Debt is one of the reasons the U.S. economy is currently in a downturn (and possibly headed towards a recession), but debt is also a major reason why there are more millionaires and billionaires today than ever before.

Debt can help someone’s finances spiral out of control, but it can also help someone build an impressive amount of wealth.

But how can that be?

Good Debt vs. Bad Debt

There is good debt, and then there is bad debt.  People who find themselves in financial trouble can blame “bad debt.”  Entrepreneurs who become millionaires can attribute their success to “good debt.” 

Debt usually carries a negative connotation, but not all debt is bad.  If used correctly, debt can help you build wealth and put you on the path towards financial freedom.

Examples of Bad Debt

Debt in any form gives you purchasing power.  You incur debt in order to buy something, whether it’s a widescreen TV, an education, a car, or a house.

The best way to determine if the debt you incur is bad debt is to ask the following question: “Is this debt helping me buy something that loses value?”  If the answer to this question is “yes,” you’re in the world of bad debt. 

Here are two common examples of bad debt:

1) Credit Cards.  High consumer debt on credit cards is probably the # 1 reason why our economy isn’t doing so well.  In the past few years, people have placed boatloads of purchases on credit cards, not stopping to think when or how they would pay off their ever-increasing balances.  Moreover, these purchases usually involve assets that lose value (e.g., televisions, electronics, expensive gadgets, etc.).  If you’re placing numerous purchases on a credit card and not paying your balance off in full at the end of the month, you’re incurring bad debt.

2) Auto Loans.  Getting a loan to buy a car is one of the best ways to get yourself into bad debt.  A car loses over 50 % of its value in the first 2 to 3 years.  Thus, by year 2, the balance you own on the loan is likely more than the car is worth.       

Examples of Good Debt

Whereas bad debt helps you buy an asset that loses value, good debt helps you buy an asset that increases in value.  People like Robert Kiyosaki and Donald Trump are in debt millions and millions of dollars.  But it’s good debt, not bad debt, that they have and that helps them continue to build their wealth.  Here are two examples of good debt:

1) Real Estate Loan.  A loan that helps you buy a piece of property is good debt because it helps you acquire an asset that increases in value at an average of 6 % per year.  Moreover, if you decide to rent out that property, you can generate positive monthly cash flow (i.e., passive income) that puts money in your pocket.  Thus, you get an asset that gains value over time and that puts short-term money in your pocket.

2) Business Loan.  A loan to help you start or grow a business is good debt because, like real estate, a business is an asset that gains value over time (provided it has valuable products and services and is property managed).  An SBA loan or a loan from a stranger like an angel investor gives you the funds necessary to invest in the business.  This investment, in turn, helps you get it off the ground or improve it over time.   

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This post concludes my three-part Financial Facts About Barack Obama series.  On Wednesday, I looked at the effect of Obama’s proposal to let the Bush tax cuts expire, and yesterday I focused on the effect of his proposal to raise the long-term capital gains tax. 

Today, I want to write about Obama’s proposal to raise Social Security taxes.

The Social Security Tax Hike

As it is, the Social Security tax amounts to a 12.4 % tax on earnings up to $102,000.  Obama hasn’t been clear on what he wants to do: 

• Originally (with regard to letting the Bush tax cuts expire), he said he would not increase taxes for people earning less than $250,000. 
• He contradicted himself by saying later that he would tax all income to fund Social Security, including income over the $102,000 cap.  
• To reconcile his contradictory statements, Obama said he would not subject income between $102,000 and $250,000 to the Social Security tax, but he would, instead, subject all income above $250,000 to the Social Security tax.

Let’s give Obama the benefit of the doubt and assume that, after being inaugurated, he will advocate taxing income above $250,000 to fund Social Security.  That’s an additional 12.4 % tax on individuals’ incomes that exceed $250,000.

Effect of the Social Security Tax Increase

This increase will have several detrimental effects, including (1) slapping a huge tax increase on today’s young voters; (2) further removing incentives from striving for professional success; (3) reducing the value of a college degree; and (4) the march towards a socialist revolution.

