Larry's Dollars and Sense

Dollars and Sense –June 28, 2017

Question: How is it possible that someone with 2 times as much income as mine pays less in taxes?

Answer: Without more information, it’s hard to say. However, it’s certainly possible. It does happen and it’s done legally. I’m not a tax expert by any means but I do know that it happens because of allowable tax deductions. There are deductions for mortgage interest, charitable contributions, real estate taxes and many other things that are deductible. Maybe you don’t have as many deductions as the person you are comparing incomes with. I assume you think this is wrong but this person may just be taking advantage of what the tax laws allow. If by some chance we ever have a flat tax in this country, this won’t happen. Everyone would pay their fair share of the tax burden but I’m not optimistic about this happening. One thing to keep in mind is that many of our tax deductions are what helps keep the economy going. These deductions may be creating jobs which create tax dollars. Quite often, what looks like someone is not paying their fair share is actually someone who is creating more tax dollars.

Question: Is there any use of tax payer money on the local and county level that you don’t think is fair?

Answer: Everyone seems to have an opinion on how tax payer money should be spent. On the Federal

Government level, I do to. On the local and county level, I don’t have an opinion and I really don’t think there is a major waste of tax dollars. We have good roads for the most part, we have adequate law enforcement protection and our tax structure is reasonable. I’ve always told people who complain that, if it bothers you that much, run for office. It’s very easy to sit back and criticize the decisions of our Village and County officials when we aren’t part of the process. That doesn’t necessarily mean you have to agree with everything they do. It just means we should be cautious about our criticism when we don’t have all the facts. On the National level, it’s different. Their mistakes are so blatant that it is almost criminal and we should speak out against the use of our tax dollars. I think we all know by now that there is abuse of power, corruption and a lack of financial intelligence at the Federal level. They leave a lot open to criticism.

Question: If we were to be given the opportunity to not pay social security tax and invest on our own,

what would happen?

Answer: I’m very sure that we don’t want to know what would happen. It would be devastating. A large segment of the population of our country is financially illiterate. All the proof you need is the fact that virtually half of the population is on welfare and other governmental assistance. Granted, our Social Security system is messed up and will be for a long time but, people are still paying into it which keeps it from folding. If we allowed people to have the option of investing this money for themselves, most of the money currently flowing into Social Security would stop coming in and that would cause a major income tax increase not to mention the fact that those doing their own investing would lose it all and increase the cost of people on subsidies like welfare. Could some of us do better than the Social Security Administration in managing our own money? Yes, but most could not. They just aren’t equipped with the knowledge needed to invest on their own.

Dollars and Sense June 21, 2017

Question: Is there any way I can tell if my pay increases are keeping up with the cost of living?

Answer: There are certain data from the government you could consider but don’t rely on it being 100% accurate. The U.S. Government puts out a cost of living index periodically but it is nearly impossible for these numbers to be accurate for every person earning a living in this country. This doesn’t mean the data isn’t helpful. It just cannot be relied on completely. The reason being that consumer items are priced differently depending on what part of the country you live in. Also, this data comes from the government so we know they might be politically motivated. If you want to know if your income is keeping pace with your cost of living, here is a way to do it. If you haven’t changed your lifestyle from 2, 3 even 5 years ago, and you are struggling more to meet your obligations, this might indicate that your income is not keeping pace with the cost of living. However, you have to be honest with yourself on your spending habits. Maybe you have improved your lifestyle faster than your pay increases will cover.

Question: I was told a Home Equity Loan could not be used to purchase a car. Is that true?

Answer: Many banks offer Home Equity Loans which are basically 2nd mortgages on your home.

