Our daily lives are filled with challenges. So oftentimes we forget the simplest teachings from the Bible. One the scriptures that has made a tremendous impact in my life is when the disciple Peter walks on the water by faith, until he took his eyes off Jesus, looking at the storm's tempest instead. With the many challenges we encounter in our lives, the media telling us daily how bad things are, family and friends around you bringing negative thoughts and energy into your lives, so often we take our eyes off the Lord, because of troublesome co-workers, marital difficulties, rude people, unfair situations, life's problems, et cetera. The lesson from the scripture is very simple--keep your eyes on the Lord and you won't sink!
Many times to achieve the goals in our lives, we must move away from those "energy suckers", pessimists, naysayers and negative minded friends, family, partners and co-workers. We need to learn to love them from far away to be able to accomplish our God given talents. These kind of people do not contribute anything positive in our lives, love them but keep a distance so you can progress in your mission. Keep in your "inner-circle" those who are a positive influence in your life and help you achieve your goals. Even Jesus at times would bring only some of the disciples to go with him and be part the process of accomplishing his goals. In the gospel of Mark for example we are presented with the event when Jesus heals Jairus' daughter (Mark 5:35-43), he appointed Peter, James and John to go with him to heal this girl who was presumed dead. Jesus loved all of his apostles, but he surrounded himself with the right people to be witnesses of this moment and enjoy Jesus' full intimacy.
The solution to difficult times is to create a habit of looking on the positive side of everything. You and I should be ashamed of ourselves. All the days of our years we have been living in a fairyland of beauty, but we have been too blind to see and appreciate it. Instead of setting your eyes on the difficulties, focus on positive thoughts and solutions, avoid those that all they have to say are the reasons why you cannot do it or you will fail, surround yourself with the inner circle that will help you in locating the solutions to overcome the challenge. Finally, there is a famous inscription found in the Cromwellian Churches of England "Think and Thank". Think of all we have to be grateful for and thank God for all our bounties. We seldom think of what we have but always of what we don't have. The tendency to seldom think of what we have and always of what we lack is the greatest tragedy on this earth. It has caused more misery than all the wars and diseases in history. Count your blessings, not your troubles!
May 30, 2011
May 27, 2011
US Reaches the Debt Ceiling, So What Do We Do Now?
The government officially has reached the $14.29 TRILLION debt limit last week. However, the US Treasury has taken steps to keep the country afloat until August. Since a federal law prohibits the federal deficit from exceeding $14.29 trillion, the federal government is now operating on IOUs while the 112th Congress continues to debate whether to raise the debt ceiling. As occurred in both 1996 and 2002, the Treasury Department has suspended payments to retirement funds until August 2nd, which is when the federal government would default if the 112th Congress does not raise the debt ceiling. Geithner repeated a warning that if lawmakers do not increase the borrowing limit by Aug. 2, the government is at risk of an unprecedented default on its debt.
A default on its debt by the United States would be disastrous on the American people and it will send the economy into a meltdown that would make the financial meltdown of 2008 look mild. The United States hasn’t defaulted on its debt since 1790. However, if the debt ceiling is not raised, the US economy will reach a halt since the Department of the Treasury would be forced to cut government spending. Even though, this is an option to consider I do not see it an option that the government will since a default would severely damage the country’s credit and ability to borrow and possibly lead to a stock market crash, the weak economy will be sent into depression and it would wreak havoc on the property markets in the form of massive layoffs, and increases in interest rates.
Raising the debt ceiling does not increase spending. It ensures that the United States will pay for what Congress has already authorized. In short, it guarantees that the federal government will pay its bills. However, who will want to continue to absorb US Debt?
Here is some information that most people are not aware of the magnitude of the situation:
* During April 2011, the federal government incurred a deficit of $40.5 BILLION, according to the Treasury Department.
* The deficit recorded throughout fiscal year 2011 is greater than the deficit recorded at this point in fiscal year 2010. In fact, the deficit in fiscal year 2011 is currently 8.1% greater than this point in fiscal year 2010 or $70.2 billion.
* This apparent growth in the deficit is a result of increased federal expenditures, despite an increase in federal revenues. In other words, the federal government has received more tax dollars this year, yet these tax dollars have not been able to offset increases in expenditures. Individual income tax receipts in fiscal year 2011 currently totals $837.5 billion, whereas individual income taxes at this point in fiscal year 2010 totaled $718 billion, which is a difference of $119.5 billion. On the other hand, corporate income taxes for fiscal year 2011 currently totals $129.9 billion, whereas corporate income taxes at this point in fiscal year 2010 totaled $144.7 billion. As a result, receipts from individual income taxes have increased 14% thus far in fiscal year 2011, while corporate income receipts have decreased 10%.
* Tax refunds from the federal government have also declined. Tax refunds to individuals in fiscal year 2011 currently totals $206.3 billion, whereas tax refunds to individuals at the same point in fiscal year 2010 totaled $217.2 billion, which is a difference of $10.9 billion. Changes to tax code, such as the expiration of the first-time home buyer tax credit, are responsible for decreased refunds to individuals in the current fiscal year. Tax refunds to corporations have also decreased in the current fiscal year. Tax refunds to corporations in fiscal year 2011 currently totals $49.8 billion, whereas tax refunds to corporations at this point in fiscal year 2010 totaled $67.6 billion, which is a decline of $17.8 billion. Therefore, the federal government has reduced its amount of tax refunds to both individuals and corporations in the current fiscal year.
* Among the 28 major federal agencies, 17 of these agencies have spent more thus far in fiscal year 2011 than at the same point in fiscal year 2010. The agencies with the greatest increases in expenditures include the Department of Health and Human Services with an increase of $21.7 billion, the Social Security Administration with an increase of $15.6 billion, and last but certainly not least is the Treasury Department with an increase of $123 billion in the current fiscal year.
* The Labor Department has incurred the greatest reduction in expenditures among all the major agencies in 2011. The Labor Department has reduced its expenditures $21.6 billion in the current fiscal year as compared to the same period in fiscal year 2010. This decline is a result of fewer individuals who are eligible for unemployment benefits, as well as those who are eligible receiving less benefits. The International Assistance Program has the next greatest reduction in expenditures, with a decline of $1.4 billion in fiscal year 2011.
