As I was washing dishes this morning a thought came to me. I started to think about the stance that Dave takes on finances and then thought “You know what? He should support Obama”.

Now I don’t know if Dave has come out against one candidate or not but based on what he has said in the past it seems that he is leaning towards the republican candidate.

There are 2 issues that I think he should support Obama on.

1. Tax Policy

I have studied the tax policies of both candidates and I feel that Dave should lean towards Obama on this one and here is why.

One of the biggest things about Dave’s program is that no matter how much income you make you can be “rich”. Yes it might take longer depending on your “shovel” as he calls it (Your income) but regardless if you follow his baby steps and stay away from debt that you will end up “Living like no one else”.

The thing is that about 95% (My statistic) of people that have called in to his show all have incomes below $200,000. They are good people making 50k-80k and yet are able to pay off their house and build wealth. Old men will call in and say “Well I got about a million five in the bank” and Dave always follows up with with “How much did you make a year?” And the answer is usually something like “Oh never more then $35k a year working at the factory”. These are the exact people that will be helped with the Obama tax plan.

Think about it: What kind of jobs make $200k or more? Not many unless you are a Doctor or a Lawyer or some top notch sales man… rarely do you make $40k a year and then all the sudden got a promotion into $250k. Joe the Plumber supports a candidate based on a pipe dream (pun TOTALLY intended) that if he was to buy a business that he all the sudden is going to make $250k a year. Even the boss that owns the business says that it probably would only be a $100k a year job and would require a lot of expansion to make it to $250k.

We need to get off this kick, and Dave would agree with me, that to be rich you have to have a “rich” income. And the true rich are those that have saved and are working the baby steps to build slow wealth with medium shovels.

And on that platform he should support Obama.

2. Health care

One of the leading causes of bankruptcy in America is medical debt according to a Harvard study done in 2001. Dave hates bankruptcy with a passion and discourages it to anyone that suggests it. I think in the 8 years I have been listening I have heard him say once that someone should get a bankruptcy. He didn’t actually say it out right but the guy basically had $500,000 in (oddly enough) medical bills and made like $20k a year. He didn’t say “oh you just need to file bankruptcy” but allude to the fact that he didn’t know of any options and that it would take you years to ever get out from under this.

The health care plan of Obama works to make health insurance not only affordable but also reform the industry so that we don’t have people who have $20k in medical debt even after paying $1000 a month for insurance!

Again, Obama.

The policies of Obama really help the middle class keep more of their money and that seems to be what Dave should be supporting.

In all I guess this is just an idea and I should probably next time think about the Red Sox losing and not on anything intelligent while washing dishes.

Just something to generate discussion on the matter. So please… discuss away! :-)

The guy over at FreeMoneyFinance posted this question from one of his readers and asked for comments. I decided to answer it here for my Financial Fridays post.

my husband passed away dec 2007 i’ve just gotten 500k from life insurance the insurance agent wants to invest all of it and give me an allowance a month. I’m 40 two children who have their own 85k each when they hit maturity. I owe 230k on my house I have a job and ss for the kids untill they are 18 ( 9 & 11 now) I want to pay off my mortgage invest 150k for retirement and have the balance for emergency also smaller investments. I feel like he’s pushing me he also wants control of the childrens UTMA accounts once I have guardianship. What sounds right. I’m picking up the check today.

OK first things first… Never EVER take financial advice from an insurance salesmen. They are SALESMEN and are not looking out for your best interest. He wants to sell you products that are going to have horrible rates of return and anyone getting a commission on the advice they are giving you are not a true advisor.

Second thing is that you just went through a fairly tough emotional crisis in the losing of your husband I don’t care how sudden or not it is still hard. You need to put the money into a money market account and sit on it for 6 months. This will allow you to get your head on straight and figure out where you need to go next.

After that I would go ahead and write a check to pay off your house. You will be debt free at this point and then I would put about $15k in a money market as an emergency fund and then the remaining $255k in an investment account. I would suggest good growth stock mutual funds that have a 5 year or more track record and yield 10% or more on average. This will give you a good income of about 30k a year and with no house payment and your own income it will give you steady money for the future.

