Lazy Man and Money

Kanye’s $120 T-Shirt vs. One Direction’s $2 Million Champagne

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In the past week or so a couple of stories of celebrities and money caught my eye. I don’t usually write about celebrities (much less pseudo-celebrities who didn’t do anything for their fame), but every now and again it is worth taking a look for a little perspective.

The first story is about One Direction’s Liam Payne buying a $2 million bottle of champagne for his friend. Who hasn’t splurged a couple of million a good friend, right? The news story cited that he took home around 7.5 million (converting from pounds to dollars) last year. It seems like that was a gift of around 25% of his earnings, which is pretty sizable for anyone. Even worse, it’s not an asset as they drank it. Not since Montgomery Brewster mailed an extremely rare stamp has so much money been blown so quickly.

The other story that caught the attention was that Kayne West is selling plain white T-shirts for $120. If you are looking to get in on that, tough luck, they are already sold out.

When I first heard these stories, I had an idea to write an article asking the readers “Which is worse?” Now I see the stories as two very different things. Liam Payne’s decision seems to be a wreckless waste of his own money while Kanye seems to be simply maximizing his business potential and taking advantage of his fans (in my opinion).

As for the people themselves, I recently learned that One Direction is not same band as One Republic, and not at all related to the New Directions on the TV show Glee. I also don’t know much about Kanye other than his famous rant during Taylor Swift’s acceptance speech at an awards show.

Here’s what I do know. Macklemore needs to do a follow-up to Thrift Shop. The $50 Gucci T-shirt he raps about “getting tricked by a business” is a bargain compared to Kanye’s $120 t-shirts.

4 Best Ways to Survive a Tough Economy

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While I’m experiencing a second delay at the airport, I’ll pass along this guest post from Anthony Alexander. He is a freelance writer who enjoys sharing his financial experiences with others. In these rough economic times Alexander feels it is important to share all the tips and advice possible to help others.

Tough times in the economy usually equate to tough times for individuals and families who are trying to get by on limited funds, a low level of job security, and a rising cost of living. There are some great strategies you can implement if you are trying to survive in this tricky situation and here are 5 tips to help:

Don’t Buy What You Can’t Afford

Expensive Property
You can’t afford this, can you? via Jimmy Harris

It may sound like an incredibly obvious statement but ‘don’t buy what you can’t afford’ is actually one of the most important rules to stick to during financial uncertainty. We have all gotten used to being able to finance and borrow for items which are outside of our current means, but in the midst of a tough economy this is a very bad idea. Your credit card is not your friend and can land you in a lot of trouble if the card limit exceeds your monthly spare income level.

Only Buy if You Can Afford to Pay in Cash

It is all too tempting to take out a loan to pay for a new car or get a mortgage for a new property, but if the economy takes another downturn you could end up paying the bank back more than your house is actually worth. As a general rule, if you can’t afford to make a purchase with cash, it is likely that you cannot afford it full stop. If we have learnt one thing from the last recession it is that spending more than you are earning and hoping that you will be able to keep up with repayments is a really bad idea. Just because finance options may be available it doesn’t mean they are a good idea.

Get into a Long Term Mindset

If the current economic situation is improving month on month, do not assume that this is the end of hard times. Things can change quickly in today’s global economy so it is best to be prepared for change. What does this really mean? If you are currently earning more than you are spending, instead of splashing out on new things which you can do without, plan for the future and put aside as much as possible each month. A good portfolio will help to ensure that you have enough savings during harsh times. Using an investment company like Fisher Investments overview is a great way to start.

Creating a Budget to Keep Spending Under Control

Creating a sensible and realistic budget will ensure that you know exactly what money is coming in, what your overheads are, and what spare cash you may have each month. It is extremely important to stick to your budget and not to overspend as this is where problems begin to occur. It takes a lot of self discipline but if you can manage to overcome your spending urges you will be in a much stronger financial position. One of the most surprising things you will notice is how much you can save by making little changes such as taking lunch to work, getting rid of the extras on your mobile bill, and disconnecting your landline if you don’t use it regularly.