Typically, your 1st mortgage loan balance must be 80% or less on the loan to value. In other words, you have to have equity in your home. Each bank can structure their product the way they want. However, I have never heard of one restricting how the money can be spent. Actually, there is a great advantage to using your Home Equity Loan for the purchase of a car because the interest paid on this type of loan is deductible for tax purposes. I’ve seen it used for the purchase of furniture, a car, adding on to their home and many other purposes. I have even known some to use it to make investments in the stock market. However, I don’t advise you do that. Unless you got your information from your bank, I’m guessing there are no restrictions on the use of draws on your Home Equity Loan. This type of product is probably not going to be available to those who have very little equity above the balance of their 1st mortgage.

Question: Do U.S. Savings Bonds continue to earn interest until you cash them in?

Answer: There are some that do but some do not. Most U.S. Savings Bonds have a maturity date. When they reach that date, they no longer earn interest. Historically, U.S. Savings Bonds have paid a good interest rate. However, if you don’t cash them in as soon as they mature, it could end up being a much smaller income on your investment and it’s free money to the government after maturity. Banks used to issue virtually all U.S. Savings Bonds. This changed a few years ago and now you must order them directly through the treasury department. Many years ago, bonds used to be considered patriotic to buy them to support the war effort. Patriotism isn’t what it once was so they are not nearly as popular. I’m sure not being able to buy them at your local bank any more has impacted sales of U.S. Savings Bonds. However, you can buy them through the Treasury web site. By the way, the government stopped them from being bought at banks. It wasn’t the banks decision.

Dollars and Sense – June 14, 2017

Question: Am I expecting too much to think my home will someday be again worth as much as it was 20

years ago?

Answer: Your home might be worth as much as it was 20 years ago now but more than likely it is not. The mortgage and housing crisis that erupted approximately 15 years ago wiped out most of the gains in real estate values. It’s highly unlikely you were able to escape that happening. However, if you owned your home that long ago and you still have no plans on selling any time soon, it really doesn’t matter. When we talk about the housing crisis, it only affects you if you bought an inflated value home prior to that and you tried to sell it during this critical period. If you didn’t, it doesn’t really make a lot of difference. Millions of families across the country lost substantial amounts by buying prior to the crisis and then having to sell the home during the crisis. It was devastating. As for your question, although your home may not be worth as much as you paid prior to the crisis, it doesn’t mean it won’t improve. Who knows what will happen 10 or 15 years from now. If we enter another period of inflation, things could change quickly. However, for now, you most likely haven’t recovered the entire value of your home.

Question: Is it possible to have too much of one kind of business in a community our size?

Answer: You can have too much of one kind of business in a community of any size not just communities our size. Whether it’s restaurants, gas stations, clothing stores, grocery stores, banks or any other type of business, you can have too much of it. What usually occurs when this happens is none of the businesses reach their full potential from a financial point of view. Over the years, I have seen individuals go into a business just because they see someone else successful at it. Just because you see someone succeeding and they are the only one of their kind of business, doesn’t mean there is enough traffic to support a second one. Everybody thinks they can do it bigger and better. Also, they might be successful because they know what they are doing. I can almost guarantee that you will not be successful if you are going into a business you know nothing about.                                          

Question: I tried to get a loan to buy a house and the appraisal came back too low. Is that unusual?

Answer: Appraisals have become one of the most frustrating things for buyers, sellers, lenders and even realtors. There was a time a few years ago when you could almost bet that the appraisal was going to come in very close to the sales price. This happened too frequently to be coincidental and most bankers were not comfortable with that. However, after the housing and mortgage crisis of the past 10-15 years, the government initiated a lot of new regulations for lenders and appraisers. While many of these new regulations go too far, they are intended to protect buyers and to a lesser extent, the lenders. There is no such thing anymore as a non-qualifying mortgage. In other words, loans that were made based on past credit history but no income analysis to determine if the borrower could pay the loan back. I don’t support all of the new rules but I do agree something had to be done. It’s not uncommon today to see appraisals come in thousands of dollars under the proposed purchase price. I understand the frustration of buyers and realtors but, this is the new world of mortgage lending and we better get used to it.

