Tag Archives: Free Enterprise

Are Working Women Choosing the Wrong Guys?

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Traditionally women sought out guys to marry who showed that they could earn money and provide for a comfortable lifestyle.  Looks and personality were also factors, and certainly some women married guys with few prospects to provide an income out of love, but the ability to earn a living was always important. At one point in history this was probably the guy who could hunt and build a cabin, or who had land and could raise crops and animals, but with time it morphed into the guy who could earn a six-figure salary.  The guy with the nice car, nice clothes, and nice watch was the one who got the girl.  Guys would buy the meals and pay for everything on dates, give gifts, and even give an expensive diamond ring when proposing in part as a way to show the ability to provide.

For many guys, attractiveness, both physical and inner beauty, were important factors when looking for a wife.  Finding someone who was fun to talk to and nice to be around, and someone who was caring and nurturing, could also be important factors.  Few guys really cared about a woman’s ability to pay for things because they had always assumed that they would be earning money for the family.  Many guys might even feel intimidated if a woman earned more than them and was the primary breadwinner, and therefore not even seriously consider a woman who was more successful.  Likewise, many women would not respect a man who earned less than them.

Gender roles are all changing, however, with many women are choosing to primarily focus on a career.  Women are moving into top roles at companies and gaining parity with men in many fields.  There are even more women attending college then men in the US, so it only makes sense that many women are moving into the position of primary breadwinner.

Given this shift, one would expect more men to be taking the role of caring for and training the children, along with managing the household since it would make more sense for the wife to work.  Given this trend, you would therefore expect women to start seeking men who would be better at raising children.   You would expect them to be looking for men with qualities such as patience, concern, devotion, communication, an ability for multi-tasking, and selflessness instead of seeking the type-A personality with little patience who is quick to anger.

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And yet it seems as though men’s role has rarely changed, so we have ended up with scenarios in which both parents work and where both are heavily focused on their careers.  This can result in some high household incomes, leading to the generation of lots of tax revenue, but it leaves the children being raised by others or by themselves.  It is as if both parents have decided to leave the cave and hunt because the hunt has become such a focus that both parents have forgotten why they were hunting in the first place.  Society has suffered as the internet and television has raised the last generation of children and imparted its morals upon them, the morals of Harvey Weinstein and individuals in the darkest corners of the world.

Maybe it is time for career-minded women to seek out men who can better fulfill the role of primary caregiver and mentor for their children instead of choosing men based on their ability to provide.  A woman who can ear a six-figure income doesn’t need a man who can do so as well.  Most people who really crunch the numbers will find that a family will actually come out better on one income with a spouse spending time doing things like preparing meals at home and taking care of the children than they will with two incomes.  In addition, time spent in childcare for one’s own children is tax-free, where extra income made at work is taxed at the highest rates.

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Our children really need to become more of the focus.  Why wouldn’t we want to spend time training our children to be good, self-sufficient citizens that share our values and make the world better rather than creating the next report or presentation that will just be forgotten in a week?  Children are our greatest legacy and will make far more of an impact that anything most of us will do in the office.  Why would we be satisfied to pay a stranger minimum wage to simply watch our children rather than to make sure our children are educated, motivated, and cared-for?

So what do you think?  If you are a woman who is focused on your career, would you marry a guy because he would be a good parent instead of finding someone who would be a good provider?  If you are a guy, would you be satisfied raising your family instead of going into work each day, and would you feel important doing so?

Got and investing question? Please send it to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles. @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.

What do you think?  Please leave a comment?

Contact me at vtsioriginal@yahoo.com

Follow on Twitter to get news about new articles. @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.

An Update on The Kiosks are Here!

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About a year ago I wrote the post below after seeing an ordering kiosk in a McDonalds down in Alabama.  I was in our Hardees last night, and they now also have kiosks in addition to a single person taking orders.  It looks like order takers will be replaced by kiosks and smart phone apps very soon.  The way to fight back is to give great customer service, making the restaurant make more per hour than your salary by your being there instead of a cold, humanless machine.

McKiosk?

McKiosk?

I was reading a stat this weekend that one in three working people were in a union in 1970 but only one in ten are now.  The author of the editorial used this to explain why wages have stagnated, but I took a different meaning.  Given that once a company is unionized it is virtually impossible to de-unionize it, this statistic means that we saw a lot of union jobs go away, forever.  A drive through Detroit (with your windows rolled up and at top speed, not stopping at the lights) would also show the effect of trying to force companies to pay a worker more than what the value of what he was doing was worth.  This, combined with absurd work rules (in some union car plants, you needed to continue to pay workers who sat and read the paper in a room in the plant if you didn’t have enough work for them), has chased a lot of companies out of the country or just out of business.

Now the same folks who brought us the unions and ran great American cities into the ground have their sites set on minimum wage workers.  With demands of $15 per hour wages, organizers are convincing some  misguided fast food workers (many workers wisely don’t participate because they can do the math) to protest at their place of business.  Note that the average McDonald’s worker produces about $13.50 in value for his/her company, so the company would be losing $1.50 per worker per hour if they paid $15 per hour.  Multiply that by thousands of workers, and you would see millions of dollars in losses each year.  No company could withstand that.

