Your Money Mogul
Helping You Make (and Keep) More Money.

When I was in high school, I’d often think to myself "how much money will I make when I graduate from college?"  I hated not knowing the answer, but like a good little boy, I figured if I went to college and studied hard, I’d get a good high-paying job.

But there was a problem.

I soon learned that how much money I made wasn’t relevant.  The only question that mattered was "How much will I KEEP?"  Let me explain.

After reading books on personal finance and wealth building, including Rich Dad Poor Dad , Cashflow Quadrant, Increase Your Financial IQ , and others, I better understood that the poor and middle class focus on their top line and not their bottom line .

As I’ve said before, your life is a business, and no one else will watch out for your bottom line but YOU.

3 Forces That Hurt Your Bottom Line…Preventing You From Keeping More Money

There are 3 forces working against you at all times to help keep you trapped from finding the financial freedom you desire.  They are:

1. Debt
2. Taxes
3. Inflation

Let’s look at each of these…

1. Debt
   
   • Debt is encouraged as a way of life.  Student loans, car loans, mortgages, easy financing options on computers, TV’s, etc.  Never-ending debt both personally and nationally leads people to distance themselves from financial freedom.  The sad part is, our entire system of money world-wide is built on debt for expansion since none are backed by any sort of tangible good in limited supply (like gold).
2. Taxes
   • For a detailed breakdown of all the different tax structures and how they impact your money, read How Taxes Eat Your Income: It’s Not How Much Money You Make, It’s How Much Money You KEEP That Matters . The tax code favors business owners; they provide the jobs to keep people employed, who pay the most in taxes.
3. Inflation
   • This occurs when governments print money or continue to issue government debt to finance operations.  This inflation mortgages the future of the country and its people.  This leads to higher taxation or price increases later.  So long as there are currencies backed by nothing but the "full faith and credit of the government" then there will be always be monetary inflation.

These 3 forces are responsible world-wide for many financial ills.  While you have limited control of government spending, you can control how you function within the system by reducing these negative forces on your finances.

What To Do About Them

1. Debt
   • Don’t take any on unless it will make you more money.  This can only happen when the cost of borrowing is less than the cash generated from the business or real estate investment that the loan was taken out for.  Happiness is positive cash flow.
2. Taxes
   • Minimize taxes through corporations and efficient use of tax deductions.  Consult a CPA.
3. Inflation
   • Do your best to invest ahead of inflation.  If you do not know of better yielding investments, seek out better information that will lead you to discover better rates of return.  They are out there.  Here are a couple of resources…
     • City Capital Corporation : invests in real estate and cash flowing businesses with good returns.  Allows you to use either your money or your credit to invest in deals.  (Minimum income and credit score requirements apply)
     • Lending Club : allows you to directly lend to other people with rates from 6-19% after their service charge

Once you understand the 3 Forces That Prevent You From Keeping More of Your Money, you’ll have a better understanding of what it takes to make, but more importantly keep , your money.

Happy investing!

Think making lots of money will make you rich?

Think again.

Most people focus on making a lot of money…at the expense of paying a lot in taxes.  Let’s look at the different tax structures and understand how they impact your bottom line.

I will do my best to keep it relatively simple.

NOTE: I am not an accountant.  Seek professional advice.

Taxes

There are different kinds of taxes depending upon whether you are an employee, self-employed, a business owner, or an investor.

To put it simply…

Earn —> Get Taxed —> Spend whatever’s left over

Earn —> Spend for Business Expenses —> Get Taxed on whatever’s left

If you want to dive more into the nitty-gritty, here is some more detailed info:

• Employees
  • 10-35% Earned Income Tax (this is the range for 2008 depending on income and your filing status)
    • Reference: 2008 Tax Rate Schedule
  • 6.2% Social Security Tax (FICA)
    • Reference: 2008 Social Security (FICA) Tax
  • 1.45% Medicare Tax
    • Reference: 2008 Medicare Tax
  • State Tax (depending on your state)

• Self-Employed
  • Self-Employment Tax
  • 12.4% Social Security Tax
  • 2.9% Medicare Tax
  • State Tax (depending on your state)

• Business Owner (depends on structure of the company)
  • Corporate Taxes
  • 6.2-12.4% Social Security Tax
  • 1.45-2.90% Medicare Tax
  • State Taxes
• Investor
  • 15-30% Capital Gains Tax (depending on short and/or long-term capital gains)
  • 0% Real Estate Income (using 1031 tax-deferred exchanges and pulling your equity out: the equity is a loan, not income)
  • Depreciation Expenses

Real World Examples

Let’s look at two people, one an employee and one a business owner.

