The phrase "Stupid Tax" means slightly different things to different people. Pretty much everyone can agree, however, that it is intended to mean spending money (voluntarily or not) because you did something dumb. Potential stupid tax reasons could include paying a speeding ticket (the speed limit is posted but because you chose to ignore it you now owe stupid tax).... paying doctor bills because you did something you shouldn't have been doing (that you KNOW you shouldn't have been doing - aka those things that get you on America's Funniest Videos) and got hurt doing it... "investing" in get rich quick schemes that turn into scams... or even playing the lottery.
Many people may disagree about playing the lottery, but it really is stupid tax. Why? Here's a list:
1) "But look at the winnings!" also known as "But someone has to win!" Yes, the huge numbers plastered over billboards everywhere are an amazing enticement. I love to sit and think of what I would do with a large sum of money like that... who I could help and what I could experience. But when it comes to playing? No thanks. See... someone is going to win. But no matter how many people play, your odds of winning a traditional 6 number lottery are about 1 in 176,000,000. I heard recently that the average spent on playing the lottery is roughly $35 PER WEEK and funny enough, less in wealthier neighborhoods... more in poorer neighborhoods.
What would happen if you took that $35... or for the sake of easier math, $50... every week and invested it at a modest 10%?
If you started at age 20 and ended at age 65 (45 years) and spent $50 every week on the lottery, you would spend $117,000. Even if you only played $50 every month, you'd still spend $27,000.
If you invested it? $50 every month for 45 years nets you approximately $524,125! And if you are a silly person who plays the lottery every week? By investing you change your 1 in 176,000,000 CHANCE at winning millions into a GUARANTEED $2.3 MILLION EVERY TIME!!
2) "But I have fun playing!" Uh... yeah... but is it really $2.3 MILLION worth of fun??
3) "But the lottery helps the schools." This is one of those turns of phrases that marketing folks use. It's similar to toothpaste ads saying that Brand X whitens teeth "50% better". Have you ever looked at the comparison? In small print is probably the phrase "vs no toothpaste". In the case of the lottery and schools, yes that money does go to schools, but it's not like some massive windfall that will help the schools. What they get from the lottery is a fairly known number. So guess what cash-strapped, budget deficit governments do? They DEDUCT the lottery contribution amount that goes to schools from the overall school budget that they have to fund. So lottery money "goes to schools" but the schools are still getting the same amount of money... just from a different pot.
Bottom line... everyone has to have some fun in their lives. But to really look at the cost of what your "fun" is... that something as simple as not throwing away money on what is essentially a pipe dream of hitting a 1 in 176,000,000 chance, could change your life in retirement to the tune of $2,000,000.... well, I think you know what my answer is. Don't Pay Stupid Tax!
Sunday, December 18, 2011
Friday, December 16, 2011
Everyone loves a windfall!
Windfall -- [n] an unexpected gain, piece of good fortune.
Who wouldn't like that? Whether it's a large windfall like winning the lottery or getting a surprise inheritance, or a small windfall like finding a dollar on the street, I don't know anyone who wouldn't enjoy it. I know I do! I haven't won the lottery* but I did recently receive a small windfall.
Windfalls are never planned for. They can't be simply based on the definition. But what you can do, and what I find make the windfall even MORE enjoyable, is just like we plan for Murphy's visits, plan for just in case windfalls. Like a to-do list, make a Windfall Wish List. I find that like with a spending plan, the money from a windfall doesn't just evaporate and I'm left with happy thoughts of receiving the windfall, but unhappy ones at trying to remember exactly where it went!
Holidays and birthdays are typical times of receiving windfalls. So I suppose this is a timely posting. I just received a windfall of $241.11 from various sources. Part of it was a christmas present, part a give-back from some activities I'd participated in throughout the year. Here is how I'm dividing up my windfall:
1) Savings. I really try from all income sources to put SOME of it into savings. I have a set amount from my salary put into my 401(K) (a minimum amount since I'm still working on paying off non-mortgage debt). From everything else I try to stash at least 10% (usually up to $50) depending on the source. Of the gift ($200), I put $20 into savings. I didn't put any of the $35 windfall into savings, but all of the $6.11 unexpected distribution from my insurance went to savings so that balanced out over 10% of the remainder. It really is clique to say "Pay yourself first", but it's also really true... and doubly so when we're talking about Windfalls.
