Journos and money; Baby bumps; A man is not a financial plan; Mitt's 14% tax burden; Embarrassment of riches

Journos and money; Baby bumps; A man is not a financial plan; Mitt's 14% tax burden; Embarrassment of riches

By Amanda Morrall

1) Financial journos and money

At a party recently someone asked me whether I was "one of those" people who dispensed advice that I didn't take myself. I laughed. Two points: First, as I'm not an authorised financial advisor I don't dispense advice. Second: as a financial journalist, I'm entitled, just like everyone else is, to my opinions. My role, as I see it, is more as a messenger or perhaps a purveyor of information.  My answer to this person's question was, in short, that I try to practise what I preach.

As evidence of that, I spent a manic weekend shifting six blocks down the street, a move that I have calculated will save me $5,000 a year in rent. The move itself cost $100 thanks to two benevolent souls who helped me out; $80 for a truck and $20 for kebabs. Diesel was another $10, which one of my helpers kindly picked up.

To satisfy your voyeuristic urges, Wall St Journal money correspondence Heidi N. Moore, in the following Q&A with thebillfold.com, reveals her common sense values and habits and discusses the aching dissimilarities between the worlds of corporate and personal finance.

I particularly enjoyed the last question when she was asked whether her job has given her any special insights.

LS: Has covering Wall Street influenced how you manage your own money?  
HM: I generally keep work and myself separate. The money I write about is like Monopoly money—we’re talking about billions and trillions of dollars. But it’s good to know how a company’s balance sheet works, and that’s applicable. Really high finance has very little to do with personal finance. The things that companies do, we would all get arrested if we tried. So it’s not tremendously useful. But this isn’t the kind of thing where more knowledge will solve all your problems. We all know that to lose weight you need to exercise and eat less, but you have to get to a point where you apply that. I don’t think everyone just wakes up one day and figures it out. You have to relearn it everyday.

The idea of living within your means is something that our society has been missing for decades and decades. It should be a comfort to young and middle-aged people that people die never figuring this stuff out. It’s hard. But to know you need to figure things out is an awesome place to start, and that’s a form of wisdom that it takes people years to get to. I think it’s valuable to hit bottom. It teaches you that it really sucks to be in that position—it’s like aversion therapy.

2) Baby bumps

Children are a major set back to one's finances. Fortunately they enrich your life in other ways. As I've written many times before, the best way to cope with the financial pains is to prepare for them.

Here's a first person, on how one couple was affected by having a family and modifications they have made to adjust for it.

3) A man is not a financial plan

Geradline Sealey, writing for Time Money, outlines four financial barriers that hold women back from taking their financial affairs to a higher level beyond the domestic. In brief, they are: 1) Lack of confidence 2) Worrying too much about stuff that doesn't matter 3) Contracting the Cinderella syndrome; expecting a fairy godmother or a prince to solve their financial problems and 4) Focussing too much on goals instead of the numbers.

4) Mitt's punitive tax burden

Not that we need it but more proof the system is broke: Forbes Money reports on U.S. presidential candidate Mitt Romney's effective 14% tax rate. He and his wife paid US$1.9 million in federal tax on gross income of US$13.7 million. Apparently their tax bill would have been even smaller had they fully claimed all charitable donations. How long before the revolution begins I wonder?

5) Rich listers

So you can keep abreast with who comprises the 1%, here's the latest list  of the top 400 wealthiest individuals in the U.S as published by Forbes. What's interesting (or maybe disturbing is a better adjective) is that when Forbes started this list making exercise back in 1982, the admission to the elite club was based on net worth of US$75 million or more.Over the three decades, it's risen to US$1.1 billion, a 10-fold increase. The combined net worth of America's 400 richest individuals is now US$1.7 trillion up from US$1.5 trillion one year ago. The average net worth of these mega richsters is US$4.2 billion. Insane.

To read other Take Fives by Amanda Morrall click here. You can also follow Amanda on Twitter @amandamorrall

 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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19 Comments

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#4 and #5 America was built on the premise of low taxes and small government. By American standards 14% isn't that low, and it's a damn sight better than the amount most of the mega-rich pay. Indeed the big debate between the Republicans and Democrats over the tax reforms (which even a special panel couldn't agree on leading to the defaults automatically kicking in at the end of the year) is that taxes shouldn't be raised - government spending should be reduced.

Regarding the Forbes list - wealth accumulates gradually into the hands of a few who seem to think that having extreme wealth entitles them to collect even more extreme wealth, while holding a let them eat cake attitude to the other 99%. Eventually the peasents revolt and the rich lose their heads and the system gets fairer for a while, until the new leaders get a taste for riches and off we go again.

The revolution is more likely to be over #5 rather than #4. Bring on the Guillotine!

It's always dangerous putting words into the mouths of others.
 
As I understand it amongst the richest are Bill Gates and Warren Buffett who have, with dozens of others, pledged to give away their fortunes within their lifetime.
 
If you read Bill Gates annual letter from the Gates Foundation link below it is hard to construe, with any level of intellectual honesty, this as any kind of request of any person to eat any cake.  Not even of any kind.
http://www.gatesfoundation.org/annual-letter/2012/Pages/home-en.aspx

The philanthropic trend of late involving the Gates and Buffetts of the world donating away their billions is a nice gesture. Hell even Larry Ellison finally admitted he would join them after realising that it's actually impossible to spend a fortune in the multi-billions, although he admitted he gave it quite a good try.