The solution for companies faced with rising labor costs who can’t just move out of the country as did the factories is to cut the number of workers.  Enter the ordering kiosk.  The picture above shows kiosks I found at a McDonald’s in Florida last week.  There were six kiosks setup and they were getting a lot of use by the customers without many complaints.  I went ahead and ordered at the counter (I like to support the workers, plus I would rather have a person help me with my order than go to a machine), but a lot of others chose the kiosks.  Smart phone apps are also being rolled out.  Raise costs enough and you’ll just have a cooked burger appear on a conveyor belt and you would add the toppings yourself.  The restaurant would just need to employ a couple of people to load the burgers into the hopper.  They could eliminate the need to clean by just making it a drive-thru with no table service.

People with three kids and a home should not be in these jobs.  These are jobs for teenagers and young liberal arts majors to take as a first job to learn the skills needed to get the next job and move up the ladder.  If you take these jobs away by raising the minimum wage or by protesting until McDonald’s and other employers relent, you’ll be cutting off this critical pathway to a better life that a lot of people need.  You can’t get a job without experience, and without minimum wage jobs, you can’t get experience.

So if you’re a fast food worker and want to keep your job, what can you do?  Be the best worker that ever existed.  Show up ten minutes early.  Leave your cell phone in the car and concentrate on doing your job to the best of your abilities.  Smile at the customers.  Help them with their orders.  Make suggestions for them to save a few cents by bundling items.  Provide value for your employer so that they have more business because of you.  Make customers visit your store to see you, rather than go to the place across the street with the kiosks.  In short, act like you work at Chick FilA.  Plus, don’t demand to be paid more than you create.

Got and investing question? Please send it to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles. @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.

What do you think?  Please leave a comment?

Contact me at vtsioriginal@yahoo.com

Follow on Twitter to get news about new articles. @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.

How to Fund Everything without Filling Out Tax Forms

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A while back, probably right after I’d finished filling out my income tax forms for 2010, I made a post about a tax idea called the Fair Tax.  The beauty of the Fair Tax is that it would eliminate all of the hassles involved in paying taxes.  Income taxes, Social Security, and other Federal taxes would be replaced by a single sales tax on goods and services when purchased (a national sales tax).  Because taxes would be figured out and charged automatically when you purchased something, you would no longer need to keep track of expenses, have tax-deferred accounts, set up medical savings accounts, 401ks, IRAs, etc… and go through other hassles.

You would simply receive your whole paycheck each month and then spend or save as you choose.  One benefit beyond the simplification of tax compliance is that saving would be rewarded while spending would be penalized.  The current system encourages spending and borrowing, through tax breaks for things like business expenses and the mortgage deduction, and penalizes earning.  This means that under the current system there is a disincentive to grow businesses or work harder because more of your income is taken the more you earn.

The Fair Tax is prevented from being regressive, or level in any case, through the use of a prebate.  In the prebate, a certain amount is refunded to each person each year at the beginning of the year.  For example, if the sales tax is 10%, and $3000 were prefunded to everyone each year, then no one earning less than $30,000 would pay any taxes that year ($30,000*10% = $3000), even if they spent their entire paycheck on taxable goods and services.

One issue with implementing the Fair Tax is the radical change to the tax system.  We have spent so many years having taxes taken from our paychecks and doing things to reduce income taxes that it would be a big shock to the system to see it changed overnight.  Imagine the shock of going to buy a new car and seeing a 20% tax added to the top of it!  Never mind that you have 20% more cash in you pockets – you still see that big tax on the car.  You were paying that big tax before, but it was taken in small increments so you did not see it all at once.  There is a way, however, to implement the tax in a way that will be a smaller shock on the system.

(Never read The Millionaire Next Door?  It is a must for anyone wanting to actually become a millionaire.)

Currently about 50% of people pay no income tax at all.  In fact, many get cash given to them by the tax system since they receive a refund through the Earned Income Tax Credit.  This means that implementing the Fair Tax to replace the tax payments of the lower 50% of earners would not require a large sales tax since the amount of revenue collected from them is mainly Social Security and Medicare, which aren’t large amounts of money.  Also, implementing the Fair Tax would enable taxes to be collected from those who currently don’t pay taxes – those who get paid under the table and/or have illegal sources of income (drug sales, prostitution, illegal labor) – since they would also be charged the sales tax when they spent the ill-gotten money.

If the Fair Tax were implemented only on people making $60,000 per year or less say, it would only be necessary to have a sales tax of about 5% or less.  This means that everyone would see a prefund each year of $2000 (5% x $40,000) and see their sales taxes increase by about 5%, assuming that it is desirable to continue to see 50% of the people pay no income taxes.

After a few years of seeing those at the low-income levels not need to file taxes and also seeing how the system worked, those in the middle and upper-middle classes would probably want to join the system.  The threshold for the Fair tax could be then be ratcheted upwards as political winds allowed.  The prefund would need to be ratcheted upwards as well since the level of the sales tax would need to increase as the income level of the Fair Tax threshold increased.  This is because in order to generate the same level of revenues the sales tax percentage would need to increase since those at the higher income levels are paying a larger portion of the taxes.  If the Fair Tax were ever to fully replace the income tax, including for those in the top 1% of earners, the rate would be about 23%.  It is thought, however, that the drop in the expenses paid by businesses for tax compliance and tax avoidance would allow them to charge less for the goods and services; therefore, the actual price of the goods might stay about the same.

If you like this idea, please tell a friend – let’s get rid of the IRS!

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.

The Evil of Income Taxes

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When America was founded, there were no income taxes – just taxes on goods and on trade.  It wasn’t until about 150 years after the country’s founding, there was no income tax.  And there is a good reason for it.