1) A HUGE increase in Social Security taxes for young people.

According to certain studies, Obama’s policy would impose a 60 % increase in lifetime Social Security payroll taxes for some young voters.  And if you’re college-educated, prepare to lose more because the future earnings of college-educated workers are likely to remain above Social Security’s maximum taxable limit for most of their careers. 

Under the current system, college graduates will contribute about 5 % of their lifetime earnings to Social Security.  Under President Obama, they would contribute almost 9 %. 

This is mind-boggling.  A majority of Obama’s supporters are young college students.  Yet, by voting for Obama, a college graduate earning $40,000 per year today is effectively surrendering an additional 4 % of his or her lifetime earnings to Social Security.  (And considering that Social Security may be bankrupt anyway by the time that college graduate reaches retirement age, he or she may get no benefits in return.)

2) Less incentives to strive for professional success.

For those with college and post-graduate degrees (me included) who have professional jobs, a higher tax rate that accompanies salary and compensation increases past $250,000 makes it less attractive to strive for that promotion or executive position. 

It’s enough that compensation above $250,000 is taxed at 30+ %.  What’s more, the top rate will likely be 39 % under Obama.  His proposal will add an additional 12.4 % tax for income above $250,000.  Thus, high-salaried executives and professionals will be surrendering about 50 % of the top portion of their compensation. 

For example, a partner at a big law firm probably makes about $1 million per year.  I know that’s a lot of money.  But let’s look at a snippet of how much this person will have to fork over to Uncle Sam under President Obama.  In addition to the taxes he pays for the lower brackets of his income (i.e., $0 – $350,000), this person will have to pay over 51.4 % in taxes (39 % after Bush tax cuts expire and additional 12.4 % for Social Security) for all income above $357,700.  $1 million – $357,700 = $642,300.  51.4 % of $642,300 is $330,142.20. 

This law firm partner will have to pay $330,142.20 in taxes for his income above $357,700.  And that’s just for income above that $357,700 tax bracket.  Add on the rest of the taxes he pays for the lower brackets of his income, including Social Security taxes on income up to $102,000 and from $250,000 to $357,700, and he’ll likely surrender about HALF of his total income to the government.

This is insane.  Looking at it from the bottom, I would HATE to fork over that much of my money.  Moreover, it’s not like these highly compensated professionals work 9 to 5.  They work around the clock.  (I know I do!)  Working that hard (i.e., late nights, weekends, etc.) and then having to pay Uncle Sam almost HALF of what you make? 

It’s not worth it.  I’d rather work less and make less because I won’t have to surrender to the government so much of the money I’ve earned for working long hours.  I know a lot of other professionals would feel the same way.      

3) A reduction of the value of a college degree.   

What does this all mean?  Two things.  First, Obama’s plans for Social Security effectively reduce the value of college and post-graduate degrees.  Higher Social Security taxes decrease the incentives of young voters to stay in school and/or pursue post-graduate degrees.  

Ordinarily, additional years of education guaranteed a higher income.  But if that additional income is taxed at a higher rate, the increased tax burden wipes away the value of paying for the additional education in the first place.

4) Socialist Revolution.

If people don’t have a monetary incentive to educate themselves, find well-paying jobs, and excel in those jobs, production will grind to a halt, the middle class will disappear, and the economy will tank.  We might as well become a socialist country because that’s what this is going to look if Obama’s tax proposals come to fruition.

There’s nothing new here with Obama.  There’s no hope or change.  It’s just more (and worse) of the same.

If you’re an entrepreneur or interested in business and money in general, a vote for Obama isn’t the way to go.  These facts about Barack Obama illustrate that, under his tax proposals, we’d be in for one heck of an economic and social disaster.

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Yesterday, I kicked off my Financial Facts About Barack Obama series by writing about the effect of Obama’s proposal to let the Bush tax cuts expire.  As I said yesterday, this guy has no idea how disastrous such a proposal would be for the economy and for business.

