Money Does Buy Happiness

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It seems there is a sweet spot in your income that determines your happiness level. That amount is $75,000. The lower your income is from the number, the more unhappy you will feel. But as you rise above that level, no matter how high you rise above it, there is no more increase in happiness. 
 
This study was conducted out of Princeton University by Nobel Laureate in economics psychologist Daniel Kahneman and economist Angus Deaton. The study draws on data from more than 450,000 Americans polled by Gallup and Healthways in 2008 and 2009. 
 
The participants were asked how they felt the previous day and how they would rate their life, from being the worst to the best. 
 
It turns out it isn't low income that saddens people; it's that less money makes them feel more ground down by other issues, like health and relationship problems. People that had health issues and a low income reported to be more unhappy about their problems. While people with the same problems but making much more income, only half the people reported to be unhappy. 
 
This effect disappears when the people make $75,000 and up. From there on up, individual temperament and life circumstances like age and education level have much more sway over how a person feels on any given day than money does. But the study doesn't explain why. Deaton concludes that there is a number where people think money is no longer an issue. Also at that income level people have enough money to do, what they want and pay for life's problems. 
 
There seems to be 2 kinds of happiness. Your day to day mood whether your stressed or happy. Then there is the overall happiness of where your life is going; that your on the right path and happy how your life is progressing. 
 
This study confirms to me a lot of my own experiences. You go through your life trying to attain money and things. There is a number of years your income is never enough. But you do reach an income level that is more than enough and that results in satisfaction. 
 
I have observed you reach a point when the car breaks, the A/C blows up and the roof leaks and you don't freak out. The reason being you have the cash to easily pay for the repair. That's what a good income does for you. 
 
They should of asked me before they did this study. I've been telling my kids this for years. My advice to them has been that no matter what problems you go through in life whether it's sickness, divorce, depression and anything that can go wrong does go wrong. If you have a good paying job and money in the bank, you may be in a fix for a period of time, but the money makes everything go a little easier. 

Taxes Going Up As The Bush Tax Cuts Go Down

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There were two major tax cutting bills enacted during President Bush's administration. They were the Economic Growth and Tax Relief Reconciliation Act of 2001 and the Jobs and Growth Tax Relief Reconciliation Act of 2003. These two pieces of legislation are what we call the "Bush Tax Cuts". The bills included across the board tax relief for American taxpayers. They will expire as of December 31, 2010. 
 
Exactly what will the loss of these tax cuts mean to you and me? 
 
Tax Brackets 

Tax brackets that are currently 10%, 15%, 25%, 28%, 33% and 35% will go up to 15%, 28%, 31%, 36% and 39.6%. This means that if you are in the 10% bracket your taxes will increase by half to 15%. What happened to helping the lower and middle class? 
 
Marriage Penalty 
 
Remember when the marriage penalty was such a hot topic in the news, well the Bush Tax Cuts fixed it. But now it's going back to the way it was, when a couple living together was paying less taxes. Married couples will have to pay more than single couples. 
 
Child Tax Credit 
 
The current child tax credit is $1000. This will fall back to $500 in 2011. Also eligible families will decline. 
 
Dividends and Capital Gains 
 
The tax rate on dividends is currently 15%. It will climb to a range of 15% to 39.6%. Capital gains top rate will climb from 15% to 20%. 
 
Estate Tax 
 
In 2010 there is no estate tax. But in 2011 it returns with a exemption of $1,000,000 and a tax bracket of 55% 
 
The Tax Foundation estimated that the median family of four saved about $2,200 in taxes under the present plan. These cuts will vanish with the next tax year. 
 
I can't reconcile any of these tax cuts as unnecessary. They effect all tax payers of every age. I can't see giving the government more of our money when the budget is out of control. When our money is wasted at every turn it unconscionable to allow them more money. Cut the budget 10% and leave us alone. 
 
Not making these tax cuts permanent will be the final nail in the Obama Administration. The damage done will echo for years to come. 

Kids Need To Work

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One of our duties as good parents is to instill the work ethic in our kids. But how do we do that? In my house both mom and dad go to work everyday to their full time jobs. Teaching by example should be enough but in this world it doesn't even come close, junior is perfectly happy to see others do the work. 
 