Once the debt ceiling is raised then what? Our Government must come to the plate. The raising of the debt ceiling is just a band-aid on a gushing wound. It will only provide a short-term solution. Politicians must stop bickering over their special interests and put the people of the United States first and make the decisions entirely on what is best for the country and not for special interest groups and pet projects. This is no time to play chicken with the debt limit, we can no longer kick the can down the road on bringing the debt and deficits under control. We are running out of time; We must reform our financial structure, spending and budgeting of this country.
A default on its debt by the United States would be disastrous on the American people and it will send the economy into a meltdown that would make the financial meltdown of 2008 look mild. The United States hasn’t defaulted on its debt since 1790. However, if the debt ceiling is not raised, the US economy will reach a halt since the Department of the Treasury would be forced to cut government spending. Even though, this is an option to consider I do not see it an option that the government will since a default would severely damage the country’s credit and ability to borrow and possibly lead to a stock market crash, the weak economy will be sent into depression and it would wreak havoc on the property markets in the form of massive layoffs, and increases in interest rates.
Raising the debt ceiling does not increase spending. It ensures that the United States will pay for what Congress has already authorized. In short, it guarantees that the federal government will pay its bills. However, who will want to continue to absorb US Debt?
Here is some information that most people are not aware of the magnitude of the situation:
* During April 2011, the federal government incurred a deficit of $40.5 BILLION, according to the Treasury Department.
* The deficit recorded throughout fiscal year 2011 is greater than the deficit recorded at this point in fiscal year 2010. In fact, the deficit in fiscal year 2011 is currently 8.1% greater than this point in fiscal year 2010 or $70.2 billion.
* This apparent growth in the deficit is a result of increased federal expenditures, despite an increase in federal revenues. In other words, the federal government has received more tax dollars this year, yet these tax dollars have not been able to offset increases in expenditures. Individual income tax receipts in fiscal year 2011 currently totals $837.5 billion, whereas individual income taxes at this point in fiscal year 2010 totaled $718 billion, which is a difference of $119.5 billion. On the other hand, corporate income taxes for fiscal year 2011 currently totals $129.9 billion, whereas corporate income taxes at this point in fiscal year 2010 totaled $144.7 billion. As a result, receipts from individual income taxes have increased 14% thus far in fiscal year 2011, while corporate income receipts have decreased 10%.
* Tax refunds from the federal government have also declined. Tax refunds to individuals in fiscal year 2011 currently totals $206.3 billion, whereas tax refunds to individuals at the same point in fiscal year 2010 totaled $217.2 billion, which is a difference of $10.9 billion. Changes to tax code, such as the expiration of the first-time home buyer tax credit, are responsible for decreased refunds to individuals in the current fiscal year. Tax refunds to corporations have also decreased in the current fiscal year. Tax refunds to corporations in fiscal year 2011 currently totals $49.8 billion, whereas tax refunds to corporations at this point in fiscal year 2010 totaled $67.6 billion, which is a decline of $17.8 billion. Therefore, the federal government has reduced its amount of tax refunds to both individuals and corporations in the current fiscal year.
* Among the 28 major federal agencies, 17 of these agencies have spent more thus far in fiscal year 2011 than at the same point in fiscal year 2010. The agencies with the greatest increases in expenditures include the Department of Health and Human Services with an increase of $21.7 billion, the Social Security Administration with an increase of $15.6 billion, and last but certainly not least is the Treasury Department with an increase of $123 billion in the current fiscal year.
* The Labor Department has incurred the greatest reduction in expenditures among all the major agencies in 2011. The Labor Department has reduced its expenditures $21.6 billion in the current fiscal year as compared to the same period in fiscal year 2010. This decline is a result of fewer individuals who are eligible for unemployment benefits, as well as those who are eligible receiving less benefits. The International Assistance Program has the next greatest reduction in expenditures, with a decline of $1.4 billion in fiscal year 2011.
Once the debt ceiling is raised then what? Our Government must come to the plate. The raising of the debt ceiling is just a band-aid on a gushing wound. It will only provide a short-term solution. Politicians must stop bickering over their special interests and put the people of the United States first and make the decisions entirely on what is best for the country and not for special interest groups and pet projects. This is no time to play chicken with the debt limit, we can no longer kick the can down the road on bringing the debt and deficits under control. We are running out of time; We must reform our financial structure, spending and budgeting of this country.
May 26, 2011
Tax Planning for Business Owners
In 2010, one of the tax law changes affecting business owners is the Small Business Jobs Act of 2010, which provides $12 billion of tax incentives – including bonus depreciation, enhanced expensing, and other relief for small businesses. Eight Small Business Tax Cuts – Effective Today, Providing Immediate Incentives to Invest:
1. Zero Taxes on Capital Gains from Key Small Business Investments: Under the Recovery Act, 75 percent of capital gains on key small business investments this year were excluded from taxes. The Small Business Jobs Act temporarily puts in place for the rest of 2010 a provision called for by the President – elimination of all capital gains taxes on these investments if held for five years. Over one million small businesses are eligible to receive investments this year that, if held for five years or longer, could be completely excluded from any capital gains taxation.
2. Extension and Expansion of Small Businesses’ Ability to Immediately Expense Capital Investments: The bill increases for 2010 and 2011 the amount of investments that businesses would be eligible to immediately write off to $500,000, while raising the level of investments at which the write-off phases out to $2 million. Prior to the passage of the bill, the expensing limit would have been $250,000 this year, and only $25,000 next year. This provision means that 4.5 million small businesses and individuals will be able to make new business investments today and know that they will earn a larger break on their taxes for this year.
3. Extension of 50% Bonus Depreciation: The bill extends – as the President proposed in his budget – a Recovery Act provision for 50 percent “bonus depreciation” through 2010, providing 2 million businesses, large and small, with the ability to make new investments today and know they can receive a tax cut for this year by accelerating the rate at which they deduct capital expenditures.
4. A New Deduction of Health Insurance Costs for Self-Employed: The bill allows 2 million self-employed to know that on their taxes for this year, they can get a deduction for the cost of health insurance for themselves and their family members in calculating their self-employment taxes. This provision is estimated to provide over $1.9 billion in tax cuts for these entrepreneurs.