Note: Examples used for illustration purposes only.

Employee: Mike, a janitor			Business Owner: Pam, a payroll clerk
Total Earnings	$ 24,000.00		Total Earnings	$ 24,000.00
Earned Income Tax	$ 4,402.50		Business Expenses	$ 7,000.00
Social Security (FICA)	$ 1,536.00		Total Income	$ 17,000.00
Medicare	$ 348.00		Earned Income Tax	$ 3,352.50
State Tax (5.3% used)	$ 1,272.00		Social Security (FICA)	$ 217.60
Net Income	$ 16,441.50		Medicare	$ 493.00
			State Tax (5.3% used)	$ 901.00
			Net Income	$ 12,035.90
Total Taxes Paid	$ 7,558.50		Total Taxes Paid	$ 4,964.10

Can you see why it may be more beneficial to be a business owner or an investor than an employee?

Stop taxes from eating your income…consider starting a corporation today.

An article in BusinessWeek two years ago was extremely relevant even today.  It talked about what’s happening in the business world with small entrepreneurs and the future demographics of business owners in an article titled Entrepreneurship in 2017 .

They found that 20 million out of 26 million small business owners don’t have any employees. These people believe themselves to be hobbyists or freelancers, not entrepreneurs. 

What do you see as being the future of entrepreneurship 10 years from now?  Will there be a dramatic shift towards freelancers and consultants?  How many of the Fortune 500 companies will still be around?

Leave your comments below and share your view on what you think will happen!

This is a letter that I saw on someone’s blog. I have no idea if it was truthfully given out to employees at a company, but it does highlight the issues that few understand from an employer perspective.

This letter openly discusses the issues facing America and how tough it can be for a CEO.  Please listen and understand the messages in this text.  If we could all try to appreciate the point-of-view, we’d all be better off.

To All My Valued Employees:

There have been some rumblings around the office about the future of this company, and more specifically, your job. As you know, the economy has changed for the worse and presents many challenges.

However, the good news is this: The economy doesn’t pose a threat to your job. What does threaten your job however, is the changing political landscape in this country.

Of course, as your employer, I am forbidden to tell you how to think politically- it is against the law to discriminate based on political affiliation, race, creed, religion, etc. Yes, the elections are now over, but as Americans, we still have a powerful voice through letter writing, placing phone calls to Congress, and volunteering our time & effort for causes near & dear to us. After all, they were elected to represent you. Please do (or not do) whatever you think will serve your interests and the interests of the country the best.

However, let me tell you some little tidbits of fact which might help you decide what is in your best interest.

First, while it is easy to spew rhetoric that casts employers against employees, you have to understand that for every business owner there is a back story. This back story is often neglected and overshadowed by what you see and hear. Sure, you see me park my Mercedes outside. You’ve seen my big home at last year’s Christmas party. I’m sure all these flashy icons of luxury conjure up some idealized thoughts about my life.

However, what you don’t see is the back story:

I started this company 12 years ago. At that time, I lived in a 300 square foot studio apartment for 3 years. My entire living apartment was converted into an office so I could put forth 100% effort into building a company, which by the way, would eventually employ you. My diet consisted of Ramen Pride noodles because every dollar I spent went back into this company. I drove a rusty Toyota Corolla with a defective transmission. I didn’t have time to date. Often times, I stayed home on weekends, while my friends went out drinking and partying. In fact, I was married to my business – hard work, discipline, and sacrifice.