Should there be a certain age for your child to look for work? I believe there is. Each family can determine if the child is physically and emotionally ready to go to a job. We found that around the time they got their driving permit was the perfect time. They were mature enough and were self motivated because they needed money for their own life. 
 
Also at this time they wanted to have their own cell phones. We were firm in stating they would be paying their own cell phone or they wouldn't have one. So the job was becoming more of a necessity in their minds. 
 
The amount of money they made was enough to pay the cell phone and give them some money in their pocket. We taught them to save for things they would need in the future. Now all this seems pretty straight forward but with kids there is always some way they mess up. But this exercise is a teaching experience and probably prone to disaster. 
 
Having a job when your young is good for you. Because it teachs many things. For starters, it teaches you to show up somewhere on time. To have an authority over you that's not your parent or teacher. Also that Work = Money. 
 
Now all of our children did not all respond the same, with this wonder plan of the parents. More than half of them learned to work. But some of them just never got on board with the plan. The disgruntled children had to be led kicking and screaming down the road to work. But in the long run it worked out for all. 
 
Everything about work is a lesson in life: 
 
1. Work=Money 
2. Being somewhere on time is a skill that will be used the rest of your life. 
3. You will always have an authority figure over you in some form or another. 
4. Self reliance is the only thing that will never let you down. 
5. Success only comes after many years of work. 
 
Parents devotion to teaching their children is a never ending job. But I'm seeing with the oldest one the fruit of all my teaching. Be prepared to see some bare much fruit and some to bare a little. 

How To: Create A Budget

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As we go through life if we don't have a plan we make mistakes. Just like taking a road trip, if we don't have a 

map we could get lost. That's what a budget is, a financial map for our money.

Ben Franklin said,

"Buy failing to prepare, you are preparing to fail."

 Because we have a natural tendency to spend all we have, we all need a budget. It doesn't matter what age, stage of life, or if we're rich or poor. The most important part of the budget is it helps us coordinate our spending with our priorities. Here are three budgeting forms: Online Budget Form , Printable Budget Form and Spreadsheet Budget Forms.
 
Step 1 Start the budget by entering your income at the top. This will should include all income. Whether it's salary, pension, social security, investment income, or other. 
 
Step 2 
Now we go to the expense section. Here we list the fixed expenses first like the mortgage/rent, car loans, and home equity loans. Also your student loans and credit card payments. 
 
Step 3 
List the amounts that you are saving for. They could be college, emergency, vacation funds. Don't forget to enter your monthly amount for investing. 
 
Step 4 
Then comes the variable expenses. These would be your electricity, gas, telephone, water, household repairs, childcare, clothing, food and dining out. Also personal care(haircuts), medical/dental, and charities. 
 
As you adjust the numbers you will see how the changes affect your ability to save more or less. The chart will also have a section where you can add the actual numbers so you can compare and adjust for next month. Don't forget that this is not your first and last budget. This has to be done every month for it to help you organize and stay organized. 
 

John Maxwell says,

" a budget is telling your money where to go instead of wondering where it went" 

 
The goals of budgeting are you will see where your money is going. If you see where it's going your more able to adjust spending and plan better. 
 
Don't worry if your doing it all right at the beginning. It takes time to get it right. But with time you will get better and better. For the items that occur that are unforeseen, that you can't budget for, that's what the emergency fund is for. 

How much should I save for college?

 Fidelity Investments released guidelines last month for how much parents should save in a 529 college savings plan. It shows both annual and monthly selections. If the plan is followed you should not have to take out any loans. 
 
The guidelines estimate what a four year in-state college would cost in 18 years from now for a parent with a newborn infant today. It used data from the College Board about the average cost of public and private colleges today and how much those costs are growing annually. It assumes a 5.4 percent annual growth rate in costs for the next 18 years. 
 
Next, using Sallie Mae data, Fidelity estimated how much in scholarships, grants and family gifts households currently earning $55,000, $75,000 and $100,000 annually could expect to receive and subtracted that amount from the expected cost. Then it estimated how much, at each of those income levels, a family would need to save to cover future college costs. Assuming they put the money in a 529 plan that gave a return in line with what the company estimates an investment in Fidelity's age based investment option should provide. 
 
The table reflects their findings and supplies their actual dollar amounts to be invested every month. 
 
