**A History of Revolution in U.S. Taxation

A History of Revolution in U.S. Taxation

Published April 8, 2019 By Jenna Ross

As Benjamin Franklin once said, “Nothing is certain except death and taxes.”

While this quote was penned in 1789, his words still ring true today. U.S. taxation has changed over time, but it has always existed in some shape or form for over 250 years.

U.S. Taxation: 1765 to Today

In today’s infographic from New York Life Investments, we explore the history of U.S. taxation – from its colonial roots to its recent reform.

A History of Revolution in U.S. Taxation

The modern American tax code has little resemblance to its early iterations.

Over the last few centuries, Americans have battled against British taxation, faced sky-high tax rates to fund war efforts, and enjoyed tax cuts designed to boost economic growth.

A Timeline of U.S. Taxation

Today, total U.S. tax revenue exceeds $3.4 trillion. Below are some notable events that have shaped modern American taxation.

Colonial Roots: 1765 to 1783

1765 – Stamp Act

In its first direct tax on the colonists, Britain places a tax on all paper – including ship’s papers, court documents, advertisements, and even playing cards.

1767 – Townshend Revenue Act

Importation duties are placed on British products such as glass, paint, and tea. The taxes are expected to raise £40,000 annually, (£6,500,000 in 2018 GBP). As hostilities continue to bubble up, colonists argue for “No taxation without representation”. Although taxes are imposed on the colonists, they aren’t able to elect representatives to British parliament.

1770 – The Boston Massacre

British troops occupy Boston to end the boycott on British goods. The March 5th Boston Massacre sees five colonists killed. By April, all Townshend duties are repealed except for the one on tea.

1773 – The Tea Act (May 10)

Britain grants the struggling British East India Company a monopoly on tea in America. While no new taxes are imposed, this angers colonists as it is seen as a thinly veiled plan to gain colonial support for the Townshend tax while threatening local business.

1773 – The Boston Tea Party (December 16)

Three ships arrive in Boston carrying British East India Company tea. Colonists refuse to allow the unloading of the tea, throwing all 342 chests of tea into Boston Harbour.

1775-1783 – The American Revolutionary War

Growing tensions between Britain and the colonists erupt in a full-scale war. After eight long years, Britain officially recognizes the independence of the United States.

A Free Nation: 1787 to 1943

1787 – The U.S. Constitution

Congress gains the “power to lay and collect taxes, duties, imposts, and excises.” The government primarily earns revenue from excise taxes and tariffs, including an “importation tax” on slaves.

1791-1794 – Whiskey Rebellion

Alexander Hamilton, the nation’s first Secretary of Treasury, leads the implementation of a whiskey excise tax. In 1794, whiskey rebels destroy a tax inspector’s home. President Washington sends in troops and quells the rebellion.

1862 – The Nation’s First Income Tax

To help pay for the Civil War, President Lincoln legislates the nation’s first income tax.

Income level (1862 dollars)           Income level (2019 dollars)           Tax Rate

$600-$10,000                                 $15,000-$250,000                     3%

$10,000+                                        $250,000+                                 5%

 Over the coming years, income tax is repealed and reinstated twice.

1913 – 16th Amendment

As World War I looms the 16th amendment is ratified, allowing for taxation without allocation according to state populations. An income tax is permanently introduced for both individuals and corporations, and the first Form 1040 is created.

Income Level (1913 dollars)          Income level (2019 dollars)           Tax Rate

$3,000+                                          $77,000+                               1%

$500,000+                                    $12,800,000+                             7%

At this time, less than 1% of the population is paying income tax.

1918 – The Revenue Act

Tax rates skyrocket to pay for World War I efforts. The top tax rate is 77%.

1935 – Social Security Act

In light of the Great Depression, the Social Security Act introduces:

An old-age pension program

Unemployment insurance

Funding for health and welfare programs

To fund the programs, a 2% tax is shared equally by an employee and their employer.

