We’ve learned some lessons–this year we’re paying quarterly self-employment taxes.  Probably the most important lesson, though, is this: I’m not sure we realized how much we paid in taxes until we were self-employed.  When you’re having your employer take taxes out of your check, you probably don’t really pay attention.  It just happens and you get what you get–you’re more focused on the net than the gross.  When you’re self-employed, however, every dollar of income is getting taxed and you’re responsible for taking care of it.  Putting aside 1/3 to 1/2 of your net for taxes is discouraging and I felt it much more this year than I ever have.

Apparently a bunch of other folks are feeling the frustration as well and have organized Tea Parties in cities throughout the country today.  It will be interesting to see if this produces a groundswell of grassroots activity or just fizzles before it gets started.  Evidently there’s one about 30 miles from my home but I won’t be attending.  I’ll be with them in spirit though.

Any thoughts on this?  Are you attending a Tea Party?  Will they send a message to our legislators and lead to reform, or is it all simply reactionary hype?:

For a clear and relatively simple explanation of the mess and some critical commentary on the plan, see Richard Posner’s thoughts and those of his colleague Gary Becker.  The two are highly-regarded professors of law and economics (respectively) at the University of Chicago.  On the other hand, investor Warren Buffet expresses a great deal of confidence in Henry Paulson.  Again, watch the markets to see how this shakes out.

A Florida man used facilities at the University of Miami to run a multimillion-dollar Ponzi scheme and recruited school employees for the operation, angry investors and investigators tell CNN.

Andres Pimstein, a UM business school graduate, has confessed to operating the scheme in which some investors were promised returns of 18 percent, Miami-Dade County police said.

Wow!  18 percent on a short-term investment–that doesn’t set off some red flags?

Several years ago I followed a broker’s advice on a stock.  I invested about $3,500.  About a year later the company didn’t exist and I lost my investment.  Seemed like such a good idea at the time…

By contrast, a time-tested way of gaining wealth is to regularly save over a long period of time.  It’s not glamorous like getting 18 percent in a few months or years; in fact, it’s boring and it takes discipline.  But it works.  Read The Wealthy Barber or Total Money Makeover or Get Rich Slowly for the details. 

The new iPhone is here.  Lots of people will buy one.  But what if you didn’t buy one and saved the money you would have spent on it and the rate plan for a few years?

Just something to consider.

Props to J.D.

If you’re not into Google Reader, here are some items from the last couple days that I’ve “starred” or “shared:”

Photography Meets Illustration @ Photopreneur Blog.  Children’s author Mo Willems discusses his use of photography and comic illustration in his books.  My kids dig these books.  So do I.

$300,000 is Rich: Don’t Deny It @ taxgirl.  My family’s income falls right around the national average (read the article to find out what it is).  I don’t like taxes any more than the next guy, but $300,000–annually–is a lot of money.

Is It Worthy? @ Seth’s Blog.  A little reflection on what individuals, businesses, and organizations offer to their customers.  (As an aside, I just set up a Health Savings Account through First American Bank.  The account setup could have been smoother and they’re online offerings lack the sophistication of USAA, my main bank, but, so far, the customer service at FirstAmBank has rocked.  I’ve placed three calls in the past two weeks to get questions answered or problems solved and the reps there have been outstanding.  Just yesterday, for example, I called to cancel a check order I’d placed earlier in the day.  The service rep, Adam, couldn’t find the order initially even though my online account info indicated the order had been placed.  Adam said he’d call me back before the end of the day to verify the order with the printing company.  I was skeptical but, sure enough, he called back.  He reported that the order couldn’t be found yet in the printing company’s system but he would check again this morning and then call me back.  Sure enough, he called this morning and said the order was cancelled as I requested.  Well done, FirstAmBank, and thank you Adam!)

Photo by emdot

First: Seth Godin shares this "urgent" thought:

If I could only share one piece of personal finance advice to grads or to just about anyone, it would be this:

Only borrow money to pay for things that increase in value.

It’s a short list: your business, your house and your education, mostly. Stocks if you’re smarter than me. That’s pretty much it.

If you have credit card debt, you’re in big trouble. Your bank account has a huge leak in it, and it’s getting worse. Hence the urgency.

