Money Reasons

Smart Reasons to Save, Use and Invest Money

Archive for March, 2010

MoneyReasons Weekly Cache 2010, Mar 07

March 7th, 2010

Weekly Cache - 2010, Mar 07

Random Thoughts:

(temet nosce)

As some of you can tell from my Yakezie badge in my sidebar to the right, I’m part of the www.FinancialSamurai.com Alexa Challenge! Last week, the carival was hosted by Jeff at DeliverAwayDebt.com, he did an excellent job, especially since it was though of a day or so before.

Because of the carnival, I wasn’t going to publish the page “Weekly Cache” today, I was going to move it to Friday instead. But, while I suppore the Alexa effort, I still have to follow my own path too. So, right before I was about to throw this post in the old recycle bin, I had a change of heart.

So without further ado:

My Favorite Top 5 PF Blogger Posts For The Week:

www.frugaldad.com’s – Weekly Roundup: How Often Do You Grocery Shop? : I picked this post because of frugaldad’s question about how often do you drive to the grocery story. This point that he makes, ties in nicely to my piece about implusive spenders: Saving By Paying Attention – Impulsers. While this topic area is not the most exciting ready, if you master your impulses, it’s has a big BIG impact on the amount of money you can accumulate, and debt you can avoid!

www.getrichslowly.org’s – Back from Belize: I picked this one because of the awesome picture of the ruin, and the message that you can glean if you think beyond the page! In my opinion, that message is: “Once you are free from the burdens of debt, you can do and try things that are important to you”! Although, the picture of that pyramid is pretty awesome!

www.plantingdollars.com – I Always Knew I Was Going to be Rich: This piece is Ryan’s “look at me, I will succeed” proclamation! Indirectly, he’s inviting us all to watch his progress as he develops as an original, unconvential entrepreneur. Personally, I will be watching! He has the drive, ambition, cleverness and quality to be one of the best bloggers out there (and I’m sure one of the best shark photographers too). He is the epitomy of Carpe Diem!

www.eliminatethemuda.com – www.eliminatethemuda.com: Yes, I have 2 links that are exactly the same, back to back. Why? Because the LeanLifeCoach’s site is literally full of great material. I could list each of the coaches post in at least 3 of my reviews for the week. Instead I invite you to go over and and a stroll throught the Coaches’ current content and archive. I promise you won’t be disappointed. Please note, you might want get to a piece of paper and pencil to write some of the information in his posts down. Yeah, the material is that good!

www.myjourneytomillions.com - Don’t Blame Others for Your Debt Get up and Do Something About It! - And finally Kevin’s post (it actually ties back into my random thoughts line above, temet nosce; opps just I created an infinite loop). In the end, you are responsible for your debt, so please don’t live your life in denial! You have friends out there willing to help! I often extend a hand to friends by offer advice. Sometimes it’s verbally slapped away, and other times its heeded but in a discreet or perhaps a subliminal manner. The only way I know that the message I conveyed was later acted upon, is when those cast of friends come back to me, oh maybe a week or month later telling me the clever move that they did thought of… which happen to be the exact thing I told them initially (hmmm, maybe I’m really a jedi master ).

My Favorite Post from Money Reasons This Week:

My Thoughts on Allowances For Less Than Rich Kids - By far, this is not my most popular post this week. But I personally like it because it goes against the herd mentality of 30/30/30 (saving/spending/charity). I believe 1 shoe does not fits all, and this is what the standard wisdom around kid’s allowance repeats. I think my allowance system that I give my kids makes the most sense and is in stark contrast to 30/30/30 matra.

My question is… do you give 30% of your discretionary income (this is your gross paycheck minus the taxes, etc) to charity?

I know I don’t, and I’m not going to start. Besides the way things are going, our govenment will do that for us automatically (much to my chagrin)… ;)

Closing Thoughts:

Don’t read books, magazines, blog post, or listen to others blindly. To often, people believe the first thing they hear, and stick to that first believe stubbornly. Think for youself, create new realities based on your experiences and the information provided to you, and revisit and review your beliefs. After all, if we all followed the same lines of thinking wouldn’t our existence (and society even more so) be truly stagnant and boring?

MR…

6 comments »

Posted in Weekly Review

Tags: temet nosce think for yourself

Sabotaged Financial Lessons For My Son

March 6th, 2010

Sometimes life throws you a curveball, and you have to adapt as much as possible!

Life throwing...

