The Conservative’s Welfare Plan


Let’s face it – welfare just isn’t working.  There is a lot of money being spent, but a lot of it is being wasted, to the point that kids are showing up at school hungry despite all of the food assistance money being sent to their households.  The issue is the same one that is always seen when you try to run something through central planning – those setting up the program don’t have the ability or the time to customize it for every person or region, so they create something that really doesn’t work for everyone.  In addition, the power created through centralization leads to fraud and abuse.  We need a better way to do welfare.

 

Some people are incapable of taking care of themselves and therefore need to be handed food, clothing, shelter, etc….  Others could take care of themselves but choose to game the system instead, taking resources from those who really need help (for example, those who abuse Medicaid to abuse prescription pain medications, making it more difficult for those who need the medications to get treatment) .  Rather than a check in the mail or an Obamaphone, many people really need a firm but caring “no” and perhaps an offer of something like a job or job training to get them back on track and being productive (and happier in the long run).  Some parents are struggling and sacrificing for their children and just need a little help to make ends meet, but others just ignore the children and spend all of the money on themselves.  Others have addictions, where giving them money just helps buy the next shot of heroin or fifth of whiskey.  A centralized program, with an army of government workers who quickly have any desire to change the system beaten out of them, gives you what we have:  fraud, waste, abuse, and a lot of hoops for those who really need help to jump through.

              

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The Conservative’s welfare program would rely on free-enterprise.   There would be a plethora of well-funded local groups that provide food, shelter, job training, and other assistance to those in need.  Because they were local, they could learn who really needs help and what kind of help is needed, be it a sandwich or a connection to a next job.  These groups would compete for donations by showing the good works they were doing.  Those who were effective at meeting needs would grow and receive more donations.  Those who were wasteful and ineffective would go out-of-business.  People could decide what was needed and direct their donations there.  If something got over-funded, to the point people for the charity were building palatial offices, people would donate somewhere else.

The issue with going to such a system is converting from what we have now.  Because people are already having a good portion of their tax dollars, on the order of 50%, going to welfare, it would be difficult for them to give additional money to charities (although a lot of them do).  It is also difficult to eliminate existing programs in order to cut taxes to allow for more private giving because there are always tragic cases for those that want to keep the power in Washington to parade in front of the cameras.  Luckily, there is a simple solution, and it would require very little effort.


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Here’s the plan:

Allow individuals to deduct their contributions to charities that provide services that replace government programs (food, shelter, job training, clothing, health care, etc…) directly from their taxes, dollar-for-dollar, up to 10% of their income.  Then, as the needs in different areas are met by private charities, discontinue the government programs, keeping them in place in areas where the needs are not met. 

Here’s why this would work:  

Right now, individuals are taxed, their money taken to Washington.  Washington bureaucrats making high six-figure incomes then hire an army of civil servants making high five-figure incomes to disperse the money they collect to programs such as food stamps and section-8 housing/HUD.  A lot of the money collected is lost in the process, plus the money is not distributed efficiently, resulting in bad results and/or an enormous cost.

By allowing individuals to give the money directly, which they would do if given the choice of giving it to causes they believe in or sending it off to Washington, groups that meet the needs of the poor and disadvantaged would be funded.  Because more money would be available, more groups would be developed and compete for funding by trying to do the most good at the least cost.  By limiting the amount that could be given, there would still be funding for things like Defense and essential government processes.

Advantages:

  • There would be more money available for the needy since there would be less waste.  Wasteful charities would change their ways or go out-of-business as more efficient competitors emerged.
  • People would be helped locally, meaning the charities would be designed to meet their needs, rather than some global need.  We’d see things like families being provided directly with food that met their dietary requirements rather than a check being sent to the home that gets spent on cigarettes and lottery tickets.
  • There would be enough different groups and people working within those groups to determine how to best meet the needs of those around them and actually improve society.  Imagine the minds who create things like the smart phone and FaceBook working on addressing the needs of society!
  • Needs currently not being met would be addressed as individuals looked for new charities to start once the space for things like food and housing became crowded.  Maybe there would be groups who drive people to job interviews or help those who are victims of crime right after they are robbed or assaulted.
  • Taxes could be lowered as needs were addressed more efficiently.
  • Those who are able to take care of themselves would be transitioned into productive members of society with an income, which in turn would further reduce the burden on those currently paying for welfare.  It would also bring pride back to people, which could change futures and neighborhoods.
  • Payers would feel good about their donations rather than feeling bad about needing to pay taxes.  There might be less tax-cheating.