1942 – The Revenue Act

Described by President Roosevelt as “the greatest tax bill in American history”, the Act increases taxes and the numbers of citizens subject to income tax. Total personal and corporate income tax revenue more than doubles:

Year       Revenue              2019 dollar equivalent

1941      $3.4 billion          $59.2 billion

1942      $8.0 billion          $123.8 billion

1943 – Current Tax Payment Act

It becomes mandatory for employers to withhold taxes from employees’ wages and remit them four times per year.

Modern Times: 1961 to 2018

1961 – Beginning of The Computer Age

The National Computer Center at Martinsburg, West Virginia is formally dedicated to assisting the IRS in its shift to computer data processing.

1986 – Tax Reform Act

The Tax Reform Act:

Lowers the top individual tax rate from 50% to 28%

Increases taxes on capital gains from 20% to 28%

Reduces corporate tax breaks

The revisions are designed to make the tax code simpler and fairer.

1992 – Electronic Filing

Taxpayers who owe money are given the option to file electronically.

2001 – Economic Growth and Tax Relief Reconciliation Act

President George W. Bush implements large tax cuts:

Creates a new lowest individual tax rate of 10%

Reduces the top individual tax rate from 39.6% to 35%

Doubles child tax credit from $500 to $1,000* (*From $700 to $1,400 in 2019 dollars)

2017 – Tax Cuts and Jobs Act

President Trump signs off on reductions in tax rates, while some deductions are made more restrictive.

For example, State and Local Taxes (SALT) deductions are capped at $10,000. Residents in high-tax states such as New York, New Jersey, California and Connecticut could see substantially higher tax bills.

The Future

U.S. taxation policy remains a contentious issue and shifts depending on who is in the White House.

Investors need to stay informed on current legislation, so they can engage in proactive financial planning and minimize their tax obligations.

 https://2oqz471sa19h3vbwa53m33yj-wpengine.netdna-ssl.com/wp-content/uploads/2019/04/nyl_tax-revolutions-08_820px.jpg

To continue reading, please go to the original article here:

https://www.visualcapitalist.com/history-u-s-taxation/

Bolsheviks Want To Shut Down Puerto Rico’s Tax Incentives

Bolsheviks Want To Shut Down Puerto Rico’s Tax Incentives

Notes From The Field January 8, 2020 San Juan, Puerto Rico

[Editor’s note: This letter was written by Sovereign Man team member Joe Jarvis, who recently moved to Puerto Rico.]

Local Puerto Ricans invariably tell me I’m overpaying on rent, and that I could have found a cheaper place to live. I’m sure that’s true. But somehow I’m not upset about my gorgeous view over the ocean and private roof deck. Beautiful beaches are right in front of me, along with three pools, a gym, and tennis courts.

At the nearby food trucks, Esteban makes a mean margarita. A native Puerto Rican, he recently went from bartending to owning his own kiosk. Same story for the father-son team who owns the ceviche truck.

They have a ton of new business now thanks to all the foreigners who are moving in to take advantage of Puerto Rico’s incredible tax incentives.

That’s why I’m here; I moved down to Puerto Rico last month to take advantage of Act 20, the Export Services Act (now reorganized under Chapter 2 of the Incentives Code).

Much of the work that I do qualifies as ‘exported services’. So I pay myself a salary that is considered reasonable by Puerto Rican standards (the median wage here is less than $20,000 per year).

And the rest of my profit is taxed at just 4%.

I owe no taxes to the US federal government. After all, as a resident of Puerto Rico I can’t vote in Presidential elections, and Puerto Rico’s member of Congress doesn’t have voting power. No taxation without representation.

This is all great for me, but it’s also benefits Puerto Rico.

This is an island that has lost more than 10% of its population over the past several years due to the seemingly interminable, decade-long recession.

As US citizens, Puerto Ricans can move to the mainland and freely live and work just like any other US citizen. And with the local economy having been in the dumps for so long, many of them have done exactly that.

These tax incentives have started to lure wealthy foreigners and entrepreneurs to the island. And when they come, they spend a LOT of money. They invest a LOT of money. They create a LOT of jobs. They generate a LOT of tax revenue.