Dollars and Sense – June 7, 2017

Question: Would there ever be a time where a bank would make a loan to someone who is already

having financial trouble?

Answer: It would take extenuating circumstances to justify doing this. The bank could determine that the new funds would insure the customer’s ability to repay existing loans.  Maybe it is a situation where the business owner had just taken on a new project that was going to cure their short term problem. Maybe the business owner had a large receivable from a customer who needed more time to pay the amount due and it was putting our customer into a short term cash flow problem. If a bank were to do this, they would place additional stipulations on the borrower to protect themselves. However, this would be a rare occurrence. I can’t imagine how a bank could justify taking on a borrower from another bank that was in financial trouble. It’s highly unlikely they would ever do that. Borrowers should always be pro-active about contacting creditors if they have developing problems rather than wait until they are unable to meet their obligations.

Question: I was told you could just put money in a regular savings account and say it was for retirement and deduct it for retirement. Is that true?

Answer: In order to put money aside for retirement and not pay tax until it’s used, it has to be in a qualified plan. Examples of qualified plans would be an IRA or 401K. An individual cannot just open a savings account, put money in it and say it’s a retirement plan in order to deduct it for tax purposes. Specific papers must be filled out and accepted by a bank or an administrator before deposits can be made to it. It isn’t as easy as you have been told. However, the extra steps needed to have a qualified plan are well worth it. By having one, the money you deposit to it can be deferred for income tax purposes until you begin withdrawing it in retirement. I assume you will be withdrawing it at a much lower tax rate than when you are working. Even the interest or dividends you earn from your deposits into a qualified fund are deferrable for tax purposes. Unless you simply don’t have excess funds to invest, it’s an easy decision to be in a qualified plan. If you are not already at retirement age, it’s not too late to start contributing.

Question: Can you explain why we should be interested in the Foreign Currency Exchange rates?

Answer: Foreign Currency Exchange rates affect all of us individually to some degree. It impacts businesses even more especially if they buy and sell products from other countries. A simple example would be the clothes we wear. Many of the clothes we buy in stores are made in other countries. When they are purchased in our country, the store will base their price to you to some degree based on what they have to pay for the product in American dollars. If the foreign country has an exchange rate of $1.15 of their currency to every $1.00 of U.S. currency, it will impact the price you pay. Historically, if the product you purchased was made in the U.S. instead of the foreign country, you might pay more for it. This is why the new Administration in Washington talks about imposing a surcharge on foreign made products. They want to force American companies who have operations in another country to bring the operation back home to help create jobs. We may end up paying a little more for certain things but, it would be better for our economy.

Dollars and Sense – May 31, 2017

Question: Are people leasing automobiles as much as they use to?

Answer: In the 1990’s through the early 2000’s, leasing was very big. The ratio of leasing vs. financing the purchase was about 50/50. While leasing is still done, I don’t believe it is as popular as it was. There are a couple of reasons for the change. First, interest rates have been so low the past few years that it made it more attractive to finance the purchase. Also, I believe individuals decided it was not as good an option as they once thought it was. Leasing is not always a good option. You pay a lease payment for 36 to 60 months and you have nothing to show for it at the end of the lease period. However, makes it possible for some who can’t afford the down payment necessary to finance a car or truck. In general, I don’t recommend leasing if you plan to drive the vehicle for 5 years or more. However, if you put a lot of miles on a vehicle and normally trade every 2 to 4 years, it might be an option for you to consider. One other consideration is the buyout price at the end of the lease. That could influence your decision as well.

Question: What kind of financial advice would you give someone just getting out of high school or college?