Meanwhile, my friends got jobs. They worked 40 hours a week and made a modest $50K a year and spent every dime they earned. They drove flashy cars and lived in expensive homes and wore fancy designer clothes. Instead of hitting the Nordstrom’s for the latest hot fashion item, I was trolling through the Goodwill store extracting any clothing item that didn’t look like it was birthed in the 70’s. My friends refinanced their mortgages and lived a life of luxury. I, however, did not. I put my time, my money, and my life into a business with a vision that eventually, some day, I too, will be able to afford these luxuries my friends supposedly had.

So, while you physically arrive at the office at 9am, mentally check in at about noon, and then leave at 5pm, I don’t. There is no "off" button for me. When you leave the
office, you are done and you have a weekend all to yourself. I unfortunately do not have the freedom. I eat, shit, and breathe this company every minute of the day.

There is no rest. There is no weekend. There is no happy hour. Every day this business is attached to my hip like a 1 year old special-needs child. You, of course, only see the fruits of that garden — the nice house, the Mercedes, the vacations… you never realize the back story and the sacrifices I’ve made.

Now, the economy is falling apart and I, the guy that made all the right decisions and saved his money, have to bail-out all the people who didn’t. The people that overspent their paychecks suddenly feel entitled to the same luxuries that I earned and sacrificed a decade of my life for.
Yes, business ownership has is benefits but the price I’ve paid is steep and not without wounds.

Unfortunately, the cost of running this business, and employing you, is starting to eclipse the threshold of marginal benefit and let me tell you why: I am being taxed to death and the government thinks I don’t pay enough. I have state taxes. Federal taxes. Property taxes. Sales and use taxes. Payroll taxes. Workers compensation taxes. Unemployment taxes. Taxes on taxes. I have to hire a tax man to manage all these taxes and then guess what? I have to pay taxes for employing him. Government mandates and regulations and all the accounting that goes with it, now occupy most of my time. On Oct 15th, I wrote a check to the US Treasury for $288,000 for quarterly taxes. You know what my "stimulus" check was? Zero. Nada. Zilch.

The question I have is this: Who is stimulating the economy? Me, the guy who has provided 14 people good paying jobs and serves over 2,200,000 people per year with a flourishing business? Or, the single mother sitting at home pregnant with her fourth child waiting for her next welfare check? Obviously, government feels the latter is the economic stimulus of this country.

The fact is, if I deducted (Read: Stole) 50% of your paycheck you’d quit and you wouldn’t work here. I mean, why should you? That’s nuts.

Who wants to get rewarded only 50% of their hard work? Well, I agree which is why your job is in jeopardy.

Here is what many of you don’t understand … to stimulate the economy you need to stimulate what runs the economy. Had suddenly government mandated to me that I didn’t need to pay taxes, guess what? Instead of depositing that $288,000 into the Washington black-hole, I would have spent it, hired more employees, and generated substantial economic growth. My employees would have enjoyed the wealth of that tax cut in the form of promotions and better salaries. But you can forget it now.

When you have a comatose man on the verge of death, you don’t defibrillate and shock his thumb thinking that will bring him back to life, do you? Or, do you defibrillate his heart? Business is at the heart of America and always has been. To restart it, you must stimulate it, not kill it. Suddenly, the power brokers in Washington believe the mud of America is the essential drivers of the American economic engine. Nothing could be further from the truth and this is the type of change you can keep.

So where am I going with all this?

It’s quite simple. If any new taxes are levied on me, or my company, my reaction will be swift and simple. I fire you. I fire your co-workers. You can then plead with the government to pay for your mortgage, your SUV, and your child’s future. Frankly, it isn’t my problem anymore.

Then, I will close this company down, move to another country, and retire. You see, I’m done. I’m done with a country that penalizes the productive and gives to the unproductive. My motivation to work and to provide jobs will be destroyed, and with it, will be my citizenship.

While tax cuts to 95% of America sounds great on paper, don’t forget the back story: If there is no job, there is no income to tax. A tax cut on zero dollars is zero.