Puerto Rico benefits. The foreigners who move here benefit. And, by the way, even local Puerto Ricans can receive the same 4% corporate tax treatment… so everyone can benefit. It’s a win/win.

But as we’ve talked about before, Bolsheviks don’t like win/win situations.

Four members of the United States Congress, including the Queen of the Bolsheviks, Rep. Alexandria Occasio-Cortez, sent a letter to the Secretary of the Treasury in December asking him to investigate the fact that “Puerto Rico has become a tax haven from the Federal government.”

They take aim at Act 20 (as well as Act 22, which allows investors to pay 0% on certain investment income). 

These Congress people have no idea what they’re talking about. In the letter, they couldn’t even properly name the tax incentives, mixing up which one was Act 20 and which was Act 22.

They also erroneously claim that the tax incentives “have not resulted in any benefit for Puerto Rico.”

That’s absurd. The government of Puerto Rico itself released a report a few months ago stating that the tax incentives have been incredibly beneficial to the island.

The government states that they have issued 1,680 Act 20 tax grants. And those grantees have generated $210 million in total tax revenue for the island.

That’s taxes across the board-- sales tax, payroll tax from any employees hired, the 4% corporate tax, etc.

That works out to be an average of $125,000 in tax revenue for every single person who comes to the island to benefit from the incentives.

Those same 1,680 Act 20 grantees have also created over 16,000 jobs-- nearly 10 jobs per person. And the average salary of those jobs is DOUBLE the median household income in Puerto Rico.

Moreover, between Acts 20 and 22, the grantees have invested billions of dollars on the island, injecting much-needed capital into Puerto Rico.

This strikes me as a win/win.

To continue reading, please go to the original article here:

https://www.sovereignman.com/international-diversification-strategies/bolsheviks-want-to-shut-down-puerto-ricos-tax-incentives-27033/

.I Sure Am Glad That I Own Gold…

I Sure Am Glad That I Own Gold…

Notes From The Field By Simon Black

January 6, 2020  Bahia Beach, Puerto Rico

The price of gold is up nearly $100 since Christmas, reaching around $1,575 per troy ounce as I write this letter.

This most recent price bump is due to the panic over Iran. But the gold price is up nearly 20% over the last year, so there have obviously been plenty of other factors driving the price higher before the Middle East started flaring up again.

And there will be plenty more after these tensions cool down.

Trade wars, economic crisis in China, Bolshevik nonsense in the US, Brexit woes… the world is definitely not lacking in major issues that could continue to drive gold prices higher.

Throughout history there have always been periods of relative calm and stability, followed by periods of chaos and uncertainty.

The 1960s were incredibly chaotic, for example. Riots, assassinations, war, etc. were the dominant stories of the time.

By comparison, the 1990s were relatively calm. Peace and prosperity reigned. And life was so easy that the biggest problem of the decade was Bill Clinton’s love stain.

We seem to be sliding head-first into another period of turmoil (though I would argue that we’ve been there for a few years).

Stability is gone. Trade wars, shooting wars, terror attacks… pretty much everything is back on the table now.

Bolshevik politicians are taking hold all over the world, even in places like the United States, where, only a few years ago, it would have been considered preposterous for a socialist candidate to run for President.

Now there’s more than a dozen.

Most of all, the Social Contract is breaking down; people everywhere are becoming angry and unglued. We’ve seen it in the streets in places like Hong Kong, Spain, Chile, Lebanon, France, etc. And we see it every single day in social media.

People are demanding change and revolution in everything from our basic system of economics, down to the very words we can and cannot use.

This is all part of a level of conflict and turmoil we haven’t seen in decades, and it’s possible we’re just in the early stages.

I somehow doubt that all of these woke social justice warriors will suddenly capitulate their war on gender pronouns, or that Bolshevik presidential candidates will abandon their Marxist ideology and embrace the free market.

Now, don’t get me wrong… I’m not suggesting this is the winter of our discontent. I’m incredibly optimistic about the world and it’s opportunities.