My son is in debt to me for a whole $36 dollars, and won’t be debt free until the beginning of the month of April. At that point, the idea was that he would save around $20 a month for a Pokemon Game (Pokemon Gold?) that he wants desperately. So I was hoping that he would save his money up after pay off his debt, to buy the game. The entire process would take about 4 months? I was even going to take him to get is favorite desert (peanut butter chocolate pie, yum)!

So he would experience 3 lessons (which I posted about: Financial Lessons Learned By My Son Today!).

In addition to these lessons, I was planning on teaching him about:

How to get out of debt.
How to plan and save up for things (I was even going to create a very simple tracking spreadsheet).

As for #1, that is already in motion, and he’s doing extra work to pay off the debt (He’s a good kid, and apparently doesn’t like being in debt… much like his proud dad).

As for #2…, Well, that’s been sabatoged by my parents! They already bought him the Pokemon game, and it’s going to be a present for Easter. Since they are my elders (not to mention my parents), I’m not going to steal their thunder on something so trivial (I’m flexible)…

So what am I going to do?

Well, continue with the debt repayment, because their actions does not really affect that. As long as he doesn’t know about the gift…

Then continue with the saving plan, at least the creation of the spreadsheet! The spreadsheet could be a good lesson in itself. Plus, we’ll use it for the next big thing…

Has good intentions by family ever thrown you a curveballs like this? And if they did…, did you still make the best of it and hit a homerun or even just a base hit, like I did?

- MR

4 comments »

Posted in Kids

Tags: parent undermining ruined financial lesson

My Thoughts on Allowances For Less Than Rich Kids

March 4th, 2010

Allowance

With allowances, it seems like I hear the same broken record erh CD that keeps playing the same song: “3 separate banks, 1 for savings, 1 for spending, and 1 for charity“. It’s always the same message over and over. And of course it’s always an even split between the three (so 33% each).

I’m going to challenge this “taken for gospel” line of thinking! First, I think that this Mantra should really only apply to the rich folk (if they want to)! Their kids are probably getting over 5 times as much as my kids for allowance. So paying 30% to charity probably wouldn’t faze them much.

So I decided to bend the rules and give my interpretation of what the allowance percentage each socio-economical (upper middle, middle and poor) classes should pay. We already discussed the rich up above, but I would like to say, I honestly don’t believe the majority of them force their kids to dole out 30% to charity either!

Upper Middle Class:

This group is the impressers! I’m sure they are the closest group to contributing the full proscribed 30% allocation that they believe the rich follow. And since they can afford it, they can do as they believe. I would guess that the average 10 year old in this group could potentially make anywhere from 50 to maybe 100 dollars a week.

Middle Class:

This group is the silent masses, they represent around 60% of the population. Most of us that do give allowances to our kids, give a dollar amount of the age of the child. so my 6 year old gets $6 and my 9 year old gets $9. I’m sure a good percentage of us follows that 3 by 30% rule, but not me. My kids split the allowance around 50% for savings, 50% for spending. They also get piggy bank money, and 50% of that goes to charity. We only give to charity at Christmas time. If you take the sum of all their money, The charity portion averages out to be about 10% to 20% of all of the money they get from allowance and the old piggy bank.

Why Christmas? Because for one, this is the time to be charitable! We all have that extra warm feeling in our heart and soul to go that extra mile to help our fellow human beings (or at least that’s the way I feel).

Working Poor and The Poor:

These groups, if they do give an allowance, most likely give less that a $1 per age. And even then they really shouldn’t! They just can’t afford it. They shouldn’t have to feel the guilt associated with the 3 by 30% generally accepted rule.

So the next time you hear that liberal message on how to divy up your money… ask yourself, does it make sense for you and your family at this particular time in your life!

Tell me what you think? Does what I say make sense, or should I force current societies socialist views on the distribution of wealth to my kids?

After all, how can I teach my kids to work for a dollar, when he would be literally giving away his money to people that don’t? What kind of screwy financial lesson would that be?!?

-D

12 comments »

Posted in Kids

Tags: poor kids poor kids allowance rich kids rich kids allowance

Sound 2010 Roth IRA Information

March 3rd, 2010

Roth IRA are fun like David Lee?

I think that everybody should have a Roth IRA! It is more fun that David Lee Roth! And by fun, I mean not paying taxes on the future earnings!

First the Basics:

The following is the “2010 Income Limits” range information. MAGI stand for “Modified Adjusted Gross Income“, and not Gross Income!


