Thursday, December 31, 2009

Will the "Fat Tax" Come to a State Near You?

By: Roshawn Watson


Perhaps residents of Alabama have one more reason to make weight loss a top New Year's resolution: their wallets. Alabama's controversial "fat tax" may revolutionize how we think about health.


What is The Fat Tax?

Alabama plans to pass some of the excess costs associated with high blood pressure, high cholesterol, high blood glucose, and excess pounds (body mass index>35) to state employees. Initially, all state employees must shell out an additional $25 per month for health insurance. State employees will be required to participate in frequent health screens, which includes the dreaded weigh ins. Those who get clean bills of health will be refunded their $25 fees. Employees found to have the aforementioned risk factors can get the fee waived by seeing their physicians, enrolling in a state-sponsored exercise or nutritional class, or losing the excess weight in a year. For example, discounts will be offered for participating in Weight Watchers and joining a YMCA.

Implications of the Fat Tax

There are vast implications to this change, as this sweeping legislation will affect 37,527 state employees. To put things in perspective, a BMI of more than 40 correlates to being around 100 pounds overweight, and 7.3 percent of Alabama state employees fall into this category according to William Ashmore, CEO for the State Employees Insurance Board. Their obesity costs Alabama in excess of $5 million per year. Additionally, Alabama has the second highest rate of obesity nationally, just over 30 percent of their state population. Obese people can cost Alabama 40 percent more in healthcare bills than people of normal weight do: $2,000 more per person each year.

This is not the first time Alabama has chosen a punitive route to deal with the ever-rising health care costs associated with preventable ailments. Presently, Alabama already charges smokers a $25 per month surcharge. Ashmore says "the main thing we're hoping for is to identify at-risk people and provide the means for them to manage their health issues. Many people do not know they have hypertension or are diabetic. We want to try to make sure every employee is given an incentive to figure out what risks they might have.”

Compelling Argument or Creative Spin on a Fat Tax


There is a clear need to promote better wellness, as health care costs are astronomical, and many perfectly capable people are failing to prevent chronic diseases and better manage their health. High blood pressure, high cholesterol, high blood sugar, and abdominal obesity really do represent major threats to our health and big resource drains to our health systems. Particularly, these four health problems are components of metabolic syndrome, which predisposes individuals to cardiovascular disease, stroke, and type 2 diabetes mellitus. Incidentally, better weight control through diet and exercise may contribute to better blood pressure, cholesterol, and blood sugar control.

The main problems with this legislation are that weigh ins are demoralizing for some people and this legislation appears to penalize individuals who may have predisposing disorders that contribute to their maladies, such as thyroid disorders and genetic aberrations. As someone who use to be over 40 pounds overweight, I can tell you that it can be a very sensitive subject. I recall ending a friendship two years ago because someone called me a former porker. Drawing attention to their weight in this way may motivate some to be more healthy just to avoid the embarrassment. Also, there are many underlying contributors both biological and social (i.e. abuse) that may increase someone's weight. Yes, these do need to be addressed, but I wonder if Alabama will increase their research efforts make sure that they aren't unfairly penalizing residents who are at a tremendous biological disadvantage.

Closing Thoughts

Although they say the primary goal of this program is to motivate people to be healthier, I wonder if there are better, non-punitive ways to motivate people to take charge of their health. One thing is for sure, doing nothing is not an acceptable option either.

Lastly, if you like this post, please subscribe (see upper right-hand corner), Mixx it, Propel it, Stumble it, and tag it on Delicious. Also, click here to get my eBook FREE.

Image Credit: Sheilla May O. Baes

Tuesday, December 29, 2009

Uncommon Money News (Vol. 81)


By: Roshawn Watson

I hope you had a very Merry Christmas. I'm looking forward to a really exciting New Year.

In preparing to write my posts, I often come across noteworthy and sometimes bizarre financial and business news. Below are links to some of these sites. Enjoy!