Amount of Windfall after Savings: $215
2) Debt Repayment. This is a major focus of mine at the moment. I'm just over a month away from paying off the last of my credit card debt. This is HUGE for me since at one point I had just one credit card with a $14,700 balance... along with carrying balances on 3 other cards at the same time (plus a car payment, rent, etc.). So for me, that means a large part of any windfall HAS to go towards debt repayment. It may mean a small sacrifice now (not going out to dinner, not buying the new video game, etc.), but I just keep imagining what I could do without those debt payments every month (which minus the mortgage last month added up to over $1500). Of the $180 remaining from the Christmas gift, $155 went towards debt repayment (77.5% of the initial gift).
Amount of Windfall after Debt Repayment: $60
3) Giving. Call it Karma. Call it Pay It Forward. Whatever you call it, giving comes back to us. Money isn't static to be hoarded. Do some good with your own good fortune and you will be repaid. I purchased 2 gift cards for the charity donation we were holding at work for the local domestic violence shelter.
Amount of Windfall after Giving: $50
4) Wish List Items. This is where having a Windfall Wish List comes in handy. You've paid yourself first (savings), you gave some of it away (giving) and you've addressed a major life challenge (in my case debt repayment). If this was planned money, I'd say we should have used it all up and be on track per our spending plan. But this is Windfall money. You've been responsible and now you should have some fun with it. We've all made bad decisions (see earlier paragraph about having over $14,000 in credit card debt to repay) but life cannot be all about punishment for past mistakes. So maintain a Windfall Wish List and when a Windfall comes... take a small portion and fund something on that list. Some of the items on my Windfall Wish List include buying a sound system for the tv, purchasing a new pair of riding breeches (want a specific color), and a variety of other "big ticket" items that will take some time to fund. For this windfall however, I made the choice to fund my part of an upcoming family tradition -- Sushi & Movie day.
Just like in day to day spending, a windfall goes farther and does more for you if you have a plan.
* I don't play lotteries anymore. As others have been quoted, lotteries are a tax on poor people and those who can't do math. I'll write an entry about lotteries at a later date, for now... the possible payoff of playing a lottery compared to the amount of money spent and what that money could be used for simply doesn't make sense to me.
Who wouldn't like that? Whether it's a large windfall like winning the lottery or getting a surprise inheritance, or a small windfall like finding a dollar on the street, I don't know anyone who wouldn't enjoy it. I know I do! I haven't won the lottery* but I did recently receive a small windfall.
Windfalls are never planned for. They can't be simply based on the definition. But what you can do, and what I find make the windfall even MORE enjoyable, is just like we plan for Murphy's visits, plan for just in case windfalls. Like a to-do list, make a Windfall Wish List. I find that like with a spending plan, the money from a windfall doesn't just evaporate and I'm left with happy thoughts of receiving the windfall, but unhappy ones at trying to remember exactly where it went!
Holidays and birthdays are typical times of receiving windfalls. So I suppose this is a timely posting. I just received a windfall of $241.11 from various sources. Part of it was a christmas present, part a give-back from some activities I'd participated in throughout the year. Here is how I'm dividing up my windfall:
1) Savings. I really try from all income sources to put SOME of it into savings. I have a set amount from my salary put into my 401(K) (a minimum amount since I'm still working on paying off non-mortgage debt). From everything else I try to stash at least 10% (usually up to $50) depending on the source. Of the gift ($200), I put $20 into savings. I didn't put any of the $35 windfall into savings, but all of the $6.11 unexpected distribution from my insurance went to savings so that balanced out over 10% of the remainder. It really is clique to say "Pay yourself first", but it's also really true... and doubly so when we're talking about Windfalls.
Amount of Windfall after Savings: $215
2) Debt Repayment. This is a major focus of mine at the moment. I'm just over a month away from paying off the last of my credit card debt. This is HUGE for me since at one point I had just one credit card with a $14,700 balance... along with carrying balances on 3 other cards at the same time (plus a car payment, rent, etc.). So for me, that means a large part of any windfall HAS to go towards debt repayment. It may mean a small sacrifice now (not going out to dinner, not buying the new video game, etc.), but I just keep imagining what I could do without those debt payments every month (which minus the mortgage last month added up to over $1500). Of the $180 remaining from the Christmas gift, $155 went towards debt repayment (77.5% of the initial gift).
