Uncommon Money News (Vol. 87)

By: Roshawn Watson

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!

Recently, I participated in the the Carnival of Financial Planning #129 hosted at the Skilled Investor. The featured posts were: Thoughts On Escaping the Rat Race and Is Bigger Better? Scaling Down The American Dream. Thanks for including my posts in your carnivals. Please check out other posts on these sites.

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

Unionized Rhode Island Teachers Refuse To Work 25 Minutes More Per Day, So Town Fires All Of Them

Top Earners Averaged $345 Million in 2007, IRS Says

The $555,000 Student-Loan Burden

Business

What Your Gadget Really Costs

Credit card relief is here, but watch out for new traps

Guys makes 100k per year for purchasing the World's Most Expensive Island online for $26,500

Unionized Rhode Island Teachers Refuse To Work 25 Minutes More Per Day, So Town Fires All Of Them (POW)

Ousted GM CEO Fritz Henderson Rehired As Consultant, Earns $60K A Month

URL typos could earn Google $497 million per year

9 Poorly Conceived Marketing Campaigns

Valentine’s Day: By the Numbers

Economy

Millions of Unemployed Face Years Without Jobs

Health-care shocker: Policy-holder's premium goes up 69%

Top Earners Averaged $345 Million in 2007, IRS Says (POW)

Entertainment
Valentine's Day conquers the box office

'Shutter Island' Thrills at Weekend Box Office

Shutter to Think: Leo Bigger Than Ever

IRS Remove $33 Million Tax Lien on Joe Francis

Beyonce's Dad Ordered to Pay Child Support

Ving Rhames to Producer: Do I Look Like a Punk?

Frank & Jamie McCourt Divorce - So Rich!

Hilary Duff's $1 Million Engagement Ring

Offbeat Money News

The $555,000 Student-Loan Burden (POW)

Doritos Fan-Created Super Bowl Ads Underdog Created for $200, Scores No. 2 on USA TODAY Ad Meter and $600,000 Prize

Are You A Real Investor?

By: Roshawn Watson

I was reading an article that challenged my notions about investing. It stipulated that most people are NOT real investors, even though many have retirement accounts (401Ks, IRAs, etc) because most of us are NOT professional investors. The distinction is elucidated when you look at amateur and professional golfers. Both types of players may be good at golf, but only the professionals are able to live off of the sport. They have hone their skill set and built their confidence in their abilities to the point where they can withstand the heat of competition and still generate income. In short, golf is their livelihood. Professional investors are the same: their investments are their livelihood.

Gaining Control Through Investing
If this economic downturn has taught us anything, it is we can not depend on others to fix our financial predicaments. When we relinquish control over our finances, there are foreclosures because we purchase homes that we cannot afford, there are Madoff-like scandals that wipe out all our investments because we didn't know who we were investing with or trusted the wrong advice, there are medical bills that wipe out our anemic savings. One of my financial heroes recently shared how he loss over $30,000 in an oil investment because he didn't bother to learn more about the investment. Recently, there have been some steps in the right directions because the decimated financial and real estate markets scared some sense into us. Although I celebrate our increased awareness and our increased savings rate, we must move from playing with our finances to becoming financial pros. One of the best ways to gain control of your finances is to become a professional investor.

Becoming A Real Investor
Investing for retirement with the traditional vehicles (401Ks and IRAs) are an okay place to start, but if your retirement plan is to solely depend on capital gains (i.e. stock, mutual fund, bond appreciation), then you may be gambling with your financial future. For example, consider what would have happened if you had planned on retiring at the end of 2008 when the economy dropped off a cliff. Fortunately, for all of us the stock market rallied in 2009 and some of the real estate markets recovered to an extent. I am also glad that that 60% of 401k accounts recovered as of December 2009 (per Vanguard). However, we all know that it could have taken longer or we could have been one of the 4 out of 10 whose portfolio is still depressed.

The key question is "where is the cash flow from your investments?"