5. Tax Relief and Simplification for Cell Phone Deductions: The bill changes rules so that the use of cell phones can be deducted without burdensome extra documentation – making it easier for virtually every small business in America to receive deductions that they are entitled to, beginning on their taxes for this year.
6. An Increase in the Deduction for Entrepreneurs’ Start-Up Expenses: The bill temporarily increases the amount of start-up expenditures entrepreneurs can deduct from their taxes for this year from $5,000 to $10,000 (with a phase-out threshold of $60,000 in expenditures), offering an immediate incentive for someone with a new business idea to invest in starting up a new small business today.
7. A Five-Year Carryback Of General Business Credits: The bill would allow certain small businesses to “carry back” their general business credits to offset five years of taxes – providing them with a break on their taxes for this year – while also allowing these credits to offset the Alternative Minimum Tax, reducing taxes for these small businesses.
8. Limitations on Penalties for Errors in Tax Reporting That Disproportionately Affect Small Business: The bill would change, beginning this year, the penalty for failing to report certain tax transactions from a fixed dollar amount – which was criticized for imposing a disproportionately large penalty on small businesses in certain circumstances – to a percentage of the tax benefits from the transaction.
Also, you should be aware of tax credits that have been extended through Dec. 31, 2011:
* Alcohol Used as Fuel
* Alternative Fuel Vehicle Refueling Property
* Biodiesel and Renewable Diesel Fuel
* Differential Wage Payment
* Indian Employment
* Mine Rescue Team Training
* New Energy-Efficient Home
* New Markets Tax
* Railroad Track Maintenance
* Refined Coal Production Facilities (for the production of electricity from renewable sources, see Code §45)
* Research
1. Zero Taxes on Capital Gains from Key Small Business Investments: Under the Recovery Act, 75 percent of capital gains on key small business investments this year were excluded from taxes. The Small Business Jobs Act temporarily puts in place for the rest of 2010 a provision called for by the President – elimination of all capital gains taxes on these investments if held for five years. Over one million small businesses are eligible to receive investments this year that, if held for five years or longer, could be completely excluded from any capital gains taxation.
2. Extension and Expansion of Small Businesses’ Ability to Immediately Expense Capital Investments: The bill increases for 2010 and 2011 the amount of investments that businesses would be eligible to immediately write off to $500,000, while raising the level of investments at which the write-off phases out to $2 million. Prior to the passage of the bill, the expensing limit would have been $250,000 this year, and only $25,000 next year. This provision means that 4.5 million small businesses and individuals will be able to make new business investments today and know that they will earn a larger break on their taxes for this year.
3. Extension of 50% Bonus Depreciation: The bill extends – as the President proposed in his budget – a Recovery Act provision for 50 percent “bonus depreciation” through 2010, providing 2 million businesses, large and small, with the ability to make new investments today and know they can receive a tax cut for this year by accelerating the rate at which they deduct capital expenditures.
4. A New Deduction of Health Insurance Costs for Self-Employed: The bill allows 2 million self-employed to know that on their taxes for this year, they can get a deduction for the cost of health insurance for themselves and their family members in calculating their self-employment taxes. This provision is estimated to provide over $1.9 billion in tax cuts for these entrepreneurs.
5. Tax Relief and Simplification for Cell Phone Deductions: The bill changes rules so that the use of cell phones can be deducted without burdensome extra documentation – making it easier for virtually every small business in America to receive deductions that they are entitled to, beginning on their taxes for this year.
6. An Increase in the Deduction for Entrepreneurs’ Start-Up Expenses: The bill temporarily increases the amount of start-up expenditures entrepreneurs can deduct from their taxes for this year from $5,000 to $10,000 (with a phase-out threshold of $60,000 in expenditures), offering an immediate incentive for someone with a new business idea to invest in starting up a new small business today.
7. A Five-Year Carryback Of General Business Credits: The bill would allow certain small businesses to “carry back” their general business credits to offset five years of taxes – providing them with a break on their taxes for this year – while also allowing these credits to offset the Alternative Minimum Tax, reducing taxes for these small businesses.
8. Limitations on Penalties for Errors in Tax Reporting That Disproportionately Affect Small Business: The bill would change, beginning this year, the penalty for failing to report certain tax transactions from a fixed dollar amount – which was criticized for imposing a disproportionately large penalty on small businesses in certain circumstances – to a percentage of the tax benefits from the transaction.
Also, you should be aware of tax credits that have been extended through Dec. 31, 2011:
* Alcohol Used as Fuel
* Alternative Fuel Vehicle Refueling Property
* Biodiesel and Renewable Diesel Fuel
* Differential Wage Payment
* Indian Employment
* Mine Rescue Team Training
* New Energy-Efficient Home
* New Markets Tax
* Railroad Track Maintenance
* Refined Coal Production Facilities (for the production of electricity from renewable sources, see Code §45)
* Research
May 24, 2011
The Pursuit of Wealth
As we prepare to celebrate Memorial Day and soon July 4th, I started to think about desire in the United States of the pursuit of wealth. When I talk to people about this subject, they tell me that it is in the declaration of independence. So I decided to check and this is what I found:
"We hold these truths to be self-evident, that all Men are created equal, that they are endowed by their creator with certain unalienable Rights, that among these are Life, Liberty and the Pursuit of Happiness –That to secure these Rights, Governments are instituted among Men, deriving their just powers from the Consent of the Governed.”
-The Declaration of Independence, July 4th, 1776
You got it, nowhere in the declaration of independence talks about wealth; it says Life, Liberty and the Pursuit of Happiness. Over the years we have turned the pursuit of the "American Dream" into a direct link between wealth and happiness. This alignment of the wealth and happiness is profoundly embedded in the history of our country. “The pursuit of happiness” is one of the “inalienable rights” as set forth in the Declaration of Independence. From its birth, our country has associated wealth with happiness, materialism with satisfaction. The ideology of Capitalism teaches that hard work and dedication leads to wealth, and wealth leads to happiness. However, will wealth leads to happiness? However, there are some flaws with this ideology, since the trajectory does not always always lead from wealth to happiness. Eventhough wealth can have some effects on happiness, it’s only one of many factors. If wealth is a guarantee for happiness why isn't the United States listed as the happiest country in the world? Actually, Denmark with a GDP per capita of $37,400 is on the top of the list. Another problem is the ideology that hard work leads to wealth. The reality of our world is that hard work and dedication does not guarantee wealth. If that was the case all we have to do is work harder (may be more hours; instead of the 50 to 60 hour weeks we are working now, maybe increase it to 80 hours per week). Once again, hard work and dedication is important and is another element in the pursuit of wealth.