But I sure am glad that I own some gold.

It’s not the fact that the gold price is up $100 in a month, or that precious metals have performed very well as an asset class. (Silver is up 21% in the last six months alone.)

The investment benefits are a nice bonus. But the real value of gold is that it’s one of the best things to own in times of turmoil and uncertainty.

Gold is a global asset with a 5,000+ year history of value and marketability. It’s a hedge… an asset you can rely on when you can rely on little else.

In many respects it’s like a life insurance policy… with the added cherry-on-top that you don’t have to be dead to benefit from it. And your gold dealer is probably not going to give you a prostate exam first.

I know this is the time of year where people make all sorts of predictions about what’s going to happen in the year ahead.

Frankly I don’t think anyone can credibly say that they have any idea what’s going to happen in the world in 2020. And that’s why I own gold.

To continue reading, please go to the original article here:

https://www.sovereignman.com/international-diversification-strategies/i-sure-am-glad-that-i-own-gold-27029/

Follow Your Passion Career Advice is Tragic

Follow Your Passion Career Advice is Tragic

 How to Fix It

Maximize the Value of You (Career)

At Millionaire Foundry we often challenge what we call common wisdom, which are sound bites of financial advice some often hear, accept, and then repeat as truth.

Common wisdom is not all bad and may be well-meaning, but its danger is that it can steer us in the wrong direction, often when it really counts. The results can be disastrous.

One piece of common wisdom career advice that deserves a major challenge is to always Follow Your Passion.

This advice has been repeated so often that its accepted as fact.

And like many pieces of common wisdom, it does contain some truth.

After all, it makes sense that combining work with what really professionally excites us has more potential for success than building our career around something we despise.

But this career advice can be painfully misleading because it misses the principle that we are only rewarded to the degree we leverage our skills to create value for others, and they in turn are willing to compensate us.

We explain the power of this important compensation-for-value principle in Maximize the Value of You.

If your desire is to build wealth, once you’ve identified your career passion, you have to take the second mandatory step of determining the marketplace for the value you’ll create from your focused passion.

A world-class poet may bring joy to millions with engaging poems.

But few poets are financially rewarded for that joy they create because their marketplace – their readers – aren’t willing to provide much monetary compensation for a poet’s output.

Thus a top poet, following their passion by honing their craft for decades, and despite delighting millions with their life’s work, may suffer a starvation-level income.

We can debate whether this is fair, but it doesn’t really matter, because those who make up any marketplace speak very clearly with their wallets.

In this example, consumers are simply unwilling to part with something of value (money) to reward the poet for the value created from their skills, experience and hard work.

If the poet is not interested in monetary compensation, but instead derives their rewards from the joy they create for their audience, then the lack of income doesn’t matter.

To continue reading, please go to the original article here:

https://millionairefoundry.com/follow-your-passion-career-advice-is-tragic-how-to-fix-it/

.What Video Games Taught Me About Finance

What Video Games Taught Me About Finance

Action-adventure and RPG games are packed with hidden lessons about real world wealth.
 
It started, as many adventures have, in the town of Blackwater on the shores of Flat Iron Lake. I walked into the Gunsmith’s shop to check out his wares and saw the most provocative and expensive weapon I had ever come across—an “explosive rifle,” on sale for $10,000.

Despite the fact that there were many people depending on me, the reformed Wild West outlaw John Marston, to carry out errands for them, I became obsessed with raising the cash to buy the gun.
 
You may have caught on that I’m not referring to real places or people, but rather locations and characters in the 2010 Rockstar game Red Dead Redemption.

Like many fans of the game, I was completely sucked into Marston’s world, which is why I was surprised by how easily the explosive rifle derailed me from the main storyline.

Ever since that frivolous quest, I’ve frequently found myself chasing virtual big ticket items in games like Skyrim or Horizon Zero Dawn, while holding off on other more pressing missions.
 
The result has been some weird lessons about money garnered from video games that are intended to be dazzling narratives, not financial primers.

