Planning For “Change” Financially

The Only Real Change I Expect   

The Only Real Change I Expect

I am not a financial advisor, lawyer, or accountant.  You should consult with someone with this type of expertise before making financial decisions, but it’s never to early to start thinking about how you should plan financially to survive/improve/thrive with the changes that may occur in the next year or two.  I’m sure people with a lot more smarts than me will have some ideas, but here are some things I’m thinking.  Feel free to add your own.

Get rid of your consumer debt.  Financing things that are going down in value (cars, boats, Whopper value meals) is never a good idea, but is especially bad when when you need to have financial flexibility.  Pay off your cars and credit cards ASAP.  Even if things work out famously, being debt free is liberating.  You’re going to need the extra cash to pay higher prices for goods and services.  You may think only corporations and rich people are going to pay more, but the reality is that the people who buy stuff from them are the ones who will pay.

Open foreign accounts.  Definitely consult your accountant and lawyer on this one. I’m just a guy who looked it up on a web site.  According to the IRS a person must report a foreign account via FBAR if:

1.  The person has financial interest in, signature authority or other authority over one or more accounts in a foreign country, and    
2.  The value of the account exceeds $10,000 at any time during the calendar year.

Invest in assetts that will be more difficult to seize.  Cash and equities can be taken pretty easily.  Of course, according to Kelo, land may not be that safe either.  As long as it’s taken for the common good, right?  Still, if things get really bad at least you can grow a garden.

Defer your income if possible, for as long as possible.  Tough to do unless you own a business.  But if you do own a business you are probably in the most danger of being hit.  If you can put earnings/income off long enough, we may return to a more sensible philosophy.

Save a little extra cash now.  Tax increases will probably be retroactive to the beginning of the year they are increased.  That means if your taxes go up you’ll have to pay extra taxes on money you were taxed on at the original rate.  You’re going to need the cash for that.

Act now to help elect a fiscally responsible representative in your district for Congress in 2010.

Again, I don’t have any financial expertise…just some things going through my mind and things I’ve heard others talking about.  Remember–I’m just an idiot with a keyboard.

Luckily, We Have The Fed

Admittedly, I am more stupider than a lot of people when it comes to finances.  So someone please tell me how the stock market really works.  See, I thought the stock market reacted to what is going on in the economy.  I didn’t realize it was the economy.  

Apparently, I was wrong, because the Federal Reserve has announced an emergency rate drop to “fix” the stock market.

The Federal Reserve, confronted with a global stock sell-off fanned by increased fears of a recession, slashed a key interest rate by three-quarters of a percentage point on Tuesday and indicated further rate cuts were likely.

This move is not an instant fix,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics

“Fix” is actually the perfect word.  Markets can be “fixed” kind of like a fight or the World Series can be “fixed”. 

So let me get this straight.  We (individually and as a country) have borrowed too much money, which has us headed towards a recession.  The obvious solution?  Lower interest rates to banks, which allows them to lower interest rates to consumers, which allows them to borrow more money.  Makes sense right?  Right?

“You can’t borrow your way out of debt”–Dave Ramsey

So rest easy tonight, all of ye lower and middle income Americans.  Though the cost of milk, gasoline, and Coors Light doth drift higher whilst thou income remaineth the same, panic disturbs not the slumber of bankers, barons, and brokers.  So long as the DJIA remaineth propped by policy, politicians, and ponzi schemes, you need not be troubled by the frightful prospect of competing on a level playing field and moving forward.

Ah, what the hell!  You can just put it on your credit card, right?  Rates have never been lower!!!

Credit Card Regulation, Free Markets, and Paying Cash

The Coyote Chronicles challenges Free Marketers to defend deregulation of the credit card industry: 

You can make the argument that people who can’t pay their balances in full every month should not take out a credit card, but thats more than a little disingenuous since we would see a staggering drop in consumer spending if people only spent when they could pay cash. The restaurant and travel industries would suffer immediately. I doubt there would be a Black Friday at all. Don’t even get me started about the car business.

I’ll take a shot at this one.  First of all, Black Friday, car financing, and credit cards themselves are all fairly new concepts.  Somehow, civilization survived before they existed, and suspect it will survive long after they are gone.  The assertion that our economy is propped up by the insane amount of consumer credit that exists currently tells me that we are, as a country, living above our means.  The fact that the savings rate keeps declining while consumer debt continues to rise tells me that we are in denial of this fact.  Government regulation that enables this foolish behavior only delays the inevitable crash that must occur to correct the market and insures with each passing year that the crash will be harder.

What would happen to the economy if people stopped using credit cards and started paying cash?  One thing is for sure.  Every debt free individual would have greatly increased buying power because a higher percentage of his income would be available to purchase goods and services instead of paying interest on the Big Mac Value Meal he bought 4 months ago.

Hat tip to MCB.