Our pursuit of wealth has been distorted and in many cases has become our master. We function on a mathematical equation that is flawed but we are told that we must continue run in the treadmill so we can reach our happiness. These days wealth means glamor, looks, lifestyle, "toys and stuff." Pursuit of wealth has become a national pastime. Shopping for many has become an addiction that compels people to buy things they do not need and they cannot afford. Like drugs, our desire to "keep up with the Joneses" have destroyed many families not only in the United States but many parts of the world. Many people get fascinated by the "glamor" of the rich and famous, sometimes they think that their poop does not smell, they do not get in accidents, wealthy people are unlikely to drown when a hurricane comes storming their houses, they must live perfect lives and of course they are happy, right?.
However, one thing that we all miss is that in a very real sense of the word we are already "wealthy." We get up in the morning so worried about tomorrow that we are missing the blessings that we have all around us. We are constantly on a rat race against the Joneses (by the way where do the Jones live?), without realizing that the "Joneses" are having as many if not more difficulties than you. If you are reading this blog, you are probably living a better lifestyle than 99% of all humans who have ever lived.
How do we change an equation so deeply embedded in our culture? To be able to break this association of wealth and happiness would cause a big impact in the foundation of our society. We’re bombarded by family, friends, movies, books, media, telling us that to earn money is to be happy. Is it really making more money the answer to happiness? Maybe this difficult times we are all going through right now will force us to focus our attention on greater well-being, and away from wealth, to attain true happiness. Maybe the solution in our pursuit of wealth is to establish well focused principles that wont distort our views while on this journey. Principles such as Wisdom, Truth, Righteousness, Peace, Love, and Non-violence should be incorporated as the values in our pursuit of wealth. Instead of principles of Lie and Cheat, Injustice, Hate, and Violence in the pursuit of wealth. See wealth is not evil; it is what we do in the pursuit to attain it and we do with the wealth that is bad. The practice of these virtues will enable anyone to progress in life without any doubt and the reason is very simple. The principles mentioned here of Wisdom, Truth, Righteousness, Peace, Love and Non-violence form the cornerstones of the code of ethics. You cannot go wrong practicing the importance to moral values and codes of conduct in your pursuit of Wealth.
You may not (yet) be a person of independent means. However, compared to the average human condition in the past and in much of world today, you are by definition rich. Most of us probably have a higher standard of living than most royalties throughout history. You have better health care (really), better and cleaner clothing, a far more comfortable house, and better entertainment than our ancestors. You will live longer and suffer less than most people ever had in the past. Your children are less likely to die at birth, your parents are more financially independent than ever before, and you have access to the kinds of knowledge that past generations would have ever dreamed possible. So yes, pursue wealth, but don't forget the principles discussed here, and be grateful every day. Also, do not fall for the deceptive of riches. Do not fall for the false glamor, many fail in the pursuit of wealth because they never find the satisfaction or happiness they expected to find. They wrongly reason that what limited wealth fails to do, greater wealth will do. So there is a constant striving for more. For the love of money is a root of all sorts of injurious things.
"Happy is the man that has found wisdom, and the man that gets discernment, for having it as gain is better than having silver as gain and having it as produce than gold itself. It is more precious than corals, and all other delights of yours cannot be made equal to it. Length of days is in its right hand; in its left hand there are riches and glory. Its ways are ways of pleasantness, and all its roadways are peace. It is a tree of life to those taking hold of it, and those keeping fast hold of it are to be called happy." Proverbs 3:13-18
"We hold these truths to be self-evident, that all Men are created equal, that they are endowed by their creator with certain unalienable Rights, that among these are Life, Liberty and the Pursuit of Happiness –That to secure these Rights, Governments are instituted among Men, deriving their just powers from the Consent of the Governed.”
-The Declaration of Independence, July 4th, 1776
You got it, nowhere in the declaration of independence talks about wealth; it says Life, Liberty and the Pursuit of Happiness. Over the years we have turned the pursuit of the "American Dream" into a direct link between wealth and happiness. This alignment of the wealth and happiness is profoundly embedded in the history of our country. “The pursuit of happiness” is one of the “inalienable rights” as set forth in the Declaration of Independence. From its birth, our country has associated wealth with happiness, materialism with satisfaction. The ideology of Capitalism teaches that hard work and dedication leads to wealth, and wealth leads to happiness. However, will wealth leads to happiness? However, there are some flaws with this ideology, since the trajectory does not always always lead from wealth to happiness. Eventhough wealth can have some effects on happiness, it’s only one of many factors. If wealth is a guarantee for happiness why isn't the United States listed as the happiest country in the world? Actually, Denmark with a GDP per capita of $37,400 is on the top of the list. Another problem is the ideology that hard work leads to wealth. The reality of our world is that hard work and dedication does not guarantee wealth. If that was the case all we have to do is work harder (may be more hours; instead of the 50 to 60 hour weeks we are working now, maybe increase it to 80 hours per week). Once again, hard work and dedication is important and is another element in the pursuit of wealth.
Our pursuit of wealth has been distorted and in many cases has become our master. We function on a mathematical equation that is flawed but we are told that we must continue run in the treadmill so we can reach our happiness. These days wealth means glamor, looks, lifestyle, "toys and stuff." Pursuit of wealth has become a national pastime. Shopping for many has become an addiction that compels people to buy things they do not need and they cannot afford. Like drugs, our desire to "keep up with the Joneses" have destroyed many families not only in the United States but many parts of the world. Many people get fascinated by the "glamor" of the rich and famous, sometimes they think that their poop does not smell, they do not get in accidents, wealthy people are unlikely to drown when a hurricane comes storming their houses, they must live perfect lives and of course they are happy, right?.