Obama’s monetary policy consists of two other major items: raising long-term capital gains taxes and raising Social Security taxes.  Today I want to focus on Obama’s proposal to increase the long-term capital gains tax rate from 15 % to 25-28 %.

Raising The Long-Term Capital Gains Tax

The long-term capital gains tax rate applies to an asset that you hold for more than one year.  Thus, if you purchase a share of stock today and sell it in August 2009, your gains (if any) are subject to the long-term capital gains tax rate.  That rate is currently 5 % for taxpayers in the 10 % and 15 % tax brackets and 15 % for taxpayers in the 25 %, 28 %, 33 %, and 35 % tax brackets.  Thus, the latter 15 % rate is the one that applies to the majority of Americans.   

Obama has stated that he will advocate increasing the long-term capital gains rate from 15 % to 25 % or 28 %.     

Who Does This Tax Increase Affect?

This tax increase affects mostly anyone who owns stocks.  It also applies to real estate investments, but I’ve already explained how you can avoid paying capital gains taxes on your rental properties.

Effect Of Raising The Long-Term Capital Gains Rate

Raising the long-term capital gains tax rate would have several devastating consequences: (1) decrease in federal tax revenue; (2) the move towards a system that doesn’t work; (3) penalizing the middle class; (4) punishing success in general; and (5) inhibiting economic growth.

1) Decrease in federal tax revenue. 

Scott Wainner (of WRevenue.com, one of my favorite blogs) writes in his post about Obama’s cluelessness that, twice in history, increases in capital gains rates have decreased tax revenues, and decreases in capital gains rates (under Bill Clinton and George W. Bush) increased tax revenues.  He uses a helpful chart to support this statement.  The numbers don’t lie.  Simply increasing taxes doesn’t always lead to a corresponding increase in federal tax revenue.   

2) Fairness cannot be imposed or regulated.

Obama insists that, although a capital gains tax hike won’t produce more tax revenue, the rate nevertheless must be increased for “fairness.”  That sounds like socialism to me.  The attempt to redistribute wealth via this backhanded way of taxing individuals who invest their money is an exercise in futility.  This method has been tried in the past, and it has failed miserably.  Free markets–not government regulation–create fairness.  

Enacting revenge on wealthy investors, mutual or hedge fund managers, and business owners effectively penalizes the driving forces of our economy.  Like I said yesterday, no one ever got a job from a poor person.  When people with money are allowed to invest that money, society benefits from expanding businesses, an increase in jobs, and a rise in innovation. 

When you take the gains away from these investors under the guise of “fairness,” you’re imposing a socialist system that punishes business, reduces jobs, and discourages innovation.  And it’s a system that has failed multiples times in our past and across the world.

3) The middle class, not the “wealthy,” are affected.

A major problem with this part of Obama’s tax plan is that it won’t just affect the wealthy (as he so naively thinks).  Instead, it would affect millions of Americans who aren’t wealthy.  As Scott points out, there are 100 Million people in the U.S. who own stock.  In fact, in 2005, 47 % of all tax returns that reported capital gains were from households with incomes below $50,000, and 79 % were from households with incomes below $100,000.  It isn’t just the wealthy who are buying stock.   

4) Punishing success.

For his Harvard education, Obama is an absolute moron on this issue.  Taking a larger chunk of people’s capital gains punishes hard-earned success.  It’s one thing to tax earned income (i.e., what someone earns from a job).  But when you increase the tax on gains people realize from investing (and risking) their hard-earned money (and gains that, by the way, help capitalize businesses and, thus, spur economic growth), that’s another story.

This country has over 300 million people.  Raising long-term capital gains taxes affects ONE-THIRD of that population.  Moreover, of that one-third (or 100 million people), 79 % earn under $100,000.  It’s not just millionaires who will be affected.  It’s middle-class America–a sector that works painfully hard to make ends meet–that will suffer, too. 

I’ve never seen such a concerted effort to wipe out the middle class.  It’s as if we have a communist running for President.  (Do we?)