So, when you make your decision whether to support or fight against the President Obama’s tax & economic plans, ask yourself, who understands the economics of business ownership and who doesn’t? Whose policies will endanger your job?

Answer those questions and you should know who might be the one capable of saving your job. While the media wants to tell you "It’s the economy stupid" I’m telling you it isn’t.

If you lose your job, it won’t be at the hands of the economy; it will be at the hands of a political hurricane that swept through this country, steamrolled the constitution, and will have changed its landscape forever. If that happens, you can find me in the South Caribbean sitting on a beach, retired, and with no employees to worry about.

Signed,
Your Boss

"Managing your time well makes you successful." - Randy Pausch

What is a greater asset to you…time or money?

I know, it’s a tough choice.  I struggled with this question for years…and at times still do.

When you truly take the time (pun intended) to stop and think for a minute…you realize that time is your most valuable asset.

Unfortunately, many overlook this fact. They believe "time is money" and use phrases like "I’m going to do this to save time."

I want to challenge those beliefs.

Saving Time vs. Buying Time

"I’m going to save time by going to the grocery store after my appointment."

On the surface, this statement sounds logical: after all, time will not be "wasted" by making a second trip.  But, I believe a better distinction is "I’m going to buy time."  Huh?

Let me explain.

The way I see it, time is a finite resource for all of us.  We all get the same 24 hours.

Some people make more money in that time period, while others make less.  Why is that?  Because few people see what they do each day as an activity to buy more time.

Most people trade their time for money.  This is especially true of employees who are on salary, and specialists who charge per-hour fees.  Hence the popular saying "time is money."

Instead of thinking of activities, software, and other things used to "save" time, a better thought to pose to yourself is "how does these (or this thing) help me buy time?

How Valuable is Your Time?

Few people sit down to determine what they are worth per hour.   If you take your salary or earnings and divide it by the number of hours you work, you will get a rough idea of the value of your time.

For example: if you work 50 hours/week for 50 weeks/year (50hrs x50 weeks=2,500hrs) and you make $40,000/year you would earn $40,000/2,500hrs=$16/hr.  You can hire virtual assistants (VA’s) through different sites at a fraction of that hourly rate.

Once you realize how much you’re worth per hour, you can better look at the next function of time: opportunity cost.

Opportunity Cost

In economics, there is a term called "opportunity cost" that refers to what happens when you make a choice; if you are spending time doing some activity, you are giving up the opportunity to do something else.  What you give up is called the "opportunity cost."

This concept is important to keep in mind because it affects several areas of your life.

Let’s say for instance that you have the option to watch Youtube videos for hours or go to the gym.  The opportunity cost of watching Youtube videos is not exercising your muscles.

Now apply this idea to every area of your life.

How great are your opportunity costs?  What are they costing you?

80/20 Principle

Another way to look at this is to not only apply the idea of "opportunity costs," but also use the 80/20 principle.

The 80/20 Principle (Pareto’s Law) states that 80% of your results in life come from 20% of your actions.

This is applicable to many areas of your life: 80% of your happiness is caused by 20% of your friends, 80% of your profits come from 20% of your customers, etc.

Let’s wrap all of this up by laying out some actions steps you can take right now to move forward with managing your time more effectively.

Action Steps

1) Determine your earnings per hour.  Divide your total salary by the total number of hours worked in a given year to give you a dollar per hour ($/hr) figure.  This will help you assess where your time is best spent, and thereby determine when you should consider outsourcing tasks that are less than your hourly rate.

2) Write down your 80/20 rules for each area of your life.  What 20% of your activities produce 80% of your results (both good and bad)?

3) Look at the opportunity costs associated with the 80/20 rule.  Once you eliminate activities or spending that are the least efficient or most unproductive, what can you do with that reclaimed time or money?

4) If you have some time, consider watching Randy Pausch, the author of The Last Lecture, give a talk on effective organization and personal time management.

Communication breakdown is what creates most problems…and right now there seems to be a disconnect between Washington, D.C. and the American people.

Government bailouts and "stimulus" packages are confusing not only to the people, but to our Congressmen and women as well.