 Their are no guidelines for family's making over $100,000 dollars per year. But they should examine the guidelines and interpret a plan that suits their own situation. Also the proposed savings amount don't consider the extra expenses that go with college, only tuition. Though transportation and health care are qualified 529 expenses. 
 
Fidelity Investments claims if you follow their recommendations the family making $55,000 would accumulate $48,000 for public college and $107,000 for a private college. The $75,000 family would have to save $51,000 for public college and $115,000 for a private college. The family making $100,000 would need to save $55,000 for public college and $123,000 for a private college. 
 
Now these figures are very subjective. We don't know what the final amounts would have grown to. Also we don't know if a family could sustain making these large payments for 18 years. But if they could the 529 accounts would become substantial. I am aware that it's pretty hard to estimate all this and I have to give Fidelity credit for attempting this. The amounts of monthly savings are relatively close. The family incomes are not, so the burden is on the lower wage earners. Like I said it's a place to start. w

10 Reasons To Rent

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Don't you sometimes get sick of all the maintenance you have to do when you own a house? Starting with the most annoying thing, mowing the lawn and trimming the bushes or trees. Then there is painting to do and leaky faucet. What about that remodeling job your wife wants you to do. It's always something breaking. The American dream becomes the American pain in the butt. 
 
Over on CBS' Moneywatch.com they had a top ten list of the advantages of renting. 
 
1.Fancier Living: You may not ever be able to afford to own it, but with renting, you can enjoy that luxury condo overlooking the ocean. 
 
2.Perks!: A lot of apartments come with community pools and gyms. My favorite thing about the apartment complex that I lived in during college was the massive swimming pool they had. 
 
3.Water/Heat Included: Oftentimes, apartments come with water and heat included, so that's less bills that you have to keep up with. And the world is better with less bills to pay. 
 
4.No Need For Weeding: I've never mowed a lawn when I've rented. You don't have to do any yard work. 
 
5.When The Move Bug Bites....: While renting, the worst case scenario is waiting a year to move. Bad landlord? Move out. Annoying neighbor? Good-Bye. With a 
Home it's much more complicated. 
 
6.No Maintenance Background Needed: As mentioned before when a pipe bursts or any other maintenance issue pops up, just make a call to the landlord and sit back and relax. 
 
7.Momentarily Cheaper: there's a lot of us financially struggling thanks to the economy and when it may be money down the drain, I am not spending nearly as much as a mortgage. 
 
8.Home Prices Fluctuate: Its a buyers market or is it a sellers market? I have no idea, because I don't have to know, I rent. 
 
9.No Risks: if you do try to sell your home during a bad economic time, your at risk for losing money. But with renting, you hopefully get your deposit check back. 
 
10.Property Tax and Insurance: No taxes for renting and renters insurance is way cheaper than homeowners insurance. 

Michael Douglas & Life

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Michael Douglas revealed this week that he has throat cancer. He is going through a regiment of radiation and chemotherapy. Fortunately his doctor found it in time to start treatment. Doctors say that the cause of the tumor was probably Douglas' smoking and drinking habits. Although the cancer has spread to his lymph nodes, it remains in his neck giving him a 80 percent chance at recovery. It's still unknown how this will effect his acting career. 
 
This news is of great interest to all of us especially to us over 50 years old. At this time of our lives we have to be on the look out for many different kind of illnesses, especially cancer. It starts in our late forty's with checking of the prostate. In the 50's, 60's and 70's we also must look out for skin and other related cancers. Mr. Douglas is 65 years old and still very active. If his doctors have caught the cancer early enough he can remain acting and speaking. 
 
Every few years a high profile person is in the news with a health crisis. Last time it was Farrah Fawcett and her cancer battle. Do we ever learn anything from their tragedy's. Do we change our health care habits? Do we get check-ups and cancer screenings. I hope some of us do. 
 
At 65 years of age Mr. Douglas is at a time he can relax and enjoy his success. His lovely wife and two small children are there to make his years even more precious. His life reminds me of what our lives could be at 65. Are we enjoying the life we prepared for, are we prepared. In a financial way are we ready. 
 
It's seems that preparation and planning are paramount for our successful retirement years. Our health also must be prepared for our older years. Do we exercise and eat healthy. Do we get regular check-ups? Maybe Michael Douglas was prepared in all these ways, yet he still got sick. It's something to think about and prepare for.