However, one thing that we all miss is that in a very real sense of the word we are already "wealthy." We get up in the morning so worried about tomorrow that we are missing the blessings that we have all around us. We are constantly on a rat race against the Joneses (by the way where do the Jones live?), without realizing that the "Joneses" are having as many if not more difficulties than you. If you are reading this blog, you are probably living a better lifestyle than 99% of all humans who have ever lived.
How do we change an equation so deeply embedded in our culture? To be able to break this association of wealth and happiness would cause a big impact in the foundation of our society. We’re bombarded by family, friends, movies, books, media, telling us that to earn money is to be happy. Is it really making more money the answer to happiness? Maybe this difficult times we are all going through right now will force us to focus our attention on greater well-being, and away from wealth, to attain true happiness. Maybe the solution in our pursuit of wealth is to establish well focused principles that wont distort our views while on this journey. Principles such as Wisdom, Truth, Righteousness, Peace, Love, and Non-violence should be incorporated as the values in our pursuit of wealth. Instead of principles of Lie and Cheat, Injustice, Hate, and Violence in the pursuit of wealth. See wealth is not evil; it is what we do in the pursuit to attain it and we do with the wealth that is bad. The practice of these virtues will enable anyone to progress in life without any doubt and the reason is very simple. The principles mentioned here of Wisdom, Truth, Righteousness, Peace, Love and Non-violence form the cornerstones of the code of ethics. You cannot go wrong practicing the importance to moral values and codes of conduct in your pursuit of Wealth.
You may not (yet) be a person of independent means. However, compared to the average human condition in the past and in much of world today, you are by definition rich. Most of us probably have a higher standard of living than most royalties throughout history. You have better health care (really), better and cleaner clothing, a far more comfortable house, and better entertainment than our ancestors. You will live longer and suffer less than most people ever had in the past. Your children are less likely to die at birth, your parents are more financially independent than ever before, and you have access to the kinds of knowledge that past generations would have ever dreamed possible. So yes, pursue wealth, but don't forget the principles discussed here, and be grateful every day. Also, do not fall for the deceptive of riches. Do not fall for the false glamor, many fail in the pursuit of wealth because they never find the satisfaction or happiness they expected to find. They wrongly reason that what limited wealth fails to do, greater wealth will do. So there is a constant striving for more. For the love of money is a root of all sorts of injurious things.
"Happy is the man that has found wisdom, and the man that gets discernment, for having it as gain is better than having silver as gain and having it as produce than gold itself. It is more precious than corals, and all other delights of yours cannot be made equal to it. Length of days is in its right hand; in its left hand there are riches and glory. Its ways are ways of pleasantness, and all its roadways are peace. It is a tree of life to those taking hold of it, and those keeping fast hold of it are to be called happy." Proverbs 3:13-18
May 20, 2011
China's Inflation Problem Should Not Be Ignored
The People's Republic of China (PRC), commonly known as China, is the most populous state in the world with over 1.3 billion people and with approximately 9.6 million square kilometers (3.7 million square miles), the PRC is the world's third- or fourth-largest country by total area, depending on the definition of what is included in that total,and the second largest by land area. Also, China is the second largest economy in the world. Due to its magnitude in land size and access to labor force, China has become a dominant monster in the manufacturing world and became the ipso facto cheap factory to the world. Eventhough many economists still view China's dominance in the manufacturing world for many years to come, I think that the rules of the game have changed and we all need to take notice and prepare for the changes.
As costs go up in China, they charge more for products and that means Americans pay more. Over the past 12 months, prices of things the U.S. imported from China, are up 2.8 percent. But five years ago, the price of Chinese imports were actually falling. Basically, for the most of the past decade, economic forces for abroad were pushing down prices in the United States. Millions of low-wage Chinese, Indian, Eastern European workers came into the global labor market. This competition reduced costs of stuff we bought. The pressure on U.S. firms was to get more efficient. It all added up to essentially importing falling prices from abroad.
The fact is that China's rising prices means the end of "cheap crap" that many times have flooded many countries and in many cases destroyed good quality local manufacturing. Another trend that you will see is the increasing number of companies leaving China for other developing countries in Asia. Manufacturers are looking beyond China because China is no longer the cheapest place to manufacture. Due to the increase in labor costs in China, manufacturing prices are rising; quality stays in the same place. In an FT.com article by Josh Noble, entitled, "The end of cheap: China's tipping point," a number of economists theorize that China's demographics have changed such that we should continue to expect China's wages to rise and its manufacturing to decline. An FT Tilt (a new FT site focusing on emerging markets) article by Hannah Kuchler, entitled, "Coach the latest to cut China production," highlights a number of foreign companies reducing their China manufacturing.
Coach is the latest company to move production out of China as labour costs rise, with a plan to cut its manufacturing in the country from about 85 per cent of its total to 40-50 per cent over the next five years. The US-listed leather goods company follows companies from Esprit to Canon which are shifting from using China as a manufacturing hub to seeing it as a major consumer market. Lew Frankfort, chief executive of Coach, said rapid income increases in China meant the company is beginning to move production to less expensive Asian countries like India, Vietnam and the Philippines. Southeast Asian countries are increasingly used as cheaper alternatives for labor-intensive manufacturing.
The article concludes by mentioning a recent Boston Consulting Group report that asserts "that by 2015, strong productivity and relatively low wages would help the US move ahead of China as a base for making goods which will be sold in North America." I think we will see an increase in "Made in the USA" sooner than later.
People will notice that electronic labels no longer always will say "Made in China" on them. Vietnam, Thailand, Indonesia, Malaysia, even Bangladesh are popping up more frequently on the backs of cameras, computers, TVs and shirts, as labour costs rise on the mainland, and as smaller southeast Asian countries get their act together to stake a larger slice of the global supply chain. Vietnam in recent years has attracted the likes of Mitsubishi Heavy Industries Aerospace, Kobe Steel, Microsoft, Intel and Canon, as well as Japanese cosmetics maker Shiseido.
