How to Detach from Your Financial Wins and Losses

How to Detach from Your Financial Wins and Losses

We never truly know whether an event is good or bad, whether it’s winning the lotto or a recession

Jacob Schroeder   Oct 14

Bear market, high interest rates and a looming recession. What a terrible time to invest, buy a home or start a business. Or, maybe it’s a great time to invest (cheaper stocks), buy a home (fewer competing buyers) or start a business (less market competition). Everything is terrible. Or, maybe everything is great.

Most financial decisions we make are in response to events – losing a job, winning the lotto, having a baby. Instinctually, we make a judgment about those events and then act; we celebrate the good and grieve the bad. But, what if we can’t really tell the good from the bad until much later – or even never?

With the firehose of bleak financial news intensifying our emotions lately, I thought it would be appropriate to talk about detachment.

Whenever I feel strongly about an event in my life, I try to retreat into the wisdom of my own ignorance. Because life has a way of proving our initial judgments wrong. I remind myself that I don’t truly know if an event is good or bad. Over time, those labels can change. What is once misfortune can be God’s gift, and vice versa.

For instance, my family moved just when I started high school. I thought it was one of the worst moments of my life. Not only was I the “new kid”, but also an extreme introvert. It wasn’t until my senior year that I made friends. Fast forward 20 years and those friendships count as some of my strongest relationships in life, a wonderful fortune that wouldn’t have happened if this seemingly major misfortune hadn’t occurred first.

Apple fired Steve Jobs, which motivated him to make the personal and professional changes that would lead to his greatest innovations and this profound realization:

“I didn’t see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me.”

In 1915, copper miner Stephen Jenkin received one thing we all wish for when we travel: a free upgrade. His ocean liner ticket back to the U.S. was switched at the last minute to a new and more luxurious ship, which he told his family he was really looking forward to sailing on. The last time his family heard from him was via postcard sent during a brief stop before crossing the Atlantic. He wrote: “The Titanic is a lovely ship.”

I’d bet almost everyone has experienced some kind of “blessing in disguise” or the opposite, which we could call a “curse in disguise.” These moments only exist because our brains are wired to create quick assessments of events. Friend or foe. Good or bad. While that works in the wilderness, it’s less effective when trying to plan for the future.

There is no such thing as wins and losses

Outside of a charging grizzly bear or a man in a hockey mask brandishing a machete, we can’t definitively tell if something happening to us is a fortune or misfortune (though it’s possible these events could also lead to good fortune – a lucrative book deal, perhaps, if you’re not brutally murdered). At least, not until later (if ever) when we see the ultimate consequences of that event.

But our instinct is to categorize events as good or bad and then act on those flawed assumptions. Which can lead to costly mistakes. A classic financial example is an ongoing investment study that shows the average stock investor greatly underperforms the stock market.

The reason is chasing performance. A stock goes down, which we think is bad, so we sell it to buy the stock that is going up, which we think is good. Except this often results in poor returns. Like a game of whack-a-mole you’re trying to hit winning stocks when it’s already too late.

 The alternative?

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

https://rootofall.substack.com/p/how-to-detach-from-your-financial

How Our Perceptions of Time and Money Change as We Age

How Our Perceptions of Time and Money Change as We Age

BY RETIRE BEFORE DAD

Our perceptions of the value of time and money shift as we age.   In early adulthood, time is abundant, while money is scarcer. We want more money and are willing to sacrifice our time to get it.

By middle age, a thriving career helps us earn more, but job and family obligations consume our time. Life is expensive, and working middle-aged people never seem to have enough time or money.

Approaching retirement, we’re more willing to spend money to save time. Why mow the lawn when you could be playing golf or Bridge? And what good is all that wealth if we have no time to enjoy it?

Time was valuable all along.

But as we age and grow wealth, we learn to appreciate time more because we have less of it to live.

The sooner we learn, the sooner we can shift our focus to what’s most important.

Important of time vs. importance of money chart.

The crossover point — when we fully embrace time as the superior resource and prioritize accordingly — is realized at different stages of life for different people.

It may be gradual or sudden.

The approach to retirement is a typical time when priorities shift.

Does retirement change our perception of the value of money?

The standard path of attaining an expensive education and then working full-time for the next four decades to retire at 65 is still predominant.

But that’s Baby Boomer gold-watch thinking.

We have more options.

Time vs. money purpose?

Maybe when we find our true purpose in life, we modify priorities to elevate the importance of time, relationships, and our impact on the world over income and wealth.

For those with a clearly defined purpose, time spent not fulfilling that purpose is wasted time.

There can be prosperity in purpose. Finding work you love that serves others and makes you wealthy might be the holy grail.

Diagnosis as the cross over point.

A serious health diagnosis, accident, or death of a loved one might change your feelings about time and money too.

Imagine a doctor telling you there are only a few months left to live.

