Yakezie Round Up and Uncommon Money News (Vol. 96)

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 three carnivals: Carnival of Financial Planning Vol. 143 hosted by the Skilled Investor and the Money Hacks Carnival hosted by Engineer Your Finances.

The included posts are Through the Looking Glass, A Secret Weapon To Your Financial Plan, and 7 Reasons for (and Against) Tracking Net Worth

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

Wal-Mart Makes Sharp Price Cuts

How Much Revenue Does Google Keep from AdSense?

Bank of America and Citigroup incorrectly accounted for billions of dollars in debt over the past three years

Goldman Trying To Get SEC Charge Knocked Down To "Material Omission" Instead Of Fraud

Toys 'R' Us files $800 million IPO

Economy

Three American cities on the brink of broke

America's shoppers: The retailers' dilemma

Entertainment Money News

Michael Jackson's Trust Lacks Trust in Kids

Dennis Hopper -- Probate Battle Brewing

Which made more money: Sequel Sex and Jake Gyllenhaal?

Offbeat Money News

Study: Lots of Money Doesn't Motivate Smart People [Vid] watch!

The poor spend 9% of income on lottery tickets; here's why

Yakezie Round Up

Oops The World Is Comming to An End at Financial Samurai (Great discussion of the market)

Is Frugal Printing Possible at Eliminate The Muda (This is the thought process of frugal people)

19 Things The Millionaire Next Door Won't Tell You at Len Penzo (Funny reworking of a classic)

Which Comes First Saving or Earning by Personal Finance By The Book (Think on this one)

Savings Down, Spending Up but What Does it Mean?

By: Roshawn Watson

New data suggests that Americans are saving less and spending more, as the vicious economic cycle repeats itself once again. In the last quarter, the savings rate was approximately 3.1%, a steep decline from last year's 12-year high of 5.4% during the same quarter. Moreover, our expenditures increased and is outpacing our personal income. It appears that despite proclamations that our newly-embraced frugality reflected a permanent change in behavior, frugality, for many, was a passing fad induced by momentary fear, not a substantive shift in consumer spending.

Earlier Than Expected

We certainly hyped the newly-found frugality to obnoxious levels. Nearly, eighteen months ago, I recall reading an article in Business Week that made the case that our "new found austerity could...rewire Americans as savers rather than spenders." One economics professor from the University of Wisconsin suggested "consumers won't be in a position to spend freely for five years.” Business Week certainly wasn't alone in this perspective. Barbara Dafoe Whitehead of the Institute for American Values and co-author of For a New Thrift: Confronting the Debt Culture said

“a turn to savings and wiser spending may persist for a long time... Like the young who came of age during the Great Depression, today’s young people may be deeply imprinted by the experience of the economic collapse. This formative memory is likely to foster more careful spending and saving in years to come -- as it did for the Depression generation.”

Sure, we did temporarily embrace a more heightened sense of fiscal responsibility. For example, we rediscovered the art of saving. We even went from record high debt-to-income ratios in 2007 to the American debt load shrinking in 2008, which is the first time American debt has shrunk since 1952. However, a knee-jerk reaction causing us to briefly pull our purse strings isn't of the same magnitude as the generational imprinting that Dafoe had hoped for; alas the sustainability of the recession-induced frugality has been in question for some time.

It's Just Like Food

Just as with food, total abstinence from spending is not a viable option. Thus, it was expected that spending would resume once we got over the shock and awe from the precipitous declines in net worth (26% decline in most Americans), prompted by job losses, home value declines, and paper asset value declines. With our spending up and savings down, it appears that our financial temperance may also be abating.