Have you ever really thought about income taxes, and what a country is doing by imposing an income tax?  Most other taxes involve doing something.  You want to buy something, so you pay a tax when you make the purchase.  The tax helps fund the protections that allowed that marketplace to function.  You want to travel somewhere, so you pay a tax when you make the trip.  The taxes help cover the cost of the roads and protections along the route.  In both cases you want something that involves help from the government and use of government services.

With an income tax, you really aren’t doing anything or asking anything from anyone.  All you are doing is producing things.  And you have not even necessarily gotten anything for the items you produced yet – you just have a bunch of IOU’s that will allow you to purchase things later.  People just come to your home (symbolically, unless you don’t pay your taxes), see that you have produced something, and demand that you give up a share of what you have made.

Imagine if you had spent all summer growing corn.  In the Spring you dig up the ground and get everything ready.  You plant the seeds and spread fertilizer out.  All summer long you water, pull weeds, and chase off crows.  Finally, in the fall, you spend hot afternoons and evenings picking the corn and storing it away, until your barn or silo is full.

Then someone comes along and says, “You owe me 15% of that corn.”

Now I’ll agree that part of your money goes towards things that government provides that enable you to make an income.  The government provides the protections that are needed to allow you to focus on running a business or working in a factory.  The government provides roads and infrastructure that allow you to ship goods and travel to and from work.

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And actually, my example isn’t quite right.  If you just grew the corn and then stored it away, I don’t believe you would owe income taxes.  Things you produce for yourself are generally not taxed.  And that’s the really strange thing.  When you do things selfishly for yourself – build a home for yourself, grow food for yourself (and you family), or make clothes for yourself, you pay no taxes.  You could even make yourself a yacht or a private plane, and you would owe no taxes (if you produced all of the materials yourself).

If you do things for other people, however, like grow food for them, build houses for them, or make clothes for them, you are taxed.  And the more you do for other people, the more you are taxed!  If you make a few clothes per week and maybe provide clothes for 100 families during the year, you’ll be taxed at 10%  If you manage a group of people, making clothing for 10,000 families a year,  you are taxed at 25%.  If you run a company that provides clothes for hundreds of thousands of people, you’re taxed at 40%!

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So think about that – the more you do for others, the more you produce, the more you make the lives of others better, the more you are taxed.  Does that sound like a good system?

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

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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.

Picture Credits:  Kevin Abbott , downloaded from stock.xchng.

How to Live Like a Millionaire

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Many would love to live the millionaire lifestyle.  Spending each day at the beach, on the golf course, or in exotic resorts around the world.  Each night would be parties and galas.  Perhaps a random trip to the office to check on things and grab some cash from the safe.

Sadly, that is not the normal lifestyle of the typical millionaire.  As chronicled in The Millionaire Next Door, the flashy lifestyles seen are those of people who have a large income, but probably would be on the streets within six months of losing that income.  Most millionaires work a lot harder than most other people.  They forego a flashy lifestyle, instead saving religiously and judiciously buying things that will increase in value rather than drop.

(Never read The Millionaire Next Door?  It is a must for anyone wanting to actually become a millionaire.)

Millionaires could afford to buy new cars every few years, but they choose not to because they know they are a wasting asset.  Likewise they could buy big, flashy mansions in new subdivisions, but instead they chose to buy modest houses in older neighborhoods since they cost less to maintain and the rate of appreciation for the neighborhood can be judged from its history.  Whenever they make a big purchase, it is something that will grow in value such as fine furniture, works of art, or properties.  They minimize the amount of money they put into things that go down in value (such as cars).Millionaires also tend to own their own businesses.  It is much easier to become wealthy when doing something that allows each of your hours spent at work to be multiplied.  For example, if you work for someone, you may get paid $30 per hour.  You can earn more by working more hours, but you still only get $30 per hour.   If you work for yourself and use the time to design and market a product, you can get paid each time someone then buys the product.  If you write a novel, you get paid each time someone buys a copy of the novel.  If you own a movie theater, you get paid more if more customers attend the movies and buy popcorn.

Having people working for you also multiplies your time since for each hour you spend supervising, several other people are working to increase the money your business earns.  If you hire effective people and manage well (eventually hiring other effective managers), the more people who work for you the more money you can make for each hour of your time.  Note that even doctors and lawyers don’t make a lot of money because of their salaries.  They make a lot of money because most of them own a practice or are partners in a law firm with people working under them.   They are business owners.

      

So, if you wish to become a millionaire, here are some tips:

1) Spend less than you make, and religiously put money away into assets – things that grow in value and eventually provide an income.  Note that investing in your own business can be an asset.

2) Start your own business, or find something to do that multiplies the value of your time.  This is a tough step for many to take and requires a certain type of personality, but it definitely makes becoming rich a lot easier.

3) Cut down on expenses and payments as much as possible – it is easier to invest and save if you do not have every dollar spoken for before you earn it.

4) Live below your means.  Have a smaller house, older cars, and take less exotic vacations than your level of wealth and income will allow.

5) Make smart purchasing choices.  Bring in drinks from home rather than hitting the vending machine every day.  Bring a lunch in rather than eating out all the time.   When you do eat out, have a water and save $2.50 plus taxes per meal.

(Save money by bringing your own water bottle and skipping the vending machines. Shown: CamelBak Eddy Water Bottle, 0.75-Liter, Cardinal.)

6) Plan your success.  Don’t simply hope your investments will grow.  Make a budget, plan how much you will invest each month, then stick to that plan.  Good luck generally comes to those who have set themselves up for success.

7) Work hard.  Whether you own your own business or work for someone else, you can plan on working harder than most other people if you want to become wealthy.  Additional money earned generally is available for investments since other expenses have been taken care of.