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So in the end, we would all pay less in taxes, there would be more people working and producing things, which would make society wealthier, people would be seeing their needs met more efficiently and with less red-tape, and we would end the cycle of poverty, bringing pride to individuals.  If this sounds good, forward a link to this post to a friend or your FaceBook page.  Then, write your Congressman and your local newspaper.  We can make society better if we all work together for change.

Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Having a Great Vacation without All of the Money Stress


Summer is the season of vacations and judging from the current hotel rates, people are back out in force.  Hotels, airlines, and rental car companies all suffered when housing prices collapsed in 2008 and people were no longer able to use their house like a piggy bank to reset their credit cards and continue spending money they didn’t have.  Indeed, many of those underwater in their mortgages were actually underwater because of all the equity they took out of their homes rather than a drop in home prices to below where they bought their homes.

Now that home prices have recovered fully, and then some, and we’ve seen that the end of the world did not come, people are whipping out the plastic once again.  Many are shocked by the credit card bills waiting for them when they return.  Bills that may be past due since the statement wasn’t sent out until after they left and was due before they returned – thanks Mr. credit card issuer.  Indeed, the attitude is often “I’m on vacation” so people stop worrying about the price of things and splurge a bit.  Hotels and shops love people on vacation.  (As an aside, why is everything extra and overpriced at the upscale hotels like the Hyatt, Hilton, Ritz, etc…. I mean you are already paying about 50% more for the room – couldn’t they throw in some things besides a fancy lobby to make it worth the extra cost?  Do they really need to charge $10 per day for internet and $4 for a bottle of water when it’s all included at the Ramada?)

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For some, this spending leads to remorse and perhaps fights when they return and need to face up to the costs.  For others, this leads to a great deal of aggravation while on vacation.  It’s not fun when you’re trying to scrimp and save your way through a vacation.  No one likes to be the gate-keeper when the kids want the $6 souvenir cup they will use once and then leave around the house for the next five years.

People who have built up pipelines can vacation without the stress – either during or after the vacation.  Recall that by pipelines, we mean sources of income beside a job, such as stocks or real estate.  The secret is to use the pipelines to fund the trip and plan the trip wisely.  Specifically:

1.  Determine your budget.  The first step is to determine how much from your pipelines you are going to use for vacations.  This could be a fixed percentage from all of your pipelines – for example, 10% from all of the income received from your assets for the year, such that your vacation funds would grow as your wealth and pipeline income grows. As another option, you could set up a specific pipeline just for vacations.  For example, you could put $10,000 in a mutual fund after a few years of working and then withdraw 10% of the funds each year to pay for a vacation.  When you are just starting this would be meager – only $1000 – so you might need to supplement with some of your income from work, but this would grow with time.  You could also add funds each year – maybe $2500-$5000 each year – until it reached $40,000 or so and then it would generate enough for a nicer vacation.

2.  Plan your trip scaled based on your budget.  Let’s say that you have $2500 for a vacation.  You might choose to drive to the beach.  Figure up gas, hotels, and money for activities, food, and souvenirs.  Add or remove nights as needed, or find ways to reduce costs like choosing a cheaper hotel if you are over your budget.  Budget in maybe $50 extra each day for things you don’t know about yet.  From experience, plan about $100 per day for food for a family of four at moderate restaurants.  Add more for dining at a fancy restaurant or less if hitting the fast food for a meal a day.

3.  For things that will be fixed, like hotels, gas, and amusement parks, fell free to pay with debit.  The cost of these things are relatively fixed, so it makes no difference if you pay with debit or cash for them.  You really don’t want to walk around most places with $2500 cash in your wallet, plus the hotels and rental car companies will give you endless grief if you pay for cash since they want a way to charge you if you make a phone call or break something.

4.  For things that are variable, like food and souvenirs, consider bringing cash.  You don’t feel the same twinge from a $150 meal when you drop down the credit card as you do when you lay out eight $20 bills, so you will tend to spend less.  Plus it is much easier to track your spending when you have cash.  You can also set limits for the children and yourselves by using cash.  Give the kids $10 each for whatever they want that day from the shops and you won’t need to tell them yes or know when they want something.  If you limit yourself this way, bring a little extra cash in case there is something you weren’t expecting, but keep it in a different place so you know you’re blowing your budget for the day.

5.  Agree on the plan before the trip.  Remember that you and your spouse are in this together.  Agree on the amount you want to spend on the trip and have for extra spending cash.  Agree on the itinerary, which level of hotels you’ll stay at, and what you’ll do for meals.  Remember that it is more fun to have plenty of cash than to scrimp and save, so it is probably better to shorten a vacation than try to vacation on $25 a day.  You can stretch a budget, however, by maybe buying some food and lunching in the room.  Be sure it is an agreement and not one side forcing their will upon the other.

