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When @Rosie Retweeted

There’s a certain excitement when a celebrity or anyone you really admire responds to a tweet of yours. That sentiment may seem strange coming from a 50+ year old vs a teen ager, but I think that feeling of looking that actor, rock star, author in the eye and sharing a thought with them has shifted from the real world to the online one.

Now. Rosie O’Donnell. She grew up in New York, and is my age. So I caught her as a rising star as she gained popularity in the world of comedy. There are a lot of comedians out there, some better than others. But, when I say that Rosie is far and above, the one with the biggest heart, I don’t exaggerate. Let me repeat that. Biggest. Heart. Ever. From a Huffington Post article, “By 2005, she had already contributed well over $60,000,000 to charities focused on the health and well being of children.” It’s 12 years later, and I’m trying to find a current total, but even if we stop on the number, it’s insane. $60 million dollars.

I’ll be honest here. I liked her standup. My New York roots gave me a special love for stand up comedy, and the thrill of seeing a comedian on TV that you remember seeing on a small stage in the city, just getting started. When Rosie moved on to The View, I was working, and didn’t see her too much.

She hit my radar again when Trump, during a debate, answered a question about calling women pigs, with the line, “Only Rosie O’Donnell.” He went for the laugh, I suppose. It wasn’t funny then, and it’s not funny now. Here’s what is funny. Rosie has earned one name, and it’s not ‘pig,’ it’s ‘Philanthropist’.” Trump doesn’t release his tax returns, so we don’t know how much he donates, but from all the detective work the media have done, we know it’s close to zero.

Yesterday, in my admittedly juvenile attempt to get a retweet from Rosie, I tweeted the image to the left. We’ve heard about the wall. The $25B price tag. There’s so much wrong with this whole scenario, there’s no good place to start. The proposed government budget has a defunding of Meals on Wheels, a charity that helps to feed those in need. Yet, it’s pushing to build a wall that will be a symbol, and nothing more. Expensive, and ineffective, as I tweeted, the technology exists to defeat it. It’s called a ladder. Rosie has been pretty vocal on twitter about her distain for Trump and she liked this one, a retweet soon followed. Thanks, Rosie! Keep up all of your good work!

Rich Country / Poor People

The country has grown richer, a lot richer. Our total net worth, as reported by the Federal Reserve, and the WSJ graphic, has passed $92.8T. That’s Trillion, as in a “one” with 12 zeros. A trillion is also a million million, so $92.8T is $92.8 million times a million.

How many households are we talking? If we divide this huge treasure over the population, what are we worth, on average? Good question.

 

 

 

 

 

 

We are up to 119.03 million households in the US. When we divide, the result is $779,635.

As a country, this makes us pretty well off. The average family can own a paid-off house worth $235K, and still have $545K which, for retirees, can provide over $20K per year income. Combine this with another $20K in social security, for a couple, and the numbers still look good.

Not so fast.  The totals reported, the treasure of nearly $93 trillion dollars, fails to discuss one crucial factor, the distribution of this wealth.

CNN offered a look at how this wealth is distributed.

That leaves just 1% of the total pie for the entire bottom half of the population. Note that while that article was written in 2016, just before the election, it used data from 2013. The point remains, half are sharing just 1% of this wealth. I don’t have a solution, today I am just making an observation. The totals and the averages that are reported are meaningless without digging deeper. A $500K average doesn’t help when your family and 8 others have virtually nothing, but one family has $5M. Keep all this in mind when you see any articles that offer this type of news presented as if we are all somehow better off.

Freebie Broadband Deals

Today, a guest post from Crystal –

Many companies offer incentives to entice new customers into buying their products. In the case of broadband, this has now become a growing trend but it is always important to consider carefully if buying the broadband package is actually worth the gift and whether or not, you could actually get better value elsewhere that a company that does not offer a free gift, but actually works out a lot cheaper. This article explores the world of free gifts and whether or not it is worth it in some case, or it is just a novelty.

Many people believe this can save you money, there are two options to consider with your free gift. The first one is whether or not you actually need the gift, for example, if you weren’t buying the broadband, would you potentially go out and buy the gift anyway. If this is the case, this is the ideal situation, however, if you don’t need the gift, it may also be beneficial to get the deal anyway as one could sell the gift and gain some extra money in the process. Free gifts such as a reward voucher can be a good example to use, you must ask yourself the question of whether or not you will use the reward voucher, it will normally be for the same company and so it is important to do your research to see if there is actually anything you want to buy from the company because you may find that there is simply nothing you would like to spend your money on out of the products that they offer.

There is no doubt there is potential to save a little extra money here, by buying the things you need and capitalizing on the free gift and you don’t even have to leave your house to do so. However, in this day and age there are also plenty of other ways to make a bit of extra money, again online and again, without leaving the comfort of your own home.