8.) Hire people to perform tasks you are not skilled at doing.  Most millionaires would not work on their own cars, repair their own sinks, or cut their own grass unless it was a leisure activity for them.   Millionaires would rather spend the time doing what they do best or with their families than doing tasks that they can hire someone to do who will do a better, faster job.  If you will take 8 hours to fix a sink and could make $400 in those eight hours at work, it makes sense to hire a plumber at $150 and instead work the extra hours.  Even if it only takes him 1 hour because of his experience and tools, you come out ahead.

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.

A Missed Chance to Change American Healthcare History

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Regular readers to the blog will remember the “Parable of the Pipeline,” which was created by Burke Hedges.  This is an excellent analogy to show how the rich become wealthy and why the “normal” person doesn’t.  (You can buy your own copy by clicking on the book cover below.)

To paraphrase:

Once in a town in Spain there were two brothers who were paid for each bucket of water they carried from the spring to the village.  They each worked hard and made a reasonable living.

One brother went out at night and had big meals and wine with friends, spending any money he had left after paying for his basic needs.  He saw a lot of money go through his hands with little to show for it, but he was not concerned because he was young and healthy.  Whenever he needed more money he simply worked harder, carrying more buckets.

The other brother also worked hard, but he spent his nights building a pipeline from the spring.  He spent any surplus money he had on materials for the pipeline.  While his brother was spending his money on fancy meals and good wine, he was eating a simple dinner he brought from home in the field.  While this brother was buying fancy clothes, he was content to buy durable, functional clothes that would last a long time.

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The first brother ridiculed the second brother, saying that he was wasting his time and not enjoying life.  He and the other men and women in town laughed at his simple clothes and pipe dream.  “We have always carried buckets from that well,” they would say.  “Our parents were bucket carriers, and their parents before them.  Quit wasting your time on this fancy.”

But the second brother continued to work on his pipeline each chance that he got.  Finally, he completed the pipeline all the way to town.  The second brother was now able to bring as much water to the village as he ever could in his youngest days simply by turning a valve.  If he also carried buckets, how could easily sell twice as many buckets as his brother could. 

When he was sick, his income did not decline.  He would travel and still have the same steady income.  He could now buy nicer clothes, using the income from his pipeline, and still have his whole salary to pay for his needs and materials.

Because he did not need to work as hard to provide for his needs, the second brother could now spend more time working on his pipelines.  Because he had even more surplus money, he could also hire others to help.  As time passed he used his wealth to build more pipelines, eventually becoming very wealthy.

As they grew older, the number of buckets each brother could carry each day decreased.  The first brother, no longer able to work, saw his income decline, making it tough to pay for necessities.    The second brother, however, was able to live comfortably on his income from the pipelines.

Note in this parable no one was cheated.  The second brother did not build his fortune by taking advantage of his workers – he paid them what they considered a fair wage for their efforts.  It is true that he worked harder for his income when carrying buckets than when he was using the pipeline he built, but he certainly worked very hard when building the pipelines and he delayed using the fruits of his labor in order to build them.  He was using his income in a smarter way than the first brother was using his – something the first brother could have done had he chosen to do so.

There is currently an assault on those who have built their pipelines and are now receiving the fruits of their efforts.  Jealousy and envy are being used as tools to divide.  So that people will not notice the political promises that have not been kept (because the economics made it impossible to do so), the blame is being placed on those who saved and invested.

Other books by Burke Hedges that you should read:

This nation is great because of those who have built the pipelines.  Henry Ford created a way that would allow average people to own an automobile and in doing so created the factory, employing thousands.  Sam Walton filled the need for a greater selection of products at prices the average person in rural communities could afford and in doing so raised the standard of living for thousands.

Even those who did not found multibillion dollar corporations, but who did save and invest so that they had a few million dollars by their 50’s benefit society.  They ensure that they will not be a burden on others as they age.  They also have the means to help individuals and organizations in their communities (as many do).

If we are all bucket carriers who spend every dime we will not be able to take care of ourselves in old age.  If we tear down all of the pipelines out of envy there will be less for everyone.  Less money, less taxes, fewer jobs, and fewer goods.

We will be like a lake full of frogs who find that the pond is dry.  As an old Texan once told me, when the pond runs dry, frogs eat frogs.

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.

Picture Credits:  Kevin Abbott , downloaded from stock.xchng.

A Missed Chance to Change American Healthcare History

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I’m extremely disappointed that one of our Senators, Lamar Alexander (R-TN), went along with nine other Republicans and all of the Democrats and voted against the straight Affordable Care Act  repeal bill put forth in the Senate the other day.  The repeal would have been phased in over two years, giving plenty of time for people to shift to new health plans (that would become available once the markets were freed to sell insurance plans that people wanted, rather than those mandated by the government) and for Congress to pass free-market measures that would reduce the cost of healthcare such as mandated Health Savings Accounts, transparent pricing,  and portable health insurance, sold to individuals instead of through work.

When I wrote to Senator Alexander about the repeal of the ACA, he said that he would not vote for any bill that caused people to lose access to health insurance.  Yet Obamacare is imploding as we speak, and it is likely that many insurance markets will have no providers, so people will lose coverage.  Others will have only one or two providers, and those ones will charge so much that those who can’t afford standard health insurance won’t be able to afford the Obamacare plans anyway, so people are losing their health insurance even if Congress does nothing.  And even if people have insurance, that doesn’t mean they have access to healthcare through their insurance.  Many people right now need to pay thousands in premiums and thousands for their deductible even with the Obamacare plans, so they end up needing to spend $10,000 or more per year before their insurance covers anything.  How is this helping them?