I have participated in the Economy and your finances carnival hosted by One Mint. I also participated in the Rich Life Carnival #38 & the Rich Life Carnival #39 both hosted by Rich Life Carnival. Lastly, I participated in the
Carnival of Financial Planning #121
hosted at the Skilled Investor. The included posts were: Is Bigger Better? Scaling Down The American Dream and Thoughts on Escaping The Rat Race. Thanks for including my posts in your carnivals.

To my readers: I am so honored by your support. Thank you for reading, subscribing, and for voting for articles from this site on social bookmarketing sites such as stumbleupon, reddit, delicious, digg, propeller, twitter, and yahoo buzz. Together, we are telling thousands of the importance of financial literacy. I absolutely could not do it without you. You are vital this this site, and I appreciate your! Thanks.

Posts Of The Week
12 Highest Paid People of 2009

Business News

$6 million paydays for these execs

Senate OKs $290 billion hike to debt limit

Senate passes $871 billion health care reform bill

How to sue Microsoft - and win

The unexpected power of $10 to $20

Fund Boss Made $7 Billion in the Panic

White-collar jobless join FedEx, UPS for holidays

Saab may get a second life

Brands We Loved and Lost in 2009

Bank of America names Moynihan next CEO


Can Steve Jobs unplug cable TV?

More registers ringing this holiday season

How Panera Bread Defies the Recession


Should Employers Ban Facebook at Work?

12 Highest Paid People of 2009(POW)

Ford sells Volvo to Chinese automaker

Economy

November home sales soar 7.4 percent

Personal income: Biggest bump in 6 months

Entertainment Money News

Nic Cage Not Being Sued For Fraud, Just $3 Million

Which movie ruled the box office this weekend (Holmes or Avatar)

'Avatar' Blasts into Top Box Office Spot

Jackson Estate earns $100 million

Michael Jordan sues two Chicago grocery stores for $10 million

What does it cost to party with Jersey Shore

American Chopper - Dad Sues Son for over $1 million

Brad & Angelina Donate $100,000 to two American SOS Children's Villages

Offbeat Money News

87-year-old woman who lost home to scam gets $116,972

More Wealthy Default on Their Mansions

Do the Rich Owe America for Their Fortunes?

Tuesday, December 22, 2009

Thoughts on Escaping The Rat Race

By: Roshawn Watson

Do you yearn to be free...really free? What would you do if money was not a limitation? Perhaps the primary reason for increasing your financial literacy is so you may indeed escape the rat race.

What Is The Rat Race?
The Rat Race refers to the trap that we often find ourselves in. It's where we work for someone's company, for the government by paying taxes, and for the bank by paying our mortgages, credit cards bills, and other numerous loans. Notice, I didn't say working for yourself or for your passion. It is easy to waste 30-40 years being miserable and never achieve financial independence. Unfortunately, this is a truism for most people. Careerbuilder.com hired Harris Interactive to conduct an online survey amongst US workers 18 and older to determine our financial solvency. The results reveal a disturbing trend: 61 percent of workers reported that they usually live paycheck to paycheck just to make ends meet. The Rat Race means you have left control of your family's financial destiny to someone or something else. One must expend no more effort than checking out the latest unemployment update to see why relinquishing this control is so dangerous, especially now.

The Sad State of American Finances
Even with the never-ceasing coverage of bad economic news, we still have poor fiscal management. According to the 2009 Consumer Financial Literacy Survey, less than half of adults keep close track of their spending, and several had no idea of food costs, housing costs, entertainment costs, and do not monitor their overall spending. I would argue that much fewer people rigorously budget than this study indicates. Additionally, one-third of adults put no part of their annual household income towards retirement. 57% of adults spend less than they did a year ago although 45% of those now spending less admit that if their financial situation were to improve, they would resume their previous spending habits. One-third of adults report having no savings, and only 23% save more than they did a year ago. 48% Generation Y adults have no savings. Also, many of us are well aware of our poor financial awareness. 41% of U.S. adults gave themselves a grade of C, D, or F on their knowledge of personal finance (I wonder what percentage of us are in denial).