My goal here is to improve the understanding of how this stimulus package will affect us financially.

The Government’s Financial Statements

Everyone (including the government) has a set of financial statements. These documents help monitor and track where money goes. Most of us don’t think about the government’s too often…and perhaps we ought to.

If you’ve read my others posts, including America’s Financial Future and Is America Bankrupt? you’d see that we are in dire straights financially as a country. It may be helpful to review these posts before continuing to give you a greater context.

Congress has before it a massive "stimulus" package somewhere in the neighborhood of $789 BILLION dollars.

Let’s look at this from a standpoint of simple math and money knowledge…

Assets	Liabilities
Taxes	Social Security
	Medicare
	Medicaid
	Welfare
	Governement Programs
	Federal Employees
	"Stimulus" Packages

So if we get a "stimulus" package, it becomes a long-term liability on our government’s balance sheet.

The only way for the government to get rid of this long-term liability is by adding assets to the asset column that will generate income to pay for the expense of the liability. It can do this by raising taxes , finding new sources of tax revenue (i.e. tariffs), or by continuing to borrow from overseas. Oh…and it can also print more money. Wouldn’t it be neat if you could do that?

None of these options are pleasant, or will help our nation regain it’s strength.

One reason why this "stimulus" package won’t work: it won’t create enough long-term jobs. There are economists on both sides of the issue, however the simple math doesn’t work.

Our national balance sheet can’t handle another long-term liability that we all will have to pay back with interest…or else print more money and cause inflation.

One way to actually stimulate the economy : reduce the corporate tax rate so companies from other countries would consider moving here and hiring U.S. workers, thus allowing other small businesses to spring up to service these companies and their employees.

According to The Tax Foundation:

"…the average combined federal and state corporate tax rate in the U.S. is 39.3 percent, second among OECD [Organisation for Economic Co-Operative Development] countries to Japan’s combined rate of 39.5 percent"

The table below looks at the relationship between U.S. State and Federal Corporate Tax rates when compared to the rest of the OECD…

Table 1
Comparing U.S. State Corporate Taxes to the OECD

OECD Overall Rank	Country/State	Federal Rate Adjusted	Top State Corporate Tax Rate	Combined Federal and State Rate (Adjusted) (a)
	Iowa	35	12	41.6
	Pennsylvania	35	9.99	41.5
	Minnesota	35	9.8	41.4
	Massachusetts	35	9.5	41.2
	Alaska	35	9.4	41.1
	New Jersey	35	9.36	41.1
	Rhode Island	35	9	40.9
	West Virginia	35	9	40.9
	Maine	35	8.93	40.8
	Vermont	35	8.9	40.8
	California	35	8.84	40.7
	Delaware	35	8.7	40.7
	Indiana	35	8.5	40.5
	New Hampshire	35	8.5	40.5
	Wisconsin	35	7.9	40.1
	Nebraska	35	7.81	40.1
	Idaho	35	7.6	39.9
	New Mexico	35	7.6	39.9
	Connecticut	35	7.5	39.9
	New York	35	7.5	39.9
	Kansas	35	7.35	39.8
	Illinois	35	7.3	39.7
	Maryland	35	7	39.6
	North Dakota	35	7	39.6
1	Japan	30	11.56	39.54
	Arizona	35	6.968	39.5
	North Carolina	35	6.9	39.5
	Montana	35	6.75	39.4
	Oregon	35	6.6	39.3
2	United States	35	6.57	39.27
	Arkansas	35	6.5	39.2
	Tennessee	35	6.5	39.2
	*Washington	35	6.4	39.2
	Hawaii	35	6.4	39.2
3	Germany	26.38	17.0	38.9
	*Michigan	35	6	38.9
	Georgia	35	6	38.9
	Kentucky	35	6	38.9
	Oklahoma	35	6	38.9
	Virginia	35	6	38.9
	Florida	35	5.5	38.6
	Louisiana	35	8	38.5
	Missouri	35	6.25	38.4
	Ohio	35	5.1	38.3
	Mississippi	35	5	38.3
	South Carolina	35	5	38.3
	Utah	35	5	38.3
	Colorado	35	4.63	38.0
	Alabama	35	6.5	37.8
4	Canada	22.1	14	36.1
	*Texas	35	1.6	36.0
	Nevada	35	0	35.0
	South Dakota	35	0	35.0
	Wyoming	35	0	35.0
5	France	34.43	0	34.4
6	Belgium	33.99	0	33.99
7	Italy	33	0	33
8	New Zealand	33	0	33
9	Spain	32.5	0	32.5
10	Luxembourg	22.88	7.5	30.38
11	Australia	30	0	30
12	United Kingdom	30	0	30
13	Mexico	28	0	28
14	Norway	28	0	28
15	Sweden	28	0	28
16	Korea	25	2.5	27.5
17	Portugal	25	1.5	26.5
18	Finland	26	0	26
19	Netherlands	25.5	0	25.5
20	Austria	25	0	25
21	Denmark	25	0	25
22	Greece	25	0	25
23	Czech Republic	24	0	24
24	Switzerland	8.50	14.64	21.32
25	Hungary	20	0	20
26	Turkey	20	0	20
27	Poland	19	0	19
28	Slovak Republic	19	0	19
29	Iceland	18	0	18
30	Ireland	12.5	0	12.5
*Michigan, Texas and Washington have gross receipts taxes rather than traditional corporate income taxes. For comparison purposes, we converted the gross receipts taxes into an effective CIT rate. See footnote 2 for methodology.
(a) Combined rate adjusted for federal deduction of state taxes paid

