Money Reasons

Smart Reasons to Save, Use and Invest Money

Archive for November, 2011

Having Stock Dividends Pay Money For Allowance

November 30th, 2011

Once my son and daughter turn 18 (or 21), I will stop paying them allowances.

It’s not that they were bad, or that I will have a sudden change of heart with the matter, it’s just that they’ll be adults then and traditionally that’s when such things stop. But in ways isn’t this almost like a punishment for becoming an adult? Perhaps at some subconscious level, it deters kids from wanting to strive out on their own, becoming totally financially independent from their parents?

Money Gift

After talking this over with my son last night, we decided to change the way that he receives his allowance. While the details are still being ironed out, basically we going to take most of his money from his saving account and invest that amount into one or more dividend paying stocks. The idea is that I will still pay him an allowance, but the dividend from these stocks and a portion of the money from his allowance will go into buying more stocks (along with Christmas & Birthday money along with any earned money that he might receive). We are still working out the details, but the idea is that if we do it right, we should be able to accumulate enough stocks that pay a dividend to provide him a passive dividend stream when he turns twenty-one. Ideally the amount would be at least $21 per week, which would match the current allowance program that I have my kids on. Of course, I’m hoping for a higher amount to offset taxes, but who knows, only time will tell.

So what are the benefits of such a Dividend Allowance Paying program?

My kids continue to receive an allowance, but instead of me paying for it out of my earned income, they will pay themselves via the passive income received from dividends. This is one of those “the gift that keeps giving” kind of ideas.
They start to learn about investments and the power of dividends and passive income at an early age. Hearing about passive income and actually receiving passive income are two different things entirely. Until you have passive income, it’s just a money myth.
They will be able to gain investment experience, learning that stock prices go up and down with time, and experiencing recessions.
The learn the concept of having your money work for you. This will help them visualize money as a tool.
I may gain kids that can talk to me about stocks, we will grow closer as we will have more in common.

Of course I can always follow a different path and invest in dividend yielding mutual funds too. But since I not that crazy about the fund fees, for now I think I’m going to stick to individual dividend stocks in the short-term.

I really like this idea and one that I’m excited about along with my son (my daughter’s to young to get excited about it yet).

Bests,

MR

22 comments »

Posted in Ideas

Tags: allowance dividend income stream dividends dividends pay allowance kids passive ncome stream passinve income stream passive income stream for kids

Never Lend Money To Friends Unless You Would Give It To Them For Free Anyway

November 29th, 2011

Borrowing money from friends is always a touchy matter.

Borrowing Friends like Whimpy

Some people will borrow money from you continuously once you lend them money the first critical time. I’ve even see this kind of borrowing “without repayment” action happen even between brothers. Both brothers are good guys, but the one would continuously borrow from friends, his parents and his family. In some ways, it’s like the borrowing brother is playing a game where money isn’t real. It’s like he chooses to believe that the money is just paper like monopoly money, or that he’s special and doesn’t have to follow the rules and common courtesy conduct when it comes to paying back money.

Such behavior has prompted me to do the following when it comes to people asking me for money.

I never have money sitting around doing nothing. So once I get paid and have some discretionary income (money after taxes and in my possession), I try to put that money to work towards goals (usually investments). That way when a friend (or really anybody) ask me for money I tell them that I don’t have any money on me (which is the truth). If it’s a large number that a friend wants to borrow, I never have that kind of money sitting by idle! By always running tight, it’s harder for a borrowing friend to slip in and take advantage of you if you have money money going to a cause (in my case it’s kid’s college funds, retirement, and goal specific tasks).
Occasionally, I will lend small denominations to friends, but it’s money that’s less than $20. When I was younger, it was $5, then later $10. The amount has shifted as I continue to build my wealth, but it’s always a small number relative to the amount of money that I have. I don’t see myself increasing the $20 cap that I currently use for a long time.
I make sure that I get the amount that I lent back, or else I don’t lend that person any more money. When someone comes to borrow money from me again, and if they haven’t paid off the first amount that they have borrow. I have no problems pointing out that they still owe me money from the first $20 that I lent them.
After anybody borrows money from me, I will then later ask to borrow money from them. This puts you on the same financial borrowing level as them, and since they hate to lend money out (kind of ironic huh), they will start to avoid asking you from money. At least this is the case in my experience. Once I ask to borrow money from people that always ask for money from others, it’s like all of a sudden they think I’m broke all the time too.

Using the techniques above, I’ve been able to twist my way out of lending money to people, especially those that always borrow money from people but never repay the money back.

If you can think of another clever way to avoid habitual borrowers that don’t repay money back, please tell us in the comments section below!