More and More Debt

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The United Kingdom owes $90 billion dollars in credit card debt. They have a population is 51 million people. The United States owes $850 billion dollars in credit card debt. It has a population of 305 million people. According to Consumers Reports Magazine and Whatsthecost.com.

In England they pay, just in interest on credit cards, $652,445,625. It's incredible this occurs every month. This is not principle, it's just the interest. That's not including interest on loans, mortgage or other types of debt.

The United States government has a total debt, at the present time, of $13.3 trillion dollars. The yearly interest payment for this debt is $383 billion dollars. According to the United States Department of the Treasury.

In a capitalistic economy like ours we are free to chose to go into debt for whatever reason we like. Some of us do by choice and some in desperation. The banks that provide the easy credit happily extend it to us. It's a service that's mutually desired. The essence of capitalism is the free exchange of goods and services for profit. 

The wisdom of the banks to extend unsecured debt in such a great amount, if defaulted on in great numbers, could bankrupt the company. Also the people taking the large amounts of credit are taking a risk and it could also be their downfall when they can't pay it back. But the risk to both parties is apparent and understood hopefully.

The difference between debt in the private sector and the government is that the private sector it's capitalism and the government it's not. The government goes into debt and has no function to pay it back, only by taxation, taking our money. We must earn our money in the economy to pay back our debt. The government is outside the give and take of capitalism. It's a thorn in the side of capitalism. It holds back the economy and hurts general business functions.

It's bad enough we are tax so heavily and our money is wasted by a government which has a foundation and history of incompetence. This is another reason for smaller government. No place could you find the mishandling of money on such a great scale.

The world has never seen this level of debt. We really don't know for sure what the ramifications will be. For the common man living with high debt payments it's a detriment. When all your money goes out for debt payments, isn't your standard of living lower? Isn't your quality of life much lower. Don't you just go paycheck to paycheck with no end in site, until the day you can't make anymore payments and go bankrupt.

We can agree that in the real world, in our individual lives this is not sustainable. There is a day of reckoning. So doesn't it make sense that there will be a day of reckoning for our government. Doesn't the common sense we all live by apply in Washington DC?

The Strangest Secret

Back in 1950's there was a motivational speaker called Earl Nightingale. He was working in the radio industry. He had an insurance company and gave motivational talks. In 1956 he gave his most famous talk. It was recorded on vinyl and won a gold record for 1 million copies sold. It was called "The Strangest Secret".  
It's only a 30 minute recording but carries a lot of good ideas. He talks about the reasons some people have success and some fail. He states out of 100 people only 5 will be financially independent. With people living in a country of abundant opportunity, why is there so much failure? 
 
He says what is the definition of success? It's the "Progressive realization of a worthy ideal". Men fail and they do not know why. They even don't know why they go to work everyday. That by their own choice they conform to what everybody else is doing. There is no success in showing up for a job. A true success is "Doing the job you choose to do deliberately". If you chose a job and educate yourself, you are a success. 
 
He says we live today in a world with a plateau of security. Most everything is available to us, we just have to show up to get it. Just having a job is not success. We have no goals and we don't use are minds and think. 
 
He says the key to success is that "We become what we think". You are what your thoughts are. If you think negatively, you will be negative. If you think good you will be good. You have to believe you will succeed then you will. If you can't find the right circumstances then make them. If you think about frustration, fear and anxiety that's what you will become. If you think about nothing you will have nothing. 
 
The trouble with today's economy is it moves at the speed of it's weakest link. It all up to each individual. We have to use are minds and think. 
 
He states that our minds are the most powerful tool we have. What we put in it is what our lives will become. Our minds are like fertile ground. Our minds like the ground doesn't care what we put in it. It will only return what we put in it. Like the ground, if we plant corn we will get an abundance of corn. If we plant a poisonous plant we will get an abundance of poison. Our minds are the same. He says it a law that we cannot change. 
 
We are the sum total of our thoughts. We have a choice, we can put good things in our mind and live successfully or put bad things in our mind and live in the gutter. 
 
I like a lot of what he has to say. It's interesting that these motivational speakers go back this far and the talks are recorded. I found this on YouTube. 
 
He calls this way of living "The Strangest Secret" because it's been known for thousands of years but very few put it into practice. 
 