Source: OECD, http://www.oecd.org/dataoecd/26/56/33717459.xls

As you can see, we are less appealing as a place to help corporations increase their bottom lines. When they go, many jobs go with them (the Multiplier Effect ).

In an age where you can hire an entire staff over the internet for a fraction of the cost of employees in America…it’s time to start rethinking some of our nation’s business policies.

"Cause when you’re up, you’re up,
And when you’re down, you’re down.
And when you’re only halfway up,
You’re neither up nor down." - Song, The Noble Duke of York

I remember singing a version of this song at Scout camp when I was younger. Seems to be fitting with the current economic times we’re living in.

I’m going to try and explain how things went up, and why they are coming down so fast.

The Multiplier Effect

It’s called the "Multiplier Effect" in economics. Now don’t go falling asleep…bare with me.

Simply put, when someone spends money, they make someone else money. That person then goes and spends that money, helping someone else to make money.

Person #1 —-spends—-> Person #2 —-spends—-> Person #3

Around and around the money goes, increasing the perceived wealth of everyone as more dollars eventually flow back into building bigger buildings, investors invest back into companies to help them grow and hire more workers, and entertainment spending increases as people have more discretionary income to spend.

The Negative Multiplier Effect

This works the same in reverse. If someone stops spending money, whoever they would have bought from loses business. This means less money for them to spend on goods and services, and the ripple effect will continue downward.

Person #1 —-doesn’t spend—-> Person #2 —-doesn’t spend—-> Person #3

Before our world was so inter-connected, this happened usually on a country-by-country basis.

Now, it’s happening globally.

So where will the bottom be? How do we know when the downward slide is over? We’ll find out sooner or later.

The best way to imagine this in your mind is to think of a floor, with building blocks stacked on top of it. These blocks are arranged to make several building structures. It’s easy to start building the blocks up, and it happens gradually.

If you take your arm and hit them, however, they fall down quickly.

Underneath each market in the world, there is a "floor"…a price where the value to someone makes it worthwhile to buy. Only when the free market is allowed to find this floor - in housing, investing, and consumption spending - will we begin to build (grow) again…starting the next bubble and eventual pop.

This up-and-down bubbling and bursting is called the "Business Cycle" and it will continue to occur. The difference between now and previous bubbles…the world is the most inter-connected it’s ever been. Imagine if you had to try and blow a bubble with gum the size of this problem…you’d have to write to Bubble Yum and ask for an entire plant full!

How Will This Affect My Money?