Spending certainly benefits the economy, as consumer spending makes up 60% of the economy. Accordingly, if you want to fund our economic recovery with the contents of your wallet, be my guest. The problem arises when we rely on the destructive habits of financial excess and self-indulgence to fuel the economy because such behavior simply cannot persists long-term without a crash. Of course, wise spending is good, just like appropriate eating. Remember, there is no direct conflict with frugality and capitalism. Frugal people are consumers too but would rather just spend their money wisely instead of being wasteful, even if it means purchasing something that has greater total costs but also has greater value. My friend over at Eliminate The Muda is the perfect example. Earlier this week, he wrote of buying the more expensive Kodak printer ink because it reduced their overall printing costs per page. That epitomizes the thought process most frugal people go through, and such spending not only stimulates the economy but ALSO will persist during boom AND bust cycles. Indeed, if we were all more frugal, I submit to you that we would eliminate so much of the volatility associated with our economy. Frugality would drive innovation and prove to be a more stable long-term economic model.

How Well Is the Economy Doing Anyway?

We have been hearing mummers of a possible double-dip recession for several months now, even from prominent economists such as Dr. Nouriel Roubini. Unemployment is still in the double digits. Interest rates are still ridiculously low (good if you are a borrower but bad if you are a saver). We really don't know what the real estate market looks like because it has been propped up so much by the stimulus. While I certainly don't mean to promote doom and gloom, I just want to echo the admonishment to be cautious and don't just blindly accept the sound bites that the economy is doing well. While it is certainly doing better than it was prior to March 9th, 2009, consider the comparison. It's easy to do better than last year when asset values dropped off a cliff between October 2008 and March 2009, so such comparisons are not saying that much in most cases.

Lastly, I know that because the savings rates are so low, the obvious interest income incentive is gone. I have accounts that were earning over 5% APR now at 1%. However, consider another benefit of saving: economic stability. As the last market correction appears to have shaved off between 6-9% of the Dow, such stability is a welcome change.

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

Frugal Printing, Is It Possible?

Changing American Economics: The New Wave of Frugality Sweeping America

ls Recession-Induced Frugality Sustainable?

For the First Time, American Debt Shrinks

Thrift Paradox - Is Frugality Hurting Economy?

Have We Stopped Saving Already?

Yakezie Round Up and Uncommon Money News (Vol. 95)

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 three carnivals: Carnival of Financial Planning hosted by the Digerati Life, the Yakezie Carnival: Credit Card Information hosted by Free From Broke, and the Economy and your Finances Carnival 23rd May 2010 hosted by One Mint.

The included posts are Through the Looking Glass, A Secret Weapon To Your Financial Plan, and Do The Rich Pay Their Fair Share Of Taxes?

Also, our brand new post 7 Reasons for (and Against) Tracking Net Worth was included in Intelligent Speculator's Financial Ramblings and Len Penzo's Black Coffee: My Favorite Blogs, Money News & Opinions #47 (The How to Retire By 40 Edition). Our old post Forget Looking Rich...BE Rich! was included in Barbara Friedberg Personal Finance's Personal Finance Tips: Week-end Round up. Thanks so much for the comments and link love. You guys and gal rock!!!

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

5 Secrets of Self-Made Millionaires

America's Underclass: The Growing Gap between Rich and Poor

Business News

5 Secrets of Self-Made Millionaires (POW)

Target's 1Q net income climbs almost 29 pct (but at what price?)

Would you trade 6% of your future earnings for $600,000 now?

How to Turn Your Hobby Into a Business

Panera Bread Co.: Pay What You Can Afford

Economy

Mortgage delinquencies, foreclosures break records

Euro’s slide may give U.S. more rope to hang itself

Unemployment Claims Jump Unexpectedly, Stocks Crash

Entertainment Money News

Dane Cook -- California Made a $500,000 Mistake

David Hasselhoff is paying off his ex-wife with $325,000 to sever her ties with the L.A. Hasselhoff homestead

Bristol Palin surprising income on Speaker Circuit

Twilight actors fights about money threaten their future in the franchise

And the First Movie Bomb of the Summer Is…?