I can see if you focus on what your doing and have good goals you will be successful. The most interesting item I thought was when he said if you can't find the right circumstances to succeed then make them. That is very important because we blame the circumstances when we fail at something. We blame other people, place and things. Then we quit and are perfectly happy to say we tried. How many times have you heard that or said that yourself. I have done that myself. Did it occur to anyone to go and make their own circumstances. 
 
Earl Nightingale was a famous motivational speaker in his day and probably helped many people. I'm glad I came across his recordings. He made me think in a different way. Maybe that is the way successful people think. If you ever hear successful people who have built large companies from scratch, this is the way they talk. It's different from the rest of 

us. Earl Nightingale says "You have to act like failure doesn't exist". 

Deep In Debt

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How do you help a friend in who is in financial trouble? A friend had his car repossessed. He works with me, he has a good job and is paid well. But he has a problem with handling money. There have been times he would want me to loan him money. I don't loan money and it kind of upset him. 
 
I would talk to him about how I take care of my finances. I told him what satisfaction and peace I had by being organized. I explained how he could apply it to his life. He listened but never took my advice. I tried to keep our conversation on a pleasant level but it got frustrating when he would never follow thru. 
 
Now with the car repoed this was where my patience became lacking. I told him he had to do something different or it would get worse. I said that I cared about him and his family's problems. I said I see you doing things wrong with money. I don't want to butt in, but you need help. What is it going to take to wake you up?
 
You guessed it, he didn't take it all to well. He was quite angry and defensive. He gave me lots of excuses for his behavior. He said it's so bad he can't do anything about it. That he doesn't have the money to work it out. 
 
He was so adamant and entrenched in his opinion. I was afraid this could end our friendship. This had been going on for many years but now it was coming to a head. I thought who am I to to be telling him what to do. I don't have this money thing down perfectly yet. I make mistakes to and I'm still learning. Maybe I should just back off. But as a parent I am not perfect , yet I still correct my children. 

I can see there is a hopelessness he feels about his situation. A comfort zone that is hard to move out of. When finances should be a matter of arithmetic, its mostly becomes a mix of behavior and emotion. 

I'll keep trying to help him. But he's on a progressively downward slope. It's seems the behavior resembles someone that drinks or is on drugs. They don't admit there is a problem.  Then hopefully someday they admit they have a problem and ask for help. All you can do in a situation like this is be patient. You have to realize their success or failure is in their own hands no yours.

Larry Burkett said,"debt is not the problem; it's the symptom." I believe failures with controlling your money is a behavior problem. You have to change behavior. The behavior that can wreck your finances is lack of planning. Planning for today and the future.

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College Students Dont Need Credit Cards

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We have a child heading off to college this week. We are not giving him a credit card to take with him. Most parents equip their child with one. If you do, it would be considered normal. Students are told that the card is only for emergencies. But to a student an emergency is a lack of donuts. You probably are thinking credit cards and students don't mix. Your right, the chance of abuse or immaturity is high. 
 
On campus they are exposed to the wiles of credit card applications. They're offered hats and t-shirts for a filled out credit card application. It's hard to say no to a nice hat. As a good parent it's our job to teach them about credit and making choices about staying out of debt when they have no income. But thankfully there is a new law that says you have to be 21 years old to open a credit card or get an adult co-signer. 
 
Parents hopefully realize co-signing makes you fully responsible if junior defaults on his account. Also if you co-sign you can monitor and keep restrictions on the account. On the other hand if junior doesn't pay, it will reflect on your credit score. 
 
Helping your child is good but doing everything for them is very bad. Sure they need to be educated about the responsibility of credit and debts. Having a credit card without a job is foolish. Having a credit card while in college is not necessary. 
 
Take this opportunity and use this experience to teach them to not use credit like it was cash. Teach them to use cash for purchases. For convenience using a debit card instead of a credit card. Teachable moments like this are great. 
 
Our son worked all summer and put money in the bank to use at school. Mom will be able to monitor this joint account and deposit money to cover expenses. Staying away from credit cards, saving money and living on less than you make is taught in our home. 
 
We won't participate in teaching our children to use credit cards as a crutch because of a lack of planning. The semester ahead has been anticipated and planned for. 