Because most immersive games mimic the real world to some extent, they weave in at least some rudimentary economic principles—a bank account, means of income, and products that can give you an edge when achieving your goals.
 
These systems are an important functional feature of the playing experience, but they also spotlighted some of my own financial strengths and weaknesses, and reinforced basic principles about real world finance. Here’s some examples of ways in which the bank accounts and wish lists of my game characters got me thinking about my money habits in real life. 

Credit Impacts Pricing
 
Like most action-adventure games, it’s fairly easy to rustle up some cash in Red Dead Redemption, so my Marston took off to bag outlaws for the bounties, gamble, collect valuable herbs, and hunt game to sell in general stores.
 
To continue reading, please go to the original article here: 
https://www.vice.com/en_us/article/pam8pv/what-video-games-taught-me-about-finance-good-habits

.Financial Concerns In A "Broken-Heart Syndrome"

Financial Concerns In A "Broken-Heart Syndrome"

Valuable Estate Lessons From The Passing of George and Barbara Bush

Megan Gorman Senior Contributor   Personal Finance Dec 3, 2018

I write about achieving wealth and how it intersects with our lives

 The death of a longtime married couple in quick succession is often explained as “broken-heart syndrome”

When spouses pass within a short period of time of each other there may be challenges with beneficiary designations.

George H.W. Bush led an extraordinary, well-lived life during an exciting time in American history. In any discussion of his life and accomplishments, his late wife Barbara quickly comes to mind as well.  Theirs is a well-documented and iconic love story.  From the battlefields of Second World War to the White House and beyond, the romance and connection between them was felt by all who saw them together.

That is why George’s death less than eight months after Barbara’s may not really feel like a surprise. The death of a longtime married couple in quick succession is often explained as “broken-heart syndrome” or “widowhood effect” - a romantic notion that two hearts are so entwined that they can’t bear to be without each other. 

George Bush’s death wasn’t specifically due to heart issues, but by all accounts he was ready to go after his final summer in Kennebunkport.

While it is a romantic ending to the Bushes’ time here on earth, the time between their deaths raises practical issues of estate planning. Timing is key in an estate plan and if the deaths of married partners occur within a short period of time, it can make the administration of an estate more challenging.  This issue is not uncommon.

“The statistics are high especially for older couples who had close marriages, dependent on each other,” says Paula Leibovitz Goodwin, partner in the Personal Planning Group at Perkins Coie LLP in San Francisco. “There is complexity when dealing with two deaths.”

Timing Is Key

To continue reading, please go to the original article here:

https://www.forbes.com/sites/megangorman/2018/12/03/valuable-estate-lessons-from-the-passing-of-george-and-barbara-bush/#30917fde515b

Awesome Jedi Lessons for Your Money

Awesome Jedi Lessons for Your Money

May 4, 2019  By Mr. The Poor Swiss

 In honor of May 4th (May The Fourth), I gathered some Jedi wisdom for your Personal Finances. I have found 11 inspirational quotes from characters from various Jedi from the Star Wars Universe that could be applied to money lessons.

There are many great quotes in Star Wars. Mostly from the great Master Yoda and his crazy talking that makes him so well-liked. But other Jedi Masters are also generous with wisdom quotes. Most of the quotes do not directly apply to finance. Here are 11 quotes that can apply to your personal finances.

May the Force be with you. Yoda

May the Force be With Your Finances! If you follow these Jedi lessons, you may well become a Jedi Personal Finance Master!

1. Always have strong goals (Yoda)

Do or do not. There is no Try. – Yoda

Your goals should not be to try to do something. Your goals should be to do something. The difference is very important. You should set your mind to do it. You should already believe you will achieve your goal and not try to achieve it.

Trying to do something means there is a risk of failure. Doing something means succeeding. That is not to say you will always succeed. But if you fail, you just have to learn from the failure and improve your next attempt. Do not stop because you fail!