And what about Senator Alexander’s other constituents?  How can he vote to protect a small subset of the people in Tennessee while forcing the majority to pay for their protection.  I strongly believe that individuals should voluntarily provide for those who they find in need due to circumstances.  Certainly we need to care for the 21-year old who gets brain cancer and needs expensive treatments.  We need to help the young single mother who has a child who need round-the-clock care.

But think about what we’re doing by enacting forced welfare.  We’re telling productive members of society that they must surrender a portion of their income to us to give to someone else, either through taxes or by forcing them to purchase subsidized health insurance on a sliding payment scale, or we will go to their homes and seize their property and/or throw them in jail.  We are taking people’s money by force and giving it to other people, some who truly have no other way, some who simply choose not to produce, and some  who are unable to take care of themselves because they always have made bad choices and continue to do so.

In many ways, forcing everyone to contribute to what is effectively a public healthcare system, which is poorly run, has an inferior product, and is way over-priced as all public systems are (see public schools for another example) is worse than simply having taxes and providing overpriced, poor quality benefits (see Medicaid) to those who qualify for them.  At least with just taxes people can take whatever money is left over and maybe get better healthcare than what is available in the public system.  By forcing people to buy into the public system (which is what you’re doing when the government fully controls the insurance offered and the prices that can be charged, even if private companies are providing the insurance), you take away that ability for all but the very wealthy to find better healthcare since they have no resources left with which to do so.  Note the similarity with public education, where because people are already paying for the public system through property taxes, only the very wealthy are able to afford private schools, even in places where the private schools are far superior.

But what about the people being helped by public welfare programs?  At least it is a good thing for them, right?  Maybe not.  Think about people in your family who could get a full-time job and take care of themselves, but choose not to.  This is different from a family member who loses a job and needs to move in for a couple of months or needs some help with the rent until they get back on their feet.  This is someone who always has an excuse about why they can’t work here or work there.  Often there is someone in your family who is an enabler – a very sweet person who pays for the food, apartment, and lifestyle of the non-working family member.  In doing so, the needy family member never gets a job or makes anything out of their life.

When we give through private charities, the charity is normally able to do a better job of figuring out who truly needs help and who would be better served with a kick in the pants.  Public programs often give money out blindly, and often even encourage individuals to not work or do anything or the hand-outs would decline.  Get a job, you see your housing allowance cut.  Have another child, see your food stamps payments increase.  If you’re religious, imagine needing to stand before God, having had two good arms, two good legs, and a good brain and having done nothing with the gifts He had given you.  If you’re not, just imagine spending your whole life and doing nothing of value.  How kind is it to encourage others to face that fate?

Contact me at vtsioriginal@yahoo.com, or leave a comment.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. 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. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Fixing the US Health Payment System: Repeal and Remove

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Many say the US healthcare system is broken, but they are wrong.  To see a broken healthcare system, go places like Vietnam and see people dying on gurneys in hospital corridors, or even Great Britain  to see people waiting months for critical procedures.  See also cases like Charlie Gard, where the government of Great Britain is basically telling the parents that they must just watch their child die, forbidding them from going and get care elsewhere.  Because the waits are so long, “good” Canadian insurance includes a clause that allows for treatment in the US if the lines are too long in Canada.  In the US you can almost always get into see a doctor the same day or at least within a couple of days, which is not true in many countries.  Even if you don’t have the money required to pay for care, you can still get the care needed to preserve and even better your life through the emergency room.  You may get a bill, but the hospital will just write the cost off and pass it on to other patients who have insurance.  No one is dying in the streets for lack of care.
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The issue in the US is not healthcare, but the effects of health insurance and government programs on the healthcare markets.  Because most people get insurance through work, and because each insurance company has their own deals cut with providers, it is virtually impossible to figure out how much you will pay for a procedure ahead of time.  You might get the list price:  “Popping that pimple will cost $20,000 plus doctor’s fees, billed separately,” but the actual price you and the insurance will pay will be maybe 10-20% of the list price.  The trouble is that the person who goes in without insurance will need to fight to get a better rate, and that rate usually depends on how much the hospital thinks they can get out of them.  If you can pay $20,000, you’ll pay $20,000.  If you can only pay $200, you’ll pay $200.

Health insurance also distorts the cost of routine care at your doctor’s office.  They charge $120 for the visit and $500 for x-rays and screenings, but they know they’ll actually get $60 for the visit and $150 for the screenings from the insurance company.  If you knew you would be paying $60 for a visit and $150 for x-rays, you wouldn’t be willing to pay $1200 per month for health insurance – you would just pocket the $1200 and write the doctor’s office a check during the half dozen times your family went in during the year.  Put the rest of that $1200 away each month and you’d have the money needed for the times you did end up with a hospital stay or more serious issues.

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The issue is that you don’t know what things will cost and what you will pay because insurance has distorted the prices so much.  As a personal example, after a family member spent a couple of weeks in the hospital recently, we received a bill for $60,000.  Insurance reduced the amount down to $15,000, then we paid $3,000.    A $60,000 bill is scary.  A $15,000 bill is significant, but manageable with some savings and perhaps a payment plan, particularly if we weren’t paying $12,000 per year or so in health insurance.  Without insurance, however, we would have needed to fight the hospital to reduce the bill, and perhaps seen it cut to $20,000 to $30,000 after a significant back-and-forth since we don’t have the negotiating power the insurance company does.  If insurance did not exist at all, however, the hospital bill would have been $15,000 to start with since no one would go to a hospital charging $60,000 when another one across town was charging $15,000.  There would probably be a phone app that you could use from the waiting room to compare prices at local hospitals and you would transfer for a $45,000 savings.