A tough economy makes life difficult for everyone but if you secure your own financial security by following the tips above you can ensure that you do not end up in a mountain of debt that you are unable to pay off. Sensible spending and saving is the key to your own financial stability and you are in control of this.

Justin Bieber Wants Teens to Bill Their Parents? It’s Not SpendSmart.

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My boy is less than 4 months old, but if he was a different gender and maybe 13-14 years old, I’d be very concerned. There are no shortage of reasons that would make me want to Rapunzel her until she’s at least 28. (Yes, I’m talking about you Sexy Baby documentary.) Perhaps it would be wise to get into the tower building business.

And then there is Justin Bieber. He might actually be more popular than Jesus especially with that teenage female demographic.

Combine that popularity with a prepaid debit card with tons of fees and parents have a potential problem. Yes, Justin Bieber is going to offer his own “SpentSmart” prepaid card through BillMyParents.com. My wife jokes that she’s going to tell Little Man to go to IGotAJobToPayForIt.com or ICollectedCansAndSavedForIt.com when he gets older. She’s not really joking though as “Bill My Parents” is just not going to fly here.

The card appears to be anything but “SpendSmart.” Here’s a list of the fees (rounding up the nickels):

  • $3.95 monthly fee to have the card… which is around $50 a year. If you are loading $1000 on the card, and I think that’s extremely generous to give a kid that’s a ~5% annual fee
  • Loading charges of ~$3 from a credit or debit card and $0.75 from a checking or savings account. This discourages loading the card often with money, but that’s exactly what you’d want to do with a teen so that they don’t have access to $1000 at one time.
  • Lost card replacement fee of ~$8. I don’t know if I was a typical teenager, but I lost things fairly often, so I could see this adding up.
  • ATM charge of $1.50 to withdra the money, and 50 cents for a balance inquiry. So the card costs me money to carry with the annual fee, money to see how much I have there (at least at ATMs) and money to access the money (at ATMs). I’m sure this doesn’t cover the fees of the company that owns the ATM itself, so that’s a double hit.
  • An inactivity fee of $3 if the card isn’t used for 90 days. So even if I’m paying to carry the card, if I don’t use it, there’s a fee.

If you were going to get this card for your teenager and put $1000 total throughout the year in small regular increments, I could see it adding up to about $75 in fees or about 7.5%. If that sounds terrible, you’ve got a keen ear.

In BillMyParents.com’s defense they seem to build some good technology into the card that could actually help parents keep track of their child’s spending. Also, let’s be honest, Justin Bieber’s branding isn’t going to come cheap either.

I didn’t like Suze Orman’s pre-paid debit card. Few liked the Kardasian Kard with fees so high it was canceled due to consumer backlash. Even though some view the Beiber card as a “middle of the road” option for the pre-paid industry (see Lauren Saunders quote on the 3rd page of this Washington Post article), I don’t like it any better.

I don’t like the intentional mixing of emotion (Bieber) with high fees. I won’t even a get a Red Sox credit card, because their rewards are simply not competitive with other credit cards.

Thoughts on the Fiscal Cliff “Solution”

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Over the past six and a half years, I’ve written quite a bit about personal finance and related financial news. However, whenever the really big financial news comes out, I’m often not interested in writing about it. Such is the case with the fiscal cliff. It seems like every news outlet is either writing about that or what’s going on Kim Kardashian’s tummy and I can’t recommend spending your time on either.

A few weeks ago, I relented and wrote about this fiscal cliff thing and I’m going to do today.

