A short while ago, I embarked on a pretty complex and ambitious project to attempt to answer the question, "What does it really cost the "average" person in Greene County to live?" Never having done payroll, I've had to do a little research, but I think I've gotten it pretty close.
As I said in Part One (http://http://magiccoalcity.blogspot.com/2007/09/recently-i-was-part-of-discussion-where.html), it became apparent rather quickly that there's a lot to think about when defining "average" because it's not as simple as it first seems. It really boils down to the fact that assumptions must be made. So, here goes:
We'll assume the household includes two people, but how the income is split among the two doesn't really matter. It could be that both make $9.98 per hour and work a forty-hour workweek throughout the year, it could be that only one of them brings in $19.98 per hour, or some other combination thereof. The main point is two people live in the household, and the annual household brings in $41,523 -- well, actually, I calculated these hourly salaries of $9.98 each will bring in $41,517, but close enough.
Another assumption will be that there are no children in the household. Yes, I know, it's not likely -- or maybe even "average" -- but kids will complicate this way too much. Their ages alone can greatly sway things; for example, will we be buying diapers or prom dresses? So, let's just argue that they're clearly more expensive and leave it at that. (Some studies have stated it costs more than two hundred thousand dollars to raise the "average" child from cradle through college, so I'll just leave it to those experts to come up with the figures on raising kids.)
We'll also assume that the employer of this "average" couple offers a 401(k) retirement plan and will match 50% of their contributions up to 6% of their pay. This average couple takes advantage of this benefit by contributing 6% of their pay. The employer will also offer health, life, and disability insurance for an assumed rate of $100 per pay period.
Now, back to the calculations:
To start the calculations, the median family income in Greene County in 1999, which was the most current U.S. Census information found, was $41,523. From this, we calculate that if each earns $9.98 per hour, they will earn a combined $41,517 for the year. Like I said before, there's some rounding error here, but it is close enough. Dividing this by the twenty-six two-week pay periods in the year, this amounts to gross combined compensation of $1,596.80 per two-week pay period.
If 6% is contributed to the employees' 401(k) retirement account, a total of $95.81 per pay is removed from this amount before income taxes. Combining this amount with an $8,000 IRA contribution each year (this will be talked about in another part of the series), the retirement deduction for tax purposes should be $10,491.06. On the couple's 2007 tax return, taxable income is further reduced by the standard deduction of $10,700 and personal exemptions of $6,800; therefore, taxable income will be $13,526 for the year. Taxed at the 2007 percentage of 10% for this tax bracket (up to $15,600 per year for those married & filing jointly), total federal income tax should be $1,353 or $52.02 per pay period. The employees' share of Social Security will be 6.2% or $99 per pay. Medicare is 1.45% or $23.15 per pay. Of course, the Governor will want his share, too, which amounts to 3.4% for the State of Indiana or $17.69. The county will get 1.1%, or $5.72, as well.
This leaves $1,203.41 net per pay period, which was calculated as summarized below:
$1,596.80
Gross Pay ($41,517 / 26 pay periods per year)
<95.81>
401(k) Deduction
<52.02>
Federal Income Tax
<17.69>
State Income Tax
<99.00>
Social Security
<23.15>
Medicare
<5.72>
County Tax
<100.00>
Estimated Employer Health, Life, & Disability Insurance
$1,203
Net "Take-Home" Pay (Rounded)
Yearly, of course, this amounts to $31,288.52 "brought home" to spend as needed -- or $2,607.38 per month.
So, now that we've estimated what will be brought home, we'll look at "average" monthly expenses next in Part Three…
Thursday, September 27, 2007
Wednesday, September 26, 2007
Social Entrepreneurship
A business professor from my alma mater was recently telling me about a new program at the School of Business, called "social entrepreneurship." What is a "social entrepreneur"? Well, the online encyclopedia, Wikipedia, defines a "social entrepreneur" as:
"… someone who recognizes a social problem and uses entrepreneurial principles to organize, create, and manage a venture to make social change. Whereas business entrepreneurs typically measure performance in profit and return, social entrepreneurs assess their success in terms of the impact they have on society. While social entrepreneurs often work through nonprofits and citizen groups, many work in the private and governmental sectors."
Essentially, social entrepreneurs kill "two birds (or more) with one stone" by providing a needed service and/or product to the community, while addressing other civic issues all at the same time. As the definition states, success is not measured in dollars but in the company or group's impact.
In my opinion, one prime example of social entrepreneurship is located in Greene County's neighbor to the east: Monroe County. The not-for-profit organization I'm thinking of is called Bloomington Restorations, Inc.
What do they do?
Bloomington Restorations, Inc. does a number of things for the community, but it seems to me that they really help address these areas through their work:
*Blighted properties
*Historic preservation
*Affordable housing
*Improving neighborhoods
In many instances, this group will purchase a historic, yet neglected property in the community. Through donations and grants, they revitalize the property while also keeping true to the historic architecture of the exterior of the home. Upon completion, they market the home for typically much less than the total dollars invested in the remodeling (that's where the donations and grants come into play). The buyer agrees to keep the historic architecture of the home's exterior intact, and they also agree not to sell the property for a profit for a set number of years.
When you look at the big picture, this not-for-profit group takes a once-blighted property, revitalizes it, improves the overall neighborhood by doing so, addresses affordable housing issues, and maintains historic homes for future generations -- all at the same time. Throw in the fact that materials, supplies, and labor can be purchased locally to have an even more positive economic impact, and you really have a wonderful program!