The problems for China is not limited to the increase in labor cost. In February of this year, China’s central bank raised its reserve requirement ratio (RRR) for banks by 50 basis points (0.5%), the second hike this year, in a further move to combat inflation. By incrementally raising interest rates and reserve requirement ratio for banks, China has slowed down its inflation rate but only modestly. However, many reports are showing that food costs have doubled in many place in China which makes it harder on average families to make ends meet. Prices of high-end condos have also doubled which has in turn raised real estate prices in China and making more costly for families to live in the commerce and more who nearly lost power in 1989 in part due to anger over rising inflation that fueled the Tiananmen protests. In January 2011, consumer price index rose by 4.9 percent over the same period of the previous year. Of which, urban area and rural area was up by 4.8 percent and 5.2 percent respectively; the price of foodstuff, non-foodstuff, consumable and services expanded 10.3, 2.6, 5.0 and 4.6 percent respectively. Compared with December 2010, CPI increased 1.0 percent. The price of foodstuff climbed 2.8 percent.
Another point to add to the inflationary issue of China is that in January 2011 the level of bank deposits were down. Dong Tao at Credit Suisse says that this is the first time this has happened since January 2002. What was more concerning was that it was corporate deposits that went backwards, not household deposits, as may have been expected around Chinese New Year. This gives us reason to believe that the fall in deposits is not seasonal.
Add to this the increase in fuel costs which has impacted China's busiest container port, making China’s inflation problem an obstacle to global trade. Incensed by spiking fuel costs and consumer prices, truck drivers hauling goods to and from the Port of Shanghai went on strike in April, triggering a major confrontation that drew hundreds of police officers after truckers reportedly blockaded the entrance to a local logistics company.
China has been slow to take the step that would strike most directly at its inflation rate: allowing its currency to appreciate. China kept its currency artificially low to reduce manufacturer’s costs and keep the country’s massive export sector competitive. This requires China to continually buy U.S. dollars and issue more yuan, a policy that expands domestic money supply and fuels inflation pressure. Rapid growth and inflation in China and other emerging markets also pose a serious challenge to policy-makers in advanced economies. Already trembling under the burden of mounting debt, many countries in the Western world are facing tough decisions over spending cuts sooner than they expected. China’s slow efforts to keep a lid on runaway growth have so far only contributed to those problems, as that nation’s inflationary pressures lead to more price increases around the world. There are also dangers if China’s slowdown comes too quickly: A significant curtailing of growth threatens to drive down commodity prices and foreign investment, pushing many advanced economies back into trouble. But those broader concerns are taking a back seat to the striking truck drivers, who are growing increasingly frustrated with the rising cost of living.
As costs go up in China, they charge more for products and that means Americans pay more. Over the past 12 months, prices of things the U.S. imported from China, are up 2.8 percent. But five years ago, the price of Chinese imports were actually falling. Basically, for the most of the past decade, economic forces for abroad were pushing down prices in the United States. Millions of low-wage Chinese, Indian, Eastern European workers came into the global labor market. This competition reduced costs of stuff we bought. The pressure on U.S. firms was to get more efficient. It all added up to essentially importing falling prices from abroad.
The fact is that China's rising prices means the end of "cheap crap" that many times have flooded many countries and in many cases destroyed good quality local manufacturing. Another trend that you will see is the increasing number of companies leaving China for other developing countries in Asia. Manufacturers are looking beyond China because China is no longer the cheapest place to manufacture. Due to the increase in labor costs in China, manufacturing prices are rising; quality stays in the same place. In an FT.com article by Josh Noble, entitled, "The end of cheap: China's tipping point," a number of economists theorize that China's demographics have changed such that we should continue to expect China's wages to rise and its manufacturing to decline. An FT Tilt (a new FT site focusing on emerging markets) article by Hannah Kuchler, entitled, "Coach the latest to cut China production," highlights a number of foreign companies reducing their China manufacturing.
Coach is the latest company to move production out of China as labour costs rise, with a plan to cut its manufacturing in the country from about 85 per cent of its total to 40-50 per cent over the next five years. The US-listed leather goods company follows companies from Esprit to Canon which are shifting from using China as a manufacturing hub to seeing it as a major consumer market. Lew Frankfort, chief executive of Coach, said rapid income increases in China meant the company is beginning to move production to less expensive Asian countries like India, Vietnam and the Philippines. Southeast Asian countries are increasingly used as cheaper alternatives for labor-intensive manufacturing.
The article concludes by mentioning a recent Boston Consulting Group report that asserts "that by 2015, strong productivity and relatively low wages would help the US move ahead of China as a base for making goods which will be sold in North America." I think we will see an increase in "Made in the USA" sooner than later.
People will notice that electronic labels no longer always will say "Made in China" on them. Vietnam, Thailand, Indonesia, Malaysia, even Bangladesh are popping up more frequently on the backs of cameras, computers, TVs and shirts, as labour costs rise on the mainland, and as smaller southeast Asian countries get their act together to stake a larger slice of the global supply chain. Vietnam in recent years has attracted the likes of Mitsubishi Heavy Industries Aerospace, Kobe Steel, Microsoft, Intel and Canon, as well as Japanese cosmetics maker Shiseido.
The problems for China is not limited to the increase in labor cost. In February of this year, China’s central bank raised its reserve requirement ratio (RRR) for banks by 50 basis points (0.5%), the second hike this year, in a further move to combat inflation. By incrementally raising interest rates and reserve requirement ratio for banks, China has slowed down its inflation rate but only modestly. However, many reports are showing that food costs have doubled in many place in China which makes it harder on average families to make ends meet. Prices of high-end condos have also doubled which has in turn raised real estate prices in China and making more costly for families to live in the commerce and more who nearly lost power in 1989 in part due to anger over rising inflation that fueled the Tiananmen protests. In January 2011, consumer price index rose by 4.9 percent over the same period of the previous year. Of which, urban area and rural area was up by 4.8 percent and 5.2 percent respectively; the price of foodstuff, non-foodstuff, consumable and services expanded 10.3, 2.6, 5.0 and 4.6 percent respectively. Compared with December 2010, CPI increased 1.0 percent. The price of foodstuff climbed 2.8 percent.
Another point to add to the inflationary issue of China is that in January 2011 the level of bank deposits were down. Dong Tao at Credit Suisse says that this is the first time this has happened since January 2002. What was more concerning was that it was corporate deposits that went backwards, not household deposits, as may have been expected around Chinese New Year. This gives us reason to believe that the fall in deposits is not seasonal.