This is the quintessential reason why many of us are not professional investors. Our income source is not our investments. To become a professional investor, you must be able to live off of your investments. Ideally, you want to replace your earned income with passive and portfolio income. This is certainly possible, but it usually doesn't happen overnight. Just as if you were training for a competition, becoming a professional investor requires time and much preparation. It also requires a conscious decision. Famous motivator Zig Ziglar always use to say, if you aim at nothing, you'll hit it every time.

Call to Action
If you have laid the groundwork to build a solid financial foundation, this is your call to action. Learn about investment vehicles today, and plan your next move now. Subscribe to investment magazines; join an investment forum; talk about your future with your partner. Learn to manage risks not avoid them altogether. Remember the biblical story about the 12 spies who were sent out to evaluate Canaan, the promise land. Ten of the spies came back with the evil report: we can't take the land because of the giants. However, the remaining two (Caleb and Joshua) had the good report: it is a land that flows with milk and honey, and we are able to overcome the giants. If we're willing to arm ourselves with knowledge about the risks and benefits of investing and with preparation, we will have the same confidence to become professional investors as Caleb and Joshua had to become giant-killers.

Don't wait until you retire to start realizing a tangible return on your portfolio. The last thing you want is to become a pro at 65 (when you retire) and get caught with your "pants on the ground." I don't care whether you decide to own income properties or are a dividend investor, perhaps it is time that we all become income investors regardless of our other professions. In short, I'm on a journey to become a professional investor, and I hope you will join me.

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.

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Image Credit: ryanpyle.com

Uncommon Money News (Vol. 86)

By: Roshawn Watson

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!

Recently, I participated in the Rich Life Carnival #44 hosted by Rich Life, the Carnival of Financial Planning #126 and #127 hosted at the Skilled Investor, Rich Money Habits Carnival hosted at Akosiallan, and the Carnival of Financial Planning #128 hosted by the Canadian Personal Finance blog. The featured posts were: Americans Have Loss Financial Hope, Thoughts On Escaping the Rat Race, Is Bigger Better? Scaling Down The American Dream, and Will the “Fat Tax” Come to a State Near You? Thanks for including my posts in your carnivals. Please check out other posts on these sites.

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.

Special thanks to Rich Money Habits for the editor's pick on my post Thoughts On Escaping the Rat Race

Post Of The Week

Avatar Dethrones Titantic Again

Business News

Goldman CEO Blankfein gets $9M stock bonus for 09

Ex-Bank of America chief charged with fraud

Mortgage Lenders Pursue Homeowners who Defaulted on Their Mortgage

Economy

January unemployment rate drops to 9.7 percent

It's official: Kiss $2.33 billion of TARP funds goodbye

Jobless Rate Down to 9.7%; 20,000 Jobs Lost in January - NYT

Housing Crisis Getting Uglier in 2010

Entertainment Money News

Avatar Dethrones Titanic Again (POW)

$49,000 per month isn't bad at all, especially considering the lengthy hiatus from full-time acting

John Mayer Donates Half Million Dollars to Haiti Relief

Michael Jackson Administrators Are in the Money!

Robin Williams just lost a $6 million lawsuit over the movie "Cop Out" -- formerly titled "A Couple of Dicks

Tyler Perry Sued Over a Song About The Devil (compare the songs yourself)

Wayne Newton's Plane -- $700,000 Down the Drain

Dr. Conrad Murray Posts $75,000 Bail

Chef Wants Dough from Michael Jackson Estate

Does Rihanna Get Paid to Watch Fashion Shows?

Offbeat Money News

Five myths about America's credit card debt

America's Biggest Rip-offs

Oregon Deciding to Fleece Their Rich

By: Roshawn Watson

Voters of Oregon have decided to take from their richest residents and businesses, as voters approved a statewide ballot to raise taxes on people with taxable income upward of $125,000. It is estimated that the new tax will affect fewer than 3 percent of filers.