Although the premise is true–credit cards are a huge problem for a lot of people–I’m not sure why he considers this urgent all of a sudden.  Folks like Dave Ramsey and others have been saying this for years.  Still, coming from a guy like Seth Godin–a guy with a big megaphone–it may help.

Second: J.D. cites a report summarized in the New York Times that worries over America’s problem with debt.  The solution: thrift (saving) and frugality (spending less).

My wife and I have been on a mission to do this very thing.  Years ago, before we had children, we chose to live a lifestyle that would enable us to live off one, modest income.  We bought less house than we could have at that time.  We have two cars but our "newest car" is eight years old.  We don’t eat out much, we haven’t taken expensive vacations, we don’t buy stuff.  To be fair, we haven’t done this perfectly and we’ve made some mistakes along the way but we’ve also managed to avoid many of the problems that come with the burden of debt.  And for that, I’m thankful.

Put away the credit card, start saving, learn to live with less.  Your happiness does not rest in stuff.

Related post:

Money Advice for College Grads

J.D. over at Get Rich Slowly asked his readers what bit of advice about money they wished they’d received as they graduated from college.  The answers aren’t surprising: a lot of folks wish they’d learned to budget, live within their means, and avoid debt.

Here are just a few of the responses:

• I wish I would have known how destructive living without a budget was.
• Basically don’t try to impress your friends and you will be way ahead later in life.
• Learn about your future spouse’s attitudes toward personal finance BEFORE you marry.
• The danger of credit cards (though as college seniors it may very well be too late to teach them that lesson).
• Compound interest, compound interest, compound interest.
• Don’t take out a loan to buy anything.
• Set up a savings habit, and a plan, with goals.
• Read every book in the personal finance section of the library and know that having a good life isn’t about making a lot of money, but how you live your life.

The main lesson here is behavioral: it’s what you do more than what you know.  It doesn’t take a lot of knowledge to manage your money but it does require the will to make choices like buying a used car, avoiding those daily lunches  out and trips to Starbucks, and living on the money you make (rather than the money you wished you’d make).

Read all the responses here.

Rob Maupin, one of my colleagues who teaches intercultural studies, asked me to speak to a group of his students about money.  Neither Rob nor I learned anything (formally) about personal finance as college students.  As could be expected, then, we made some mistakes and learned a lot by trial-and-error.  Now, however, we’re trying to help our students make better decisions with their money.

Students (and others) can download the presentation handout here (PDF).

Additional Resources

Dave Ramsey.com – Author of The Total Money Makeover (recommended) and the Financial Peace University course (also recommended).

Get Rich Slowly – If you follow only one link out of this site, make it this one.  J.D.’s site is a fantastic resource for those trying to get out of debt, make better financial choices, and live more simply.  Also features a list of the best books for personal finance and an updated list of the best banks for high-yield savings accounts.

USAA.com – When my wife and I first married 12 years ago, I read an article in Money magazine on the best bank in the U.S.  USAA topped the list and we moved our money there.  We also have our mortgage and auto insurance with USAA.  The company’s exceptional products and services are available only to military personnel and their families.

HSBCdirect.com – HSBC offers an easy-to-use, high-interest savings account that can be opened with as little as $1.  A good place for your emergency fund.

Photo by fragglerawker_03

Making money on the Internet is easy. I think I’ve made close to $30–without hardly lifting a finger–in two years. Which leads us to this truth:

Making a lot of money on the Internet is hard.

Without an effective strategy, you won’t be earning a living from your online experiences. Essentially, there are three methods for generating revenue:

• Sell advertising
• Use affiliate links
• Sell a product

These are a few of the best articles I’ve found that discuss the nuts and bolts of these methods:

• The Three Ways to Generate Revenue from Your Website
• How to Make Money From Your Blog
• Making Money on the Internet

For day-to-day reading, these three four sites are, hands down, the best resources for would-be blogger/podcaster entrepreneurs:

• Copyblogger
• The Business of Podcasting and New Media
• ProBlogger
• doshdosh (added with Jacob’s recommendation)

Throw these into your feed reader and absorb.