Paid Off!!! Amber Rose Signs a Multi-Million Dollar 'Silence Agreement' . . . Not Allowed to Discuss Her Relationship with Kanye!!

Career News

Psssst--Your Boss Is Spying on You

A Useless Job Search strategy

Offbeat Money News

The Net Worth of the U.S. Presidents: Washington to Obama

How Facebook Is Redefining Privacy

Why You Should Teach Your Kids About Money

How Churches Invest Their Money

America's Underclass: The Growing Gap between Rich and Poor (POW)

New study finds racial wealth gap quadrupled since mid-1980s

American Savings Down, Spending Up

Yakezie Round Up

The Emergency Fund Fallacy at Financial Samurai (food for thought)

Why Your Expensive Luxury Car Doesn't Impress Smart People or Me at Len Penzo (agreed)

A Thought Experiment: Changing Roles at Eliminate The Muda (Appreciate your spouse)

More On Card Fees at Joe Taxpayer (Short and sweet read)

My House Flipping Experience at Personal Finance by The Book (exciting new journey)

Financial Ramblings at Intelligent Speculator

Black Coffee: My Favorite Blogs, Money News & Opinions #47 (The How to Retire By 40 Edition) at Len Penzo dot com

Personal Finance Tips: Week-end Round up at Barbara Friedberg Personal Finance

Yakezie Round Up & Uncommon Money News (Vol. 94)

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 three carnivals: Carnival of Economy, Business, Credit, & Debit hosted by One Family's Blog, Money Hacks Carnival #115 hosted by Money Beagle, and the Carnival of Financial Planning #141 hosted by The Skilled Investor.

The included posts are Through the Looking Glass, 8 Questions for the Constantly Broke, and A Secret Weapon To Your Financial Plan.

Also, our brand new post Do The Rich Pay Their Fair Share Of Taxes? was included in JoeTaxpayer's A post Dow micro-crash Roundup. Thanks so much for comment and link love. You rock!!!

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

Home Depot Steals Inventor's Invention; Must Now Pay $25M

5 Crazy Ideas that Resulted in Million Dollar Paydays

Business

William Shatner Has Made $600 Million Shilling Priceline.com

Teenage Entrepreneurs

The Best Business Incubators in America [Infographic]

Blockbuster Posts $65.4M Net Loss

Economy/Real Estate

Merkel: $1 trillion rescue package only buys time

Greek leader considers action against US banks

America's Most Expensive Homes 2010

U.S. Home Prices Drop By $25 Billion Dollars !!!!

Entertainment Money News

The World's Most Successful Movie Franchise Of All time

Robin Hood Right on Target—Behind Iron Man 2

TV’s richest kids

'Twilight' Drama: Will Cast Negotiations Suck The Life Out Of Possible Fifth Film?

Inside Sandra Bullock's New $2.25 Million Mansion

Career & Offbeat Money News

5 High-Paying, Low-Stress Jobs

Net Worth Obsession

Conn. judge: Elderly sister can keep lottery prize

Worst-Paying College Degrees

The Path To A $100K Career

Yakezie Round Up

The Hitchhikers Guide to Dealing With Financial Catastrophe at Eliminate The Muda

5 Crazy Ideas that Resulted in Million Dollar Paydays at Len Penzo

List of Dream Jobs I'd Do For Free at Financial Samurai

How Minimum Credit Card Payments Will Keep You In Debt FOREVER at Personal Finance By The Book

A post Dow micro-crash Roundup at Joe Taxpayer Blog

Do The Rich Pay Their Fair Share Of Taxes?

By: Roshawn Watson

Statements such as "the rich don't pay their taxes" can be misleading because they often ignore factual evidence to the contrary.

Mr. Warren Buffett has been a frequent critic of US tax laws and a proponent for a more progressive tax system. At a 2007 fundraiser, he mentioned...