Thanks,

MR

11 comments »

Posted in Problems

Tags: avoiding borrowing friends friends that don't repay money habitual borrowing friends how to avoid lending money to friends money trick to avoid lending money to others stop borrowing friends from asking ways to never give out loans

Reducing The Maximum 401k Contribution Limit To Help The Economy

November 28th, 2011

Okay, yes this title isn’t a preferred route for the government to take, but there is a good chance a small decrease in 401(k) limits would help both the government and the economy.

Currently in 2012, the cap for the 401(k) contributions is set to $17,000. But what if we reduce the contribution limit down to $15,500?

Such a decrease in the contribution limit would mean that those (like me) that were contributing that extra $1,500 would be a direct impact on tax collection for the government and there is a good chance it would help business too. With respect to business, it would help because when people get that little extra money per pay period they most likely would spend that money. After all it’s only about $30 if you are paid weekly ($60 if you are paid biweekly). It might not seem like a lot, but it would give business a big boost really. Actually the $30 and $60 figures would need to have taxes taken out of the amount received, so it would be less that those figures, but for simplicity I’m going to keep it as I state above.

And the government would be the biggest boost of all. Most of the people who are contributing that extra $1,500 are in the 25% or 28% tax bracket. Most of us will be millionaires some day (or so I hope). So if we go with the lower percentage bracket (25%), that would mean that the government would get an injection of $375 extra per year per person. So if there were just a mere million that were in the $1,500 camp, that would mean that the government would receive an extra 375 million injected into the economy.

Now that just a mere $1,500 decrease in the contributions limit. If the reduction was more, the impact would be greater… The problem is that the government would also increase their spending too. They wouldn’t keep their spending in check, and this would mean that in about 5 to 10 years, we would be back in the same condition that we are currently in.

So even though it seems like a good solution to fix some of our problems from a mathematical sense, we would be in the same position in a few short years. Change need to be in the way that government runs, not in the amount of taxes that they receive.

What are your thoughts on the matter and the idea of reducing the 401(k) contribution limit? I know personally I’m not in favor of it, even if it would help. I would rather the government cut out some of their more wasteful programs, but this is an option that should be considered.

Bests,
MR

18 comments »

Posted in Economy

Tags: 401k hurts the economy 401k reduces taxes does the 401k costs us Fixing the economy government should hate 401k reducing 401k maximum limits

Buying Black Friday Sales Online

November 25th, 2011

Well, I took the plunge spending $574 on Black Friday online purchases this year.

I’ve decided to buy a new hosting service for my websites. Now on the surface, this might seem odd since I can have unlimited domains on my site with my current host. The primary reasons I decided to make this purchase are because of speed and reliability. While my current host has been decent, I think that the jump to the HostGator could provide more speed and stability. I’m keeping my current host too, but if the jump to my new host pans out, I might move everything over.

My next two purchases were SEO software, but that’s boring and nobody gets into that so I’ll skip it.

My final purchase was a new Canon PowerShot SX150 Camera!

Canon SX150 Camera

This particular Camera was $100 off the original price of $250, but the real selling point was the 12x optical zoom (we all know that digital zoom sucks)! That means I’ll be able to take pictures of things that normally would be very difficult for me to capture!

You may have noticed that everything I mentioned above is for my blog site! I didn’t really spend anything on myself or for my family. My family shopping was done a long time ago.

Well, this Black Friday has been the most I have ever spend on Black Friday. In fact, if you add the amount that I spent on all of the previous Black Fridays days, this day tops them! The funny thing is I expect to spend more next year, if all goes well!

Regards,

Don

21 comments »

Posted in Bargains

Tags: Black Friday black friday camera purchase black friday online purchases black friday purchases

The Cost of Thanksgiving

November 23rd, 2011

We all know that the obvious cost are for the food, but I’m finding that a lot of people travel far during Thanksgiving, and those people are the ones that incur the real costs.

flying

I’m fortunate in that the expense for gas as I drive on two separate days to both my of our parents isn’t really that bad. I estimate that the cost runs close to $25. For my sister it runs at least double that number. She lives 2 hours from my parents and a good distance from her in-laws…

I don’t have the stats., but it would be interesting to see how much the cost of traveling is overtaking the cost of the food and preparation. Just in my little example, it’s obvious that the expense of traveling can cost as much as the food itself. Then again, perhaps Thanksgiving has always been about traveling far to meet family? I’ve always lived close to my family, so while I still enjoy Thanksgiving, it’s really not a rare event since my sister and I meet our parents often.

I have to admit, it is fun watching football on TV, and having “The Christmas Story” play in the background as we all eat. These are what I call soft traditions in our family. They are soft because some years we do them, while other we don’t.

Here’s wish everybody in the US a Happy Thanksgiving!

MR

13 comments »

Posted in Vacation

Tags: Thanksgiving the cost of thanksgiving