Answer: There are three things that young people just getting out of school should do. The first one is, get a job. All too often, young people say they are waiting for the “right job” to come their way. There is plenty of time for the “right job” to surface. Since you have lived off of mom and dad for 18 years or more, it’s time to become self-sufficient. Unfortunately, our society is promoting dependence for our youth and it’s disturbing. Those of us who are now senior citizens remember our parents telling us to get off of our rear end and go make some money. Every young person wants a great job but it isn’t sitting there waiting on you to get out of school. It takes time. I recently heard someone say their child was going to take a year off after graduation and have some fun before they begin to work. It was hard to keep from laughing when I heard this and I would have been embarrassed to say that about one of my kids. The second thing I would tell the younger generation is to establish their credit if they have not done so yet. It may take mom and dad signing on the loan with them the first time but it’s something you need to do. Third, don’t think you have to have it all immediately. Owning a home, buying a new car or some other extravagance can wait until you are established.

Question: What is the most frequent cause of credit card or debit card theft?

Answer: We have all read stories about on-line theft and computer hacking. These are very real threats to your money. However, there is another one that is quite prominent and it comes as quite a shock to customers when it happens. It has to do with your own family. If you have a troubled teenager or other family member with problems living in your home, don’t leave yourself open for card theft and, under no circumstances give your PIN number to anyone. You may have what you think is the most honest young person in the world under your roof. However, they are still children and incapable of handling something like a credit card or unlimited access to your checking account. PIN stands for Personal Identification Number and no one should have it but you and your spouse. If you want someone to have some of your money, write a check or give them cash. Don’t give them access to your accounts. If you do, it will fall completely on your shoulders. Your bank is not going to make your bad decisions right for you. If you don’t protect yourself, don’t expect your bank to do it for you. I can’t tell you how many times situations like this have been exposed.

Dollars and Sense – May 24, 2017

Question: What happens when someone is buying a business based on a lot of unreported cash income?

Answer: I think your accountant, lawyer and banker would all tell you not to pay a price based on a lot of unreported income. The seller is asking you to pay more than the business can justify. You could always take their word for it but I would not recommend it. Doing business this way is just asking for a lot of trouble sooner or later. If the business is incorporated, you could even be liable for unpaid taxes if you are ever audited. If the seller of the business won’t sell it based on just reported income, I would walk away from the deal. Here is another thing to consider. If you need financing to buy this business, you may have a problem. A competent banker will never use the unreported cash income for the analysis to determine if the business can support the amount of debt you are requesting. Therefore, if the unreported cash income is substantial, the portion of the income that is reported probably won’t be sufficient to service the debt. I’m not judging anyone for doing it but it’s going to catch up with you.

Question: What is the single most important thing in being successful in business?

Answer: We can talk about cash flow, experience, working capital, identifying a need for your product or service and many other things that go into being a successful business person. However, nothing comes close to the need for common sense in being successful. Unfortunately, I see a lack of this quite often. Someone can want something so badly that they don’t care what the outcome is. They just want it. This applies to the business world as well. I will stop short of saying it is stupidity but in some cases, you have to wonder. Owning a business or taking on a major project is hard. One big mistake can doom your chances of success. I see individuals go into ventures all the time without a clue as to what they are doing. It may surprise you but it often happens to people who have been successful in other ventures. They become over confident in their abilities and they dive into something without any knowledge of how to make it succeed. A lack of common sense will kill any business venture.

Question: You mentioned grocery stores won’t come to small towns because of traffic count. How do they arrive at a number?

Answer: Large chain stores and restaurants are very sophisticated when it comes to making decisions about locations and they rarely deviate from their business model. I will use a chain restaurant as an example. Maybe the company feels they need to see 12,000 cars pass by the location they are considering. If the count is only 7,000 cars, they won’t do it. Traffic counts have been a basis for these decisions for decades as a measure for success or failure. They realize that all 12,000 cars won’t stop and eat at their restaurant. However, historical data tells them that maybe 15% will stop. Is there a chance they will pass up a good opportunity by sticking to this formula? Of course there is but 99% of the time, they are convinced it is accurate. Regardless of what type of business it is, if it relies on walk-in business to survive, traffic count is a very big issue for success. Some types of operations like a mall, will need a traffic count of 150,000 to maybe 250,000 per day to succeed.