Some companies will also offer gifts in the form of electronics and this can be a good example to use and try to weigh up the pros and cons. For example, if the free gift is a television, this can be very profitable, but you must ask yourself if you need a television? Do you already have one? If you do then it may be wiser to sell the free gift as it comes and you can get cold hard cash instead. The resale value of a television for example will be very high, providing you do not take it out of the packaging and you can find a buyer. Speak to friends, family or even put it on eBay, it could be very easy to sell and get cash in no time at all. If you are selling a free gift, you must do the calculations. Will the money you get from the gift actually be worth spending more money on what could be a much more expensive broadband package than many other service providers and it is also important to make sure you know it can be sold quickly as otherwise you could be left with an expensive broadband deal and a spare television collecting dust, slowly depreciating in value.

In conclusion then, when entering into a broadband deal, this is a long term commitment and before you go splashing out on something just because you get a fancy new gift with it, it is important to weigh up both the advantages of the free gift, in terms of money and how much you will save and the disadvantages of the free gift, in terms of are there other broadband providers out there that don’t offer free gifts, but actually work out cheaper in the long term. You should also consider other factors in terms of broadband speed and the quality of the service provided.

How I Changed to an S-Corp to Lower My Taxes

This is a guest post by Eric Rosenberg, a full-time freelancer and blogger at Personal Profitability. Eric writes about personal finance and entrepreneurship at InvestmentZen, his own blog, and other sites around the web.

When I started writing about personal finance online in 2008, I had no idea where it would take me. Here I am nearly a decade later and writing about personal finance is my full-time job! Earning as much as I have online, I have picked up a few tax tips as well. None were as valuable to me as changing my business to an S-Corp, which I did when I went full-time in April last year. Read on to find out why I did it, how much I’ve saved, and if it makes sense for you.

Business Structures and Taxes

When I started my online money making adventure, I started working under my own name. Any time you earn money outside of a job with an employer, you are considered a sole proprietorship by default. This means that you are personally liable for any legal issues or claims and count all income and expenses on your personal tax return.

Eventually I started to make enough money that I thought it was worth filing as an LLC. Registering as an LLC was very easy and only costs $50 in Colorado. I filled out the form myself online and was operating as a business, Narrow Bridge Media, LLC, by the end of the day.

Like a sole proprietorship, single member LLC taxes are reported on your personal tax return. In both cases, you use Schedule C to report your business earnings and expenses. An LLC offers legal benefits over a sole proprietorship but as far as taxes go, they are pretty much the same thing. As I started earning more and more each year, reaching $40,000 from my side hustle in 2014, I noticed that my tax bill was going up too.

Self-Employment Tax

The big downside of self-employment as far as taxes go is self-employment tax. When you have a job of any type, both you and your employer are required to pay income taxes on your earnings. You see the taxes you pay deducted from each paycheck, with a true up due in April. You don’t typically see, however, that the employer is paying quite a bit in taxes as well.

As a business owner, you are required to pay both sides of the income tax equation. You pay your own income taxes from your personal earnings and have to pay the employer part of the taxes. This is known as the self-employment tax.

Self-employment tax adds up fast. If you earn $40,000 in a year, your self-employment tax is $5,652. If you make $100,000, you would pay $14,130. The FICA, or Social Security, component is limited to $14,694 per year, but the Medicare component does not have a cap.

How S-Corps Lower Taxes

When I quit my job in April, I knew that I would earn well over $40,000 in 2015. At the end of the year, it came out closer to $100,000 in revenue. Looking forward to increased earnings, I wanted to take steps to limit my tax liability. I found that S-Corps were the right way to do that in my situation.

An S-Corp is a type of corporation that acts somewhat independently. Think of it as a step up from an LLC. In some cases, an LLC can be taxed as an S-Corp. Because I was moving states at the same time, I decided to just register as an S-Corp from the start effective April 1, 2016. Starting on that date, the business became Narrow Bridge Media, Inc.

When the business became an S-Corp, I became its first employee. Now, rather than just keeping everything my business earns, I get a paycheck every Friday. I have to pay self-employment tax on every dollar I earn through my paychecks, but any income I earn above that is taxed at my regular income tax rate which is lower than the self-employment tax rate.

For this to work, I have to follow some special IRS rules. I have to pay myself a “reasonable” paycheck amount for someone doing the work that I do. As a content writer, I did some research and found $35,000-$40,000 per year to be common, so that is what I used for my paycheck. Any additional earnings are considered dividends, not employment earnings.

I did some math to estimate how much this would save me on my 2016 taxes, which I have yet to file, and found I would save around $6,000-$8,000. That is huge! Even with the costs of registering an S-Corp in California and dealing with payroll, this was still a no brainer.

Does an S-Corp Make Sense For You?

If you earn income on the side or are self-employed, you may be wondering if this makes sense for you. It very well might, but it doesn’t in all situations. In general, if you are making around $40,000 or more per year, it is worth looking into. If you find this too confusing or complicated, speak with a local small business accountant to find out what makes the most sense for your own unique situations.

For me, running my business as an S-Corp has been great. There were no operational changes to my business, but I am saving money on every dollar I earn over $35,000 per year. That is something anyone can get on board with! Sorry Uncle Sam, but I’m keeping as many of my hard earned dollars as I can.