To learn more about this organization, visit their website at: http://www.bloomingtonrestorations.org/
It seems to me that we could use a group like that here. What do you think Greene County?
"… someone who recognizes a social problem and uses entrepreneurial principles to organize, create, and manage a venture to make social change. Whereas business entrepreneurs typically measure performance in profit and return, social entrepreneurs assess their success in terms of the impact they have on society. While social entrepreneurs often work through nonprofits and citizen groups, many work in the private and governmental sectors."
Essentially, social entrepreneurs kill "two birds (or more) with one stone" by providing a needed service and/or product to the community, while addressing other civic issues all at the same time. As the definition states, success is not measured in dollars but in the company or group's impact.
In my opinion, one prime example of social entrepreneurship is located in Greene County's neighbor to the east: Monroe County. The not-for-profit organization I'm thinking of is called Bloomington Restorations, Inc.
What do they do?
Bloomington Restorations, Inc. does a number of things for the community, but it seems to me that they really help address these areas through their work:
*Blighted properties
*Historic preservation
*Affordable housing
*Improving neighborhoods
In many instances, this group will purchase a historic, yet neglected property in the community. Through donations and grants, they revitalize the property while also keeping true to the historic architecture of the exterior of the home. Upon completion, they market the home for typically much less than the total dollars invested in the remodeling (that's where the donations and grants come into play). The buyer agrees to keep the historic architecture of the home's exterior intact, and they also agree not to sell the property for a profit for a set number of years.
When you look at the big picture, this not-for-profit group takes a once-blighted property, revitalizes it, improves the overall neighborhood by doing so, addresses affordable housing issues, and maintains historic homes for future generations -- all at the same time. Throw in the fact that materials, supplies, and labor can be purchased locally to have an even more positive economic impact, and you really have a wonderful program!
To learn more about this organization, visit their website at: http://www.bloomingtonrestorations.org/
It seems to me that we could use a group like that here. What do you think Greene County?
Tuesday, September 25, 2007
Dogs of the Dow
You may have heard the term "Dogs of the Dow" -- but what is it exactly?
The "Dogs of the Dow" investment strategy is a technique used by some stock market investors. It calls for the investor to buy the ten highest dividend-yielding stocks within the Dow Jones Industrial Average and review these picks on an annual basis.
The theory is that these ten dividend-producing stocks tend to have a good overall return because they are typically being bought at depressed prices; therefore, the investor enjoys high dividends, while these stocks "snap back" to higher prices.
The "Dogs of the Dow" investment strategy is a technique used by some stock market investors. It calls for the investor to buy the ten highest dividend-yielding stocks within the Dow Jones Industrial Average and review these picks on an annual basis.
The theory is that these ten dividend-producing stocks tend to have a good overall return because they are typically being bought at depressed prices; therefore, the investor enjoys high dividends, while these stocks "snap back" to higher prices.
Monday, September 24, 2007
The "Rule of 72"
The "Rule of 72" is a quick and simple way to approximate how long it will take for your money to double. Simply divide 72 by the interest rate you will receive. For example, an account earning 4% interest will double in about 18 years (72 divided by 4 equals 18).
Friday, September 21, 2007
Mom & Dad, How About Some Land?
It has happened for ages, yet with the ever-increasing number of divorces, bankruptcies, and general use of credit, the scene has dramatically changed. Mom & Dad's little boy or girl is now grown up, married, and has children, and the young family may be looking to build a new home to escape the small confines of their current "starter" home or rental.
So, who do they turn to solve their problems for land?
Yep, Mom and Dad, and they're happy to help!
The parents are thrilled to have their son or daughter living so close, so they can see the grandkids all of the time, but this luxury may come at a future cost. In fact, Mom & Dad may give their child a small plot among their farm or excess acreage, the child and his/her new family may build a new home, and there may be several years of bliss. No one asks the simple yet painful question, "What happens if there is a divorce (assuming the couple is married) or otherwise a break-up, bankruptcy, loss of a job, or costly and unexpected illness occurs?"
Soon the once-new home filled with happy grandkids -- along with what use to be part of Mom & Dad's farm -- goes through foreclosure, sheriff sale, growing weeds, various infestations, and just maybe and eventually new faces move into the home.
Did I mention that these new faces next door to Mom & Dad also happen to have an endless stream of "five-minute friends" stopping by at all hours of the day-and-night but seemingly only when the porch light is on, a vicious pet named "Tiny" is tied up out back, and an interesting yet growing salvage yard art business begins even though they never seem to sell any of it?
Of course, now Mom and Dad are less than happy -- and rightfully so. Aside from losing their immediate family as neighbors, they have now given up part of the family farm that has been in the family for years, and they have the new faces next door to contend with, along with the other issues these new faces brought with them to the neighborhood.
But what could have changed this whole scenario?
A little planning, forethought, and a trip to your friendly, legal adviser would have certainly helped before the land was even given. Although I'm not an attorney, nor play one on TV, I can think of two potential ideas that could have helped in this situation:
One is called a "First Right of Refusal" clause in the deed and another is implementing "Deed Restrictions and Covenants" on the land given to the kids.
The online encyclopedia Wikipedia defines "First Right of Refusal" as "a contractual right granted by the owner of something, that gives the holder of the right an option to enter a business transaction with the owner according to specified terms, before the owner is entitled to enter that transaction with a third party." In other words, Mom & Dad have the right to be first in line to purchase the property back, possibly even at a pre-set price, say, the average of two appraisers' opinions of value, for example. One is chosen by the buyer, and the other one is picked by the seller.
If you look up "restrictive covenant" on the same website, you'll note that it is "a legal obligation imposed in a deed by the seller upon the buyer to do -- or not to do something." It goes on to say, "such restrictions frequently 'run with the land' and are enforceable on subsequent buyers of the property. Some examples include: maintaining a property in a reasonable state of repair, preserving a sight-line for a neighboring property, not to run a business from a residence, or not to build on certain parts of the property."
In both of these instances, however, it assumes the parents have the money or financing available to re-purchase the property (possibly with a new home and other improvements now on it) or pay the costs to sue to enforce the covenants if they are broken, respectively.
Although these may or may not work in a particular situation, the point is this: when you seek legal help, don't just solve today's pressing issues, such as preparing the deed. You should spend a little time exploring what could go wrong -- or at least not as planned -- in the future with your legal advisor, so potential situations can be dealt with before they happen. Although it may cost a little more now, it could save thousands later.
As Ben Franklin was credited saying, "An ounce of prevention is worth a pound of cure."
So, who do they turn to solve their problems for land?
Yep, Mom and Dad, and they're happy to help!
The parents are thrilled to have their son or daughter living so close, so they can see the grandkids all of the time, but this luxury may come at a future cost. In fact, Mom & Dad may give their child a small plot among their farm or excess acreage, the child and his/her new family may build a new home, and there may be several years of bliss. No one asks the simple yet painful question, "What happens if there is a divorce (assuming the couple is married) or otherwise a break-up, bankruptcy, loss of a job, or costly and unexpected illness occurs?"
Soon the once-new home filled with happy grandkids -- along with what use to be part of Mom & Dad's farm -- goes through foreclosure, sheriff sale, growing weeds, various infestations, and just maybe and eventually new faces move into the home.
Did I mention that these new faces next door to Mom & Dad also happen to have an endless stream of "five-minute friends" stopping by at all hours of the day-and-night but seemingly only when the porch light is on, a vicious pet named "Tiny" is tied up out back, and an interesting yet growing salvage yard art business begins even though they never seem to sell any of it?
Of course, now Mom and Dad are less than happy -- and rightfully so. Aside from losing their immediate family as neighbors, they have now given up part of the family farm that has been in the family for years, and they have the new faces next door to contend with, along with the other issues these new faces brought with them to the neighborhood.
But what could have changed this whole scenario?
A little planning, forethought, and a trip to your friendly, legal adviser would have certainly helped before the land was even given. Although I'm not an attorney, nor play one on TV, I can think of two potential ideas that could have helped in this situation:
One is called a "First Right of Refusal" clause in the deed and another is implementing "Deed Restrictions and Covenants" on the land given to the kids.
The online encyclopedia Wikipedia defines "First Right of Refusal" as "a contractual right granted by the owner of something, that gives the holder of the right an option to enter a business transaction with the owner according to specified terms, before the owner is entitled to enter that transaction with a third party." In other words, Mom & Dad have the right to be first in line to purchase the property back, possibly even at a pre-set price, say, the average of two appraisers' opinions of value, for example. One is chosen by the buyer, and the other one is picked by the seller.
If you look up "restrictive covenant" on the same website, you'll note that it is "a legal obligation imposed in a deed by the seller upon the buyer to do -- or not to do something." It goes on to say, "such restrictions frequently 'run with the land' and are enforceable on subsequent buyers of the property. Some examples include: maintaining a property in a reasonable state of repair, preserving a sight-line for a neighboring property, not to run a business from a residence, or not to build on certain parts of the property."
In both of these instances, however, it assumes the parents have the money or financing available to re-purchase the property (possibly with a new home and other improvements now on it) or pay the costs to sue to enforce the covenants if they are broken, respectively.
Although these may or may not work in a particular situation, the point is this: when you seek legal help, don't just solve today's pressing issues, such as preparing the deed. You should spend a little time exploring what could go wrong -- or at least not as planned -- in the future with your legal advisor, so potential situations can be dealt with before they happen. Although it may cost a little more now, it could save thousands later.
As Ben Franklin was credited saying, "An ounce of prevention is worth a pound of cure."
Thursday, September 20, 2007
Funny Money
Locally, we have seen a recent surge of funny money being passed from person-to-person, and person-to-store, and so forth. It's a national epidemic that hits even close to home.
To combat the ever-increasing counterfeit activity in this age of better digital technology, the United States Bureau of Engraving and Printing unveiled a new $5 bill, which is touted as being "safer, smarter, and more secure." It also marks the first time the government has unveiled a new bill entirely online.
You can visit the U.S. Bureau of Engraving and Printing's website to learn more about the new $5 bill being introduced at:
http://www.moneyfactory.gov/newmoney/fla...
Before you say it, I know what you're thinking: why even bother with redesigning a measly $5 bill? After all, if a person is going to counterfeit money and risk very long jail sentences for doing so, they should go after printing the big bucks, right?
Well, it seems there's a method of counterfeiting that removes the ink from a $5 bill and prints over it to create a fake $100 bill. So, the Bureau of Engraving and Printing is issuing the new bills in an effort to eliminate the similarities between the $5 and $100 bills to foil this counterfeiting method, among other reasons.
It goes to reinforce the age-old adage of "where there's a will, there's a way…" I guess.
To learn more in general, an interactive tutorial is also available to show the security and design features of the new $10, $20, and $50 bills being produced now at:
http://www.moneyfactory.gov/newmoney/mai...
You should get to know the new bills, so counterfeiters don't take advantage of you too.
To combat the ever-increasing counterfeit activity in this age of better digital technology, the United States Bureau of Engraving and Printing unveiled a new $5 bill, which is touted as being "safer, smarter, and more secure." It also marks the first time the government has unveiled a new bill entirely online.
You can visit the U.S. Bureau of Engraving and Printing's website to learn more about the new $5 bill being introduced at:
http://www.moneyfactory.gov/newmoney/fla...
Before you say it, I know what you're thinking: why even bother with redesigning a measly $5 bill? After all, if a person is going to counterfeit money and risk very long jail sentences for doing so, they should go after printing the big bucks, right?
Well, it seems there's a method of counterfeiting that removes the ink from a $5 bill and prints over it to create a fake $100 bill. So, the Bureau of Engraving and Printing is issuing the new bills in an effort to eliminate the similarities between the $5 and $100 bills to foil this counterfeiting method, among other reasons.
It goes to reinforce the age-old adage of "where there's a will, there's a way…" I guess.
To learn more in general, an interactive tutorial is also available to show the security and design features of the new $10, $20, and $50 bills being produced now at:
http://www.moneyfactory.gov/newmoney/mai...
You should get to know the new bills, so counterfeiters don't take advantage of you too.
Wednesday, September 19, 2007
Wal-Mart Becomes a Church?
Once Wal-Mart moves to a bigger and better store, what happens to the monstrosity of a building left behind?
Wal-Mart Realty, a division of Wal-Mart Stores, Inc., takes care of trying to locate new tenants for the old building, sell the property, or find new uses. Incidentally, if you want to buy or lease a former Wal-Mart, check out the ones available nationwide here: http://wal-martrealty.com/Buildings/Main...
Some new uses for former Wal-Mart buildings in other communities include the new home of Arkansas State University, a Mercedes-Benz dealership, a telephone company call center, a pizza place, and even a church!
To view some photos of these new uses:
http://wal-martrealty.com/Buildings/Phot...
Of course, our own former Linton Wal-Mart has seen a new use by becoming the new home for a Goody's clothing store several years ago. If you've been watching the recent construction take place, a farm supply store will be co-occupying the building soon.
The building looks great, and I'm very happy to see the pavement repairs completed recently over the much-needed area by the traffic light.
Wal-Mart Realty, a division of Wal-Mart Stores, Inc., takes care of trying to locate new tenants for the old building, sell the property, or find new uses. Incidentally, if you want to buy or lease a former Wal-Mart, check out the ones available nationwide here: http://wal-martrealty.com/Buildings/Main...
Some new uses for former Wal-Mart buildings in other communities include the new home of Arkansas State University, a Mercedes-Benz dealership, a telephone company call center, a pizza place, and even a church!
To view some photos of these new uses:
http://wal-martrealty.com/Buildings/Phot...
Of course, our own former Linton Wal-Mart has seen a new use by becoming the new home for a Goody's clothing store several years ago. If you've been watching the recent construction take place, a farm supply store will be co-occupying the building soon.
The building looks great, and I'm very happy to see the pavement repairs completed recently over the much-needed area by the traffic light.
Friday, September 14, 2007
The Tortoise & The Hare
When I was working as a stockbroker, a mutual fund representative came into my office one day for a visit. He left me with essentially an interesting twist on the old fable of the tortoise and the hare, focusing the story on investments of course, and I thought it was worth sharing.
On a sheet of paper he wrote "Mutual Fund A" and "Mutual Fund B" side-by-side. Fund A was a "rock 'n roll" type fund providing a 70% return in Year 1, but then lost 80% the next year, and gave a 31% return the next. (It sounds reminiscent of the tech funds of the late 90's, doesn't it?)
Fund B provided a consistent 7% return each of the three years.
Now, here is where you pull out your calculators!
You can see by adding the returns of each of the three years for the funds and dividing by three, you get the "average" annual yield. Each fund had a 21% overall return, and a 7% average annual return. So, they're the same, right?
Nope. Do the actual math, and you will see.
Put $1,000 in Fund A. After Year 1, you have $1,700. Of course, in Year 2 you lose 80% or $1,360, so you're left with only $340. Year 3 gives you a 31% return on that amount, so you end Year 3 with $445.40.
Put $1,000 in Fund B. After Year 1, you have $1,070. With another 7% return in Year 2, you have $1,144.90. And in Year 3, you end up with another 7% to end with $1,225.04 -- or $779.64 more than Fund A.
Of course, this doesn't have to be labeled "Mutual Fund A" or "Mutual Fund B" as you can substitute "Stock A" or "Investment B" or really anything. When looking at prospectuses for mutual funds, the often-quoted figure is the average annual return, so be aware that not all "averages" are created equal.
On a sheet of paper he wrote "Mutual Fund A" and "Mutual Fund B" side-by-side. Fund A was a "rock 'n roll" type fund providing a 70% return in Year 1, but then lost 80% the next year, and gave a 31% return the next. (It sounds reminiscent of the tech funds of the late 90's, doesn't it?)
Fund B provided a consistent 7% return each of the three years.
Now, here is where you pull out your calculators!
You can see by adding the returns of each of the three years for the funds and dividing by three, you get the "average" annual yield. Each fund had a 21% overall return, and a 7% average annual return. So, they're the same, right?
Nope. Do the actual math, and you will see.
Put $1,000 in Fund A. After Year 1, you have $1,700. Of course, in Year 2 you lose 80% or $1,360, so you're left with only $340. Year 3 gives you a 31% return on that amount, so you end Year 3 with $445.40.
Put $1,000 in Fund B. After Year 1, you have $1,070. With another 7% return in Year 2, you have $1,144.90. And in Year 3, you end up with another 7% to end with $1,225.04 -- or $779.64 more than Fund A.
Of course, this doesn't have to be labeled "Mutual Fund A" or "Mutual Fund B" as you can substitute "Stock A" or "Investment B" or really anything. When looking at prospectuses for mutual funds, the often-quoted figure is the average annual return, so be aware that not all "averages" are created equal.
Thursday, September 13, 2007
It Will Never Happen to Me
Imagine coming home tonight to see flashing lights, sirens, and a large group of people surrounding what was once your home, which is now a pile of smoldering debris.
Think it couldn't get worse? It can and probably will.
Whether you have a house fire, a tornado hits, or a thief strikes, you'll soon be meeting an insurance adjuster, who will give you a stack of triplicate forms to itemize everything in your home that you lost. You'll have to fill these out, itemizing every item you lost, when you bought it, where you bought it, and how much you paid for it. Unless you have a superhuman memory or a ridiculously meticulous record-keeping system, which is also protected against the fire, flood, tornado, and other disaster that occurred, you are going to have some problems coming up with a comprehensive list of everything you lost.
So, here's what to do:
Take photos of every room of your home and place the prints in a safe place away from your home. If you have a digital camera, you can burn a copy of the photos to a CD or even e-mail the attached photos to yourself, so they are out in your e-mail box somewhere in cyberland and away from your home. If you want to take this a step further, you may want to record the serial numbers of larger items on the back of the photo or electronically as the file name to the photo if you have digital photos. (This should be helpful to police if your home is robbed.)
While this will not save your home, it can save hours of frustration trying to remember what you lost in the case of a disaster and aid recovering what you should. It will also serve as evidence that you did own and possess the items lost should there ever be an accusation otherwise.
This takes very little time or money to do, so why not?
It's cheap "insurance" in the case disaster does strike, but hopefully it won't…
Think it couldn't get worse? It can and probably will.
Whether you have a house fire, a tornado hits, or a thief strikes, you'll soon be meeting an insurance adjuster, who will give you a stack of triplicate forms to itemize everything in your home that you lost. You'll have to fill these out, itemizing every item you lost, when you bought it, where you bought it, and how much you paid for it. Unless you have a superhuman memory or a ridiculously meticulous record-keeping system, which is also protected against the fire, flood, tornado, and other disaster that occurred, you are going to have some problems coming up with a comprehensive list of everything you lost.
So, here's what to do:
Take photos of every room of your home and place the prints in a safe place away from your home. If you have a digital camera, you can burn a copy of the photos to a CD or even e-mail the attached photos to yourself, so they are out in your e-mail box somewhere in cyberland and away from your home. If you want to take this a step further, you may want to record the serial numbers of larger items on the back of the photo or electronically as the file name to the photo if you have digital photos. (This should be helpful to police if your home is robbed.)
While this will not save your home, it can save hours of frustration trying to remember what you lost in the case of a disaster and aid recovering what you should. It will also serve as evidence that you did own and possess the items lost should there ever be an accusation otherwise.
This takes very little time or money to do, so why not?
It's cheap "insurance" in the case disaster does strike, but hopefully it won't…
Wednesday, September 12, 2007
Going to College at MIT for Free?
Everyone says "there's no such thing as a free lunch" these days, but faculty at the Massachusetts Institute of Technology disagree. Although there may be no food involved in this free offer, MIT began publishing its courses online for the general public to view for free about five years ago -- and the program just keeps growing!
Self-learners around the world can now log in at http://ocw.mit.edu/index.html to view their 1,700-plus class offerings, which include online syllabi, suggested readings, lecture notes, problem sets, etc. So, if you've ever dreamed of attending a world-class educational institution, it's certainly worth a look!
Self-learners around the world can now log in at http://ocw.mit.edu/index.html to view their 1,700-plus class offerings, which include online syllabi, suggested readings, lecture notes, problem sets, etc. So, if you've ever dreamed of attending a world-class educational institution, it's certainly worth a look!
Tuesday, September 11, 2007
What It Costs To Live In Greene County: Part One
Recently, I was part of a discussion where the topic was how everyone was tired of reading about how they should put away so much in an emergency savings account every month, allocate a percentage of their wages into a retirement account, earmark funds for that special summer vacation or getaway, and the list goes on and on. It just couldn't be done.
Of course, if you pick up any personal finance magazine off the news rack these days, they are packed with tons of supposed sage advice, penny-wise wisdom, and general financial rules of thumb, but the question is: How practical is it to do these great, glorious things anyway? An even better question may be: Can the "average" person do this in Greene County, Indiana?
To help answer these questions -- at least theoretically -- I started putting together an Excel template with the notion that if all of those things you're "supposed to do" couldn't be done on paper then the real-life version would be nearly impossible. So, to put "pen to paper" per se, I looked up some average incomes for the area on the U.S. Census Bureau website and got started.
When I was working more on this template, it dawned on me that I should use these monthly amounts to "back out" into an amount of the original mortgage loan, for example. The thought process being is that a $100 a month mortgage payment sounds spectacular, but what does a $100 per month mortgage payment actually buy you? Say, the area's median home price is $50,000 -- which is the average value for Linton according to the census and another independent housing study-- and a normal loan-to-value is 80% then a person must figure out how much it would take per month to finance a $40,000 loan (80% of $50,000) -- just so they can own the supposed "average" home in the community.
I tried to estimate true taxes to be paid, not what a person's W-4 tells the employer to take out each pay. This is especially insightful for those who get a large tax refund check at the end of the year -- because basically they've overpaid their taxes for the year to the detriment to their bi-weekly paycheck amount. (See the "Are You Making 0% Interest Loans to Uncle Sam?" blog entry on Thursday, September 6th, 2007).
It also became apparent rather quickly that there's a lot to think about when defining "average" because it's not as simple as it first seems. Does this include a single-income or dual-income household? How many kids live in the "average" home"? With regard to having children, is it more expensive to raise girls than boys? Does everyone in the house have a cell phone? Will having cable, internet, and other electronic gadgets around the house be considered "average" or not? Even a family's faith and values can determine where -- and how much -- of their income goes to a church, various charities, sports and leagues, eating out, etc.
So, stay tuned as this project progresses and unfolds… it's a pretty complex and ambitious one.
By the way, do you have a guess of what the median family income in Greene County, Indiana was in 1999, which was the most current census information I found?
It was $41,523.
Of course, if you pick up any personal finance magazine off the news rack these days, they are packed with tons of supposed sage advice, penny-wise wisdom, and general financial rules of thumb, but the question is: How practical is it to do these great, glorious things anyway? An even better question may be: Can the "average" person do this in Greene County, Indiana?
To help answer these questions -- at least theoretically -- I started putting together an Excel template with the notion that if all of those things you're "supposed to do" couldn't be done on paper then the real-life version would be nearly impossible. So, to put "pen to paper" per se, I looked up some average incomes for the area on the U.S. Census Bureau website and got started.
When I was working more on this template, it dawned on me that I should use these monthly amounts to "back out" into an amount of the original mortgage loan, for example. The thought process being is that a $100 a month mortgage payment sounds spectacular, but what does a $100 per month mortgage payment actually buy you? Say, the area's median home price is $50,000 -- which is the average value for Linton according to the census and another independent housing study-- and a normal loan-to-value is 80% then a person must figure out how much it would take per month to finance a $40,000 loan (80% of $50,000) -- just so they can own the supposed "average" home in the community.
I tried to estimate true taxes to be paid, not what a person's W-4 tells the employer to take out each pay. This is especially insightful for those who get a large tax refund check at the end of the year -- because basically they've overpaid their taxes for the year to the detriment to their bi-weekly paycheck amount. (See the "Are You Making 0% Interest Loans to Uncle Sam?" blog entry on Thursday, September 6th, 2007).
It also became apparent rather quickly that there's a lot to think about when defining "average" because it's not as simple as it first seems. Does this include a single-income or dual-income household? How many kids live in the "average" home"? With regard to having children, is it more expensive to raise girls than boys? Does everyone in the house have a cell phone? Will having cable, internet, and other electronic gadgets around the house be considered "average" or not? Even a family's faith and values can determine where -- and how much -- of their income goes to a church, various charities, sports and leagues, eating out, etc.
So, stay tuned as this project progresses and unfolds… it's a pretty complex and ambitious one.
By the way, do you have a guess of what the median family income in Greene County, Indiana was in 1999, which was the most current census information I found?
It was $41,523.
Monday, September 10, 2007
ID Theft: Quick Tip
With identity theft on the rise, here is a quick tip to help if your wallet or purse is ever lost or stolen. It only takes a minute, but can potentially save you hours of frustration and heartache.
Here it is:
Place the contents of your wallet or purse on a photocopy machine and make a copy of both sides of each license, credit card, ATM debit card, etc. Keep the photocopies in a safe place -- maybe even away from your residence such as a bank lock box.
If lost or stolen, you will know what you had in your wallet or purse. More importantly, you'll have all of the account numbers and phone numbers to call to report the incident or to cancel the accounts.
Here it is:
Place the contents of your wallet or purse on a photocopy machine and make a copy of both sides of each license, credit card, ATM debit card, etc. Keep the photocopies in a safe place -- maybe even away from your residence such as a bank lock box.
If lost or stolen, you will know what you had in your wallet or purse. More importantly, you'll have all of the account numbers and phone numbers to call to report the incident or to cancel the accounts.
ID Theft: Quick Tip
With identity theft on the rise, here is a quick tip to help if your wallet or purse is ever lost or stolen. It only takes a minute, but can potentially save you hours of frustration and heartache.
Here it is:
Place the contents of your wallet or purse on a photocopy machine and make a copy of both sides of each license, credit card, ATM debit card, etc. Keep the photocopies in a safe place -- maybe even away from your residence such as a bank lock box.
If lost or stolen, you will know what you had in your wallet or purse. More importantly, you'll have all of the account numbers and phone numbers to call to report the incident or to cancel the accounts.
Here it is:
Place the contents of your wallet or purse on a photocopy machine and make a copy of both sides of each license, credit card, ATM debit card, etc. Keep the photocopies in a safe place -- maybe even away from your residence such as a bank lock box.
If lost or stolen, you will know what you had in your wallet or purse. More importantly, you'll have all of the account numbers and phone numbers to call to report the incident or to cancel the accounts.
Friday, September 7, 2007
Credit vs. Debit: Is There a Difference in Cards?
These days, debit cards look exactly like credit cards with most even carrying the same logos on the card's face. Both types of cards can be swiped at the checkout and used to make purchases online or to make reservations at a hotel or airline. But is there a difference?
In a word: Yes!
A credit card differs from a debt card because when you use your credit card to make a purchase you are using the money of the company that issued the card, which is typically a bank, even though it may be for as little as 20 or 30 days ("the grace period"). In this scenario, you agree to pay the card issuer back the money you borrowed to make your purchase. Depending on your credit agreement, in addition to the money borrowed, you will also pay interest on the money borrowed at the rate you agreed to when you applied for their credit card, known as the annual percentage rate or "APR". Most credit cards allow a 20 to 30 day "grace period" in which no interest is charged.
When a debit card is used to make a purchase, it essentially works like using a check, as the account that is attached to your debit card is automatically debited when you use your debit card. The cost of your purchase is almost immediately deducted from the funds you have in this account; so, unlike a paper check, there is essentially no "float" time to the transaction. Problems also can occur when a debit card is used for a reservation because the money for the product or service is "blocked" from the account. When this happens, the money has not been actually taken from the account, but it is has been earmarked for the reservation.
For example, you may call a hotel to reserve a room for $100 to be used a month from now, and you provide your debit card for the reservation. Say, you have $500 in the checking account linked to this debit card, and you go to the electronics store the next day to buy a gizmo costing $401. You should have $99 in your account after this purchase, but your check will "bounce" because you only have $400 left available in your account -- not the $401 needed for the check -- even though the actual balance is still $500. See, although the hotel has not yet taken the money out of the account, it has blocked the $100 reservation charge from your account. This is a very common issue with using debit cards -- and one situation which creates a lot of phone calls to the customer service departments of banks, airlines, and hotels.
Another difference: While the two cards might act and look alike, the levels of consumer protection that each type of card provides can be different, such as in the case of a stolen and/or fraudulently used card. (Incidentally, many homeowner's or renter's insurance policies offer additional protection from fraud and identity theft, so you should check your policy or with your agent for more information about this coverage, if applicable.) So, you should check with your card issuer -- whether credit or debit -- to see how they handle fraud and lost/stolen cards.
In a word: Yes!
A credit card differs from a debt card because when you use your credit card to make a purchase you are using the money of the company that issued the card, which is typically a bank, even though it may be for as little as 20 or 30 days ("the grace period"). In this scenario, you agree to pay the card issuer back the money you borrowed to make your purchase. Depending on your credit agreement, in addition to the money borrowed, you will also pay interest on the money borrowed at the rate you agreed to when you applied for their credit card, known as the annual percentage rate or "APR". Most credit cards allow a 20 to 30 day "grace period" in which no interest is charged.
When a debit card is used to make a purchase, it essentially works like using a check, as the account that is attached to your debit card is automatically debited when you use your debit card. The cost of your purchase is almost immediately deducted from the funds you have in this account; so, unlike a paper check, there is essentially no "float" time to the transaction. Problems also can occur when a debit card is used for a reservation because the money for the product or service is "blocked" from the account. When this happens, the money has not been actually taken from the account, but it is has been earmarked for the reservation.
For example, you may call a hotel to reserve a room for $100 to be used a month from now, and you provide your debit card for the reservation. Say, you have $500 in the checking account linked to this debit card, and you go to the electronics store the next day to buy a gizmo costing $401. You should have $99 in your account after this purchase, but your check will "bounce" because you only have $400 left available in your account -- not the $401 needed for the check -- even though the actual balance is still $500. See, although the hotel has not yet taken the money out of the account, it has blocked the $100 reservation charge from your account. This is a very common issue with using debit cards -- and one situation which creates a lot of phone calls to the customer service departments of banks, airlines, and hotels.
Another difference: While the two cards might act and look alike, the levels of consumer protection that each type of card provides can be different, such as in the case of a stolen and/or fraudulently used card. (Incidentally, many homeowner's or renter's insurance policies offer additional protection from fraud and identity theft, so you should check your policy or with your agent for more information about this coverage, if applicable.) So, you should check with your card issuer -- whether credit or debit -- to see how they handle fraud and lost/stolen cards.
Thursday, September 6, 2007
Are You Making 0% Interest Loans to Uncle Sam?
Did you receive a large tax refund this past tax season? If so, that probably made you pretty happy, right?
What if the question was re-phrased, though, as, "How would you like the opportunity to make a zero percent interest loan to Uncle Sam?" There is no one jumping at that opportunity, is there? In essence, by having too much tax withheld from your paycheck, you are making an interest-free loan to the government.
Now, how do you feel about that big refund check?
It may be an odd time of year to be discussing income taxes, but this situation can affect a wager-earner all year long. So, if you commonly feel like there is "too much month left at the end of your paycheck" then you may consider changing your situation, so you not only have more money available to you at each payday, but you also stop resorting to credit cards or payday loans, which both likely will cause you to incur high interest and finance charges.
Yes, for some this is a "forced savings" plan of sorts, which they do not want to change. There also may be life or financial changes that some may be anticipating or already know about in the next tax year that will affect their tax situation to the better or worse, such as a marriage, divorce, birth of a child, death of a spouse, job change, etc. If you have the self-discipline needed and you believe your tax bill will be similar to last year's, though, you may consider changing the exemptions and withholding amounts from your paycheck.
To do this, you should request a Form W-4 from your employer's human resource department. When you receive this form, you should make the necessary changes to get your refund for the year as close to zero as possible. There are several withholding calculators on the internet, including ones on tax preparation and personal finance websites, which may help you to re-examine this form. If you need help, ask a tax preparer to assist you with the calculations.
So what is Form W-4? If you do not recognize this form, you most likely completed it on your first day on the job -- and you've now long forgotten it. Possibly when you first started in your position, the taxes being taken out were adequate, but as your life and job changed, the withholdings became too large. Life-changing events, such as a major job promotion, marriage, divorce, and the birth or adoption of children can change your tax situation.
Of course, it should go without saying that if you take more money "along the way" through each paycheck, you will not receive as large of a tax refund check afterward, but you will get to use this money throughout the year, and you will not have to resort to borrowing money that you should have had to spend in the first place. It can be a smart approach to "finding" more money each month, while only having to fill out a simple form at work to get it.
What if the question was re-phrased, though, as, "How would you like the opportunity to make a zero percent interest loan to Uncle Sam?" There is no one jumping at that opportunity, is there? In essence, by having too much tax withheld from your paycheck, you are making an interest-free loan to the government.
Now, how do you feel about that big refund check?
It may be an odd time of year to be discussing income taxes, but this situation can affect a wager-earner all year long. So, if you commonly feel like there is "too much month left at the end of your paycheck" then you may consider changing your situation, so you not only have more money available to you at each payday, but you also stop resorting to credit cards or payday loans, which both likely will cause you to incur high interest and finance charges.
Yes, for some this is a "forced savings" plan of sorts, which they do not want to change. There also may be life or financial changes that some may be anticipating or already know about in the next tax year that will affect their tax situation to the better or worse, such as a marriage, divorce, birth of a child, death of a spouse, job change, etc. If you have the self-discipline needed and you believe your tax bill will be similar to last year's, though, you may consider changing the exemptions and withholding amounts from your paycheck.
To do this, you should request a Form W-4 from your employer's human resource department. When you receive this form, you should make the necessary changes to get your refund for the year as close to zero as possible. There are several withholding calculators on the internet, including ones on tax preparation and personal finance websites, which may help you to re-examine this form. If you need help, ask a tax preparer to assist you with the calculations.
So what is Form W-4? If you do not recognize this form, you most likely completed it on your first day on the job -- and you've now long forgotten it. Possibly when you first started in your position, the taxes being taken out were adequate, but as your life and job changed, the withholdings became too large. Life-changing events, such as a major job promotion, marriage, divorce, and the birth or adoption of children can change your tax situation.
Of course, it should go without saying that if you take more money "along the way" through each paycheck, you will not receive as large of a tax refund check afterward, but you will get to use this money throughout the year, and you will not have to resort to borrowing money that you should have had to spend in the first place. It can be a smart approach to "finding" more money each month, while only having to fill out a simple form at work to get it.
Tuesday, September 4, 2007
Internet Resources for Small Business
If you have ever aspired to start your own small business, you may find that some of the websites listed below can help you get started.
The office of the Indiana Secretary of State has put together a great resource called the "An Entrepreneur's Guide to Starting a Business in Indiana," which is a must-read for the beginning business owner. http://www.in.gov/sos/business/corps/guide.html
To put your business ideas on paper, so you can effectively communicate them to your banker, accountant, attorney, and potential investors or partners, you should write a business plan. For tips on how to do this, visit the Small Business Administration's website at:
http://www.sba.gov/smallbusinessplanner/plan/writeabusinessplan/index.html
Think you have a great name for your new business venture? Before you get too far along, though, you may want to see if the name is already registered with the State of Indiana. You can make sure it hasn't already been applied for by checking another area of the Indiana Secretary of State's website at: https://secure.in.gov/sos/bus_service/online_corps/default.asp
If you start your business as a separate legal entity, such as a corporation or a limited liability company, the Secretary of State has standardized forms to accomplish this: http://www.in.gov/sos/business/forms.html
To obtain the federal identification number you will need to do business, you may fill out the application online, which can be found at: http://www.irs.gov/businesses/small/article/0,,id=102767,00.html
[A WORD OF CAUTION: If you are unsure of the advantages and implications of forming these entities and their tax consequences, you should consult an accountant, attorney, or financial advisor before taking matters into your own hands. Looking at these forms, however, may prompt some good questions to ask them though.]
The office of the Indiana Secretary of State has put together a great resource called the "An Entrepreneur's Guide to Starting a Business in Indiana," which is a must-read for the beginning business owner. http://www.in.gov/sos/business/corps/guide.html
To put your business ideas on paper, so you can effectively communicate them to your banker, accountant, attorney, and potential investors or partners, you should write a business plan. For tips on how to do this, visit the Small Business Administration's website at:
http://www.sba.gov/smallbusinessplanner/plan/writeabusinessplan/index.html
Think you have a great name for your new business venture? Before you get too far along, though, you may want to see if the name is already registered with the State of Indiana. You can make sure it hasn't already been applied for by checking another area of the Indiana Secretary of State's website at: https://secure.in.gov/sos/bus_service/online_corps/default.asp
If you start your business as a separate legal entity, such as a corporation or a limited liability company, the Secretary of State has standardized forms to accomplish this: http://www.in.gov/sos/business/forms.html
To obtain the federal identification number you will need to do business, you may fill out the application online, which can be found at: http://www.irs.gov/businesses/small/article/0,,id=102767,00.html
[A WORD OF CAUTION: If you are unsure of the advantages and implications of forming these entities and their tax consequences, you should consult an accountant, attorney, or financial advisor before taking matters into your own hands. Looking at these forms, however, may prompt some good questions to ask them though.]
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