May 17, 2017

Question: What can be done to get more industry to come to smaller communities like ours?

Answer: We are one of the more fortunate communities of our size you will find anywhere. We have a number of manufacturing firms in Hicksville. I honestly don’t know of any community our size that can boast of the numbers we have. I am going to guess there are at least 1,000 jobs at various companies. This doesn’t even include retail stores. The number might even be higher than that. How many 4,000 population towns can say that? It happened for various reasons beginning with a very nice industrial park. We also have a state of the art school system, a medical facility and a very supportive business base. We have a county economic development organization that is supportive and a village government that offers incentives for companies to expand and relocate here. Take these factors and add in the fact that people in this community help others and you have a good environment for industry. More manufacturing would be great but we’re better off than most.

Question: Why can’t a clothing store or department store survive in towns our size?

Answer: Things began to change about 35 years ago in small communities. Large department stores in bigger cities began to open and it spelled doom for small town clothing stores. The large stores were able to buy their products much cheaper than the small store and one by one, the small operators closed their doors. It’s not just towns and villages our size. Even communities with populations of 25,000 can’t support clothing and department stores. Once every so often you might see one but it’s rare. Don’t expect this to change because it won’t. It’s just like in the old days when the butter and egg man came around to neighborhoods. My grandmother would send me out to the curb on a Wednesday to wait for the man with a truck to get eggs, butter and sometimes fresh vegetables. It’s the same thing with the door to door milkman. We have to accept that there are some things that are gone forever.

Question: There are a lot of people upset over the closing of our grocery store. Can we get another one? 

Answer: It’s always unfortunate when a local business closes. However, don’t be upset with the owner. What happened locally when our grocery store closed is happening all across the country. I am confident that they did everything they could before closing. There are several factors that caused it. We are in close proximity to a large city in Fort Wayne and a smaller one 4 times our size in Defiance. People go to these cities to buy many consumer items that cannot be bought locally and while they are there, they often go to a grocery store that is larger and they have other products not related to groceries. If you want to place blame for losing our local store, place it on us for not trying to buy local at least part of the time. I appreciate the owners for keeping it going probably longer than they should have to save jobs and serve the community. If you have never run a business, you especially have no right to be upset because running a business is tough even in good times. Chain grocery companies rely on one major thing to decide if they will come to a small town and that is traffic count. If there aren’t enough vehicles passing by a location, they won’t come. So, we are unlikely to get another one.

May 10, 2017

Question: My bank turned down my loan request to start a new business. Are banks not making loans for new businesses because of the economy?

Answer: I believe that most banks are very much willing to approve business loans. However, there’s a qualification process and if the business owner can’t meet those qualifications, the loan will probably not be made. There are many parts to the process. A lender will want to know what experience and skills you bring to the business. They will want to know what research you have done to justify the need for your product or service. They will want to know if you have a business plan to include projections of income and expense with enough left to service your debt. They will want to know how you plan to secure the loan or if you even have sufficient assets to secure it. Every new business starts out with no income. The period between when you first open your doors for business and sales sufficient enough to pay your bills is critical to a new business. Therefore, they will want to know if you have sufficient cash to cover this period of time before you have income. If you don’t, that’s a problem. As you can see, there are several important pieces to the approval process. Banks are in the business of making loans. They just want to be reasonably sure the loan will be repaid.

Question: I gave my financial statement and tax returns to my banker when I took out the loan. Why is it necessary to do it again every year?

Answer: Your banker made an investment in your company and in you. They don’t own stock in your company but you are partners with your bank and that’s the way your banker should view it. I would be surprised if your banker didn’t tell you when they made the loan that they will ask for annual financial information to include tax returns. Like any investor would do, they want to know that their investment is still solid. If they see something that concerns them, they will want to talk to you to see if there are necessary changes to get your business back to where it was when they made the loan. A borrower should never refuse to give this information to their bank. They have a right to ask for it and if you want to maintain a good relationship, you won’t refuse them. They don’t ask for it just to protect themselves. They also want to help you. They may spot some trends that should not be overlooked and adjusting them could mean the difference between your success and failure. Chances are, they will review the information and that will be the end of it. However, if problems are spotted, they should discuss this with you.