This is a historic moment for Oregon, as its voters have repeatedly thwarted Congress's attempts to increase tax revenue. For example, cigarettes taxes for children's health care, income tax affecting most Oregonians, and nine sales tax measures over the decades have all failed. Indeed this is the first corporate minimum tax increase in 80 years.

This vote strenghtens the two-year budget that the Legislature adopted last year, and spares it $727 million worth of budget cutting during its present four-week session. However, it also raises a lot of questions, such as whether this wealth tax is unfair, "will it cause an exodus of the wealthy and businesses?", and "will it prevent other businesses from coming there?" Maryland can serve as a reference.

The Revenge Of The Millionaires

Briefly, Maryland failed to balance its budget in 2007, so it decided to create a special millionaire tax bracket to make up the deficit.

“Governor Martin O'Malley, a dedicated class warrior, declared that these
richest 0.3% of filers were ‘willing and able to pay their fair share.’ The Baltimore Sun predicted the rich would ‘grin and bear it.’"

However, there were two things that Maryland politicians didn’t count on (1) a world-wide economic crisis decreasing the number of million dollar earners and (2) millionaires simply leaving (or taking in less income). “By April 2009, one-third of the millionaires had disappeared from Maryland tax rolls. On those missing returns, the government collects 6.25% of nothing. Instead of the state coffers gaining the extra $106 million the politicians predicted, millionaires paid $100 million less in taxes than they did the previous year -- even at higher rates.”

Indeed, the number of residents with net taxable income of $1 million or more fell more than 30% to 4,910 in the 2008 tax year from 7,067 the year before. Of the 2,157 “missing” millionaires, the Comptroller’s office said 542 filed no tax return for 2008. Of course in addition to moving, some of these 542 million dollar earners died, requested extentions, or just didn't file. Also, don't forget that some of the 2157 likely lowered their taxable incomes to avoid taxes.

New Jersey’s Richest Citizens Flee its Taxes

New Jersey appears to have a similar problem. They enacted the half-millionaire tax, and the concern is clear: New Jersey’s 2004 millionaire tax killed the golden goose. There's a barage of headlines such as "New Jersey Wealthy Residents Flying the Coop,” “New Jersey’s Richest Citizens Flee its Taxes,” and “Departing Wealth Hurts New Jersey Charities.” Many of the recent public outcry stems from findings in a study Migration of Wealth in New Jersey and the Impact on Wealth and Philanthropy by Boston College's Center of Wealth and Philantrophy. The study found that New Jersey lost nearly $70 billion in net wealth from 2004 to 2008 because fewer rich people moved in than out.

Ralph Nader's father purportedly once said that "Capitalism will never fail because Socialism will always bail it out." My concern, especially in this election year, is that socialists will seek revenge. Already I can hear the war cry "tax the rich!" The problem with taxing the truly rich is that the rich simply move their money to countries that treat them and their money with undue respect. And when the rich move their money, the poor and middle class end up paying more taxes (Robert Kiyosaki on April 14, 2008)

In Maryland and New Jersey's cases, the rich did not need to move their money to other countries, just to tax-friendlier states. After all, these high income earners often own second homes in tax-friendlier states, so switching your primary residence is not nearly as big of an ordeal as leaving the country. Additionally, many of these millionaires are also business owners who control their own salary, so it would not be a tall order for some, especially those who are marginally over the tax bracket, to adjust their salary slightly downward to avoid excess taxes. Of course, there are also several loop holes in almost any tax system (especially for business owners), and many of the wealthy would used their resources to find them.

Imagine the implication of driving away from your state of thousands of jobs in this economy and some of the world's most influencial people because your state can't balance its budget. I have stated it before; the biggest limitation to a progressive tax system is that it creates an overdependence of the state government on relatively few individuals. Thus, if they fall (i.e. because of the economy), change their residence, or lower their income, the whole system stumbles. Simply put, you just cannot tax the rich beyond their willingness to pay. I can see 70 billion reasons why this may not work out so well for Oregon.

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 Revenge of The Millionaires