Wednesday, February 18, 2015


This time instead of discussing debt, we will take a look at income tax, January and February are the two months when the majorly of Americans’ attention turns to another aspect of finance; namely taxes.

The question is, what are taxes?  

Definition of tax: a fee charged or levied against a process, product, and license.

There probably is not a day that goes by that you do not pay tax on something. A couple examples of these taxes are: cigarettes, tax on food when you eat in a restaurant, gasoline tax, taxes on movie tickets and sporting tickets. These give you how vast the field of taxation is in this country.

The taxes on ones paycheck are the ones that effect the individual the greatest this time of year. In most cases, the items mentioned in the chapter on income are taxed.

How does one prepare for annual income tax?  If you are starting to gather data for tax year 2015, you start collecting on January 1, 2015.  It is a wise idea to keep every receipt you receive on every purchase you make or every donation made. If a donation is greater than $500 you are usually required to have a letter of thanks from the party or parties that received the donation. The letter will state that you did not receive any service or reward for the donation.  Usually if you buy a chance on a car or money or anything of value, the gift is not considered a donation. Dues you pay to certain non-profit organizations are not considered deductible, but money donated to one or more of their Charites is.

At the present time most states and many cities also have income tax. You can check on your state status by going to your State Department of taxation and for the city in question to the city’s Department of taxation.

Monday, January 19, 2015


From the previous stated equation:  INCOME = EXPENSES + DEBT + SAVINGS.

In common usage, an expense or expenditures are an outflow of money to another person or group to pay for an item or servicer for a category of costs. It is almost impossible not to have expenses. Expenses are a part of life. One universal rule that can be used to keep expenses under control is to buy or obtain needs instead of wants. How often do we go shopping with a specific item in mind at a specific price and see an item we want at a higher price with more bells and whistles on it. This happens often with cars. Many of the modern cars have so many gadgets on them that we never learn what each device does. Depending what you are setting up an expense account for, the items used will differ and may be more complex.

An example would be if you are preparing a budget for a small business. In this blog I will discuss the expenses that you will need to use and understand to work with your finances.

The finances that you need to know and understand are three different expenses:

                1. Fixed

                2. Flexible

                3. Other

All 3 expenses are important, but I believe that the fixed expenses are the most important. Why I say this, is because if you do not pay them you may lose the item that you need to pay on a regular basis.  Let’s look at some examples of fixed expenses:

1.   Rent or mortgage

2.   Car payments

3.   School loans

4.   Utilities - if you have these on level billing.  This means that the total, which is an estimate of what you will pay for 12 months, is added together and 1/12 is paid each month. Any of your bills that can be placed on level billing will make handling your finances a little easier.

5.   Savings, which is one expense that people do not think enough about. A great deal of your further success in the financial world will depend upon your ability to save money.

Flexible expenses are those expenses that vary in amount from month to month. Some examples of flexible expenses:

                1. Food

                2. Gasoline

3     Charitable donations

4     Utilities not on level billing


The third and last type of expenses is other. This is sort of a catch all that does not fit in the first two: Items such as clothes, presents, comfort things such as magazines, candy, and most things that you buy once or twice a year. We will cover this in more detail when we cover budget and credit report.

Some of the reasons that expenses get out of hand:

1.   Divorce

2.   Putting wants ahead of needs

3.   Spending money from an upcoming raise that does not occur

4.   Lose of job and not adjusting to the circumstances

5.   Trying to keep up with the Jones’ life style.

6.   Drugs, alcohol, gambling

7.   Too much night life


Next time the discussion will be on DEBT

Monday, January 5, 2015


Remember three sessions ago I introduced you to the equation:


The next 3 or 4 sessions I will attempt to explain how these terms and equation may help you with your money matters. Again, I will only give you ideas and thoughts.  I stress again and again in this Blog - that I will give you the basics so that you are able to make decisions on your own.

When money is involved, it is very wise to receive input from several people you respect before spending large amounts of income on an item of which you have little or no knowledge.

Always keep in mind that you earned your income and you want to “get the best bang for the buck”.

On the surface you might ask why we are spending time on income. We receive income and we spend it. This is true, but I want to cover some types of income that may need to be handled in different ways than you would handle money received in a paycheck. There are basically three types of income:

1.   Earned Income

2.   Portfolio Income

3.   Passive Income


1. Earned income is any income that is generated by working. This includes money made from hourly employment. This also includes money earned from hourly work done for another person or from your own consulting.

Some common examples of earned income include:

a.    Working on a job

b.    Owning a small company

c.    Consulting

d.    Gambling (if you declare yourself a professional) and keep track of all your gains and losses.

When it becomes tax time, each one is treated differently, so it makes your tax reporting somewhat more complex.

2. Portfolio income is when you sell any item at a price higher than what you paid for the item. Often this is referred to as a capital gain or gains.

                              a. This can occur if you are selling stocks or bonds. These  

                                  are referred to as paper assets. Other types of paper              

                                  assets include; Certificate of deposits, Treasury Bonds, Saving Bonds.          

                               b. Buying and selling Real Estate. Portfolio income

                                   would occur if the property is sold at a profit.

                               c. Buying and selling of any other assets if a profit is                

                                    generated from the sale. A few examples of this

                                    are: coins, stamps and antiques that have increased in


                              You may need some professional help if you are buying       

                                     or selling items listed in item 3 above.


3. Passive income is income you receive from something you have purchased or created. An example of this would be if you purchased a house and rented it out for more money than it cost you for the mortgage and other items related to upkeep of the property.


Remember the equation I gave you above.


 Always be on your toes to see how you spend or use your money. In the next couple of chapters I will talk about the 3 areas that your income needs to cover.

1.   Expenses

2.   Debt

3.   Savings

If I were to ask you what is the hardest to start and maintain, how would you answer?

All 3 are important and probably addressed in the goals that you are writing. For most people I have worked with, the savings is the hardest to start and to maintain. Most of the articles that I have read stress that people retiring have not put away enough to live securely in their retirement.  One article that was published this week stated that 1 out of 5 retirees will or have died in poverty. PLEASE do not let it happen to you.