Add to this the increase in fuel costs which has impacted China's busiest container port, making China’s inflation problem an obstacle to global trade. Incensed by spiking fuel costs and consumer prices, truck drivers hauling goods to and from the Port of Shanghai went on strike in April, triggering a major confrontation that drew hundreds of police officers after truckers reportedly blockaded the entrance to a local logistics company.
China has been slow to take the step that would strike most directly at its inflation rate: allowing its currency to appreciate. China kept its currency artificially low to reduce manufacturer’s costs and keep the country’s massive export sector competitive. This requires China to continually buy U.S. dollars and issue more yuan, a policy that expands domestic money supply and fuels inflation pressure. Rapid growth and inflation in China and other emerging markets also pose a serious challenge to policy-makers in advanced economies. Already trembling under the burden of mounting debt, many countries in the Western world are facing tough decisions over spending cuts sooner than they expected. China’s slow efforts to keep a lid on runaway growth have so far only contributed to those problems, as that nation’s inflationary pressures lead to more price increases around the world. There are also dangers if China’s slowdown comes too quickly: A significant curtailing of growth threatens to drive down commodity prices and foreign investment, pushing many advanced economies back into trouble. But those broader concerns are taking a back seat to the striking truck drivers, who are growing increasingly frustrated with the rising cost of living.
May 19, 2011
A Sad Story; Misalignment of Goals and Values
In the last couple of days, I was reading a book about improving personal effectiveness and it shares a sad story which I share with you here:
Once upon a time there was an attorney at a Capitol Hill cocktail reception. This man has spent his entire life working to build one of the biggest law firms in the country - over 300 attorneys in the Boston, New York and Washington, DC. You would think that this person would be proud of his success, so someone asks him "You really must be proud about your accomplishments. Lots of lawyers have the dream you had, but could not pull it off and YOU DID IT!" The expected reaction was one of pride of accomplishment. Instead , this gentleman with now gray hair and softer face takes a long sip of scotch and replied, "Son, let me tell you how I feel about my accomplishments. From the time I was in law school, my dream was to become the best and the biggest. I had a burning desire to build the largest law firm in the country. I married my college sweatheart and soon after receiving my law degree I started working day and night to realize that dream. When my wife began telling me that she wanted to spend more time with me, I would say, "But honey, I am doing this for you". She would tell me many times that if I wanted to do something for her, I could spend more time with her instead of with my job.
The old man continues with the story, "Our first child came, and then our second. I was not there when they were born. I was off opening offices in other cities. Again my wife begged me, "You have got to spend more time with us", and my standard reply was "I am too busy right now but I will change"; I never did. I am 75 years old now. My wife left me 20 years ago and I never remarried. At the time, I was shocked because I thought I had made it possible for her to have every material thing a woman could want. I know better now I was wrong. I gave her everything I wanted her to have. What's worse is that my children and I do not talk, I was not part of their lives when they needed me. I am a stranger even to my grandchildren, whom I have never seen."
By this time, the old man has tears down his cheeks. "If I had it to do over again, I would first determine what was really important to me and build my life around that instead of what I thought was supposed to be important to me. But now it is too late".
This story happens every single day by men in their stupid pursuit of riches which are misaligned with the family values. Many times in the pursuit of riches we sacrifice what is truly important to us and when we realize it; it is too late. The good new is that if you are reading this now, you may have time to make correction to past mistakes. Do not wait like the gentleman in the story and make a change in your life to align your values and goals. It is a fact; you will have conflict when your goals and values are out of alignment. To truly achieve success and wealth in life you must first determine your values, then align your goals to match your values (not the other way around).
Once upon a time there was an attorney at a Capitol Hill cocktail reception. This man has spent his entire life working to build one of the biggest law firms in the country - over 300 attorneys in the Boston, New York and Washington, DC. You would think that this person would be proud of his success, so someone asks him "You really must be proud about your accomplishments. Lots of lawyers have the dream you had, but could not pull it off and YOU DID IT!" The expected reaction was one of pride of accomplishment. Instead , this gentleman with now gray hair and softer face takes a long sip of scotch and replied, "Son, let me tell you how I feel about my accomplishments. From the time I was in law school, my dream was to become the best and the biggest. I had a burning desire to build the largest law firm in the country. I married my college sweatheart and soon after receiving my law degree I started working day and night to realize that dream. When my wife began telling me that she wanted to spend more time with me, I would say, "But honey, I am doing this for you". She would tell me many times that if I wanted to do something for her, I could spend more time with her instead of with my job.
The old man continues with the story, "Our first child came, and then our second. I was not there when they were born. I was off opening offices in other cities. Again my wife begged me, "You have got to spend more time with us", and my standard reply was "I am too busy right now but I will change"; I never did. I am 75 years old now. My wife left me 20 years ago and I never remarried. At the time, I was shocked because I thought I had made it possible for her to have every material thing a woman could want. I know better now I was wrong. I gave her everything I wanted her to have. What's worse is that my children and I do not talk, I was not part of their lives when they needed me. I am a stranger even to my grandchildren, whom I have never seen."
By this time, the old man has tears down his cheeks. "If I had it to do over again, I would first determine what was really important to me and build my life around that instead of what I thought was supposed to be important to me. But now it is too late".
This story happens every single day by men in their stupid pursuit of riches which are misaligned with the family values. Many times in the pursuit of riches we sacrifice what is truly important to us and when we realize it; it is too late. The good new is that if you are reading this now, you may have time to make correction to past mistakes. Do not wait like the gentleman in the story and make a change in your life to align your values and goals. It is a fact; you will have conflict when your goals and values are out of alignment. To truly achieve success and wealth in life you must first determine your values, then align your goals to match your values (not the other way around).
May 18, 2011
How To Pay Less Taxes
Tax time has already passed and many people do what they do every year and they forget about it until next year around March when they start stressing about it. I have decided to share with you throughout the year, tax tips that will help you accomplish something that all of us want; pay less taxes. After 20 years in the industry as a CPA and business advisor I want to share with you how you can accomplish that. I invite you to follow this blog and share your thoughts and email me any questions you may want us to talk about.
Please keep in mind that the intent of the blog is to be general and that for specific tax/wealth planning you must seek professional help. This blog is not intended to replace proper professional guidance. However, you will find valuable tax and personal finance information that will help you gain a better understanding of the matter. I will be addressing the topics in simple terms to help all of the readers to be able to gain from these readings.