2010 Roth IRA Income Limits
	(The Numbers below are MAGI number not Gross earning!)
Type of Filing	Full Amt if Less than:	Phase out range:	Nothing if over this:
Married Filing Jointly	$166,000.00	$166,000 to $176,000	$176,000
Single	$105,000.00	$105,000 to $120,000	$120,000

What is the contribution (the amount you are depositing for the year) limit for 2010?

2010 Combined Traditional and Roth IRA Contribution Limits (taked straight from the goverment site: http://www.irs.gov/ )

If you are under 50 years of age at the end of 2010: The maximum contribution that you can make to a traditional or Roth IRA is the smaller of $5,000 or the amount of your taxable compensation for 2010. This limit can be split between a traditional and a Roth IRA but the combined limit is $5,000. The maximum contribution to a Roth IRA and the maximum deductible contribution to a traditional IRA may be reduced depending upon your modified adjusted gross income (modified AGI).

If you are 50 years of age or older before 2011: The maximum contribution that can be made to a traditional or Roth IRA is the smaller of $6,000 or the amount of your taxable compensation for 2010. This limit can be split between a traditional and a Roth IRA but the combined limit is $6,000. The maximum contribution to a Roth IRA and the maximum deductible contribution to a traditional IRA may be reduced depending upon your modified AGI.

Okay, now for the stuff I want to write about!

Why do I like Roth IRAs?

You can withdrawal your contributions at any time (but not your earnings without incurring penalties and taxes)
This is your discretionary income (take home pay), so this amount can be tucked into an Roth IRA, and it will grow without being taxed, since it was already taxed when it was your gross pay. Beats putting the money in a regular brokerage account and getting taxed every year on dividend, interest or capital gains tax.
It’s a perfect emergency fund! Since you can pull your contributions out at any time tax and penalty free. Just don’t pull out any of the earnings from the contribution amount, those would be tax at your current marginal rate, and also carry a 10% penalty hit!!!
You can pass this down to your children when you die and they won’t have to pay taxes on it!
You can use a part of the IRA amount to help buy a first time house.
You can create them for your kids, and make them potentially rich (as long as they have earned income) someday.

So how do I use my Roth IRA?

I use my Roth IRA for 2 purposes:

I use it as an Emergency fund. I don’t ever expect to need it, so this is the perfect vehicle for it in my opinion!
I also use a small portion of my Roth IRA to buy high beta stocks. This is good because if the stock appreciates like nuts and I have capital gains, I don’t get taken down by taxes on those huge gain. But if it’s bad (because of the economy), like it has lately, you can’t take the tax losses against your earned income.

Okay, that covers what I like about IRA’s!

Are there an additional aspects of the Roth that you can identify? Perhaps you use the Roth for something special? Or maybe I missed a benefit?

Anything you can add would be appreciated!

-MR

2 comments »

Posted in Retirement, Roth IRA

Tags: Retirement roth emergency fund Roth IRA

Financial Lessons Learned By My Son Today!

March 2nd, 2010

Pokemon Kitty

Well something amazing happened today. My son all of a sudden wanted to sell his old Nintendo DS games and Transformer Toys that he never plays with.

So we hopped on eBay and did a search for his DS games that he wanted to sell. Unfortunately, they only were worth about $5 to $10 dollars. I winced a little at the hurt look on this face. Some of his transformer will go for over $10, but not much more, maybe top side will be $20.

So after a few eBay searches, I asked him why he wanted to sell them… That when he told me. He wanted to buy a new Pokemon DS game that just came out. But just last week he spend all of his money and took a $40 loan out from me to buy a $120 Lego Star Wars ship… And now he’s realizing he should have held off on the purchase! He learned a small lesson in opportunity costs. You see he has about 25 Lego star wars models already, and he’s been waiting for the new Pokemon DS game to come out!

So what lesson did he learn?

The first lesson, not to go in debt! He won’t be able to afford that DS game until mid summer.
2^nd lesson,diminishing returns on the Lego Star Wars ships… I mean how many of these does he really need?
3^rd it smart to keep some money aside for be events that are important. So he learned about a weak form of an emergency fund (although it’s not really totally that, it’s similar enough…)

I refused to give him the money to by the new game. To do so would ruin the lesson. I do feel bad that all of his friends will have the game and will have mastered it by the time he finally get it. But I think the lesson is much more important!