Amount of Windfall after Debt Repayment: $60
3) Giving. Call it Karma. Call it Pay It Forward. Whatever you call it, giving comes back to us. Money isn't static to be hoarded. Do some good with your own good fortune and you will be repaid. I purchased 2 gift cards for the charity donation we were holding at work for the local domestic violence shelter.
Amount of Windfall after Giving: $50
4) Wish List Items. This is where having a Windfall Wish List comes in handy. You've paid yourself first (savings), you gave some of it away (giving) and you've addressed a major life challenge (in my case debt repayment). If this was planned money, I'd say we should have used it all up and be on track per our spending plan. But this is Windfall money. You've been responsible and now you should have some fun with it. We've all made bad decisions (see earlier paragraph about having over $14,000 in credit card debt to repay) but life cannot be all about punishment for past mistakes. So maintain a Windfall Wish List and when a Windfall comes... take a small portion and fund something on that list. Some of the items on my Windfall Wish List include buying a sound system for the tv, purchasing a new pair of riding breeches (want a specific color), and a variety of other "big ticket" items that will take some time to fund. For this windfall however, I made the choice to fund my part of an upcoming family tradition -- Sushi & Movie day.
Just like in day to day spending, a windfall goes farther and does more for you if you have a plan.
* I don't play lotteries anymore. As others have been quoted, lotteries are a tax on poor people and those who can't do math. I'll write an entry about lotteries at a later date, for now... the possible payoff of playing a lottery compared to the amount of money spent and what that money could be used for simply doesn't make sense to me.
Monday, December 5, 2011
What's in your budget?
The dreaded B word. Most people hate it. I hate it too. I hated it so much that I, like many others, avoided it for a LONG time.
Humans have an amazing capacity for changing their perception of reality. Taken to the extreme you end up with someone who thinks it's perfectly normal to eat the mailman's liver with fava beans or is always looking around corners expecting to run into either hobbits or stormtroopers.* But often we can use this part of our brain to alter reality just enough to actually HELP us!
Try this... think of the word "Budget". What comes to mind? Deprivation? Frustration? The mental image of an authoritarian parent saying "No!" like you would scolding a dog for peeing on the carpet (rolled up newspaper optional)? Perhaps you see chains and shackles and a lifetime of being on the outside looking in?
Ok... erase those cold dank images and instead think of the words "Spending Plan". To me, I start thinking of things like having a list of fun items and going from store to store to store (often skipping - which I never really do), checking them off one at a time. Usually with a big grin on my face.
Guess what? In real life, the words mean the same thing! It's our perception of the words that is different. That's why I use a SPENDING PLAN instead of a budget. A Spending Plan means that I can take all the money I earn in a month and have a plan for it. I know where each dollar is going to go before I get it (and if I get more than I planned, I have a plan for it too). If you don't PLAN where each dollar is going to go, trust me, those dollars will find a way to go somewhere... and quicker than you can fathom. If you don't plan for your money, your money will find a way to disappear all on its own.
Dave Ramsey says money is fluid. It comes and goes and there's no sense in trying to hang on to it. Think of it like water. If you take a handful of water and squeeze it tightly, trying to hang on to it, it just runs out of from between your fingers. If you just sit there with your hand open, eventually it will evaporate into nothing. But if you take that handful of water and put it into a glass... that's a plan. You can add to it (grow your water... aka saving)... your can drink it (spending) or you can give it to someone else (giving).
Some people LOVE to plan. They like lists and enjoy playing with plans to see what the best plan is. Others... sometimes it's easier to teach a baby calculus than getting them to sit down and go over finances and planning. But the fact is, if you want to improve your financial position and change your life for the better, you HAVE to plan. Call it dreaming, call it planning. Figure it out. Don't expect to be perfect the first time, but make an honest effort. Every dollar in... equals a plan for that dollar. Every dollar. Every month.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
"Too many people spend money they haven't earned, to buy things they don't want, to impress people they don't like." - Will Smith
Humans have an amazing capacity for changing their perception of reality. Taken to the extreme you end up with someone who thinks it's perfectly normal to eat the mailman's liver with fava beans or is always looking around corners expecting to run into either hobbits or stormtroopers.* But often we can use this part of our brain to alter reality just enough to actually HELP us!
Try this... think of the word "Budget". What comes to mind? Deprivation? Frustration? The mental image of an authoritarian parent saying "No!" like you would scolding a dog for peeing on the carpet (rolled up newspaper optional)? Perhaps you see chains and shackles and a lifetime of being on the outside looking in?