Our tax system is overly complex. This is one of the reasons that most people go every year paying more taxes than they should and not receiving the proper guidance since most tax preparers are not properly educated to advice their clients in how to save money. Tax planning is for everyone, it is not exclusive to the rich. Our tax system is so complex that unfortunately distorts investment decisions of most. Over the years, I have seen how many individuals have made poor investment/business decisions due to the lack of understanding of taxes or poor advice. Some of the decisions many of them make are motivated to save taxes, but they are more like tax avoidance schemes or in the borderline of that. Here you wont find tax schemes or avoidance techniques. My goal is to share with you how you can comply with the tax law and minimize the tax liability impact.
To many the word "Income Tax" and "IRS" may either cause their whole body go into a convulsion or simply dance in front of their eyes in a meaningless procession. It does not have to be that way, it is not that complicated and it is what we will accomplish through our posts in this blog. This blog is not to bash our government nor any political party. It is intended to bring to the people the power; the power of information. If you believe that the power of a government resides in the people then stay tune gain knowledge that you can apply and improve your wealth. Remember that knowledge by itself is not power. Knowledge in its own is just information in your hard-drive. When you apply the knowledge then you have power.
Today, I want to conclude my posting by addressing one question that has been brought up many times. Is is legal? Is the tax system in the United States legal. The answer is simply, yes. I know that you will see many posting in the Internet that disagree with me and will guide you in the path of tax avoidance and will try to prove to you (for a fee of course) that it is illegal for US Citizens to pay their taxes. The tax code has been referred to as a "remarkable essay of sustained obscurity...a conspiracy and restraint of understanding". The tax code is legal, our responsibility is to learn it and use it in our favor.
Did you know that for the tax year of 2008, taxpayers received $257 BILLION dollars in tax refunds. That represents $257 BILLION dollars of free tax loan to the IRS. Assume a conservative interest rate of 5%, that is almost $13 MILLION dollars in lost interests. Do you know what we can do with $13 MILLION dollars? That is the danger of our ignorance of the tax code, moneys that we overpay and that at the end of the year the IRS graciously will return with no interest to you.
Did you know that after inflation, the US government collected TWICE as much income tax revenues in 2001 as it did in 1981. Did you know that the IRS sends approximately 10 MILLION correction notices and that 50% of them are wrong? Did you know that the paperwork received by the IRS would circle the globe 36 times (lets talk about killing trees).
Time is money and these dollars we are talking about here come from YOUR POCKET and drain your family and your ability to save and invest. We need to stop wasting our time trying to fight with our government if our tax code is legal. We must gain an understanding of how our tax code works and avoid overpaying unnecessary taxes. Tax planning is a must for all of us, not just the rich. Stop using cheap tax preparation programs and cheap tax preparers. Your goal must be toward reaching paying zero taxes and this is doable, all it takes is planning. The reality is that you pay too much in taxes, and it costs too much for you to do your tax returns.
Please keep in mind that the intent of the blog is to be general and that for specific tax/wealth planning you must seek professional help. This blog is not intended to replace proper professional guidance. However, you will find valuable tax and personal finance information that will help you gain a better understanding of the matter. I will be addressing the topics in simple terms to help all of the readers to be able to gain from these readings.
Our tax system is overly complex. This is one of the reasons that most people go every year paying more taxes than they should and not receiving the proper guidance since most tax preparers are not properly educated to advice their clients in how to save money. Tax planning is for everyone, it is not exclusive to the rich. Our tax system is so complex that unfortunately distorts investment decisions of most. Over the years, I have seen how many individuals have made poor investment/business decisions due to the lack of understanding of taxes or poor advice. Some of the decisions many of them make are motivated to save taxes, but they are more like tax avoidance schemes or in the borderline of that. Here you wont find tax schemes or avoidance techniques. My goal is to share with you how you can comply with the tax law and minimize the tax liability impact.
To many the word "Income Tax" and "IRS" may either cause their whole body go into a convulsion or simply dance in front of their eyes in a meaningless procession. It does not have to be that way, it is not that complicated and it is what we will accomplish through our posts in this blog. This blog is not to bash our government nor any political party. It is intended to bring to the people the power; the power of information. If you believe that the power of a government resides in the people then stay tune gain knowledge that you can apply and improve your wealth. Remember that knowledge by itself is not power. Knowledge in its own is just information in your hard-drive. When you apply the knowledge then you have power.
Today, I want to conclude my posting by addressing one question that has been brought up many times. Is is legal? Is the tax system in the United States legal. The answer is simply, yes. I know that you will see many posting in the Internet that disagree with me and will guide you in the path of tax avoidance and will try to prove to you (for a fee of course) that it is illegal for US Citizens to pay their taxes. The tax code has been referred to as a "remarkable essay of sustained obscurity...a conspiracy and restraint of understanding". The tax code is legal, our responsibility is to learn it and use it in our favor.
Did you know that for the tax year of 2008, taxpayers received $257 BILLION dollars in tax refunds. That represents $257 BILLION dollars of free tax loan to the IRS. Assume a conservative interest rate of 5%, that is almost $13 MILLION dollars in lost interests. Do you know what we can do with $13 MILLION dollars? That is the danger of our ignorance of the tax code, moneys that we overpay and that at the end of the year the IRS graciously will return with no interest to you.
Did you know that after inflation, the US government collected TWICE as much income tax revenues in 2001 as it did in 1981. Did you know that the IRS sends approximately 10 MILLION correction notices and that 50% of them are wrong? Did you know that the paperwork received by the IRS would circle the globe 36 times (lets talk about killing trees).
Time is money and these dollars we are talking about here come from YOUR POCKET and drain your family and your ability to save and invest. We need to stop wasting our time trying to fight with our government if our tax code is legal. We must gain an understanding of how our tax code works and avoid overpaying unnecessary taxes. Tax planning is a must for all of us, not just the rich. Stop using cheap tax preparation programs and cheap tax preparers. Your goal must be toward reaching paying zero taxes and this is doable, all it takes is planning. The reality is that you pay too much in taxes, and it costs too much for you to do your tax returns.
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