Joe the Plumber

I was thinking about all this Joe the Plumber baloney today. Let's say he really is a plumber who is going to buy the business, and he is so worried that he will be taxed more if he makes over $250,000. If he actually reports over $250,000 in a year, he should fire his accountant, because no self respecting business owner reports a lot of income. All he has to do is incorporate the business and then much, if not most, of what he owns can be purchased by the business and written off as business expenses. As long as he follows the rules, it is perfectly legal. The business buys his car which he uses as a company vehicle, and he writes it off as a business expense. Perfectly legal. When Joe takes a vacation, he mixes in a little bit of business and writes off most of the trip. Joe's business can buy football season tickets and Joe can take a customer of his from time to time to keep it legit. Joe's business can buy a yacht which Joe goes fishing on every weekend. He takes a few customers or employees out once in a while to keep it legit and the yacht is written off as a business expense. Once Joe goes big time, his business can buy a private jet, which of course Joe uses all the time. These business expenses just keep adding up. He can buy vacation homes in Aspen and Honolulu, and again, as long as he follows the rules, they can also be written off as business expenses. There is little reason for Joe to be buying any big ticket items himself(and thus have to pay himself a lot of money and expose himself to taxes) as they can all be justified as business expenses. The company I work for has a private jet, a megayacht, and a luxury skybox(that I know of, and I assume they have a lot more then that). Do you really think that the owner of my company paid himself a ton of money, paid the income taxes, and then bought that stuff? Of course not. They are all "owned" by the company and written off as business expenses. In the company I work for, even lower level management abuses this type of thing all the time. Forgot their lunch money? No problem, take a trainee to lunch, use your credit card, and bingo, it a business expense. Just submit your T and E report and get reimbursed. Feel like pounding beers after work but are a little short of cash? No problem. Invite your employees and bingo, it is a company night out! submit your T and E report and all the beer is free. The world series starts this week. I have a feeling there will be a lot of company nights out that night..lol. I won't worry about Joe the plumber and his tax problem too much. I have a feeling that regardless of how his business does, he won't be paying much in taxes.

Colin Powell Endorses Obama

I was on the treadmill at the gym today when they announced that Colin Powell is endorsing Obama for president. That is a good development for Obama. I usually don't put much stock in endorsements but Powell is a very well respected person in both parties. The endorsements keep piling up for Obama, which can only help. We need to get this election over with so that we can at least have some clarity to the political situation. It doesn't help to be in the middle of this financial crisis and have a president that nobody likes or will listen too. Once the new president is elected, that person can start talking and moving the country in a more positive direction. They also reported today that Obama raised $150 million last month, and McCain is complaining about it. Boo hoo. The Republicans have always resisted campaign finance reform because they assumed that they would always be better at fundraising then Democrats. They never figured on having to deal with someone like Obama. Maybe they should take a longer view next time the subject comes up. Lastly, I came across a nifty website called the Ripoff Report. I am starting to look for a new job and am cross checking some companies I have not heard of on this site. What an eye opener! I have put the link up top. If you have posted your resume on line and are getting calls, as I am, from companies that say you can make fantastic sums of money in your first year, you had better use that site.

What's a poor working stiff to do?

So I am watching and reading the business news lately and the basic theme is that we are screwed no matter what we do for a while. The markets will be very volatile for some time and we shouldn't expect to get any decent returns anytime soon. Our homes are dropping in value so we will all be lucky to sell them for what we paid for them if we bought them anytime in the last five years or so. So the best thing to do they say is to pick safe investments, like money market funds and bonds, etc, however inflation is running higher than most of the returns they offer, so we still lose money. What a mess. It is amazing that just a couple of months ago the President and his men were telling us how the fundamentals of the economy were strong, and now they are telling us what a disaster this is. What a bunch of irresponsible jerks. They actually knew all along that the fundamentals were not strong. You can't run massive budget deficits, massive trade deficits, have a negative savings rate, and pretend that all is well. They were just hoping to get out of office before the crash happened. Oops, it didn't work out that way. Now Bush has solidified his spot as one of the worst presidents in US history. What an idiot. Trillions of dollars have been lost, retirements wrecked, careers extended, and our leadership couldn't care less. I used to be a Republican. Not any more.

Stay the course

With all the turmoil in the markets, we may have been tempted to just get out where we can(can't just dump the retirement accounts) and stop investing for a while. We decided that would be a really bad idea. We would have missed the big rally yesterday and would be kicking ourselves again. The pros always advise to stay invested all the time, and ride out the highs and lows. In the end we should be ok as long as we ratchet back the market exposure gradually as we approach retirement. It is tough to watch the markets every day not knowing what is going to happen, but there really is no other choice. Sticking our money under the mattress is simply a bad idea. Hang in there everyone!

Will the bailouts end?

So Congress has passed the bailout. Now they are already talking about the next bailout..that of the homeowners. Just when they get done with the first bailout they say it won't be good enough. They say we will have to bail out all the homeowners who are in trouble with their mortgages because unless we do that, the housing market will never recover. Wow, what a mess we are in. It is amazing that the govt was just telling us a couple of months ago that the economy was strong and resilient. Apparently not. We citizens are going to have to be a little smarter in the future and not buy all the baloney that the govt is feeding us. If it seems to good to be true, it probably is.

Confused post

I was planning on writing a post about another topic, paying ourselves, but I decided not too. I am a little too distracted to do that today. I have been sitting at work for the last couple of days clicking on the internet news and finance sites compulsively(while doing my job) at regular intervals to find out what is going on in the world of finance. Banks are collapsing, the Dow is tanking, our retirement accounts are losing money...etc. It is one huge mess. I am fully aware of business cycles and how recessions come and go, but this seems different. In the past they seemed to be part of the normal course of things and while recessions were a drag, they were nothing to panic about. This one worries me more than the others because there seems to be no control at all over what is happening. The Treasury Dept reassures us every few days that things are fine and we are ready for the upswing, then another shoe drops. The Bear Stearns bailout was supposed to stop the free fall. It didn't. The Fannie and Freddie bailout was then supposed to fix the problem they said. It didn't. Now Lehman Brothers is gone and AIG is in trouble. AIG only needs $75 billion to right itself. Oh, is that all? Let me look under my couch for that..no worries. Geesh! I don't pretend to be smart enough to know where all this is leading, but I have real worries. I bet you do too.

Ouch!!!!

As you must already know, wall street took a dive today. Today was a really bad day. It is getting harder and harder to know what to think. The gov't keeps telling us that they have the situation with the financial sector under control, but it just keeps getting worse. Our retirement accounts are getting crushed, like everyone else's. The only thing we know to do is to hang in there and keep telling ourselves that we must be buying stocks cheap in our retirement accounts. It is hard to believe that the Dow is back to where it was years ago. So much for the good economy they kept talking about. All the gains we all made are all gone. We will just have to perservere. We will continue to follow the conventional advice and keep contributing to our retirement accounts out of every paycheck, and assume that that is the best thing to do. It had better be because there doesn't seem to be a better option. Good luck to all of us.

Social Security or Social Insecurity

I received my new issue of Money magazine yesterday. It has an ominous article about social security and medicare. We have known for a long time that those two programs are in trouble, but the article does a nice job of laying out exactly what the issues are and what the potential fixes are. To boil it down, we should expect the feds to raise taxes and cut the benefits that we will receive. They could do one or the other but it is more likely that they will do a combination of the two. Social security can be fixed fairly easily, but it is Medicare that is the biggest problem. It makes it tough for all of us to plan our retirements because we don't know exactly what is going to happen, so we end up having to plan for the worst. In some ways, I just wish they would do something, fix it however, just to remove the uncertainty so that we can know how much we need to save for retirement. As it is, I am thinking that we will need to change our calculations and assume that we will only receive 75% of the benifits that we are supposed to get. Then we can recalculate how much we need to save, or assume that we will have a lower income in retirement. If we get full benefits, I guess we would look at that as a bonus. Trying to plan for retirement has become such a moving target that getting it right is becoming increasingly difficult to get it right. The article also says that we will need several hundred thousand dollars to pay for out of pocket health care expenses. Several articles I have read give out varying numbers on that, but they are all really high. Yikes. I wonder what the future holds for all of us in terms of retirement. I know that I read a great deal about personal finance and I know that very few other people do. When I bring up any of these topics with people I know I usually get the blank stare. If I mention something such as a target date retirement fund to my coworkers, I might as well be speaking Chinese. As complicated as finance has gotten, and with as little financial education as there is, how is the average person supposed to survive in these times. We are increasingly expected to take charge of our financial lives(401(k)s instead of pensions) however too many people are ill equipped to do so. It worries me...a lot.

Another Bailout?

I am watching the news this weekend and it appears that they are working towards some sort of solution to the Lehman Brothers problem, namely lining up a buyer to take over the company at a fire sale price. What the hell is going on in the economy? They are afraid that the failure of Lehman will cause a whole bunch of problems so it is better to organize a buyout(sort of a bailout) than let the company go under. That seems to be a growing trend. We working class stiffs need to start taking exception to some of this. They took down all the regulation in recent years, let the banks do whatever they wanted(loan money to deadbeats) and now we all have to pay for that. The companies have sucessfully privatized profits while socializing the losses. Investment bankers are vacationing on tropical islands enjoing their huge bonuses from the past few years and sticking the taxpayers with the bill from the inevitable losses. What a crock. We working class stiffs ought to be mad as hell about that. Something tells me this won't be the last bailout. It will take a while to work through this mess. Why the greyhound? Because I love them. No other reason.

Does net worth matter?

I have been reading other blogs debating the value of "net worth." Does net worth really matter? Is it a deceptive number, or is it just an ego trip? I have read books that tell you to calculate everything you own, including clothes, furniture, etc. and then subtract your debts to determine what your net worth is. They seem to think that this matters. They are missing the point. The point is, "do we have enough money, or are we on track to have enough money, to create the income stream we need to retire?" The personal objects we have, such as an old couch, cannot generate any income so they don't matter. I have never understood why some financial planners insist that people add up the value of all the junk they have. The only things that matter are those that can generate income when you need it. When I calculate net worth, we add up our savings account, checking account, 401(k), 403(b), our Roth IRAs, and the stocks we own, plus what we think we have in home equity(obviously a little tough to gauge now), and subtract out our liabilities, which is our mortgage only. The personal junk we own, such as the beer can collection that I started when I was ten(it was popular then) is irrelevant. The beer cans will never generate any income, so they don't count. I would be curious to see if other people agree. Why the greyhound? Cause she rocks and looks beautiful, that's why.

More links

I have added more links today to add more resources for everyone. I particularily like the CNN calculators link, as they are really helpful. You can calculate what you need for retirement, see how fast your money will grow, etc. I use them all the time and find them to be very helpful. In fact, I find them probably to be the most helpful tool out there. If you want to achieve a goal, you have to know where you are and where you need to go. The calculators help you determine both. It is funny to me that more people don't use them. I survey people I work with, most of whom never do any sort of retirement planning. I see some of them studying all sorts of things, such as specs on new cars, consumer reports on electronics, etc., but nobody but me wants to study anything about retirement. The small amount of time they spend trying to save a few bucks on an appliance is fine, but if they were to spend the same amount of time organizing their finances, they could make hundreds of thousands of dollars. It just doesn't make any sense. So many don't seem to realize that saving a little now means a lot later. Oh well, live and learn, or better yet, don't live and learn and be poor. Why the picture of the greyhound..?? Because greyhounds are most excellent. No other reason. Just enjoy the pic of this beautiful boy!

Tough year

It is looking like this year is going to be a writeoff year. We have managed to save enough to offset all the market losses, and will probably end up the year in the positive range, but not by much. It puts us a year behind and there is no way to know if future years will be able to make up for the lost time. If you are like us, you keep track of your investments every year and track your progress towards your retirement goals. If you have done your homework, you know how much you need(or want) to have for retirement and therefore how much you need to save every month. This year isn't helping anybody's cause. It makes me wonder what could have been done to stop this mess from happening. Maybe if the housing and mortgage market had been better regulated, as they are now proposing, the real estate bubble could have been avoided and therefore the bubble would not have burst. The cascading effect of the housing market on the rest of the economy is killing all of us. I hope this nightmare ends soon and we can get back to making progress.