I have four main areas that I’d like to cover with regard to the fiscal cliff:

1. The 2% “payroll tax hike”

I’ve read numerous articles claiming that everyone’s taxes are being raised. Each article points to the 2% tax relief we (Americans) got to help boost the economy. This came from the Social Security tax. In other words, we took more from an underfunded source creating a bigger problem in the future. Guest author Kosmo covered it well in this article, Social Security’s Death Clock Ticks Faster this Year:

“So we take a program that is already on shaky ground … and cut funding? Sure, it will be great to have a few extra dollars in our pocket on pay day (I like extra money as much as the next person), but this seems to be missing the forest for the trees. Then there’s the prospect of this cut ending at the conclusion of 2011. Will it really end? Or will there be fear that a reversion to the regular rate will be characterized as a ‘tax increase’? If that’s the case, we could see a few more years of underfunding for social security until someone finally has the cojones to say ‘If we want to keep Social Security, we need to pay for it.'”

Nostradamus had nothing on Kosmo. Almost every article I read is characterizing this reversion to the regular rate as a tax increase. While technically true, it doesn’t deserve the bad press surrounding it. Either be thankful you got it in the first place, or celebrate our Social Security funding getting back to the norm.

The upshot of the 2% means that someone making $30,000 is going to be making around $50 less a month. I realize that there are a lot of struggling people out there. I feel for those people. On the other hand, to the people with iPhones and iPads complaining about this, “I’m Like, ‘[email protected]#% You!’”.

I can save most people a lot more than $50 a month, relatively painlessly. I put a bunch ideas on that here: fast finance fixes.

2. The raising of taxes on people making 250K vs. 450K

We just finished saying how it is such a crime that the people making $30,000 a year are going to lose $50 a month, right? With all the struggling people and the high unemployment rate, we should be focused on these people right? So what better way to demonstrate the highest level of hypocrisy by making a big deal out of whether we are raising on those making 250K, 450K, or 1M?

Let me make sure I’m clear on this: Congress was quarrelling over whether to raise taxes on the top ~98% or the top ~99% at the expense of everyone (including those in both ranges since they’d have their taxes raised too).

The only way this could make less sense is if the quarrel was irrelevant in the first place. And according to this Forbes article it was. The long shot is that many of these people are going to get hit by the Alternative Minimum Tax (AMT) anyway.

Awesome… all that fighting for what seems to be nothing.

3. This “Solution” is just a drop in the bucket

The taxes amounted to 61 billion in more income a year for the government on average, while the annual deficit is something like 1100 billion (or better known as 1.1 trillion). So we’ve fixed about 5% of the problem for this year… and then we’ve got another 16 trillion in debt behind that.

I like how Rob Berger of The Dough Roller put it in one of the comments of his article: “… we’ve spent an extraordinary amount of time arguing over taxes on the top 2 percent when the revenue they will generate is so small compared to our problems. It would be like focusing all of our attention on patching a small hole in the Titanic while ignoring a huge hole on the other side of the ship.”

I wish I was an artist so I could draw some kind of political cartoon with an ant ($61 billion) trying to fight an elephant (1.1 trillion) and both them not being aware of the nuclear bomb being dropped on them (16 trillion). I realize you have to start somewhere, but it is ridiculous to be fighting a this level.

4. The people upset with politicians in Washington

This reminds me of one of my favorite Buffy the Vampire Quotes: “So, Dawn’s in trouble… must be Tuesday.” In other words, what else is new?

I am shocked that night after night the news was able to find people legitimately surprised by everything that happened with the fiscal cliff. I turned on CNBC and people were complaining about the lack of leadership in Washington.

How much progress do you think would be made if you put the Hatfields and the McCoys in the same room and told them they had to come to an agreement. What about the Autobots and the Decepticons? You get the idea.

It’s like complaining that a country in the middle of a civil war isn’t leading the rest of the world. It just isn’t going to happen.

I’m trying hard not blame one political party or the other, but well, screw it. When someone says, “The rape guy lost the election” and another person has to clarify, “which rape guy?” your political party has a problem. When one of your most public faces, Michele Bachmann, doesn’t know the basic facts about vaccines and autism, and publicly displays her ignorance many times, it demonstrates a lack of intelligence in your party’s leadership. All is not lost for your political party though… in the past few months Chris Christie has shown multiple times that he’s there for the people he represents with his response to Hurricane Sandy. He’s not afraid to praise the other political party when they help the cause. He’s not afraid to blast his own party and John Boehner when they leave without voting on the bill that would aid victims of Hurricane Sandy.