2. Do not time the market (Yoda)

Difficult to see. Always in motion is the future – Yoda

As Yoda tells us, the future is always in motion. There is no way to accurately predict the future. The same is true for the stock market. Trying to predict the stock is a fool’s game.“ Much to learn you still have my old padawan. This is just the beginning.” Yoda

This does not mean that we should not invest. This should simply mean that we should rely on the performance of the market rather than rely on the performance of fund managers that will take a large part of the gains.

It has been shown many times that active funds did not beat the market over the long term. On the other, passive funds allow replicating the performance of the market at very low fees.

3. Be Patient (Yoda)

Patience you must have, my young padawan – Yoda

You will not achieve your goals in a single day or even in a single year. Whether your goal is to get out of debt or to reach Financial Independence.

You need to be patient and stay consistent. If your goals are going too slow for your taste, you can try to improve their speed. You could try to save more money towards your goal by cutting some more things you do not really need.

Or you could set yourself some intermediary goals. For instance, if your goal is to get out of debt in two years, you could set monthly goals to eliminate one debt after another.

And once you reach the first small goal, you can make the next one more difficult. Such a strategy will make you feel your progress and will make it so you reach your goals faster!

4. Do not let your emotions decide (Luke & Yoda)

Fear is the path to the dark side. Fear leads to anger. Anger leads to hate. Hate leads to suffering. – Yoda

It is a well-known fact in investing that your emotions are your worst enemy. You should try to be as detached as possible when you make decisions.

For instance, investing in cryptocurrencies because you fear missing out on the huge gains achieved by some people is not a good reason to invest. And selling out all your shares because one index lost 10% of its value in a few weeks.

Your overconfidence is your weakness – Luke Skywalker

Fear is not the only emotion that is dangerous. Overconfidence can be highly detrimental to your investments. If the stock market is going very well and you are overconfident, you may invest more than you should. And once the stock market goes down, and it will, you may be left with too little money and forced to sell at the worst time.

To continue reading, please go to the original article here:

https://thepoorswiss.com/11-awesome-jedi-lessons-money/

The Fear of Losing It All

The Fear of Losing It All

By Charlotte Cowles@charlottecowles

About five years ago, I received a tax bill in the mail for a crazy amount. I can’t even remember what the number was because I practically blacked out. I had to lie down on the floor to stop the room from swimming. I couldn’t pay this money. I didn’t have it. What could I sell? Who could I borrow from? Could I charge it on my credit card? Should I open an additional credit card?

My immediate reaction was a textbook case of what psychologists call “scarcity mind-set” — the panic of not having enough, the doomsday thoughts that immediately followed, and the onslaught of bad ideas for “quick” fixes. As it turned out, I had misread the bill, and after closer examination and a couple of phone calls, I was able to sort things out and resume my normal heart rate.

In theory, the threat of coming up short should have spooked me into making smarter financial decisions in the long run (saying no to an expensive dinner and bulking up my savings instead), and research does show that it can incentivize people to stretch their money further

But that effect is only temporary, and it can backfire. According to several studies, people’s brains function differently when they perceive or anticipate scarcity.

More specifically, people get dumber: One study found that when subjects simply thought about a big bill that would strain their finances, their cognitive abilities plummeted by an average of 14 IQ points — a similar deficit to pulling an all-nighter.

When people simply thought about a big bill that would strain their finances, their cognitive abilities plummeted by an average of 14 IQ points.

“When you experience the feeling of not having enough, your concerns with money consume your cognitive resources,” says Jiaying Zhao, a psychologist who studies scarcity at the University of British Columbia. “As a result, you’re no longer able to perform at the same level that you would otherwise.”

This fight-or-flight response affects people of all socioeconomic levels, she adds. “Scarcity is inherently subjective. Your perception of how much you have versus how much you need is different from your objective level of income. A rich person can still experience scarcity if they feel they can’t juggle their demands.”

Once in scarcity mode, people tend to become hyper-focused on the present and lose perspective on longer-term planning. “Any time we get into fear-based thinking, the part of our brains that can compare options and accurately assess risk and opportunity goes offline,” says Amanda Clayman, a therapist who specializes in money issues.