Ok... erase those cold dank images and instead think of the words "Spending Plan". To me, I start thinking of things like having a list of fun items and going from store to store to store (often skipping - which I never really do), checking them off one at a time. Usually with a big grin on my face.
Guess what? In real life, the words mean the same thing! It's our perception of the words that is different. That's why I use a SPENDING PLAN instead of a budget. A Spending Plan means that I can take all the money I earn in a month and have a plan for it. I know where each dollar is going to go before I get it (and if I get more than I planned, I have a plan for it too). If you don't PLAN where each dollar is going to go, trust me, those dollars will find a way to go somewhere... and quicker than you can fathom. If you don't plan for your money, your money will find a way to disappear all on its own.
Dave Ramsey says money is fluid. It comes and goes and there's no sense in trying to hang on to it. Think of it like water. If you take a handful of water and squeeze it tightly, trying to hang on to it, it just runs out of from between your fingers. If you just sit there with your hand open, eventually it will evaporate into nothing. But if you take that handful of water and put it into a glass... that's a plan. You can add to it (grow your water... aka saving)... your can drink it (spending) or you can give it to someone else (giving).
Some people LOVE to plan. They like lists and enjoy playing with plans to see what the best plan is. Others... sometimes it's easier to teach a baby calculus than getting them to sit down and go over finances and planning. But the fact is, if you want to improve your financial position and change your life for the better, you HAVE to plan. Call it dreaming, call it planning. Figure it out. Don't expect to be perfect the first time, but make an honest effort. Every dollar in... equals a plan for that dollar. Every dollar. Every month.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
"Too many people spend money they haven't earned, to buy things they don't want, to impress people they don't like." - Will Smith
Thursday, December 1, 2011
Let's get real... First post... first step
I've wanted to do this for a while... start a blog. I've actually tried to start it a few times, but never quite felt like I started it off on the right foot. Still not sure I'm starting right, but as I heard once.... it can't be great til you start, but you have to start to be great. So here it is.
I guess this is where I say why I'm writing and what I hope to accomplish, right? My story isn't terribly dramatic. It isn't some fantastic tale that no one can relate to. It certainly isn't the stuff of legends. So why write? Why put it out there for everyone to see? After all, I'm nowhere near perfect and I'm going to make mistakes.
Fact is that mistakes aren't the worst things in the world. Human beings learn from mistakes. We also learn from other people's mistakes, although much to the chagrin of parents everywhere, we tend to learn more from our own than from what other people tell us. But, we do learn from them.
I've made my share of mistakes and will probably make more. I've also read a lot of different books and different people's stories and learned a lot from them. Writing things down is one of the lessons I've learned in trying to get and maintain control of my finances. Wanting to help others has always been an aspiration. So, blogging about my financial adventure, triumphs and mistakes, became the logical step in the process.
The good, the bad and the ugly... it's all going to be here. Hopefully there will be a few tidbits of valuable information or at least a worthwhile mistake that a reader will enjoy hearing about. And with any luck, we'll all come out of it financially better off than when we started.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Money only buys a small measure of happiness, and then only for those who have the wisdom to use it properly. - Steven Scott
I guess this is where I say why I'm writing and what I hope to accomplish, right? My story isn't terribly dramatic. It isn't some fantastic tale that no one can relate to. It certainly isn't the stuff of legends. So why write? Why put it out there for everyone to see? After all, I'm nowhere near perfect and I'm going to make mistakes.
Fact is that mistakes aren't the worst things in the world. Human beings learn from mistakes. We also learn from other people's mistakes, although much to the chagrin of parents everywhere, we tend to learn more from our own than from what other people tell us. But, we do learn from them.
I've made my share of mistakes and will probably make more. I've also read a lot of different books and different people's stories and learned a lot from them. Writing things down is one of the lessons I've learned in trying to get and maintain control of my finances. Wanting to help others has always been an aspiration. So, blogging about my financial adventure, triumphs and mistakes, became the logical step in the process.
The good, the bad and the ugly... it's all going to be here. Hopefully there will be a few tidbits of valuable information or at least a worthwhile mistake that a reader will enjoy hearing about. And with any luck, we'll all come out of it financially better off than when we started.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Money only buys a small measure of happiness, and then only for those who have the wisdom to use it properly. - Steven Scott
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