"[We] pay a lower part of our income in taxes than our receptionists do, or our cleaning ladies, for that matter. If you’re in the luckiest 1 percent of humanity, you owe it to the rest of humanity to think about the other 99 percent.”

Mr. Buffett said that he made $46 million in 2006 and was taxed at 17.7 percent, without trying to avoid paying higher taxes, while his secretary, who earned $60,000, was taxed at 30 percent. It's troubling statistics such as these that fuel cries of income inequality and the deterioration of democracy. However, a new paper by Greg Mankiw entitled “Spreading the Wealth Around: Reflections on Joe the Plumber” elucidates a completely different perspective, citing the Congressional Budget Office calculations.

The poorest fifth of the population, with average annual income of $15,400, pays only 4.5 percent of its income in federal taxes. The middle fifth, with income of $56,200, pays 13.9 percent. And the top fifth, with income of $207,200, pays 25.1 percent. The richest 1 percent, with an average income of $1,259,700, forks over 31.1 percent of its income to the federal government.

Accordingly, he concludes that it is simply inaccurate to argue that we do not have a progressive tax system and that the "best analysis shows that average federal tax rates rise steeply with income.” The truth is the "lower tax rates" mentioned by Buffett and others often excludes corporate taxes, which would boost the rate significantly (remember double-taxation).

Additionally, consider that nearly 50% of all filers pay nothing in federal income taxes. These non-payers are families with children, the elderly, low income households, those who either have too little income to pay taxes or who benefit enough from all the deductions, credits and exemptions in the income tax, so they're zeroed out on the bottom line of their 1040.

This leaves the higher income earners and upper middle class paying the bulk of income taxes. Those who earn over $500,000 per year pay about 24% of all US taxes and earn about 16-17% of all income. Those who earn over $100,000 per year pay about 70% of all US taxes and earn about 56% of all income.

Source Of Income Matters...Much

Just because our tax system is progressive doesn't mean that there aren't tax-avoidance strategies to shelter income.

If the majority of your income is derived from tax-advantaged sources, then your tax burden can be minimized...drastically. For example, it is estimated that Ross Perot took in $230 million in 1995 but only paid 8.5 percent of that income in taxes. Compare this to the person with an earned income over $259,700, who would pay 31.1 percent in taxes. The Atlanta Journal-Constitution reported that this is because Perot "minimizes his tax bill by investing heavily in tax free municipals, tax-sheltered real estate, and stocks with unrealized gains."

A more recent example is Frank McCourt, the owner of the L.A. Dodgers. He received a reported $108 million and paid no federal and state taxes because of loss-carry forwards.

The truth is that one of the reasons the super-affluent get into that position is by being masters at minimizing their realized income.

Before You Join the Fleece the Rich Crowd

Attempts to use the government to strip wealth from the rich have often failed miserably and publicly. Consider Maryland as a cautionary tale.

The WSJ article Millionaires Go Missing: Maryland's fleeced taxpayers fight back details how Maryland failed to balance in budget, so its governor decided that he was going to enact a special millionaire tax to make up the deficit. The projected revenue was supposed to be $106 million. However, after a year, Maryland collected $100 million less than what they collected the previous year. In addition to the incomes of some of Maryland's high-income tax payers going down (in some cases deliberately), other millionaires simply left the state. It turns out that having a very high income affords one both mobility and control over one's realized income (if you own your own business). All told, one-third of millionaires disappeared from Maryland's tax rolls, of which Maryland got 6.25% of nothing. Of course, the same thing happened in New Jersey, yet Oregon still wants to adopt this strategy.

Increased taxes on high income earners can de-incentivize hard work and innovation. It is no fun feeling like you are being punished for getting ahead financially. Additionally, there are plenty of individuals and companies that take tax laws into consideration before deciding on whether to move into a state. Of course, the fatal flaw of a progressive tax code is that it creates an overdependence on the incomes of relatively few. During economic decline, the net worth and incomes of wealthy and rich individuals typically drop more drastically than the general public, so states with more progressive tax systems often suffer severe budgetary deficits.