Oh and did I mention NEVER TAKE ADVISE FROM A SALESMAN!?!?!?!

Did I make myself clear? :-)

NOOOOOOOOOOOOOOOOOOOOOO!!!!!!!!!! I replied

He told me “yeah I should have asked you earlier”

He went on to tell me that the company he used hadn’t been making his payments on time (imagine that!) and that one of this credit card companies had jacked his rate up to 22% from 8%!

I told him to cancel that right away and he told me he already had and was able to talk to the Credit Card company and that they were able to revert him back to 8% (I was floored).

The thing about these debt consolidation/credit counseling services is that they do not treat the problem, only the symptoms. He got in to debt because he was laid off and out of work for 6 months. He had like $10k in credit card debt plus student loans and a car.

I told him his problem was not that he had to make so many payments, it was that he had the credit cards in the first place. I am a firm believer that they will get you nowhere and are too easy to pull from in an emergency. He was off work and I asked him that if he didn’t have the credit cards would he have been unemployed for so long and he admitted “No, I probably would have gotten a job doing SOMETHING”. Yeah he sat on his butt for a few months because he had a cushion. If the cushion wasn’t there his butt would have started hurting and he would have gotten a job a Starbucks or Wal-mart or Krogers doing SOMETHING.

My point is that yes you need emergency funds because things happen… but it needs to be cash and it needs to hurt when you use it. If he had spent 10k in CASH that he had in a savings account I guarentee you it would have hurt WAY MORE then 10k in credit card debt and he would have worked harder to get a J-O-B.

In talking with friends and co-workers I have been asked a few questions about the Economic Stimulus Package money that American tax payers are suppose to receive over the next couple of months. Here are a couple that I thought I would highlight:

I just graduated College in December and my father claimed me as a dependent in 2007. This is the last year he will be doing it but is there anyway for me to get a check?

The money that we are all receiving is actually an advance of a tax credit that we all will receive on our 2008 tax return. Since the IRS can’t look into the future to know they are going on the information for 2007 for your advance. Since life situations change often in a year you might be eligible on your 2008 return to claim any or more then what you are receiving.

So to answer your question if you are Single and filing on your own for 2008 you can claim a $300 credit on your 2008 taxes. Also if you have a child in 2008 you can claim the extra amount you would have received. There will be a second chance worksheet that will help you determine that in 2009 when you do your 2008 taxes.

So when are we getting them!?

The direct deposits are already starting to go out and here is the chart from the IRS.gov website.

Got a question you want me to answer for Financial Fridays just hit the contact me link in the top menu.

Hey,
Because I’m doing a lot of sub contract and freelance work, I don’t
currently have an active 401k. I have money tied up in two old ones, but I’m
not contributing to either because I’m not working for the employers that
have the 401k’s.

I’d like to consolidate these into one account independent of an employer..

Is anyone doing this, or have any suggestions?

Thanks

To short answer your question you can rollover the 401(k) into a traditional IRA account at any broker. You can either contact your banks investment branch or just jump on etrade.com and have one setup in minutes. Because the 401(k) and the Traditional IRA are all pretax money you won’t have to pay any penelties or taxes on the money. Also being self-employed allows you to setup what is called a SEP IRA (Simplified Employee Pension Individual Retirement Account). These are a little more difficult to get setup and if you don’t plan on being self-employed for a while this might not be the best way to go.

Now let me go into some details on the why…

401(k)’s are a great investment vehicle but are not the best option we have out there. What I suggest to people is to only put in money into your 401(k) up to the employer match. Because the way 401(k)’s work you are usually locked in to only investing the money in 10-20 funds that are preselected. These are either picked by the group manager or your employer. The amount of funds depends on how much your employer wants to pay in fees so larger employers tend to have more funds available.

The reason I say to only do up to the match and no more is because Congress a few years back gave us one of the greatest gifts they could called the Roth IRA. This is an IRA account that is after tax money, meaning you won’t have the ability to “write off” your contributions at the end of the year. The nice thing is that when you pull the money out when you are ready to retire you DON’T PAY ANY TAXES ON IT. That’s right, if you have all your money in a Roth you can say bye bye to taxes after 60!

It’s amazing how just a couple of dollars a paycheck can really add up!