand the marketplace, business, law and taxes even more. Even if it is expanding a passion or hobby into a legitimate business that occupies your life only on weekends, there is value in this process. The key word here is legitimate. In Chapter 8 “How to Shield yourself from the IRS weapon of Classifying a Business as a Hobby”, Sandy describes strategies for making sure the IRS sees your activities as a business. For instance, the act of forming an LLC, keeping excellent records and ensuring your business activities are separate from your personal activities is a good start. Proving that you are in fact striving to make a profit at this point is much easier.
I recommend this book. It is well written and informative. I have picked up each annual edition for the past several years. This might not be necessary for each edition, that depends more on how drastic tax law changes from year to year. The greatest value of this book for me are lasting ones:
1. Understanding the ‘real’ value of choosing the proper business structure.
2. Understanding and developing good habits of record-keeping. This includes automobile, business related activities, meeting attendees, etc. Having a Tax Diary and keeping it up to date will alleviate 90% oftax stress. Knowing that you have excellent documentation is key. Having excellent documentation actually helps you grow your business and succeed.
3. The importance of running my business as a business, keeping a firewall between my business and personal finances, has benefits beyond dealing with the IRS. Running a ‘real’ business is empowering and a fantastic education on how things work.
If you are in business or considering one, pick up a copy of this book.
-WR
please comment…
Auld Lang Syne and A Financially Independent New Year!
Happy New Year!
This day tends to force us to reflect on the past and as a result, there is no shortage of top ten lists out there. We have instant access to the top 10 movies, games, news items, victories, blunders,the sexiest, the ugliest, the best dressed, etc…
I wanted to take a different tack and focus much more on the coming year. In that vein I have chosen one area of reflection and several more items to help plan for an amazing 2011. I hope you find these ideas useful.
The Past:
Consumerist has a tidy list of their most read stories of 2010. Since I got a Best Buy gift card for xmas, this article popped out as one of my favorites. They are all good as there are few things more satisfying than hearing about a little guy beating a corporate Goliath. As their tag-line reads: shoppers bite back.
OK, enough about the past…
The Future:
J.Money at Budgets are Sexy posted a great looking forward article.
Entrepreneurship:
Is this the year you are going to get that business started?
Now would be a great time to visit SCORE.
What is SCORE you ask?
SCORE, Counselors to America’s small business, is a nonprofit association dedicated to educating entrepreneurs and helping small business start, grow and succeed nationwide. SCORE is a resource partner with the U.S. Small Business Administration (SBA).
As I mentioned in The Hero with a Million Dollars, SCORE is all about finding a mentor to help you with your business.
Should you incorporate? Form a multi-member LLC? Go in as a Sole Proprietor? Should I set up in my home state or in Nevada? Delaware?
These are questions every potential entrepreneur faces from day one.I have 2 things that helped me and could serve as the launching point for your great idea:
1. Get a copy of Limited Liability Companies for Dummies by Jennifer Reuting and (after you read it) head over to her site: MyLLC to set yours up.
2. Don’t be afraid to Ask the Business Lawyer about specific issues related to your chosen endeavor. Nina Kaufman has tons of excellent articles, a free E-zine and if you are considering a partnership of any kind, you absolutely need to check out The Entrepreneurs Prenup.
Investing:
1. Open an account with Vanguard (Disclaimer: I have zero affiliation with Vanguard other than some excellent investments). They have the best low fee mutual funds in the industry. Whether you are starting a Traditional IRA, Roth IRA or a Tax advantaged Bond fund, you should be working with Vanguard. Do you want to learn about ETF’s? Check this out. It is the single best overview of ETF’s I could find anywhere.
2. Do you already have an IRA? Don’t worry, you still have until April 15th, 2011 to max out your 2010 contributions. Nice!
3. Pick up a copy of The Richest Man in Babylon and check out my review of The Elements of Investing. Both of these small, easy to read books should be on your bookshelf.
Taxes:
1. Get a copy of Sandy Botkin’s Lower Your Taxes: Big Time. It is an eye opener and will pay for itself in the first chapter.