The Affordable Care Act (Obamacare) has not brought healthcare to millions of people as some advertise.  Instead it has just amplified the issues caused by the insurance market by making all plans cover the same thing (everything) and forcing everyone to pay with insurance instead of paying out-of-pocket.  It has also added government subsidies, which have the effect of making health insurance cost “whatever you are able to pay” rather than being based on the value of what you receive in return.

In addition, while you may have insurance through Obamacare, it doesn’t mean you’ll actually get healthcare.  Customers are stuck with insurance policies that they cannot use since the deductibles are so high.  It doesn’t do anyone any good to have a policy with a $9,000 deductible since very few people would ever reach that level in a given year.  Even if they did, how many would have the $9,000 to pay?  They would be better off just saving the $4,000 to $8,000 they spent on the insurance policy and just paying for healthcare out-of-pocket.

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Even those who are now on Medicaid, which covers all of the costs, are having trouble getting care since the government is not reimbursing providers enough to make them want to treat Medicaid patients.  In California the free and reduced price clinics have gone away due to the ACA, but doctors are not accepting Medicaid patients.  One individual was quoted in a recent Wall Street Journal article who went to mexico for a critical gull bladder operation after waiting for months in the US for the surgery needed to save her life.

The actions needed to fix the US health payment system are actually quite simple and could be summarized as follows:

  1.  Repeal the ACA in its entirety.
  2.  Eliminate the tax deduction for companies that provide health insurance to their employees.  This would incentivize them to stop providing employer healthcare and just pay higher salaries instead.
  3.  Create a tax deduction for individuals who buy insurance.  This would further create the incentive for insurance to be something individuals buy instead of the norm to be to get health insurance through work.
  4.  Outlaw insurance with deductibles of less than $3000 per year for a family of four.  This would cause most people to pay for routine care out-of-pocket, which means they would be more sensitive to prices and shop around.
  5. Require that all doctors and hospitals publish their rates for procedures online and outlaw charging different people different rates.  Pricing transparency is critical to an effective, efficient market.  Prices would fall as people sought out the best deals for healthcare just as they do for everything else.
  6. Require that everyone put 10% of pay into an HSA.  This would ensure people had the money to pay for healthcare as needed instead of buying a bunch of other things and then not having money for the doctor.
  7.  Provide a direct tax credit for donations made to organizations like free clinics and hospitals.  This would provide a safety net for those between jobs or who were unable to work.  Individuals would be funding these causes directly instead of the money filtering through the government first.

Take these actions and the issue would virtually disappear.

Contact me at vtsioriginal@yahoo.com, or leave a comment.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. 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. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

A Love Letter to the American Press

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Dear American Press,

You have always been an important part of my life.  From a young age I remember sitting at the breakfast bar in our house, reading through the local newspaper.  When I was younger still, I remember that they brightly colored Sunday comics were always anticipated and savored each week.  Through my teens I watched the local and national news each night.  Your anchors and reporters became uncles and aunts to me who would visit each night to tell about things happening around town, around the nation, and around the world.  I particularly remember being impressed by the local weather man, Stu Tracy, who would throw up the suns and rain symbols that would magnetically stick to the map.  I never understood how he would remember just where each symbol would go and was disappointed when he stopped creating the map real-time, instead having it setup before the forecast.

In college I made the decision to spend an hour each day in a particular chair in the student union and pour through the Wall Street Journal, cover-to-cover, as well as Barrons on the day it came out.  I also remember the start of CNN and ’round-the-clock coverage during the first Gulf War.  How amazing it was to be able to be there in Baghdad as the American bombs were falling.  I remember the chill in the air as Saddam Hussein fired scuds at American troops and Israeli cities that could be filled with chemical agents, never knowing where one might land.

              

Yes, I have loved you for all of my life.  But to truly love someone also means to be truthful when that person is making bad decisions that are hurting her.  To act like things were just fine when someone you love it tearing herself apart is not love, but enabling.  Having someone speak up may bring about anger and resentment, sometimes causing an irreconcilable split in the relationship.  It would be far easier to stay silent and not bring up difficult issues, but that would not be love.  God says to treat others as we would like to be treated; that should go doubly for someone we love.  If I were destroying my life, I would want someone to tell me.  So here goes….

Your reporting is full of incomplete and biased information – even some flat-out lies at times – and that is causing people to not trust you anymore.

OK – there it is.  Right out on-the-table.  I know that you think that people are generally ignorant and even dull, such that they would not know that you were trying to manipulate them through the facts you tell and the ones you leave out, the words you choose, and even the stories you choose to cover and those you don’t.  But they are seeing right through you and it is causing them to turn away.   They don’t want to be around you because you’re trying to get them to believe an alternative reality and then to act accordingly.  You want them to think that nationalized health care is a great thing, while they see the premiums rise and their doctor networks shrink.  You want them to believe that higher taxes, government programs, and strong regulations are the road to happiness for the middle and poverty class, but they have seen jobs disappear, wages stagnate or decline, and poverty increase as these things have come to pass.

Bottom line:  They no longer feel like they can trust you.

          

Need a little Honesty?  It’s such a lonely word.