Lastly, in some parts of the world, you are considered VERY rich. Do you feel like you pay YOUR fair share? While I certainly have nothing but admiration for Mr. Buffett, I think he can always increase his earned income at his company if he wants to pay more in taxes. His checks to the government would certainly be welcomed. However, I don't think that would solve the problem.

Although I know the likelihood of this is very small, but perhaps it is time for a flat tax based on consumption instead of income. This probably would indeed be a "fair tax." What do you think? Are we ready?

Related Posts

Good Ole' Middle Class, or Wealthy: You Decide

Revenge of the Millionaires

Uncommon Money News (Vol. 93) & Round Up

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 four carnivals: The Best of Money Carnival at Eliminate the Muda (I'm so honored), the Carnival of Financial Planning Vol 139 hosted by GreenPanda TreeHouse, the Economy and your finances carnival May 9 2010 hosted by One Mint, and the Carnival of Financial Planning – Edition #140 hosted by Cash Money Life.

The included posts are Through the Looking Glass, What’s Your Financial Mindset, and A Secret Weapon To Your Financial Plan.

I am also happy 8 Questions for the Constantly Broke was included in Consumer Boomer's Mother’s Day Roundup, Online Investing AI's Weekly Wisdom: The Most Important Financial Questions, and Personal Finance By The Book's Tribute to Mom Weekly Round Up. This rocks!!! Thanks so much to all these awesome blogs for spreading the link love!!!

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

World's Richest Moms

Dow Jones Industrial Average falls 900 points

Business
Warren Buffett Aggressively Defends Goldman Sachs

Continental, United to combine in $3 bln deal

Is an MBA a Plus or a Minus in the Startup World?

WaMu made subprime loans it knew were likely to go bad

Dow Jones Industrial Average falls 900 points (POW)

Starbucks sued over hot tea alleged to cause burns

Google Throws $38.8 Million To The Wind

Economy

EU Ministers Working On Euro Rescue Plan

Greek Debt Crisis Offers Preview of What Awaits U.S.

Entertainment Money News

Iron Man 2 Does It All (Except, um, Beat Dark Knight) with $133 Million Opening

'Pirates' No Longer of the Caribbean

Taylor Swift Donates $500,000 to Nashville Relief

Offbeat Money News

Ditching a $500,000 Salary to Teach Lit

World's Richest Moms (POW)

43 ways to ruin your finances by age 30

Career
The Worst Words to Say at Work

Salaries Inside vs. Outside the US Government (PIC) view!

Yakezie
8 Tips How To Ensure That You Will Never Be a Millionaire from Personal Finance By The Book

Why Squeezing Every Last Penny Out of Savings Accounts Isn't Worth It? from Sweating The Big Stuff

The Dark Side of Early Retirement from Financial Samurai

Should You Put Your Kids In Private School from Money Funk

12 Good Reasons Why You Should (and Should Not) Pay Off Your Mortgage Early (Len Penzo)

47% Don't Pay Income Taxes from Consumer Boomer

Image Credits: fintag and pairadocs

8 Questions for the Constantly Broke

By: Roshawn Watson

Recently, Yahoo Finance republished an article from US News entitled the "8 Questions for the Constantly Broke." I enjoyed reading it. I wanted to highlight the major points from the article, provide some rationale and context for the advice given, provide some helpful and relevant rules of thumb for some of the various topics discussed, and share some personal anecdotes.

Where Is My Money Going?

Your answer to this question is so critical. The most important phrase in the world of money is cash flow management. Cash flow management is the skill that allows you to identify deficits, to do economic forecasting, to meet goals (i.e. paying off debt or having enough funds for investments), and stop financial hemorrhages, etc.