With people like that, maybe there’s hope that common sense and coming together for the welfare of the nation can still happen.

What is this Fiscal Cliff Thing?

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I’ve got a bit of a confession to make and it may solidify my standing as one of worst personal finance bloggers ever. After the election results came through with Obama projecting to win Ohio, I saw a bunch of tweets on my Twitter stream with two messages: 1) “Congrats Obama” and 2) “Next up, tackle the fiscal cliff.”

To the Google phone website: What is this fiscal cliff thing?

This Wikipedia article does a much better job explaining the fiscal cliff than I ever could. It’s too complex to break down in this post, so I’ll do a grand generalization and let you get all the fine details from there if you are interested.

The grand generalization is two-fold:

  1. Some tax cuts that President Bush created during his time in office are expiring
  2. Some planned budget cuts from the past would expire resulting in more spending

As I mentioned before it gets complicated especially with the politics of the Republicans and the Democrats slinging a bunch of nonsense. On my recent drive across the country, talk radio had Rush Limbaugh, Glenn Beck, and Sean Hannity on the multiple channels. I’m not into politics, but these big three of conservatives made it sound like Obama was out to purposely kill America, by raising taxes on the wealthy to help balance the deficit. Sounds like a very logical thing to me, but I’ve lived in blue states my whole life.

During the week, I ended up listening to a good 30 hours of their unproductive hatred of the democrats… stuff that makes a Red Sox fan and Yankees fan having a “discussion” after a few beers seem downright civilized. I finally came to this conclusion…

I don’t care about the fiscal cliff… and neither should you.

Well, you should care about the fiscal cliff a bit, because it can have a real effect on your financial situation. If taxes go up, you’ll have less money to spend. If spending is cut, you might lose on some key benefits you were counting on.

However, unless you happen to have the ear of the politicians working on it, you can’t change anything that’s going to happen with it. It’s out of your hands. With that being the case, let’s look at the things you can control:

  • Limit Your Tax Liability – If nothing is done long term capital gains tax will go up. So if you are sitting on a pile of stock and are looking to use the money any time soon (I love the real estate market), this may be a good time to sell some stock and hold on to cash. I’m personally not going to sell any stock, choosing instead to stay invested and hope that the gains of the market surpass the tax liability. This is also a good time to think about putting more money in a Roth IRA as you’ll get it tax free no matter what the tax rate is. If income tax rates go up, there will be even more incentive to stash money in your company’s 401k plan.
  • Minimize Your Expenses – Look into cutting down on any unnecessary subscriptions. I know multiple who have Netflix subscriptions that they admit they don’t use. It may seem like a drop in the bucket, but it adds up to a couple of hundred dollars a year. I’ve compiled hundreds of ways to save money on nearly everything.
  • Double up on your Investment in your Career – Learning a new skill or two can not only help you keep your job, but also get a raise. Sure, some careers have limited ceilings, but you’d be surprised how many do not. I learned that lesson when I worked at Papa Gino’s (a New England Italian food chain) at the age of 16. While being a cashier was my specialty (no one knew the PLU codes like me), I soon learned that if I could make pizzas and man the grill area, I’d be more valuable to them. I was one of the first to do dishes during the slow period, which showed management that I had the drive to do even mundane tasks if it helped the business (the truth was that I was just bored). In the end, it didn’t take long before I was getting raises and as many hours as I wanted to work.

    Don’t know what you can do to make yourself more valuable to your company? Ask your manager that question, she/he should be able to give you a good and hopefully productive answer.

If you going to waste your time with pointless debates, I suggest you move away the Republicans and Democrats debating the fiscal cliff and go all out and check out some Skip Bayless / Stephen A. Smith debates on the Patriots (ESPN is good for one of these annoying things a month):