To be Free, This Just Won't Do
If we truly desire to escape the rat race, we obviously must increase our financial literacy and execute better financial decisions, regardless of our income. Consider that even a household making a modest $40,000 per year income will bring in over $2 million during the typical working life-time. One of the biggest misconceptions about millionaires is that they all have huge incomes. While the median millionaire income is in excess of $100K, there are still plenty who make less than six figures who cross the mark through conscientious financial planning. If you want to retire early, some of the best ways to prepare are...
  • Eliminate your consumer debt. The reason this is so key is because as long as you are mired in debt, it will be difficult to build any real wealth unless you have an exceptional income.
  • Stash between 15 to 33% of your income away for retirement, regardless of your net worth. Consider that the majority of millionaires invest at least 15% of their incomes and live on less than 7% of their overall net worth.
  • Consider owning investment real estate. 46% of millionaire households own investment real estate. Yes, owning and managing property can be a hassle, especially if you have no business acumen and no people skills. Few people enjoy the stress of being a landlord, for example, but learning how to be a good one can be key to increasing your cash flow.
  • Make savings and investing automatic. If money is funneled directly from your paycheck into your investment account, you won't give it a chance to get spent.
  • Start as early as possible. Beginning at age 30, if you save $671 each month at an 8% return, you'll have $1 million by age 60. Begin at age 40, and you need to save $1,698 each month.
  • Cut your expenses. A recent article in the WSJ suggests most middle-class household budgets can be cut. The most common advice is to look at your current expenditures and see where you can pare back.
The Real Problem
These are all tried and proven tips, but unfortunately, the real problem lies not in an inability to grasp these concepts or even a lack of available information but rather a lack of desire. For most people, being financially inept reflects irresponsibility or disinterest, especially considering all the resources available. I have purchased books and audio books for several people, only to find them unread years later. If you never get fed up enough, you won't act. Get disgusted with your financial situation today. Don't leave your family's financial destiny to chance. Even if you don't plan to retire, you should still change. Just because you are financially able to leave your job doesn't mean you have to. Becoming a financial champion is about giving your family more choices, so choose freedom.

Lastly, if you like this post, please subscribe (see upper right-hand corner), Mixx it, Propel it, Stumble it, and tag it on Delicious. Also, click here to get my eBook FREE.

Related Posts

The Sad State of American Finances

The Dangers of Living Paycheck to Paycheck


Becoming a Financial Champion

Image Credit: sunnymarry

Thursday, December 17, 2009

Uncommon Money News (Vol. 80)


By: Roshawn Watson

Brand New Post Coming Tuesday Dec 22.

In preparing to write my posts, I often come across noteworthy and sometimes bizarre financial and business news. Below are links to some of these sites. Enjoy!

I have participated in the Carnival Twenty Something Finances hosted by My Beauty And Fashion Blog. I also participated in the Rich Life Carnival #37 hosted by Rich Life Carnival. Lastly, I participated in the carnival of road to financial independence #14 hosted by One Family's Blog. The included posts were: Becoming A Financial Champion and ls Recession-Induced Frugality Sustainable? Thanks for including my posts in your carnivals.

To my readers: I am so honored by your support. Thank you for reading, subscribing, and for voting for articles from this site on social bookmarketing sites such as stumbleupon, reddit, delicious, digg, propeller, twitter, and yahoo buzz. Together, we are telling thousands of the importance of financial literacy. I absolutely could not do it without you. You are vital this this site, and I appreciate your! Thanks.


Business News

Friday, The Obama Administration Decides To Curtail Executive Pay At Businesses Receiving TARP Money. Monday, CITI Group Announces It Will Repay All Of $20 Billion In Tarp Funds To "Curtail Government Influence"

Madoff: Victim vs. victim

Wendy's fast food chain says 'sayonara' to Japan

AOL made over $2 billion from subscriptions last year? Who still pays for an AOL subscription?