Taxing middle-class workers for achieving monetary gains in the stock market punishes them for their efforts and wipes out their hard-earned success in the market.  Economic growth depends on rewarding success, not punishing it.

5) Anti-growth consequences.

Punishing over 100 million investors discourages them from entering the market.  It keeps them from investing their money in the stocks of companies.  In addition, like increased taxes on small businesses, a higher long-term capital gains rate reduces the motivation for entrepreneurs to invest their money in start-up companies or in growing businesses.  The whole point of investing one’s money in a business is the goal of having more cash in your bank account.  Take a bigger bite out of that, and you remove the incentive to invest and innovate.

These additional facts about Barack Obama are problematic.  I don’t think this man truly understands the ramifications of raising taxes across the board.  We may not be in a recession, but we’re certainly in a downturn.  This is not the time to raise every tax in the book.  Doing so (especially hiking the long-term capital gains tax) discourages and destroys investment, risk-taking, entrepreneurship, innovation, and the all-important goal that we so desperately need right now: growth. 

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I have avoided politics on this blog since its inception, but I’m writing about the U.S. presidential race this week because it’s turning out to be one of the most important campaigns of this generation.  However, I want to stay within the themes of this blog (i.e., money, investing, entrepreneurship, etc.), so I thought I’d focus on the financial facts about Barack Obama and why his proposed monetary policies are terrible for businesses, entrepreneurs, and money and investing in general. 

In short, America cannot afford to have this man become President.  Our wallets cannot endure four years of a Barack Obama presidency. 

John McCain has some drawbacks as well, but Obama’s monetary policies will have a far more drastic effect on this country than anything McCain will do.  Thus, I think it’s imperative to look at certain key facts about Barack Obama and how they will affect the U.S., its economy, and businesses and entrepreneurs.

Monetary Facts About Barack Obama

Obama has promised to implement and/or advocate the following policies:

1) Allow the Bush tax cuts to expire for Americans earning more than $250,000 per year.

2) Increase long-term capital gains tax rates from 15 % to 25 %.

3) Increase Social Security taxes by subjecting income over $250,000 to a 12.4 % tax.

I want to look at the effects (particularly the economic and business effects) of these policies, but I can’t do that all in one post.  It’s a lot of information, so I thought I’d spread it out over three posts. 

So today, I will look at the effect of Obama’s promise to allow the Bush tax cuts to expire.  Tomorrow, I will look at the effect of raising the capital gains tax.  And on Friday, I will look at the effect of increasing the Social Security tax.    

Expiration of Bush Tax Cuts

Currently (under the Bush tax cuts), the top income tax rate is 35 %.  Under Obama, that rate would go back up to 39 %.  Obama claims that this shifts the tax burden to American households that earn more than $250,000 per year . . . or, in his words, the “wealthy.”

Burden on Small Businesses, Not “Wealthy” People

But he’s wrong.  This logic (i.e., shifting the tax burden to the “wealthy”) assumes, first, that people who make $250,000 are wealthy.  In today’s economy of inflated real estate prices, high gas prices, and a falling dollar, $250,000 only goes so far and doesn’t even come close to equaling “wealth.” 

But there’s a bigger problem with Obama’s logic.  He isn’t shifting anything to the wealthy.  Instead, he’s shifting the tax burden to small businesses.

Several articles, including this one, have pointed out that about two-thirds of the $700+ billion of income from small businesses in 2006 was reported by households making $250,000 per year or more.  (Income for “small businesses” is primarily derived from sole proprietorships, partnerships, and S-corporations.) 

Note that these are the same households (i.e., those making more than $250,000 per year) on which Obama wants to increase taxes.  Thus, raising taxes on these households will effectively raise taxes on most small-business profits in America.

How High Will Taxes Be For Small Businesses? 

Under President Obama, the S-corporation tax rate would rise from 35 % to 39.6 %.  The tax rate for sole proprietors and general partners, however, would rise from 37.9 % to 50.3 %.  (Sole proprietors and general partnerships have to pay income tax and the Medicare portion of the payroll tax.) 