Do you make too much to be this broke? Cash flow management can tell you why. Without proper cash flow management, you not only risk making little to no progress in your finances but in some extreme cases, you may be a bankruptcy waiting to happen. I firmly believe that my financial life and the lives of nearly everyone I know would be a wreck if they neglected managing their cash flow for too long. The reason is most of us simply cannot afford NOT to pay attention. Even if you think you can, you should heed the tacit warning in last year's post Rich But Financially Inept. In it, I discussed the various ways athletes and other professionals have personally generated hundreds of millions and still file bankruptcy. Two of those reasons are: lacking financial adaptation and poor spending habits. The kicker is how do you know if you need to adapt or if you have poor spending habits if you aren't tracking your finances. You can use tools such as http://www.mint.com/ and http://www.wesabe.com/ or Excel to track your income and expenses, or have someone else do it (i.e. hire a bookkeeper). Without knowing what your income statement looks like, you won't see your financial past or your financial future. Using income statements to assist your cash flow management will allow you to plan your expenses (monthly and yearly), identify your Latte Factor (items that you spend money on daily that ultimately have huge financial implications), and your weaknesses, which were all listed as potential reasons for you being broke in the original article.

Are You Saving Too Much?

This is a hard one to write about because saving is supposed to be good. Up until 2008, we had a savings rate that hovered around 0 to negative. For example in 2007, it was -1.22%. I always joke that only an economist can calculate a negative savings rate. However, the problem is the yield from savings tends to be much than eliminating debt and investing. What sense does it make to have $10,000 in credit card debt at 15% APR and $50,000 in a savings account generating a dismal 1.10%. Pay off the bill. I agree with the statement in the article: "if you're going into debt to fund your lifestyle and you've already cut back wherever possible, then it's time to look at how much money you're (saving)." I personally stopped saving and investing until I became debt-free excluding the house. It's one of the ways I could eliminate those debts more quickly.

Is Your Relationship Hurting Your Finances?

This is an interesting one because relationships often get missed in many personal finance discussions, and yet they have so much bearing on our financial successes and failures. Consider the following two statements very carefully.

1. The number one reason for divorce in North America is money problems.


2. 95% of millionaires are married and 70% have spouses that are more frugal than the highest income earner of that household. (Millionaire Next Door)

It is extremely difficult, and sometimes impossible, to make progress if your significant other is not on board with the plan. If you are married, you are not a joint venture and should strongly consider managing your finances together. It not only enhances communication about finances but also allows you to share the financial burden of the household. There is clearly a strong association with financial agreement and becoming a millionaire, so don't neglect this important principle.

Watch Those Big Ticket Items

I am so old school conservative when it comes to big purchases and for good reason. Big ticket items are a quick way to become poor or at least an under accumulator of wealth. Dave Ramsey offers sage advice regarding major purchases that I agree with: your monthly mortgage should not exceed 25% of your take home (net) income, you shouldn't finance a car ever, you cannot afford to purchase a new car unless you are already a millionaire, and your wedding shouldn't exceed 50% of the annual income of the people who are paying for the wedding. Probably the hardest rules of thumbs are not buying a new car and the reducing the costs of the wedding. Most of us are car people, but as the original article suggests, cars are being made now better than ever, so the risk of buying a bad used car is lower than ever. Buying a gently used car instead of a new car can literally save you tens of thousands of dollars. Additionally, most new cars depreciate 45% in the first 3 years, and most people simply cannot afford to lose that much of their net worth. Containing wedding costs is even more challenging because it is such an emotional purchase, so we often rationalize expenses that we simply cannot afford. However, beginning a marriage saddled with debt provides a challenge for the newlyweds: the stress of money problems. Remember, the number one reason for divorce in North America is money problems. Of course, I am not saying it cannot be done (it certainly can and has), but I can personally vouch for the fact that it is great to begin your marriage without money stresses. Other big ticket items to monitor are debt and groceries (note that the cost of groceries tend to add up and are a major expense).