Question: I refinanced my home recently and was shocked by the amount of paperwork. Why are banks asking for so much information?

Answer: If you had taken out a mortgage on your home or purchased a home 25 to 30 years ago, the number of pages in the documents would have numbered 10 or less. Today, the number of pages would be somewhere between 30 and 40. Most individuals believe these additional pages are all the fault of your banker. That could not be further from the truth. All additional documents are necessary to comply with new rules and laws passed down by the federal government. It’s insane how much additional paperwork we are dealing with now and each document must be completed correctly or it could result in a delayed closing of the loan. If you are frustrated by all this additional paperwork, just imagine how frustrated we are in having to prepare it. A large portion of it doesn’t accomplish anything even though our government claims it is there to protect you the customer. This is a topic that we could talk about for days. We understand your frustration. We don’t like it either.

 

Dollars and Sense – May 3, 2017

Question: Do people still borrow money for home improvements with the economy not so good?

Answer: The economy isn’t what we would like it to be but it’s getting better. The answer to your question is yes, people still borrow money for home improvements. Sometimes, it’s the only way they can get them done if they don’t have the cash to do it. Although the economy is still in recovery, individuals and families with steady long term employment are able to live their lives normally which includes improving their living conditions. Maybe it’s a room addition, a new kitchen, new siding for their home or building a new patio area but there is no reason to deprive yourself of things like this if you can afford it. Quite often, homeowners will get a home equity loan to do these kinds of things and we are more than happy to accommodate them if they qualify for it. The best thing about a home equity loan is that you can pay the money back and the home equity will stay in place for future use like the purchase of a new car or boat. Customers sometimes borrow the money for their project even though they have the cash to do it. They would just rather not use their savings which is understandable.

 

Question: My mother-in-law is ill. I contacted her bank to get some information on her accounts for her and they refused to give it to me. Don’t I have a right to be upset?

 Answer: You can be upset if you wish but it isn’t going to change the outcome. If a bank is enforcing laws on privacy, you will not get any information. Unless you are named on your mother-in-law’s account, you’re not entitled to any information. Her banker may even know you and you may even be a good customer but you are not going to get information from them. It doesn’t even matter if your spouse has power of attorney on your mother-in-law’s affairs. If so, he or she will have to make the call. There is nothing more important to a banker than protecting our customer’s privacy and we will go as far as we need to go to do it. Years ago, I had a similar request from a very good customer. I explained that I could not give him the information he requested and he threatened to pull his accounts from the bank if I didn’t tell him what he wanted to know. He said it in a very offensive tone of voice. I told him, “your threat is very unfortunate and if you insist on carrying it through, I will escort you to the lobby to talk to the appropriate individual to close your accounts.” I think this was a bit of a surprise to him. By the way, he did not close the accounts and he did not get the information he was asking for.

 

Question: Is a bank obligated to honor a garnishment against my account?

 Answer: A garnishment is a legal action issued by the courts. It may be related to unpaid child support, or other debt owed to someone else. If the courts determine that the money is owed, they can issue a court order for the bank to freeze a certain amount of money and require they send it in to the court. Sometimes the court will send the garnishment to the bank with the name not being shown exactly like it is on the account. Or, there could be some other improper wording that does not match the account the person has. However, if everything is properly stated and the individual does have money in an account, we are obligated to take the money and send it. We do not know the particulars on the case and we don’t need to know. Bankers are not thrilled to receive these documents because it does cause extra work but we are obligated to process it. These kinds of things do not happen daily. However, from time to time, we are served with documents of this nature. Generally, the account holder knows they owe the money and they say nothing to us about the action. Or, they anticipate this happening so, they take out the money before we are served the papers.