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Teaching Kids About Work and Money

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Kids are dumb. You have to teach them everything. Except to eat and watch TV. We have to teach them many things in life and one of the most important things is to work. Teaching your kids to work and having a work ethic is not easy. We had 6 kids in the house at one time. Giving them all chores to do was a time consuming task. Some did there chores well and when they were supposed to and some didn't. It was a job to keep on top of them.

Some parents give ther children an allowance. But in our case it wasn't practical. Handing out money to six kids would force us to get a bookeeper to keep track. We figured they had all they needed so no allowance. They didn't seem to suffer because of it or ever complain. It just wasn't done. You may decide to give your children an allowance yet it seems unnecessary. When I was young we never got one either. We didn't miss it.

Now when they were older their chores increased. Now they started to look for money. They also wanted cell phones. It was starting to get expensive. My Wife and I decided they needed to get jobs. It took some time but they did. Now they paid for there own cell phones with their money. The jobs also filled their time and kept them out of our hair. But don't forget they had to be taken to and from work. More time spent on our part.

They were taught how to spend and where to spend their money. Teaching how to buy things always looking for getting the most value for there money. They also learn the idea of preparedness. Getting somewhere on time. Preparing there clothing and seeing their uniforms or clothes are washed and ready for work. If your kids learn anything, I hope the one thing they learn is Work = Money. My Father always says "You don't work you don't eat."

Todays kids Have many bad examples of people on television, having plenty money and things, but you never see them going to work. They see people just having money. To see on TV an example of someone working hard is rare. If you don't teach your children good habits who will.

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Loans To Your Children - Great Idea?

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Is it a good idea to loan money to your children? We all have crossed this bridge one way or another. One day your child comes to you with a need for money. Maybe they screwed up and need money for college. Something is broken in their car or house. Because they have never saved for a rainy day, they come to you. But maybe it's an emergency so great and unexpected no one has the resources like Mom and Dad. Your little child is hurting and you feel bad for them. You want to help them feel better. What do you do? 
 
A family I know had this same problem. There was a family with 3 children. All grown children living on their own. By coincidence all 3 lost there jobs at the same time. Mom lent her children money for a period of 6 months. She put on credit cards almost $55,000. Dad didn't even learn about this till in was all over. Mom reached a point where she couldn't even pay the minimums. One thing led to another, she couldn't pay her mortgage. The house is in foreclosure now. 
 
What went wrong here? Mom went nuts and helped the kids in the extreme. I'm sure she didn't mean for it to go that far. This has destroyed her future as well as the children's. Also Dad is going to suffer for his ignorance too. 
 
Maybe what should of happened is Mom and Dad should of sat down with everyone, plan something that would help the children without destroying the family. Maybe a plan of non-monetary help. It reminds me of the way you help someone who is drowning. A life guard is trained to approach a drowning person from the back. Many a time a drowning victim ends up drowning his rescuer in the panic of the moment. 
 
My own sob story pertains to my daughter. She got in a fix and couldn't pay for her last year of college, she needed a place to stay and car insurance. Also she had no job. What I did was let her stay with me. She got room and board. Car insurance with repairs and tuition/books. In a period of 18 months the total came to $8500. All on a credit card. Of course I justified it at the time as an emergency, it had to be done. I had to help my kid. Like the story above. I didn't really make the the right decision. It was agreed that she would pay it all back when she got her professional job. She finally got her good paying job. Let's see when I'll be paid back, I'm sure she will. 
 
The credit card payment isn't killing me and it won't. But it's a nuisance I want out of my life. I probably wouldn't do it again this way. But when your kid is in apparent trouble your brain turns to mush. I'm alot wiser now and alot broker. You also don't look at your kids the same way when they owe you money. You look at everything in their life when they spend money as a waste, that money could have been used to pay the debt. You don't look at your kids the same way. They can feel it and it hurts the relationship. 
 
I hate to reveal this but my parents helped me to the tune of $25,000. I was getting divorced, over a year I spent this much money on lawyers and expenses. If they didn't help me I would of been screwed. This is beginning to look like a trend. That was 14 years ago. They just gave it to me. Never asked for it back. Someday I will pay them back. 
 
Have we learned anything here. Human nature is strong. Parental love is strong. Don't lend money to your kids, just give it to them if you have it. And don't let them drown you. 
 

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