Economy & Real Estate

Why The Recession Is Not Officially Over

Working Two Jobs and Still Underemployed

The Biggest Real Estate Flops of 2009

Entertainment Money News

Garth Brooks to Sue Oklahoma Hospital for $500,000

The Princess Frog Kisses off Matt Damon

Do you know who is the highest grossing actor of the decade?

Offbeat Money News
Man wins lottery and then leaves wife: who gets foreclosed

Teen runs up dad's cell bill to nearly $22,000

Why Men Don't Promote Women More

Monday, December 14, 2009

Housing Market Only Loss $500B in 2009

By: Roshawn Watson

Home values have dropped $500 billion in 2009, which is not nearly as bad as it sounds considering the staggering $3.6 trillion home values declined in 2008.

Of course, there were some areas that were disproportionately affected. For example, Los Angeles suffered the single biggest decline in home values; properties there loss nearly $61 billion of their values (note that Los Angeles loss over $340 billion last year, so $61 billion is an improvement). Metro Chicago and New York were also hit badly, with each losing over $49 billion.

The Tide Is Turning

Encouragingly, about one-third of home markets surveyed had gains. Boston topped this list, gaining $23.3 billion, with a 1.5% gain in home values. Note last year, the Boston lost $53.4 billion. Other areas postings gains include nearby Providence, R.I., which gained $12.4 billion; and Denver increased $10.7 billion. Even Los Angeles has been doing better recently. For example, even though it will post an overall loss for the year, it has seen six consecutive months worth of gains, as of October.

"Home values stabilized significantly during the second half of 2009, with the total dollar value of U.S. homes increasing since June," said Zillow's chief economist, Stan Humphries, in a prepared statement. "Most housing markets across the country had a good summer, spurred largely by the government's tax credits for homebuyers combined with very low mortgage rates."

This welcomed stabilization in the housing market is very much needed and has some important implications.

Since the home represents most homeowners’ largest assets, gains in, a slowing of, or a cessation of declines in home values represents a stabilization of a significant chuck of homeowners’ investment portfolios. Thus, this is big news for many. Recall, Americans saw their net worth plummet by 18-23% in 2008, as the market erased 4 years worth of growth in stocks and real estate. Moreover, this stabilization could reflect progress towards overall economic recovery. Note that both the Dow and S&P have surged over 60% since March.

The Important Of Equity

Home equity is important because it allows homeowners to avoid foreclosure by making money available in the event of a job loss or during other financial challenges. Additionally, equity allows homeowners to sell their homes and make a profit or at least get some of their money back. Indeed, negative equity is the key predictor of mortgage default. Mortgage default typically occurs when a borrow experiences a rough financial stretch and has substantial negative equity.

Caution Advised

The major contributors to positive signs in the housing market are believed to be the government’s tax credits and low mortgage rates. The Fed will slow down its purchasing of mortgage-backed securities, which will likely spur a mortgage rate increase after the first quarter of next year. Additionally, the tax credits are scheduled to end next spring as well, so the immediate future of housing remains unclear. However, in the long-term there are several markets that are poised for a recovery.

It is always dangerous to speculate with your house. Your house is where you live, and unless you plan on selling it or really need to access the equity to avoid foreclosure or bankruptcy, the value of the house should have a marginal impact on your day to day life. However, as with any sound investment, if you have a long-term strategy, you can usually avoid getting your head taken off.

Saturday, December 12, 2009

Uncommon Money News (Vol. 79)


By: Roshawn Watson

Brand New Post Coming Monday Dec 14.

In preparing to write my posts, I often come across noteworthy and sometimes bizarre financial and business news. Below are links to some of these sites. Enjoy!

I have participated in the Carnival of Financial Planning 118 ed hosted by The Skilled Investor and Carnival of Financial Planning 119 ed hosted by Dinks Finance. The included posts was: Are Wealthy People Dishonest? and Should You Buy a House Outright? Thanks for including my posts in your carnivals.
To my readers: I am so honored by your support. Thank you for reading, subscribing, and for voting for articles from this site on social bookmarketing sites such as stumbleupon, reddit, delicious, digg, propeller, twitter, and yahoo buzz. Together, we are telling thousands of the importance of financial literacy. I absolutely could not do it without you. You are vital this this site, and I appreciate your! Thanks.