A tax rate of over 50 % would be the HIGHEST rate a small business has paid since before Reagan was president.

Serious Economic Consequences

If two-thirds of all small-business income is taxed at 50 %, there will be serious economic consequences, including (1) fewer businesses, (2) fewer jobs, (3) more tax evasion and tax avoidance, (4) less federal tax revenue, and, ultimately, (5) a full-blown recession.

1) Fewer Businesses

Right now, the fastest way to achieve financial freedom is by starting your own business.  Under President Obama, however, a 50 % small business tax rate will discourage Americans from starting a small business or expanding or growing an existing one. 

Who would want to start a business where, if you achieve any level of success, you might lose HALF of the business’s earnings to Uncle Sam??  Any reasonable person would rather remain employed (and get taxed at 20+ % or 30+ %) than start a sole proprietorship or partnership (and get taxed at a top rate of 50 %).  A 50 % tax rate wipes away any financial potential of working for yourself or starting your own business.   

2) Fewer Jobs

Obama’s tax increases will also reduce the number of available jobs.  Small businesses create the majority of jobs in the U.S.  So do the math: If fewer people start small businesses, and fewer people expand and grow their small businesses, there won’t be as many businesses (and as many growing businesses) offering jobs. 

Even if you think that a sole practitioner like a doctor who makes $500,000 per year is “wealthy,” ask yourself this question: Have you ever gotten a job from a poor person?  The answer, of course, is “no.”  “Rich” people–or, more accurately, small and medium-sized business owners–provide jobs.    If you place such an enormous tax burden on these businesses, you prohibit them from growing (or starting up in the first place) and even might cause many of them to contract to save money.  And if businesses don’t get started, don’t grow, and if some have to downsize, there will be fewer and fewer jobs on the market. 

This is a stunning cause-and-effect that you don’t see reported in the media or in any popular publication.  Obama has stated (like every liberal) that he wants to create more jobs.  Yet his own tax proposals will destroy job growth!

Think about it in real-world examples.  In your town, the restaurant down the street that was about to open doesn’t.  The manufacturing company that just opened a new plant decides to close it two weeks later because it lacks the funds to sustain the plant during its initial stages.  The doctor who wants to leave a university to open up a private practice in the town center decides that his money can be better spent elsewhere. 

These events all have one thing in common: they don’t create jobs.          

3) More Tax Evasion

Tax evasion would certainly increase.  If business owners have to struggle to pay Uncle Sam, a good number of them might very well try to get crafty with their tax returns.  When the choice is between sustaining your livelihood (e.g., your handy man business or your moving company) or paying Uncle Sam, you can bet business owners will try to avoid paying some of their taxes.

4) Decrease in Federal Tax Revenue

Don’t pay attention to the media on this.  If you have fewer businesses, fewer sole proprietors, and fewer employees (due to fewer jobs) paying taxes, and if you have an increase in tax evaders, federal tax revenue will decrease.  Count on it.

5) Full-Blown Recession

If you’re keeping score at home, we have fewer businesses, fewer jobs, an increase in tax evasion, and a decrease in federal tax revenue.  We’ll also have higher unemployment and less innovation, investing, and entrepreneurship.  Fewer people will have money, and those who do will have less.  Less money means less consumption and less disposable income to spend on products and services. 

These are the classic ingredients of a recession.  Obama’s tax proposals would bring this economy to halt.  We’re not even close to a recession yet (i.e., the economy grew 1% last quarter, and you need two straight quarters of negative growth).  If you think times are tough right now, just wait for Obama to take the helm. 

That’s not change we can believe in.  (It’s actually much of the same failed policies from the 1960s and 1970s.)  Despite the Harvard education (which, by the way, is overrated), these cold, hard facts about Barack Obama illustrate that he doesn’t have a clue about the economy.

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Few politicians exist who understand money and the declining value of the U.S. dollar.  Whether or not you like Ron Paul (which is irrelevant here), he gives a nice, straightforward explanation about monetary policy and the Federal Reserve’s role in maintaining the value of the dollar. 