Your money will rise and fall based on what’s happening the global market. Your earnings may be cut or wage increases frozen as a result of companies losing money.

Your stocks will be affected depending on what you invest in and your investment strategy. Mutual funds will suffer greatly.

Your real estate holdings will perhaps decline by a large percentage as well.

Remember : You always make your money when you buy , not when you sell . This goes for all investments, and should be your mantra no matter what the market is doing.

If you have made investing mistakes up until this point, it’s time to start getting smarter by asking questions.

Questions such as:

• What are you invested in?
  • Find out what your mutual funds and 401(k) plans are invested in. Even if it’s a small. Know where you stand.
• How is your industry doing?
  • Will you get fired sometime soon?
  • How are you preparing for a layoff or for your business to stay afloat?
• How many months can I survive without working?
  • Do you have adequate reserves built up to hold you over?

These are just a few questions that will help you get re-focused.

The Trend is Your Friend

One last note: follow trends.

If you position yourself in front of an upward trend, you’ll gain. If you’ve fallen behind a winning trend, you’ll continue to lose.

As Einstein said, "you can’t solve today’s problems with yesterday’s thinking."

The best defense is a great offense. Perhaps it’s time to shed your old ideas and adopt new ones.

Think student loans will lead you to a better job, better income, and therefore (based on what our society makes you believe) a better life?  Think again.

Student loan debt has for the last couple decades risen higher than inflation.  It is an area that is little mentioned in the media, but is surely one of the next big bubbles in our economy.

The problems with having large student loan debt are:

1. There are fewer jobs

2. Most people don’t work in the same field as their major (atleast this was the case in the past)

3. School’s lag the real world and by the time 4 years goes by…the world is totally different.

4. The biggest problem of all: the only asset to pay off that debt is YOU.  They lent money to you, expecting you to work your tail off for the rest of your life to pay off your loans.  How’s that plan sound to you?  Hence why buying assets is so important.

I read an article in the LA Times about student loans.  The last story sums up the problem that many college students and grads face…and shows how many of us will see a standard of living below what we grew up with.

Marja Lopees of Burbank, CA went to college to become a lawyer and makes about $70,000.  Her total cost for college: $196,253.  Yikes!  Her payments are 40% of her earnings.

She was having trouble paying for school with just federal loans (no surprise) and so had to turn to private loans.  The $88,303 of private debt is currently at an interest rate of 8.84%.  Ms. Lopees has been quoted as saying: "I’m making interest-only payments on one of the loans, and still the payments keep going up.  It’s just overwhelming."

After paying for rent and student loans, she has just 40% of her after-tax income left for food, clothes, utilities, gas, maintenance, insurance, etc.  There won’t be any vacations, home buying, or anything else for a long time with that amount of debt.

Her last statement rings so true because this was the mentality of most people as they went to college.  As quoted in the LA Times :

"No one tells you to be careful of taking on too much debt when you’re in school.  It’s just the opposite. They just keep giving you loans and saying, ‘Don’t worry about it. You’re going to be a lawyer. It’s no big deal.’ "

Re-think how much debt you take on, and what interest rate you’re paying.  Compound interest scared Einstein…does it scare you?

Are you tired of the commercialization of Christmas?

When you stop and think of it, does it really matter if you buy people another toy/trinket or some other thing that has no lasting value?  Do materialistic things really matter that much?

As I get older, I’ve been reflecting back on my childhood and Christmas in general.  I don’t remember all the presents I got, but I do remember the quality time spent with family that I am fortunate to have.  Making memories through experiences are worth much more than a toy or other tangible gift.

So I propose to you: this Christmas, give a gift that has lasting meaning.

Action Steps

1. Sit down and hand write a note to the person you care about.  Tell them how much they mean to you and why you feel blessed to have them in your life.  Wrap this present and give it to them: it will go much further long term than anything you could possibly give them.
2. If you want to give a gift: give a gift that keeps on giving… a gift certificate for a nice dinner out perhaps or another experience that will bring you closer with your family or friends.  These memories are priceless.
3. Give to others out of the kindness of your heart.  It feels much better to give than receive.