Dollars and Sense – April 26, 2017

Question: If our government fixes the welfare system, will it lower our taxes?

Answer: No, it will not lower our taxes. It is true that government subsidies have played a big part in creating our country’s financial problems. However, the deficit is so large that fixing the welfare system will only be a good starting point. It won’t suddenly cure the entire problem. We have many other areas that need to be addressed like the current funding for many useless research programs and the extreme number of government employees. Research on life threatening diseases like cancer is very important. However, there is some research that isn’t. If we do not fix many of these problems the deficit will only get bigger. I know that we are hearing about the need for tax cuts from the President. However, these cuts are being proposed to stir the economy and to get people back to making purchases and creating jobs. It has nothing to do with welfare reform or any other program cuts. Those cuts need to be made just to decrease the federal deficit.

 

Question: If I have to finance the purchase of a rental property, can I still make money from it?

Answer: The first question you should ask is, can the property rent for enough to cover the mortgage payment, repairs, taxes and insurance? Then, you can think about making a little money from owning it.

Many landlords who finance the purchase are content to cover these expenses and build equity as the loan is paid down. Owning rental property can be a good way to create income at some point later. However, it can also be a way to lose money. It has to be a long term commitment on your part. If you can buy the property and cover the mortgage payment and other expenses listed above plus a little bit of a cushion, you are probably the average rental owner with a mortgage. Also, if you can do most of the upkeep on your own without hiring all the work done, it’s a big plus. I would not discourage anyone from investing in rentals but you better know what you are doing and you have to make a commitment to stay in it. It’s not a short term investment. Obviously, being able to buy it without any debt is the ideal situation but it is not mandatory.

 

Question: Is it normal for a town our size to have an income tax and if I don’t work here why should I pay it?

Answer: Communities both large and small have some sort of tax to produce income. Some of them

have a sales tax and some have an income tax. We could argue about which one is best but I believe the income tax approach is the fairest way to address the need for revenue to run the community. I don’t think anyone is happy about paying income tax locally or to the federal government. What I do know is that none of us would be very happy if we didn’t have clean water, a good sewer system, paved streets and snow removal. As the old saying goes, “you can’t have it both ways.” If you want these services, you have to pay for them. The bulk of the revenue collected to perform those duties comes from an income tax. You may not work here but you must live here or you wouldn’t be paying it. So, why should you get these services for free just because you don’t work here? This isn’t a tax on your employer. It’s a personal income tax and you pay it because you use the services. Except in rare instances, you are going to pay a tax to the community you live in. It’s just a matter of how it will be paid.

Dollars and Sense – April 19, 2017

Question: Our new President is trying to do some good things. When will we start seeing financial results?

Answer: Our country didn’t get in this current condition overnight and it won’t be fixed overnight. The U.S. Government is equal to the largest corporation or business in the world and it has been run by very incompetent individuals for a very long time. Based on their actions and decisions, most of them could not get hired at an executive level position in the real world. This applies to both political parties. Electing a person who is not a politician at this particular time is a step in the right direction whether you like him or not. I’m not saying he will be highly successful but if we had elected another self-serving politician, things would have definitely gotten worse. It seems to me that starting back 30 years or so ago, things began to steadily deteriorate. Many of us would like it if our President would tone down the unnecessary comments once in while but that isn’t likely to happen. It’s just his personality. Even so, that should not keep politicians from both parties from working together on important issues. Change will take time.

Question:  Why isn’t it unlawful for illegal aliens to receive money that comes from my taxes?