She Can’t Be Serious

Hillary Clinton’s latest idea

“I like the idea of giving every baby born in America a $5,000 account that will grow over time, so that when that young person turns 18 if they have finished high school they will be able to access it to go to college or maybe they will be able to make that downpayment on their first home,” she said.

Uh, by “give” do you mean take $5,000 from the money raised through various taxes and handing it back out to every newborn? That’s not really so much of a gift as it is a re-distribution, but I’ll play along.

So who will administer these gifts? Are they willing to work for free? I’m assuming not, so let’s add a little bit to each of these gifts to collect from the taxes and hand it back out. A dime each? Maybe if this were private industry, but we’re dealing with government, so it will be more like $1 each. With 4 million babies being born each year, that’s $4M in overhead alone.

I like this idea of “grow over time”. Is this going to “grow” like the national debt or social security shortfalls? Will it grow like the federal budget? Will it grow like the effective tax rate? Hmm…it doesn’t seem like the federal government has a good track record in growing anything that benefits the public financially, does it?

I’m assuming from the article that this would be some kind of bond? If so, it seems to me this is what you are proposing, step by step:

1) Take money from some people
2) Pay the salaries of the people you hire to do the taking
3) Pay the salaries of the people you hire to give out money
4) Give whatever is left from step (2) and (3) to some people, in many cases the same people you took it from in step (1)
5) Instantly loan this money to Uncle Sam at a low interest rate
6) Eighteen years later, wonder why Uncle Sam can’t repay the loan, never realizing that this, along with other ingenious ideas, have crippled the middle class financially to the point that are more people in step (4) than there are in step (1)

I’ve got an idea. Let’s eliminate at least one ponzi scheme we already have going before we start another one.

**UPDATE**
Doug Mataconis at TheLibertyPapers has scienced out all the math–$12,492,000,000 for a year’s worth of babies.

Live Blogging of the South Carolina Debate Part I

Not really live…there’s about an 18 minute TiVo delay plus pausing for “I can’t believe he just said that” moments.

Question 1:  McCain seems like he is just trying to fill up a minute’s worth of talking

Question 2:  Thompson isn’t answering the question at all.  What he should say is, “If they don’t do it our way, we’ll leave–that’s how I can require them.”

Question 3:  Romney answers the question immediately.  He at least has a firm grasp on what he believes, assuming that it is within a reasonable foreign policy to be there.

Question 4:  Brownback, I think the base of the question was whether or not winning the war has anything to do with politicians.  You missed where he was going with this.  How do you use politics with people who only understand killing.

Question 5:   Guiliani makes a great point about the Democrats’ timetable.  That is a planned retreat–stupid tactically.

Question 6:   So basically, Tancredo would do exactly what Bush is doing…wrong answer.

Question 7:   Ron Paul is basically quoting how war is supposed to be declared constitutionally.  Channeling Ronald Reagan again…good move.

Question 8:   Hunter is more interested in presenting his resume where he “didn’t do anything special”.  That’s funny.

Question 9:  Huckabee looks like Kevin Spacey.  I believe in God, and the only thing I’m afraid of is  Mike Huckabee.

Question 10:   So will you or won’t you rule out striking Iran?  I’m confused.

Question 11:  How could you have raised taxes in Massachusettes?   They are so high they can’t be raised anymore.  “Washington is broken”–that sounds like something I’ve heard before.  Romney is the most impressive speaker.

Question 12:   Yes, spending is out of control McCain.  And how long have you been in Washington?  Yes, you are repeating your story.  Get some new material.

Question 13:  Huckabee throws the Fair Tax out there. I’d like to see how many of these clowns agree with him.  “John Edwards at a beauty shop”–that’s a lame and contrived line.  Minus some points for that one.

Question 14:  Guiliani catches on and invokes Reagan’s name.  Reduce government by attrition.

Question 15:  Brownback is a butt hook.  As soon as you start talking about how you can affect the markets as president, you’ve lost my support.  Let the providers increase supply if the market demands it.

Question 16:  Thompson looks like he’s reading his answer.  If he is, he should find someone to write a better answer for him.  He didn’t even name one program that needs to be eliminated.  And he got busted for it.  He immediately goes to his own department.

Question 17:   And Ron Paul names three DEPARTMENTS that need to be eliminated…not just programs.  I love this guy!  He is so on point it is unbelievable.  When have we ever had a Department of Homeland Security in any of the other wars we won…why do we need it now?

Question 18:   Gilmore is riding Ron Paul’s coattails in talking about making people independent of the government.  Pimps his website and blog.  I can respect that.  🙂

Question 19:   Hunter attacks China for devaluing their currency.

Question 20:  Tancredo has to think about whether or not debt is bad.  Everyone is now questioning the federal government’s role.  Ron Paul may not be able to win, but he’s moving the debate in the right direction.