However, for every Gates or Buffett there is a Koch brother or other billionaire who is not above bribing politicians to keep legislation that assists the 99% from being passed to the detrement of the 1%, or building a billion dollar house in the middle of a slum. Most of the rich got that way because they fought tooth and nail against those who wanted a fairer system - just take a look at the lobbying $$$ paid each year in congress and see who is paying it and what they are lobbying for - it's not to help you or me, or protect our environment, or make the playing field level.

And this lobbying money is from the already very rich, wanting to be richer still.

Despite the pledges made by those joining Bills Billionaires Club, the disparity between the 1% and the 99% is growing to obscene levels. Just witness the scramble over the One57 building in New York to see how far the disconnect is already.

Sadly the track record of guillotines in history shows them to be poor quality tools for sifting the generous from the stingy.

OK now we are just quibbling over semantics. Guilottine, firing squads, or being beaten to death by the masses - there is only so much that people will suffer before the ongoing injustice of those abusing power i.e. the Fulds, Corzines, Diamonds, Goodwins of the world, becomes intolerable and change is pushed through by bloody means.

But I agree revolution is never fair - chances are several if not all of the do-gooders in Bills club would get the chop as well no matter what their atonement for being rich has been.

 

My bad; I should have said revolutions.  I wasn't trying to quibble semantics.

+1

I must respectfully disagree with these ideas.
 
Firstly, nobody "gave" either Bill Gates or Warren Buffett a billion dollars, they both worked for their fortunes so your implication is *at best* an inaccurate generalisation.
 
Secondly, not all billionaires live in the manner you describe.  It is quite well known for example that Mr Buffett does not live in "the best houses".
 
Thirdly, the last implication is if you have a lot of money it is *easy* to give.  My own experience is this is not the case.  If a person is a stingy, hard hearted, bitter person who believes life owes them a living - then what they become with money is a RICH stingy, hard hearted person who believes life owes them a living.
 
Money does not change the heart.

What would Romney's tax bill be as a NZ citizen though?

In NZ, I believe he would have paid 0% since his income came from capital gains. 
His 14% tax rate is due to the US having a 15% capital gains tax, less deductions he was able to claim.  Also, the 14% rate does not include state income tax which likely was another 5%. In the US, people separately pay both federal and state income taxes, but in NZ, there is just one national income tax.

A little research
 
Romney receives "management fees" from Bain Capital classed as "carried interest"
 
"Private equity fund managers are compensated in two primary ways: management fees and carried interest. The management fee, traditionally two percent annually, is paid to the managers to cover overhead, salaries, and so forth. The carried interest, traditionally twenty percent, is a share of the profits from the underlying investments. Management fees are taxed at ordinary income rates; carried interest is often taxed at capital gains rates (around 15 percent - Jesse). Carried interest portion is better viewed like bonus compensation and should be taxed at ordinary income rates.
 
Are the same loopholes available under NZ taxation rules?

A Man may not be a full plan   -   but a couple who stays together over 30 or 40 years can accumulate much more  -  basically you need 2 fulltime incomes to get ahead in todays economy....
Starting all over again financially on your own in your 50s due to a split seems quite sad really ...    but is it being very trustful by having an emergency stash for such a possibility?

Absolutely.
 
A good man is a great financial plan, with the caveat we are talking about men - and not boys, those adult males who won't grow up and get over themselves.  Who struggle to see their role or what it means to be a man.  Who are full of take, secret bank accounts and run around sowing destruction of every kind in their own household.

Wow, for a second there it was like being back in the 50s

Ah the 50's.  Boys who left for war and (mostly) came home men.  Not what I would ever choose it as a path mind you.

A minor quibble with Heidi N.Moore.
 
My hope is people don't have to hit rock bottom and those I have watched have convinced me it is very far from a good thing.  It means they are too self absorbed, too narrow minded and too proud to learn anything other than the hardest way.
 
In some cases the mistakes rip apart marriages and families and the damage wrought is painful to survey.
 
I would suggest the path of wisdom lies in the humility of open ears that can receive lessons others paid the price for.

Good advice as usual Ralph. Yes, I was surprised she put that too. It's advice better suited to alcoholism than personal finance. Although in some respects I believe it takes a major shake-up in life to evaluate what is truly meaningful and then rearrange your finances around that. That seems to be a common theme. Ideally, one shouldn't have to lose it all to rebuild tho.
 

Quite.  In my experience when in comes to shake-ups, gentle is best.  Certainly those are the ones I myself prefer.

Second: as a financial journalist, I'm entitled, just like everyone else is, to my opinions. My role, as I see it, is more as a messenger or perhaps a purveyor of information
 
WRONG, Amanda
You see journalist are busy trying to come to grips with the new media and their main problem is getting people to pay for it. Now ASK yourself
"Would you pay for somebody else's opinion?"
OR
Pay someone to tell you what some so called expert (with a vested interest) told them to report?
I think not
OR
Would you pay someone who actually finds out what is really going on and informs the public just like back in history.
Amanda, may i suggest you go back to journalist school and ask them to teach you what your job is supposed to be and how are you supposed to achieve it.
 
To me, at least, journalism is NOT about opinion as that is BLOGGING which any fool can do so why pay for it? We post our opinion and don't expect to get paid for it. Nor should journalists.
 
 
 
 
 

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