Are You Wasting Too Much Money Carrying Debt

Some of you have called me out on this before, but I never tried to hide my bias: I hate debt. However, let me attempt to make a logical argument for why you shouldn't be carrying consumer debt. The second biggest constraint to the cash flow of most people is debt. Consider that the typical car payment in North America is $480 monthly (Edmund.com), the second car payment averages $200 monthly, the average student loan payment is $250 monthly, and a typical credit card payment is around $200 monthly, and then there are other miscellaneous debts (i.e. furniture, stereos, personal loans etc.) of around $120 monthly. You can easily see how debt costs the typical American family in excess of $1000 monthly. If this were invested for 25 years instead and received a conservative 10% return, you would have $1.3 million. It is no wonder that 75% of the 400 richest Americans (Forbes 400) say "the best way to build wealth is to become and stay debt-free." Simply put, paying off your consumer debts gives you a guaranteed return on investment (ROI) and liberates your most powerful wealth-building tool: your income.

Related Posts

Rich But Financial Inept

Stop Investing To Get Out Of Debt

Image credit: Matthiaorfield

Uncommon Money News (Vol. 92)

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 two carnivals: the Money Hacks Carnival #113 and The Best of the Best in Money and Personal Finance #14 at Len Penzo. Wow, I'm so excited that Through the Looking Glass was an editor's pick. This rocks!!!

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.

Lastly, check out our brand new motivational series: Why We Should Be Motivated.

Business
Greeks Face Long Hardship as Govt Seals Huge Rescue

Goldman's Shares Plunge on Inquiries and Downgrade

It's Time to End Scientology's Tax Exempt Status

Government workers out-earn private sector workers

Senate Probe: Goldman Planned to Profit from Bust

The 8 dumbest business decisions ever

GM's phony bailout payback. Take $43 billion, borrow $7 billion, then pay back the $7 Billion with the money you took, borrow $10 billion more, and annouce you've 'paid back the loan'. Enron and Lehman got nothing on these guys.

Looks like Lehman Bros. boss Dick Fuld just got caught lying under oath. Now will anyone have the guts to prosecute him?

HP is Palm's Silicon Valley savior in $1.4B deal

Economy

The Federal Debt: How To Lose A Trillion Dollars

Economists: The stimulus didn't help

Entertainment Money News

Hollywood sign $12.5 million bailout

Herbalife: We Didn't Mean to Pay the Hiltons

Celine Dion's Home -- The Ultimate Water Park

Gisele Bundchen & Tom Brady's $20 Million Dream Home

A Nightmare of Elm Street Makes A Killing At Box Office

Offbeat Money News

Thrifty Engineer Leaves $2 Million to Charity

Yakezie

Money, Loyalty and Investing

Nick Vujicic Shows Us How to Get Up and Never Quit

Is College Worth The Cost

Why We Should Be Motivated

First, I have to apologize for this long-gestating release of Why We Should Be Motivated. Work-related circumstances beyond my control prevented me from releasing it on Saturday as initially intended.

Inspiration for Why We Should Be Motivated

In writing Through the Looking Glass last month, I realized that my personal paradigm for viewing our money had changed. I was more ambitious, optimistic, and creative than I have been in years. I also was desperately seeking action, which some say is the manifestation of a true change: acting on your convictions.

This inspiration is likely attributable to the fact that over the past 2 months I have:

1. read six new personal finance books and enough other PF blog posts to make my head spin.


2. and have been motivated by what is happening in our own personal finances and investments.

In short, I have been on a true high. However, as I speak to other people, I realized that so many are discouraged. Accordingly, I decided to compile some of my most motivating posts (in my own estimation). For those who have read through previous posts or who have been with me for a while, these will hopefully be a familiar encouragement. For new readers, allow this compilation to serve as a motivational primer for your own financial journey.

Best regards,

Roshawn Watson

If you want “Why We Should Be Motivated”, just email me at roshawnwatson at gmail dot com.