6.  Tap the pipeline.  Just before the trip, withdraw the money for the vacation from the pipeline and place it in your checking account so it is ready.  Get needed cash, and you’re ready to go.

                   

Please contact me via vtsioriginal@yahoo.com or leave a comment.

Follow me on Twitter to get news about new articles and find out what I’m investing in.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Finding the Right Stocks to Invest in


When I wrote and published the SmallIvy Book of Investing: Book1: Investing to Grow Wealthy, I covered a lot of the information on how to invest, including what the different types of assets are (stocks, bonds, mutual funds, warrants, LEAPs, REITs, and options) and what the risks are when you purchase these assets.  It also covers how to use investing, along with management of your money from work, to grow wealthy and have a good chance of becoming financially independent by the time you are in your mid to late forties, assuming that you start right out of college (or even in high school).


 

A question I would often get, however, is:

How do I find stocks to invest in?

To answer that question, let’s take a look at the type of company that you want to invest in, assuming you’re following the advice in  the SmallIvy Book of Investing: Book1: Investing to Grow Wealthy and buying great companies and planning to hold them for a long time.  If you’re instead planning to trade stocks – trying to time the market or find stocks to hold for a short period of time – I wish you the best of luck, because I think you’ll need it.  After several years of trying to do the same thing, I learned that I would have gotten a better return just investing in index mutual funds.  (See, for example, Bogle On Mutual Funds: New Perspectives For The Intelligent Investor (Wiley Investment Classics) to learn about this very sound investing method).  The way to have a chance to outperform the markets with individual stocks is to find great, growing companies and then plan on holding them of a long time, through good times and bad.

If the Loveless Cafe, near Nashville, TN were a publicly traded company, that would be the kind of stock you would want to own.  They have a top-quality product (fantastic southern food in a unique atmosphere) with few real competitors in the area.  They are fortunate in that a lot of people think they can cook and open southern-style restaurants, but most of them can’t cook.  Those who become chefs end up cooking fancier fare and also tend to open places in the bigger cities rather than out in the country, and therefore don’t compete. For more information on The Loveless Cafe, check out Meet Me at the Loveless or one of the other books below (just click on the image).

Part of the charm of the place is the location – it is just on the side of the road in what used to be a motel.  It is close enough to Nashville that people visiting the Music City can head out there for dinner after a day shopping and seeing the sites in Nashville, but it is remote enough to be memorable.  The remoteness also helps in that if you want a snack or a drink while you’re there, you almost need to pay the high prices they charge in the stores surrounding the restaurant since they have an effective monopoly.  (In actuality, there is a gas station with a store right next door, but they keep it hidden from sight on the property with hedges and such – smart.)  Having a lot of available free parking, to me at least, also is a draw.

More than just being a country diner, The Loveless Cafe is a name and a destination.  They can sell shirts, bags, and hoodies with their logo plastered across the front and people will pay high prices to buy them.  Think about that – owning a business where people from all over the world will pay you to advertise for you!  Few other restaurants have been able to accomplish this feat  Some examples include The Hard Rock Cafes, Planet Hollywood, and Joe’s Crab Shack.  There are other restaurants that are successful, but no one is going to pay to wear their logo.  In fact, most people probably wouldn’t wear something with their logo even if it were given to them.  Would you wear a shirt advertising Red Lobster, The Olive Garden, or Outback Steakhouse?  These are all great restaurants, but they are not destinations and tourist attractions in their own right.

As it stands today, The Loveless Cafe would not be a good investment as a SmallIvy, grow wealthy over time through growth, stock.  It would be a great income investment since I’m sure that the restaurant generates a ton of cash each year.  Even though their prices are very reasonable in the restaurant (not so much in the gift shops surrounding the restaurant), they pack people in every night from opening to closing.  The issue is that they currently don’t seem to have a plan to grow – they are happy just doing what they are doing in one location.  A great growth stock requires that the profit the make each year increases – not just that they do a lot of business.

The amount of income you produce is proportional to the number of people who you serve.  If the Loveless Cafe were to be sold to a family or a corporation who desired to expand operations, opening additional locations and also expanding the lines of products they sell directly to consumers off-of-the-web, they would then be instantly transformed into a great growth company.  So that is what you need to look for when selecting a company:

  1.  Find a great brand with few real competitions, at least in the same class of the company.
  2. Make sure the company has the ability to expand.
  3. Make sure that the company has good management. (Just look at their track record.  If they have had the ability to steadily grow the business each year while taking on a reasonable amount of debt, if any, they are good managers.)

Have a question?  Please leave it in a comment.  Follow me on Twitter to get news about new articles and find out what I’m investing in. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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