Answer: If it’s unlawful, that makes it illegal but it doesn’t seem to make any difference. Most of us pay taxes. Some pay more than others. Our borders, especially those in the southwest, are not very well controlled. We allow people by the thousands to flow through these borders. Most of  them never make an effort to become legalized citizens. They come here and collect welfare and unemployment benefits. They receive free healthcare and they sometimes vote in elections. I am all for those immigrants who come legally. However, I can’t understand why anyone regardless of their political views could possibly think this is acceptable use of our taxes. The estimated cost is $10 billion a year. The actual number is probably over $20 billion. Our country should welcome those individuals who come to us the proper way but coming here illegally for a handout is unacceptable.

Question: Why can’t politicians get prosecuted for misappropriating our tax dollars?

Answer: I don’t believe U.S. Senators or Congressmen can be prosecuted as a group. I would be very surprised if they could. I believe they could be prosecuted individually for unlawful acts they may commit. However, as a whole body of elected individuals, I’m pretty sure they cannot be successfully prosecuted because of immunity. There have been many decisions they have made as a group that were so wrong that I wish they could be prosecuted because they seem almost criminal in nature. Political positions are the only job anywhere that you do not have to be qualified to get it. You don’t need to submit a resume and you don’t have to be tested to see if you are even smart enough to make decisions and spend money for U.S. citizens. All you have to do is spend enough money for advertising to get elected. The U.S. budget is larger than any business in the country or possibly the world and you need no qualifications to spend it. It’s kind of scary when you put it in that perspective.

Dollars and Sense – April 5, 2017

Question:  A friend wants me to invest and be a partner in a business that I know nothing about. What’s your opinion?

Answer:  Partnerships are difficult even when it’s your friend or family member and business ventures are often the reason for the breakup of friendships and families. When going into a partnership with someone who knows more about the business than you do, be prepared to let them have more decision making power than you. It’s only natural that it would be that way since they have more knowledge about the product or service. There are certainly ways to protect yourself like having a good partnership agreement drawn up by an attorney. However, the agreement won’t take away the emotional aspects of this. I guess my first reaction would be, why did this person not go to a bank and apply for financing so that they would not need a partner? The answer might be that they did and they were rejected for the loan which brings more questions. If your investment is minimal and you can afford the loss if it doesn’t pay off, it might make the decision easier. However, if the investment is major and it would hurt you financially if it failed, you might want to take your time and ask some questions.  
      

Question:  Why does the government reduce my Social Security check if I work after I start drawing it?

Answer:  There are some limitations on how much you can earn and still collect your full benefits until you reach your full retirement age. This age is different depending on the year you were born. Personally, I think this rule is ridiculous. We work most of our lives and pay into the Social Security system and we should be able to get back the full amount earned regardless of what our other income might be. I think a fair comparison is our 401K and Self Directed IRA. We pay into these for years. How would it feel if we were told we can’t earn additional income when we start drawing on our IRA or 401K? That would be terrible. Our Social Security is no different. It’s our money and we should be able to draw it without penalties if we have other income. This is just another way our government can reduce the amount paid out because of the fund deficit created by poor decisions made by our elected officials.

Question:  People are paying Social Security tax every day from their wages. How can it be broke?

Answer:  Here is an illustration. Let’s say you opened two savings accounts many years ago. One for your child’s college fund and the other one for your retirement fund. Your child goes off to college many years later and you realize you saved less than what it will actually cost. So, you “borrow” money from your retirement fund to pay the remainder of the cost of college. Years go by and it’s now time to retire. However, you are short on funds because you never paid back the money you borrowed from your retirement savings account to fund your child’s education. So, now you have a big problem because you are short on retirement funds. This is basically what our government did. They took money that you paid into Social Security and used it to pay for things unrelated to your retirement. There’s on big difference. You had to adjust your lifestyle and maybe even prolong your retirement date because you didn’t pay the money back. Our government is handling it a different way. They are just using the money our kids and grandkids are paying into Social Security to pay us and this cycle will continue for future generations. The Social Security fund is broke. There isn’t enough money to pay us without using the new money coming in. What we paid in is gone.

 

 

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