These are issues that affect all of us because the majority of us deal with dollars on a daily basis, and the U.S. dollar plays a major role in the world. 

I won’t try to restate Ron Paul’s take on money or what he says about the value of the U.S. dollar.  In the video below, he generally talks about the following topics: 

1) The dollar’s lack of intrinsic value.

2) The overall depreciation of the dollar.

3) Monetary policy and how money is involved in everything we do.

4) Availability and ease of credit.

5) The Federal Reserve’s creation of money out of thin air.

Ron Paul on Money

 

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I car pool sometimes with one of my friends from work because we live fairly close to each other.  The other day, when I was driving him home, we somehow struck up a conversation about business ideas and what it takes to start a business.  During that conversation, he said two things that made me think about and revisit some of the ideas I’ve written about and explored on this blog.   

I thought it would be helpful to quote him in this post to illustrate how the majority of society thinks and feels about money, risk (including risks for investing money and business risk), and businesses.

“That Is Too Risky.”

The first thing he said that caught me was embedded in a story he told me about one of his own friends.  Here is how the conversation went:

Me: “It really doesn’t take much to start a business.”

Friend: “Yeah, it doesn’t seem like it.  For example, one of my friends from law school made these flash cards on Microsoft Word when he was studying for the bar exam.  He ended up having hundreds of them, and they were real helpful.  So he put an ad on Ebay to sell copies of them for $50.  When someone bought them, he would just print them out from his computer and mail them to the buyer.  He sold over 200 of them!”

Me: “That’s a nice $1,000 profit.”

Friend: “Yeah, I know.  Another thing he did when we were in school was he found a car for sale on Craigslist.  He bought it for like $4,000 and then turned around and sold it to someone else for $8,000.”

Me: “Wow.  He must have figured out that the book value of the car was much more and thought $4,000 was a bargain for it.”

Friend: “Yeah, but man, I could never do something like that.”

Me: “Why?”

Friend: “I mean, that’s risky.  I’m not about to go buy a car on Craigslist and then try to sell it.  What if I get stuck with it, and then I’m $4,000 in the hole.  He has this mind that I don’t have.  He doesn’t seem to care about risk.  That’s just way too risky.”

“I’m So Conservative.”

The second thing my friend said was a followup to his story and his comments about risk.  Here is how the exchange took place:

Me: “Well, what he did wasn’t really risky.  He knew and understood what he was doing.  He probably researched the car.  Looked at its market value.  He most likely inquired about the mileage, etc.  I’m sure he did his due diligence and figured out that he could probably sell it for much more.  All that knowledge decreased his risk.”

Friend: “Yeah, I guess.  But I just could never do that.  I’m so conservative.  I have a family.  I’m so conservative with my money.  I can’t just take risks like that.”

Me: “OK.  Think about it this way.  You say you’re conservative with your money.  So you wouldn’t do like your friend did and buy a car off Ebay for $4,000 for a short-term business venture.  And you probably wouldn’t spend even $1,000 or $500 on starting a business, right?”

Friend: “Exactly.”

Me: “That’s fine.  But what I see is the following . . . and I’ve seen this with myself in the past: Someone who is unwilling to spend $1,000 on, for example, putting up a website and developing a product to sell instead goes and spends that money on 7 or 8 dinners at fine restaurants.”

Friend: “Right.”

Me: “How is that being conservative?  If you think in terms of investing your money in assets, investing $1,000 on going out to dinner over the course of two months doesn’t yield you one penny in return.  You had a good meal, but that money is gone.  On the other hand, investing $1,000 on starting a business is more likely, if done with proper research and due diligence, to yield you a return on that investment.”

Friend: “Right.”

Me: “So, to me, it’s more risky to go out to dinner consistently than it is to save that money you use on expensive nights out and invest it in a business idea.  When you go out to dinner or buy a TV, you’re just throwing your hard-earned money away.  You’re putting it in a depreciating asset.  When you start a business, however, you’re investing your money in an asset that can appreciate and possibly yield you substantial returns in the future.”