And you see, trust is everything for you.  People don’t buy your papers or watch your newscasts because they like your witty writing and snappy graphics.  They don’t give a couple of hours of their valuable time each day to watch the evening news and read the morning paper because they want to be told what they should think, particularly when there are such clear holes in that thinking.  They do so because they have a need to know the truth about things for which they can not discover the facts themselves.  They cannot go to Iraq or Afghanistan and see the conditions and the interaction between the local people and American troops.  They cannot spend all day in Washington D.C. and see if their representatives are passing laws with which they agree and spending the people’s money wisely.  They cannot go to the police stations across the country and see if laws are being enforced fairly and effectively, if certain cities are safe or dangerous, and if government agencies are being run efficiently.  The desperately need someone to do this for them so that they then have the information that they need to make the right decisions.  

You are supposed to be the one who finds out the truth for them.

This is why your prevarication, equivocation, replacement of opponent viewpoints with straw man arguments, and manipulation of the facts is so damaging in your relationship with them.  If your product is truth, “All the news that is fit to print,” as one of your publications says, then damaging that trust is the worst possible thing that you could do to them.  They can tolerate mistakes, but they cannot tolerate lies and distortion.  There are plenty of more interesting things they could watch on TV for entertainment or tabloids they could find in the checkout line if they want to read great fictional stories.  They go to you for the truth, but you have let them down time and again, and they know it. 

                   

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Right now, I see that you are shaking your head.  You say that you may stretch things from time-to-time, but your overall purpose is to guide people to a bigger truth and the way you see the world, so changing things around once in a while or selectively leaving some things out that would just confuse people is justifiable.  And that is a big part of the problem.

You lack so much diversity of thought, since all of your employees coming from places where only one point-of-view was allowed, that you don’t even know that you are seeing the world through terribly distorting lenses.

People – evil people who want to seize control in America by centralizing power in a large government – have gone into the universities, then even the high school and grade schools, and filled them with people who all have the mindset that big government is good and socialism (and even communism) are better than free enterprise and capitalism.  The education you received did not include all of the facts, plus it included a lot of unverified conjectures.  If anyone questioned what was presented as facts, they were chastised and humiliated by the teacher and their peers.  People who initially didn’t believe in socialism either dropped out of the major or were made to change their minds.  They may have seen the inconsistencies, but they felt it was for the greater good that they just go along.  And so they came out of the classrooms and went into the newsrooms unable to objectively examine the facts.  They were sent with a mission to convince the readers and viewers that the orthodoxy they were taught in their schools is the right one.  

They became propagandists rather than journalists, even if they did not realize it.

Even once your journalists enter their careers, they continue to shelter themselves from other opinions.  Your newsrooms are echo chambers where everyone agrees with what they say, and your employees live in cities where everyone feels the same.  They are so sheltered that they come to think that their opinions are those of the average American.  They also think that they are far smarter than most people.  That everyone else has the intellect of a child compared to them.  Smart people think the way they do – anyone else is either ignorant or trying to take advantage of the foolish.  Hmm….  They are so convinced that they know better that even when they are proven wrong, such as in the last election when they were sure which candidate would win and the other did, they think there must be some sort of mistake.  Or some boogeyman like the Russians changed things.

          

And another thing….

Referring to the land occupying 90% of the United States as “fly over country” and thinking that those who live there are unimportant isn’t a good way to keep readers and viewers.

Now before you say that they watched and they read and they listened just fine before the internet came along and took their attention, let me counter.  You are right that fewer people are reading your newspapers and watching your evening news casts because of the internet, but it is not because the internet is more exciting or convenient.  If that were the case, people would be flocking to your online content as they stopped getting a daily paper.  But they aren’t, are they?  And no, it isn’t because of right-wing propaganda from talk radio and Fox News either, although both of those sources are part of your problem. 

Alternative news sources like the internet, Fox news, and talk radio are providing the facts that you are leaving out.

They are also providing alternative viewpoints and explanations.  They are giving different reasons why things may happen as they do.  They give different predictions about the effects of policies and government actions.  They also provide logical explanations for their predictions and assessments, rather than just focusing on people’s emotions or dictating how people should feel and what they should do.  They don’t just provide conjecture, using a snooty voice to make their listeners think they need to think the same way or they are stupid.  “Obviously, trickle down economics don’t work.”  “Even a fool should know that raising tax rates brings in more money for the government.”    The alternative news sources are resonating with the hearts of people because those who have worked a real job, built something, or had the real experience of trying to raise a family can tell logical explanations and ideas from, well, what they’re stepping in sometimes in fly over country.

So, it is with great sadness that I now need to tell you that I’m leaving. I no longer want you to show up on my doorstep in the morning.  I won’t be there with you before dinner or at night before going to bed.  I won’t waste my time listening to what you have to say, because I cannot trust what you are telling me and I have better things to do.  I also will not be telling you what I have to say, by writing letters to your editors, since doing so only helps you continue on your destructive course and gives you hope that continuing along the same path will eventual lead you to a better place.

No, it is better to step away and let you hit rock bottom, for it is often only by hitting rock bottom that people decide that they need to change.  I wish you best of luck.

Take care of yourself, because I won’t be there until you change your ways.

With great sadness, love,

SI

Got a comment?  Please use the form below to let me know what you think.  Please also leave a comment or contact me via vtsioriginal@yahoo.com if you’ve got an investing question you’d like to see featured.

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.