“People in this mind-set tend to do things like put more money on their credit cards and let debt creep up because they’d rather borrow money than spend down what they actually have.” (My reaction to the tax bill, in a nutshell.) Of course, this decision makes sense in the moment — you want to avoid hitting zero at all costs. But you may be digging yourself into a bigger hole in the process.

Many people don’t just experience this abject terror every once in a while, like I did — they live with it all the time, says Zhao. If it’s not at the forefront of their brains, it’s squatting somewhere in the back, weighing down their cognitive bandwidth and inducing that fluttery dread when a bill arrives, even when they can technically afford what’s on it.

This anxiety is very real. But the reasons behind it can vary, and sometimes they aren’t entirely rational. Psychologists have found that this “starvation” mentality is more prevalent in those who grew up in financially volatile families or have experienced periods of intense budgetary pressure, which can make security seem more tenuous.

Even if these people are financially stable, they may never feel that way, and miss out on opportunities to manage their money more strategically as a result (the classic example is hoarding cash instead of investing in the market).

To continue reading, please go to the original article here:

https://www.thecut.com/2019/03/money-problems-stress-finances-debt-advice.html

Coping With the Guilt of Losing Money

Coping With the Guilt of Losing Money

By THE INVESTOR 

I accept it’s normal to feel frustrated, angry, or even downright stupid when you lose money on your investments.

But what about guilt?

 My portfolio’s fall from its peak value in summer 2007 to a low in October 2008 represents a big loss for a 30-something private investor like me: at least a couple of years of after-tax income in cash terms.

 More importantly, the losses meant I had fewer options in October 2008 than the year before. I’d originally begun investing to build up a house-buying war chest for when the over-valued housing market corrected itself.

 After several years waiting, house prices were finally falling, but my investments had fallen further.

It was my sister who put it simplest and best, when I explained to her my fate:

 “Ah, I see. If only you’d sold all your investments and put the money into a savings account! Now you’d have even more money, and you could buy a cheaper house.”

 My sister was a 100% right.

 Being told what I did wrong by my sister, who takes no real interest in money, might have hurt my pride. But then my emotional state has taken several turns during the bear market.

I’ve felt:

 Frustrated:  After half a decade of waiting for property prices to fall and saving as much as 50% of my annual after-tax income, I’d thrown away my ticket to the ball.

Angry:  At the world, and at the markets. What were the chances of a once in a hundred year credit crisis coming along just when I was finally getting ready to buy a house?

Foolish:  If I’d thought property prices would fall so far, how could I have missed the connection with the stock market? Wishful thinking, perhaps?

Gilty:  My family background is not a wealthy one, and the money I’d lost was modestly substantial – more than my parents’ life savings. What was I thinking playing roulette with the market and exposing myself to such losses?

Despite these churning emotions, I didn’t sell up in despair. Instead, I kept buying while shares were cheap. I did what history and the likes of Warren Buffett say you should do – hanging in and even buying when others were fearful.

Time will tell if this faith in the stock market simply compounds my losses or leads to a recovery, but I’m glad I’ve stuck to the rational line.

Here some tips that might help you if you’re also feeling guilty or giving in to bear market despair

1. Don’t take it personally

The stock market doesn’t know or care that I was saving money for a house, or what I’d given up. The world is a billion times bigger than our own investments, and our good or bad decisions. Market declines of 40% will leave anyone’s portfolio battered. A bear market is not your fault.

To continue reading, please go to the original article here:

https://monevator.com/coping-with-the-guilt-of-losing-money/

Absolute Value vs Relative Value:

Absolute Value vs Relative Value:

Doing Nothing Is Not the True Alternative

Post From the Finance Buff  March 26 2019

I read a great comment on the blog Frugal Professor that I’d like to share. The business school professor there needed a new mattress. One model that came into consideration costs $3,500.