Friend: “Yeah, I guess that makes sense.”

Risk Is Nothing But A Myth

I was fascinated listening to him.  He’s a good friend, and the above exchange shouldn’t paint him in any negative light.  His thoughts about risk and being conservative with one’s money are an epidemic that affects a lot of people in society.  And it used to affect me, too.

Risk is just a myth.  It’s an excuse we create to forego an opportunity, and it simply masks our lack of knowledge regarding that opportunity.  In other words, the more we know about something (i.e., a product, a market, an industry), the less risk there is in pursuing a business opportunity in that direction.

But people use “risk” as an excuse to stay in their comfort zones, and they think–erroneously–that those comfort zones are actually safe.    

This line of thinking probably needs its own blog post (or posts).  So I’ll finish this with two important and related thoughts about why I think risk is simply a myth:

1) Risk is inversely proportional to knowledge.

2) People use “risk” to hide their fear of uncertainty.   

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Like many taxpayers, my wife and I received our tax refund check from the Internal Revenue Service this past week.  The amount of the check was $5,000 even. 

Now, there are a lot of people who love receiving tax refunds, especially if it’s a sizable amount.  I remember back in high school when I got a job as a stock boy at a grocery store, the training coordinator went on and on about how she’d rather get a check from the IRS rather than write them one.

If you think this way, stop right in your tracks.

Getting a check from the IRS, particularly a big refund, is deceptive.  All it means is that you gave the government an interest-free loan for almost a year.  In other words, the government kept money that was yours and that you could have put in your pocket or invested sooner.  You’re allowing the government to withhold too much of your money, and you’re cheating yourself.

Controlling the amount of taxes you pay, including how much you give the government upfront, is as important as anything else when you’re trying to create wealth.  It’s not how much you make.  It’s how much you keep.  The $5,000 above is too much for my taste.  I wish my wife and I had had a good part of that throughout 2007 instead of receiving it now.  Nevertheless, it’s a lesson learned.

Of course, if you’re not an employee and, instead, are an entrepreneur, you don’t have to deal with with-holdings and related minutia.  Entrepreneurs and business owners control how much they pay in taxes and don’t have to worry about giving the government interest-free loans. 

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I’ve enjoyed posting videos from YouTube because there is a lot of interesting content on there.  In particular, there is a lot of good content related to money and investing.  I think some of the content is so good, in fact, that I think I’m going to make YouTube a regular contributor to this blog.  Starting today, and every Friday after today, I will post a video from YouTube that is related to the topics I write about on this blog.  I’ll also provide a little commentary about the video and what it’s about.

Today, I came across this video from one of Robert Shemin’s seminars.  Shemin is the author of the recently-published book How Come That Idiot’s Rich And I’m Not?  In this segment from one of his seminars, he offers 7 ideas for making money. 

You might find some of these unconventional, but you can’t argue with the fact that they do help you make money.  I find that Shemin is great at simplifying wealth-related concepts to illustrate to people that anyone can become rich or at least get on the right path towards wealth.

Here are the ideas he explains in the video. 

1) Think of something you can sell.  Anything around your house that you don’t want.  Pick up, and sell it. 

2) Exploit your favorite hobby by teaching others how to do it or selling your expertise in that hobby in the form of an ebook, seminar, or related educational product.

3) Save money by negotiating lower interest rates with your credit card companies.

4) Cut your expenses by doing things like housesitting, using public transportation, downsizing your vehicle costs (i.e., trade in that 8-cylinder SUV for a Prius).

5) If you don’t have any money to start a business, raise it.  Ask your friends and family for money.  Start a fundraiser.  Simplistic, but how do you know it doesn’t work if you don’t try?  People do this all the time.

6) Invest in the stock market for the long-term.  Relax and don’t try to time the market (i.e., buy low and sell high).

7) Make friends with rich people, and copy what they do.

 

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