401K Changes that Would Work

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IMG_0120401k plans are better than traditional pensions and way better than Social Security, if they are used correctly.  The issue is that they are not used correctly.  People are too timid and leave all of their money in the money market or treasury fund their entire careers, missing out of the growth they could have had if they had invested.  They don’t enter the plan until they are in their forties or fifties, or contribute far too little.  They are too aggressive when they are nearing retirement, usually because they are trying to make up time, and see a market crash wipe out half of their portfolio value right when they were ready to head out-the-door.  They borrow against their 401k plan, or take the money out entirely, and lose the effects of compounding.

These issues could be easily solved.  The reason they occur is the rules behind 401k plans that allow or even encourage behaviors that are destructive to the employees retirement.  People have no choice in the amount they contribute to Social Security or pension plans.  The employer or the government dictates how much of the employee’s pay is contributed and how much they provide.  And at least with Social Security, you have no choice but to participate.  You are enrolled whether you like it or not.  Employees can choose not to enter the pension plan at some companies, but most realize that they should and they do enroll.  Likewise, you can’t borrow against your pension plan or Social Security or take it out early.  In the case of pension plans, they are invested in a mix of stocks and income investments in a manner that is appropriate for the goals of the plan and the payouts that must be made.

The sad part is, if people were to put all of the money they are putting into Social Security (about 13% of their paycheck) into a 401k plan and invested it properly, everyone who worked their whole life would be set for retirement.  There would be no issue paying for living expenses and medical bills.  The senior discount would vanish since most seniors would be multi-millionaires.  Unfortunately, people don’t think about their futures and plan.  They either see the big pile of cash they’ll need to build up to have  comfortable retirement as being either too difficult to achieve or retirement too far out in the future, so they sabotage themselves.  Much as I hate to see central government planing and control, some regulation is needed to nudge people in the right direction.  Unlike Social Security, where the government has proven that they’ll just squander any money given to them, however, government involvement should only extend to preventing people from drawing the money out to soon, not enrolling at all or not contributing enough,  or investing the money in a way that is too timid early or too aggressive late.  Here are some regulations that would make 401k plans the path to comfortable retirement for all:

1.  Required enrollment.

Employees should be required to contribute at least 5% of their pay to a 401k plan to ensure they’re putting enough away for at least a basic retirement.  While I hate to force people to do anything, it is for the good of society to not have a group of destitute retirees.  As an incentive to contribute more, the rules could eliminate the need to make a Social Security contribution if at least 10% of an employee’s paycheck is being contributed to a 401k, between the employee’s contribution and the employer’s.

2.  Forbid withdrawals until age 62, then limit withdrawals until age 70.

There is no good reason for people to be pulling their retirement savings out early, and again, doing so subjects society to the burden of carrying a lot of destitute old people.  No withdrawals should be allowed until the employee has reached at least the age of 62 (which also encourages people to work longer and reduce the number of years they’ll need to be supporting themselves with their savings).  To prevent people from pulling all of the money out at age 62 and blowing it, they should only be able to pull out a portion, like 5%, each year until they are age 70.  Hopefully by that point they will have learned that it is a good thing to take the money out slowly since then the account has the ability to recover and generate more money and they’ll continue that behavior from then into old age.

3.  Eliminate borrowing of funds.

Just as funds should not be withdrawn, they should not be borrowed.  If people want to pay down credit cards, start a business, or upgrade their home, they should find the money elsewhere than their retirement savings.  People shouldn’t live beyond their means at the expense of their retirement funds.

4.  Remove the money market option for those under age 58.

There is zero reason for anyone to have a dime in a money market fund within a 401k account until they are getting close to using the money.  Removing this option would force employees to invest the money, which would allow the money to grow and prevent inflation from reducing their spending power in retirement.

5.  Require a professional money management option.

Most people know little about investing.  An option where a professional money manager just invests the money for employees should be included.  This would be similar to a traditional pension plan, except the money manager could invest for groups of employees separated into different age brackets instead of investing everything as one big account.  Because there would just be a few, large accounts (maybe three), instead of a lot of little accounts to manage, and because the manager would be investing in mutual funds instead of individual stocks, the cost would not be very much.

6.  Limit the contribution of company stock by employers.

Some employers like to issue company stock as their contribution instead of giving cash because cash is more precious.  This puts an employee in a risky position since he/she then has a big position in one company – their employer’s.  They could both lose a job and see their 401k decimated should the company misread market conditions.   A reasonable limit, such as 1% of salary, should be placed on the amount of company stock that can be issued by a company for a 401k contribution.  Alternatively, require a company match at least 5% of salary with cash before issuing stock so that the employee at least has 10% of his/her salary going into the 401k in a diversified manner before concentrating in company stock.  Employees should also be able to sell shares that a company distributes to them immediately and shift the money into mutual funds where it will be appropriately diversified.

7.  Require low-cost index fund options in each plan.

Research has shown that low-cost, passive funds will beat out high cost, actively managed funds over time.  Unfortunately, some employers only have high cost funds available.  Every 401k plan should at least have the choice of a large cap, small cap, international, and bond index fund in their investment mix.

8.  Auto-enroll employees in a target date retirement fund.

Even when they do enroll (usually through automated enrollment), many employees tend to wait to get into their 401k plans and make their investment choices, sometimes for years.  Currently, many 401k plans auto-enroll employees in a money market fund, meaning they are losing money to inflation until they shift the money somewhere better.  Instead, they should be auti enrolled in a target date retirement fund so that at least they’ll have a reasonably good investment plan until they get the time and motivation to take a little more active role.

To ask a question, email  vtsioriginal@yahoo.com or leave the question in a comment.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. 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. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing