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Money Matters

Corporations, Taxes, People, and 'Fair Share'

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GOP presidential candidate Mitt Romney committed a huge political gaffe in Iowa by telling the audience that he believed that corporations were people and that if the audience didn’t like what he was saying that they didn’t have to vote for him. Corporations are currently taxed as though they are individuals, but does that make it right?

There is a lot of debate right now over “everyone paying their fair share”. I’m sure you’ve seen the YouTube videos of millionaires begging to be taxed along with articles ardently arguing that corporations should pay fewer taxes than individuals, capital gains taxes are not the same as earned income, and that if the economy is going to improve businesses need to be supported. Which side is right?

The answer is complex, but I believe both groups are right. Of course, every American should contribute to the overall well-being of our country however America runs on small businesses, so it’s important that small businesses aren’t taxed too much so they can grow. There is a fine line between paying an amount of tax that will support good roads, solid schools, and an able cadre of firepersons and paying an amount of tax that will cripple your business so you can’t afford to hire employees. Wouldn’t it be simpler to have a flat tax? Everyone would pay the same percentage of earned income, regardless of how they earned it, to help contribute to the betterment of our country.

There is no worse feeling than working hard to earn more money, be it from getting a promotion and new job title or building your business from the ground up, only to have your hard-earned money taken away while multi-million dollar corporations are paying less than you are. If everyone, including corporations, paid their “fair share” by contributing a portion of income to the government via a flat tax system we’d all be better off.

Shay Olivarria is the most dynamic financial education speaker working today and the author of three books on personal finance. Visit her at www.BiggerThanYourBlock.com.

Building Your Net Worth

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Last week, the Pew study that found that African-American households lost about 53% of inflation-adjusted median wealth during the Great Recession was released. Instead of focusing on what we’ve lost. Let’s take a look at what we can do to build our net worth.

Understand, and agree to, everything you sign.
The biggest asset most Americans have is their home, so when the housing market crashed it took the positive net worth of many with it. The crash was caused, in part, by people not understanding the loan products they agreed to and losing their homes when they couldn’t make the payments.

It is so important to understand, and agree to, everything that you sign before you sign it. If you don’t understand the terms or the language make sure to ask what everything means. If the person doesn’t want to explain everything until you understand or, even worse, tries to make you feel bad for nothing understanding, do not sign anything. There are hundred of companies that are more than willing to work with you. You’re not begging for anything. They need you just like you need them.

Have more than one stream of income.
It’s vital that each of us has more than one way to earn money. It’s even better if you have active income (a way to earn money from your labor) as well as passive income (a way to earn money from not doing anything). Money that you earn from a job is active income; you have to get up do some kind of work to earn money. What happens if you can’t go to work? You don’t earn money. The biggest risk isn’t that you’ll die, it’s that you’ll become incapacitated and won’t be able to work. Having money that comes in rain or shine regardless of what you do is the answer. Passive income is money that you earn from not doing anything; like rental income.

Spend money on appreciating assets.
I’m a firm believer that it’s not how much money you earn that’s important it’s how much you spend that really matters. You want to use your money to buy things that are going to be worth more after you buy them (think real estate) than things that are going to be worth less after you buy them (think clothes).

The key is to think critically about your purchases and then spend the bulk of your money on things that will help you to build up your net worth. Of course, we have to buy things that depreciate over time; however we should be consciously making those spending choices. Every dollar you spend is either helping you to become wealthy or keeping you from wealth.

Once you’re doing these three things you’re net worth will be growing every year. You’ll make great decisions about your money, you’ll have active and passive income coming in, and you’ll be using the money from your multiple streams of income to purchase more assets that will add to your net worth.

Shay Olivarria is the most dynamic financial education speaker working today and the author of three books on personal finance. Visit her at www.BiggerThanYourBlock.com.

The Only Color That Matters is Green

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The blogosphere is abuzz with talk lamenting the Pew study that found that African-American households lost about 53% of inflation-adjusted median wealth during the Great Recession. Most of the articles focus on the fact that white people only lost 16% of their wealth without acknowledging that African-Americans are adults, have power, and can make wise decisions.

There is a mentality amongst many African-Americans that white people are “out to get” us. Though there are systems in place that have historically kept African-Americans from sharing in the benefits of being an American, many of the missteps that have kept us from benefiting socially, financially, and emotionally are due to our own choices.

I can’t tell you the number of articles, blog posts, etc. that talk about predatory lending as if unscrupulous bankers are forcing people of color into horrible loan products. I see very few articles, blog posts, etc. that admit that not only are people of color, sometimes, uneducated in the arena of personal finance we aren’t even interested in learning about it.

The sooner we learn that being African-American doesn’t automatically grant you clemency for making bad choices, the better off we’ll be. It’s never been about blacks and whites as much as haves and have-nots. The only color that matters today is green. The golden rule, she that has the gold makes the rules, has never been more true. We’d better start making wise financial choices, creating generational wealth, and imbuing our children with the skills to manage and grow that wealth over time because now, the only color that matters is green.

Shay Olivarria is the most dynamic financial education speaker working today and the author of three books on personal finance. Visit her at www.BiggerThanYourBlock.com.

Don't Expect Your Job to Create Financial Stability in Your Life

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I’ve run across many people that seem to think that having a job is the best way to create financial stability. I’m aware that it’s a common idea, but it always floors me when I hear it. Owning a business and having passive income are much better ways to create financial stability for you, your family, and your community.

Let’s look at the idea that your job is a stable source of income. Ha! Your job is not as stable as you might think. We all know people that have been laid off for no reason other than it was best for the company’s bottom line. You will be hired or fired based on the needs of the company. Your employment, from the business’ perspective, has nothing to do with your needs.

What about the idea that having a job brings in “good” money? A job provides x amount of money for y amount of time. Usually you’re trading your time for a specific amount of money without understanding the affect our specific work has on the company’s overall bottom line. Businesses are in business to make money, so it makes sense that whatever amount you are being paid is obviously much less than that work is actually valued at.

A job is a critical piece for most people, but not because of the reasons that most people think. A job provides income for you to leverage to build wealth. You should be squirreling away money to purchase real estate, a passive income business (think cash cows like fast food restaurants, chain hotels, or laundry mats), or a home to live in. Your goal should be to create your own little passive income kingdom. Based on several reports in 2010, the average American family of four brings in about $50,000 per year. How difficult do you think it would be to replace that income with passive income?

It will take time to build your kingdom, and it will definitely take some hard work, but the rewards are worth it. What would you do with your time if you didn’t have to get up and spend forty hours per week at a job and another estimated five hours every week driving to and from work? Where would you go if you weren’t expected at your job every day?

All it takes is a shift in mindset to get you there. Start reading everything you can about your goals. Start saving money, even if it’s only $50 a paycheck, towards a down payment on …. something. Who can you network with to learn some applicable tips to help you reach your goals? Start now because you can’t expect a job to create financial stability in your life.

Shay Olivarria is the most dynamic financial education speaker working today and the author of three books on personal finance. Visit her at www.BiggerThanYourBlock.com.

Four Things You Might Not Know About Retirement Accounts

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While working in Boyle Heights this week I realized that there are some amazing things about investing for retirement that some folks don’t know about. Setting a little money aside today to build a retirement, and generational wealth, tomorrow is really simple and it’s rather fun to watch your money increase over time. Here are four things that you might not know about investing for retirement.

#1 Anyone with earned income can start investing.
That’s correct. Anyone that has earned money can invest it in a tax-deferred mutual fund. That’s great news! It means that as soon as you begin making money, you can start putting some aside for retirement. It doesn’t matter if you’re a child star, helping out with your parent’s business, or starting your first job you can contribute money towards building generational wealth with your first check.

#2 It only takes $50 a month to invest.
There are quite a few funds that will let you open a retirement account (read: Individual Retirement Account or IRA) for as little as $50 per month if you set up automatic withdrawals from your checking account. Don’t tell me you don’t have $50 to contribute to building generational wealth because I’m pretty sure you spend more than $50 a month on non-essential items. Why not use your money to build wealth for yourself, your family, and your community? Once you’re comfortable with $50 a month, try increasing it every year.

#3 You don’t have to do much to earn money.
The sooner you get started the better off you’ll be financially. Not only will you create good savings habits, but you’ll also be able to take advantage of the ups and downs of the stock market for that much longer. Let’s say that you own one hundred shares of Shay Mutual Fund. You bought the shares for $1 each, so you spent $100. If you hold on to those shares and the mutual fund value appreciates you make money. Let’s say that over time your shares become worth $2 each. That means that you have made $100 and you know have $200 worth of Shay Mutual Fund. Congratulations! Investing can also lose money, but if you stay the course, that could be a good thing.

#4 Take advantage of dollar cost averaging.
The key to building a retirement nest egg is to contribute money steadily. Most people will have a monthly amount taken automatically from their checking account every month to contribute to their retirement account. The amount of shares you’re able to purchase depends on how much the mutual fund is selling for when you purchase it. That means that if Shay Mutual Fund cost $1 per share in January and you’re contributing $100 per month, you’ll be able to purchase 100 shares. Let’s say in February something happens to make the mutual fund share price dip, but you believe in the fund and continue to invest. If the shares dip to $0.75 per share you’ll be able to purchase 133.33 shares. Now you own 233.33 shares and your shares are worth $175. You’ve lost $25. March comes around and Shay Mutual Fund rallies. Now, Shay Mutual Fund is worth $1.50 a share so you can purchase 66.66 shares. You now own 299.99 shares and they are worth $450! In three months you’ve contributed only $300 but your shares are now worth $450. You’ve earned $150. Stick to the plan and invest the same amount, or more, every month to take advantage of small dips in the market. Using dollar cost averaging you can by more shares when the price is cheaper and fewer when the price is higher.

What are some other things that we might not know about investing in mutual funds? Leave comments with your tips because we all have something we can teach and we all have something we can learn.

Shay Olivarria is the most dynamic financial education speaker working today and the author of three books on personal finance. Visit her at www.BiggerThanYourBlock.com.

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