Posts Of The Week

Why A Comcast/NBC Merger Is Bad News

Food Stamps Go to a Record 37.2 Million, USDA Says

Business News
Need A Job? Head To DC

The Coming Wave Of Debt Defaults

Why A Comcast/NBC Merger Is Bad News

Bank of America Out of TARP

Wal-Mart will pay $40m to workers

US Economy

Food Stamps Go to a Record 37.2 Million, USDA Says

The world's most expensive homes fall victim to the recession

Average Federal worker pay $30,000 over private sector

Entertainment Money News

John Stamos: I Was Targeted By Extortionists

Nicolas Cage's Ex Suing Him for $13 Million

Amazing Race' Winners Take Home $1 Million

'Blind Side' eclipses 'New Moon' with $20M weekend


Tiger Woods Reaches Seven-Figure Deal with Alleged Mistress


Is it Legal for Tiger to pay Hush Money to Mistress

Marketers Pull All Tiger Woods Ads From PrimeTime TV

LA Pulls $4 Million from Jackson Tribute Concert

Offbeat Money News
Best Bang-For-The-Buck Cities

7 Odd Jobs That Pay $100K Per Year

Friday, December 04, 2009

Becoming A Financial Champion


By: Roshawn Watson

Last week, I was counseling a college student about building a firm financial foundation. As we spoke, I began to reflect on my own journey towards getting out of the rat race and the many financial lessons I have learned over the last few years. Here are three nuggets that profoundly changed my financial life.
Check Spelling
Avoid and Eliminate Debt

Perhaps one of the biggest obstacles to becoming a financial champion is debt. Eliminating consumer debt removes one of the biggest constraints to your cash flow. Debt avoidance and elimination is one of the fastest ways to position yourself to build wealth because you are no longer robbing tomorrow's prosperity. In other words, $60,000 per year can go a lot further if you don't have to pay Sallie Mae, Visa, and Chase Auto every month. Don't take my word for it.
According to the 400 richest Americans (Forbes 400), 75% believe "the best way
to build wealth is to become and stay debt-free."
That’s because as long as you are paying payments to someone 1) you are likely paying too much and 2) your cash flow is constrained from building wealth. Last year, an interesting book came out by Dan Ariely called Predictably Irrational arguing that credit puts a buffer between the "ecstasy of consumption and the agony of payment."

In other words, the "pain of paying" cash serves as an effective deterrent against overspending.

Thus, as credit becomes more difficult to obtain, more people feel the pain of spending and therefore limit their purchases. In effect, there is a shift back to evaluating the true costs rather than the monthly payments. The data supports this. According to Dun and Bradstreet, consumers spend 12-18% more when making credit card purchases compared with those who pay in cash. Of course, cash is also a great negotiation tool in many instances.

Realize That Money Is Important

I personally believe that your view towards money can be a barrier to your becoming a financial champion. I had a friend over last month, and somehow we got on the topic of the place of money in our lives. She believes money is not that important, which always baffles me. After all, she is the one who constantly talks about going on vacation and retiring early. I explained to her that money will be required for many things she wants to do. She retorted "money isn't everything."

Look, I’m not saying to deify money but merely to respect it. The law of attraction has bearing here: what you respect, you attract. What you don’t respect moves away from you. Unfortunately, my friend is careless with her money, and I believe it stems from her lack of respect for money. The Millionaire Next Door by Thomas Stanley sheds light on this subject in contrasting high income earners who are prodigious accumulators of wealth versus those who were under accumulators of wealth. A hallmark of under accumulators of wealth is their lackadaisical attitude towards money: they are likely to say that “money is your most easily renewable resource,” and their behavior reflects this belief. As a result, they accumulate an average of 4 times less wealth than prodigious accumulators of wealth.