Someone commented that considering that you spend around 1/3 of your life on the mattress, it’s worth spending $3,500 on a good mattress. The professor replied:

These thoughts have gone through my mind as well. But I also spend around 95% of my life wearing socks and can’t justify paying $3500 on them. The tradeoff I’m making with this purchase, as with all purchases, is to maximize value by maximizing marginal benefit divided by the marginal cost.

In the case of the mattress, I’m trying to figure out what the marginal benefit is of a $3500 mattress relative to a $500 mattress (does the marginal benefit exceed the marginal cost of $3k). But, overall, I’m sympathetic to the idea of not cheaping out on a mattress given that it will affect the quality of my life in a non-trivial way for at least 10 years.

This highlighted the difference between what I call the absolute value and the relative value.

The absolute value is the value of having something over having nothing. If I must sleep on concrete for 10 years, I would spend $3,500 on a mattress. If I must walk 10 miles to work every day, I would pay $35,000 for a car.

The relative value is the value of something over its next acceptable alternative. When a $1,000 mattress does the job, a $3,500 mattress offers poor relative value. When a $5,000 car gets me to work just fine, a $35,000 car offers poor relative value.

Sellers like to use the absolute value to make the sale and justify to themselves they are providing value. Here are some examples:

“Before I sold you this whole life policy, you had no life insurance. You would’ve blown your money on unnecessary spending. You should be happy your family is protected now and the policy is worth something.”

“When you walked into the bank, your money was all in CDs. These mutual funds with 2% expense ratios still made more money for you than those CDs.”

“I talked you out of selling at the bottom when the market crashed. That’s worth a lot more than the 1% I’m charging you.”

“If I didn’t treat you after that bus accident, you would’ve bled to death. So pay me $27,000 for giving you stitches.”

In each case the sellers provided absolute value. However, buyers still received poor relative value. A whole life policy isn’t the only option to protect one’s family. You don’t have to blow away your money if you don’t buy a whole life policy.

To continue reading, please go to the original article here:

https://thefinancebuff.com/absolute-value-vs-relative-value-true-alternative.html

Money Lessons from the Game of Dreidel

Money Lessons from the Game of Dreidel

While most can readily point to the dominant holidays of Thanksgiving, Christmas, and New Year, they aren’t the only ones.

In fact, the holiday season is filled with several other holidays you may not even be aware of.

One such event is the Jewish holiday of Hanukkah. Also known as the Festival of Lights, Hanukkah is an 8-day celebration commemorating the miracle of the oil during the rededication of the Jewish temple in Jerusalem.

 One of the most recognized and beloved traditions of Hanukkah is playing the game dreidel, and is something I do with my students every year. I firmly believe in teaching tolerance for differences and beliefs, and so I spend a great deal of time exposing my students to different cultures and traditions.

While my students have a great time playing dreidel, it is far more than just a game. In fact, dreidel is a fantastic teaching tool, especially when it comes to money.

Those of you familiar with dreidel already know its many relations to money, but for those of you who don’t, I’d like to break the mold this holiday season by focusing on a non-dominant tradition and the lessons we can learn from it.

I want to share with you money lessons from the game of dreidel.

But first, a little history lesson.

The History of Dreidel

Dreidel originally developed from a gambling game played in various parts of Europe that used a top called a teetotum.

However, the game of dreidel became solidified within the Jewish culture during the reign of the Syrian king Antiochus IV, who ruled what is modern-day Israel in 167 BC (the start of the Maccabean Revolt).

Antiochus had attempted to force the Jewish people to convert and worship the Greek gods by forbidding Jewish religious practice. With this decree, actions such as studying the Torah were punishable by death.

Although still very dangerous, the game of dreidel was developed as a shield for Jews who were illegally studying the Torah. If Syrian soldiers or officials came around, the Torah scrolls were hidden and replaced by dreidels.

Thus, dreidel originated as a way for Jewish individuals to access their religious teachings

How Do You Play Dreidel?

At its core, dreidel is a basic gambling game

To continue reading, please go to the original article here:

https://www.moneysavedmoneyearned.com/money-lessons-from-the-game-of-dreidel/