It may work for you as well. If you have any self-employment income, it is certainly worth a look. Who knows, maybe you’ll save even more than me on your 2017 taxes thanks to reducing your self-employment taxes!

When feeling good costs you $20,000 (The failure of the Debt Snowball)

A fellow blogger wrote about the debt snowball. For those of you who do not know what the debt snowball is, it’s a method of paying one’s debt off (a good thing) ordered from lowest balance to highest. I wrote about this over 7 years ago when I was Thinking about Dave Ramsey. In that article, I was trying to keep an open mind. I’ll even suggest that for the lost few hundred dollars, if the good feelings you get from knocking off the first card help keep you going, a few hundred, or even a thousand dollars might be a small price to pay for long term success. In my opinion, the fastest way to eliminate all one’s debt is simple – make all minimum payment due, and send any extra money to the highest interest debt. Others insist on the snowball good feelings.

But. As a numbers guy, I ask, “Where do you draw the line?” And toward that end I wrote to Derek, the blogger I mentioned –

“I don’t dispute that killing off a card completely can provide an emotional reward, a boost to one’s feeling of accomplishment, etc. But, I often say “knowledge is power” and one should know the cost of that decision. A few hundred dollars over 4 years? No big deal. Thousands of dollars? Look carefully at the numbers before choosing the method.

Consider – ‘snowballers’ suggest you pay your 8 student loans, all zero interest, $10,000 each, before paying that $20,000 18% card. Of course, that’s an exaggeration, but one that easily illustrates why it’s important to look at the numbers.”

What I expected was an acknowledgement that there are some extreme, contrived, cases when you just pay off that 18% debt first. Nope. His response?

“I used to be like you – a hard-nosed financial professional that only believed in the numbers and percentages. Today, I understand much more about the emotional side of money. If you make no progress over the course of a year, there’s about a 100% chance of giving up. If, however, you pay off a $2,000 loan and get rid of that payment completely, you’ll be charged up and ready to tackle another!

I’d still suggest that people pay off their $10,000 zero interest loan before their $20,000 18% interest loan because there’s a greater percent chance of them getting rid of the smaller debt and continuing their debt payoff journey! Pay a couple thousand extra dollars in interest but paying off the debt is better than trying to save the interest and failing at the debt payoff entirely, don’t you think??”

snowball17

What? I aimed to find the most ridiculous spread from high rate to low, trying to show how there’s some point where it’s silly to pay off your low-to-no interest debt first. And, with a daughter about to enter college, I figured that an example of 8 low rate separate loans was actually possible.  Here’s what this would look like. Do you see what makes this so ridiculous? You graduated college, and the loans happen to be individual loans. The lender could just as easily have made this into one loan with a monthly $664 due. In which case, the snowballers would have no issue paying the “low balance” $20,000 card first. But because these loans are each $10,000, they rise to be the priority, pay them off, get rid of 1, 2, 3, etc as fast as you can, before sending an extra dime to the $20,000 high rate loan.

Let’s look at what happens when we prioritize that awful 18% debt. I happen to choose a total $1,200 available to pay debt, just $236 more than the minimums required. If we pay the low balances first, the interest jumps by over $20,000. A $10K loan is too small to kill in less than a year with only the $236 extra, so the snowball takes 32 months to eliminate one debt,  while my plan gets rid of the credit card 18% debt in 56 months. Would you really be happier paying interest-only for 89 months on that 18% debt but feeling great that you have fewer loans, fewer checks to write?

The truth is that most people are not in such an extreme situation. And the real cost may be far less that this contrived example. As I offered on Derek’s site, knowledge is power. Why would you not wish to know the cost of one method vs another?  And if you knew the cost, how high (or low) would it need to be to sway your approach to paying off your debt? What could you do with the $20,000 you’d have saved over these 10 years? How much snowball Kool-Aid does one have to drink to state they will stick to a method no matter the cost?

By the way, I do believe in more than numbers and percentages. I also believe one shouldn’t fall for bad advice offered by a celebrity, Dave Ramsey, who takes a “my way or the highway” approach to his advice. Know your options, and decide for yourself.

On a final note, as I was writing this, John, another blogger who writes at Military Fire, also visited Derek’s article, and agreed with me, stating,

“If the snowball method costs you “a couple thousand” annually, and you make less than $50K a year, you would have to work 13 months a year to recoup that unnecessary interest. The snowball requires nuance. Lets help people work smarter, not harder.”

Derek, on the other hand, wasn’t budging,

“I’m a nerd just like you and understand the percentages perfectly. After helping hundreds of people though, there’s no denying that those who pay off a debt early are far more likely to stick with their debt snowball. To help the most people possible, I’m sticking with this method for life.”

Check out John’s excellent article Debt Snowball: Not a Chance in Hell, because John doesn’t like throwing away money on interest any more than I do. If you comment at either site, let them know that Joe sent you.

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