Reshape Your View of Millionaires

A warped view of the spending habits of “those with money” can also prevent you from becoming a financial champion. Hollywood and the media have so distorted our society’s view of millionaires. We are indoctrinated with the belief that “those who have money spend lavishly” and “if you don’t show it, you don’t have it.” Like many, I used to imagine Barbie and Ken with the big home, matching BMWs, vacation home(s), and luxurious yacht. I assumed that Barbie and Ken were the very portrait of success. However, a closer look revealed that my vision was distorted. That mortgage payment is over 50% of Barbie and Ken's gross income, and the BMW is leased. That boat was financed too. Once I realized that Barbie and Ken likely had plenty of credit cards and student loan payments too, I had a profound revelation. Barbie and Ken are broke!

Most millionaires don’t care much about conspicuous spending. In fact, many people who display a high-consumption lifestyle have little to no investments, appreciable assets, income-producing assets, common stocks, bonds, etc. Instead millionaires live on less than 7% of their wealth and still choose to invest at least 15% of their earned income. They typically have more than 6.5 times the level of wealth of their non-millionaire neighbors, who outnumber them by 3 to 1.

Becoming a financial champion will enable you to be a real blessing to others. Don’t sacrifice that destiny for the latest Prada bag. It’s just not worth it. Remember, you don’t have to keep up with the Joneses because they’ve been faking it anyway, and your family’s financial destiny is far too important to waste on frivolous spending. If you can truly afford it (i.e. pay cash), then it is okay to buy some stuff. However, you still need to act your wage, for that’s what most millionaires really do.

Lastly, if you like this post, please subscribe (upper left-hand corner), click here to get my eBook FREE, and Propel it, Stumble it, and tag it on Delicious.

Image Credit: Rumanía mi país

Related Posts


Thursday, December 03, 2009

Uncommon Money News (Vol. 78)


By: Roshawn Watson

Hopefully, you had a Happy Thanksgiving and didn't break your budgets on Black Friday :)
Brand New Post Coming Friday Dec 3.

In preparing to write my posts, I often come across noteworthy and sometimes bizarre financial and business news. Below are links to some of these sites. Enjoy!

I have participated in the Carnival of Financial Planning 116 ed hosted My Personal Financier and Carnival of Financial Planning 117 ed hosted by the Skilled Investor. The included posts was: Are Wealthy People Dishonest? and Should You Buy a House Outright? Thanks for including my posts in your carnivals.

To my readers: I am so honored by your support. Thank you for reading, subscribing, and for voting for articles from this site on social bookmarketing sites such as stumbleupon, reddit, delicious, digg, propeller, twitter, and yahoo buzz. Together, we are telling thousands of the importance of financial literacy. I absolutely could not do it without you. You are vital this this site, and I appreciate your help so much! Thanks.

Posts Of The Week

How This Kid Made $170 Million in Two Years

Judge Angry at Bank Cancels Couple's $525G Mortgage

Business

Goldman Sachs's Tax Rate Drops to 1%, or $14 Million

Courts Raise Bar on Employers' Reading Employee Email

Comcast Buys NBC From GE

Bank of America Out of TARP

GM CEO Henderson Resigns

How the geniuses running Harvard pissed away $1.8B in cash

BBC: We won't charge for online news

How This Kid Made $170 Million in Two Years (POW)

Goldman Sachs bankers now arming themselves with guns to defend against angry peasants.

Monsanto's dominance draws antitrust inquiry

Does Gates Foundation Need $500 Million Complex?

Economy
1 In 4 U.S. Borrowers Have Negative Equity On Their Homes

Goodbye jobs, hello mom and dad

11 Things to Celebrate Money-Wise in 2009

Growing Gains - 6 Jobs With High-Rising Numbers

Judge Angry at Bank Cancels Couple's $525G Mortgage (POW)

Entertainment Money News

The Economics of Jay Leno

Martha Stewart's Prison Stay Cost Her $1 Billion

Michael Jackson's Moonwalk Glove Sells for 420K

New Moon Eclipses Dark Night