Frugality:
1. Check out inexspensively.com and clean out your cupboards already!
Giving Back:
I believe giving should start at home, in your neighborhood and in your community. Give to your church, your school, your firehouse. Buy local when possible and help employ one of your neighbors. The following organizations are amazing in their creativity and cause. Give till it hurts then give some more, you will never regret it! Here are my favorite charitable groups:
1. There is nothing quite like Operation Homefront. Helping out those who bravely and tirelessly defend our freedoms is possibly the best kind of giving back.
from The Giving Effect’s about page: Most of us have lives filled with things we don’t use — shoes, food, clothes, computers, and more. At the same time, thousands of non-profits and civic-minded people are struggling to get basic items to people in their communities. We see an opportunity to connect these groups together.
What a great concept!!!
3. LoveDrop:
You’ve heard of micro-transactions right? Small amounts of money from a large enough pool of people can add up to some huge results. Well, Love Drop is a micro-charity concept. With as little as $1 a month, you assist the love drop team in helping one person or family a month.
-WR
Please Comment
How to Follow Your Bliss
It is no secret that I am a fan of the late Joseph Campbell. My book adheres closely to his concept of a monomyth. I do not pretend to be an expert on the subject matter that so fascinates me. I consider myself a student and will always be one. Comparative mythology studies the myths that people live by. It is as much concerned with paleolithic cave drawings as it is with modern middle eastern strife. The breadth is staggering. With our big brains and our assorted accoutrements of modern life it is easy to forget how closely linked we are to our rich mythological past. While there is an anthropological slant to many of the approaches I have studied, Joseph Campbell brings passion and more than a little dramatic flair to his chosen life-work. We all live by a myth, this is our personal story, our personal narrative. Sometimes this is a part of a larger worldview as in the case of membership in one of the great world religions. Sometimes we try to find our way by other means.
Joseph Campbell used to like to say “mythology is referred to as other peoples religion“ and that “religion is simply misunderstood or misinterpreted mythology“. He felt that the emphasis on the historicity of religious texts often got in the way of the spiritual message. While many people get caught up on both sides of the fence trying to either prove or disprove a finite act of religion, trying to tie a religious event to a real historic place, date or person, I believe that it is the abiding, guiding message that matters most in our lives. For example, flood myths preceded the Bible by many centuries. Deucalion of Greek myth was the son of Prometheus and Pronoia. Pelasgians were the neolithic culture that preceded the greeks and the story goes that Zeus let loose a heavy rain, the rivers swelled and the seas rose. Deucalion and his dad Prometheus built an ark and was saved from the deluge. Noah and the Sumerian Xisuthros are both heroes of the same myth, the same story. There are strikingly similar stories in the Koran, in China, in Aboriginal Australia and even with the North American Indian tribe the Menominee. These stories hint at both a universal threat of flood on the ancient world stage and the need for humans to mythologize about it. Our shared stories and ritual bring order out of chaos and help us relate to each other in meaningful ways. We destroy these relationships when we throw out the story and the ritual and instead cling simply to the historical vessel that carried them.
Any of Joseph Campbell’s densely academic books require dedication and commitment to thoroughly absorb. Among his pantheon of wisdom regarding comparative mythology he states that one needs to follow their bliss in order to live a fulfilling life. It is the history of the world as seen through the eyes of the great story tellers that bind us all together and in that vein Campbell drew heavily on the Hindu Upanishads to form his belief on this subject. Earlier, both Ralph Waldo Emerson and Henry David Thoreau espoused transcendentalism as a kind of personal mythology.
I try to view Campbell’s admonition within the scope of his greater body of work. He seemed to firmly believe that we are all intrinsically connected. We all share a common background that reaches back far beyond recorded history might suggest. The roots of the human condition dig deeper than many of feel comfortable admitting. Despite our apparent differences we all share a closely held need to help others. Our bliss is a reflection of that.
Another way of saying follow your bliss could be to follow that which holds you in rapture, that which arrests your soul. It is imperative for us to define our purpose in life and get to the business of following our bliss. Your bliss takes you by the hand and pulls you where you’ve always wanted to go but were afraid to tread there yourself.
What is my bliss?
What draws you forth?
What would you gladly do for free if your bills were paid and you had no obligations?
Imagine that after you die, there is a giant brass plaque erected in your honor…What would you like it to say?
In the ceremony, the great mayor of the city gives a speech in your honor…What does he say about your life, your contribution?
What does your family say?
To follow your bliss is to do what you are.
To follow your bliss is to help others with the gifts you were given, the skills you acquired and all the strength you can summon.
Write a one-page plan on how to follow your own bliss.
please comment