trying to keep up

The markets have been so terrible lately that we are having a tough time keeping the account balances stable. The markets seem to drop as fast as we can save money into them. I guess we are fortuate that we are able to save quite a bit of money, but it is getting tougher every day. Food prices are rising, gas is crazy expensive, and our utility costs have nearly doubled in the last year. Maryland thought that deregulating the utilities would bring competition and lower costs for everyone. It didn't. No new competition came and now our rates have gone up and are expected to keep going up. We live near the Chesapeake Bay and it is fairly windy here. I was wondering today what it would take to put up a windmill in our yard. I saw a news story about a guy in Delaware who lived next to the beach and did that. He said it supplied about 30% of his energy use. Then his neighbors complained and he was forced to take it down as they said it made too much noise. I will have to search the web and see how those things work, and if it would be feasable. I am at the point that I am willing to try pretty much anything to save money now. It sometimes seems like everything is lining up against us these days and it is getting so tough for us regular people to get ahead. We will have to just keep forging ahead and hope for better times, although I am not too optimistic about that. Even when the economy recovers, whenever that is, wages and salaries are not going to jump up, and prices are not going to come down. I will keep searching the web for more links and info that can help us regular working class stiffs try to improve our lot.

Working on more links

I am working on putting together more and better links to this site, but quality links are a little tough to find. Too many sites are just somebody trying to sell something or doling out the latest fad advice that fits todays news. I am really looking for links that will be useful in helping us all get a better handle on money and our futures. I have spent the last couple of years reading nearly every book about personal finanace and investing that are available in our local public library. I watch a ton of business news, most of which is just nonsense anyway, but I still like it. The problem seems to be that there is so much backround noise of all kinds of people telling us what to do that too many of us can't figure out what to do. A bright coworker of mine recently told me that he was going to invest in a particular natural gas company soon. Even though he doesn't know much about the company, he plans to invest as he sees good things for that industry. This is despite the fact that his 401(k) is not even close to being maxed out and he has no Roth IRA. It is tough to convince people that they shouldn't invest in anything until they have maxed out those two tax advantaged accounts first.

My money commandments

I developed some commandments that we are following in our attempts to get ahead. Here they are:

1)WE SHALT NOT HAVE CHILDREN: Kids have become a one-way ticket into the poor house, and are simply too expensive for most people to afford. We decided to get a dog instead. If you have an overriding maternal or paternal instinct, try babysitting. Otherwise, do like we have and just forget about having kids. It aint like the old days.

2)AVOID DEBT AT ALL COST: We have a home mortgage, but no other debt. Debt has become the modern day replacement for slavery. The credit card companies get you hooked on debt at 18%-30% interest and you become their slave to work it off. Pay as you go, as uncool as that sounds. People who collect interest get richer, people who pay interest get poorer.

3)THE GOVERNMENT WON'T HELP US: Our government is totally incompetent. I can't remember the last time they did anything useful. The government has known they need to fix Social Security and Medicare for many years but they do nothing. With all the major issues in the country today, Congress spent the summer holding hearings on steroids in baseball. Don't look for the government to throw you a lifeline, we must each save ourselves.

4)NOBODY IS IMMUNE: Everybody is being affected by the new economic realities. Some more than others, but in the end all of will be affected in one way or another. Even doctors and lawyers are now being outsourced.

5)DEAL WITH WHAT IS, NOT WHAT WE WISH IT WOULD BE: I have decided to stop complaining(for the most part) about the problems and just deal with what we think the realities will be going forward. For example, instead of complaining about Social Security, we will instead prepare for the probability that it will not be there for us, in whole or in part, when we retire. Preparation is our best path to success.

Just a working class stiff

I am just a working class stiff. I am college educated(doesn't mean much anymore), married, and struggling to get ahead like the rest of us. This blog is about our attempts to get ahead and lead a prosperous life in a land where the American dream is quickly disappearing. We all see it in the news all the time. Prices are rising, incomes are stagnant, the national debt is out of control, the trade deficit is out of control, bla bla bla. We are, as a nation, getting poorer. Last year our nation sent over $700 billion out of this country to other countries. I can't do anything about that, and neither can you. We can only try to manage our own situations to the best of our ability and hope things work out ok. I am not a financial adviser and am not licensed to give advice about anything. This blog contains my personal opinions and they should be taken only as that.