Life’s priorities would shift immediately.

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

https://www.retirebeforedad.com/time-and-money/

Yikes. The Federal Reserve Lost $4.1 Billion Last Month

Yikes. The Federal Reserve Lost $4.1 Billion Last Month

Notes From the Field By Simon Black   November 1, 2022

In the early spring of the year 1492, Lorenzo de’ Medici had just arrived to his family’s opulent villa in the hills nearby Florence when he began to experience severe stomach pains.  His pain quickly grew worse, and the finest physicians were summoned to heal him; Lorenzo was reportedly given a number of potions and treatments. But nothing worked.

Within a matter of days, the 43-year old Lorenzo had passed away. And all of Florence panicked at what might happen next.  They called him Lorenzo the Magnificent for a reason. Under his leadership, the Republic of Florence had cemented its position as one of the biggest powers of Europe.

The Florentine economy was exceptionally strong. So strong, in fact, that Florence’s 3.5 gram gold florin had become the dominant reserve currency in Europe. And Florence’s highly advanced banking system made it Europe’s leading financial center.

Taxes were low. Crime was low. Peace was maintained. Trade flourished. Science and technology advanced. And art experienced an unprecedented boom.

During Lorenzo’s rule, Florence was graced by many of history’s most celebrated artists, including Leonardo da Vinci, Botticelli, and Michelangelo.

When Lorenzo died, Florence went downhill very quickly. His son Piero de’ Medici succeeded him as the Lord of Florence. But Piero (known as Piero the Unfortunate) did not have his father’s skill.

Piero’s mismanagement resulted in a severe economic downturn, plus diplomatic humiliation at the hands of one of Florence’s geopolitical rivals, the French.

Piero even managed to abandon some of Florence’s most important military fortresses to his sworn enemy, French king Charles VIII.

Naturally people were horrified by his incompetence. And after just two years, the people of Florence forced Piero into exile. Yet the decline of Florence was only getting started.

The next ruler was an ultranationalist, puritanical fanatic named Savonarola who claimed a divine mandate to make Florence (according to 16th century poet Girolamo Benivieni) “more glorious, more powerful, and richer than ever.”

It didn’t work; within a few years, Savonarola was executed. He was replaced by a French puppet, who was then ousted when the Medici family invaded Florence (with the help of the Spanish) and once again seized control.

It was around this time that a new book about political theory began circulating in Florence; it was written by a fairly obscure bureaucrat turned diplomat named Niccolo Machiavelli. And his book was called The Prince or Il Principe.

In his writings, Machiavelli attempts to justify the actions of pernicious, despotic rulers, claiming that cruelty, deceit, violence, and immorality were all acceptable traits of a ruler trying to maintain power.

Quite ironically, Machiavelli himself was a victim of his own logic; he was exiled, then imprisoned, then brutally tortured by the ruling Medici who suspected Machiavelli of conspiracy and sedition.

Most people would probably agree that a violent dictatorship isn’t a great political system. And yet the book eventually became incredibly popular among European nobility.

Henry VIII of England, Charles V of the Holy Roman Empire, and many more leading monarchs of the era were heavily influenced by Machiavelli’s terrible ideas.

This has happened many times throughout history — a writer comes along and publishes a work that becomes highly influential in political circles.

Hundreds of years after Machiavelli, the works of Voltaire, Rosseau, Adam Smith, de Toqueville, etc. had a profound impact on prevailing political and economic trends. And in the 20th century, the works of John Maynard Keynes were central in establishing the modern system of economics and central banking.

Some of these ideas (Rousseau) were great. Many of them (Keynes) were terrible. But they’ve all had a lasting impact on the world.

Today we have a mountain of idiotic works that have become required reading among the political elite, from Klaus Schwab’s The Great Reset, to whatever self-aggrandizing nonsense Anthony Fauci will publish in a few months.

But perhaps none has been more destructive than The Deficit Myth, i.e. the holy book of Modern Monetary Theory (MMT).

This is the completely idiotic idea that governments can go into debt and print as much money as they want, forever and ever until the end of time, without any consequences whatsoever.

MMT has made its rounds all over the world, and it’s astonishing how many policymakers have bought into it.

MMT is the sort of thing that makes politicians say things like “We can pay for it with deficit spending” (AOC). Or that their multi-trillion dollar spending bill will “cost nothing” (Pelosi). Or that inflation is purely the result of “corporate greed” (Biden).

According to MMT, “Congress doesn’t need to ‘find the money’ to spend it. It needs to find the votes! Once it has the votes, it can authorize the spending. The rest is just accounting.”

That’s it! It’s just accounting! Trillions upon trillions of dollars conjured out of thin air is just accounting… with no consequences whatsoever. It’s genius!

Except we all know there are consequences. Inflation has been an obvious one. But there are so many more.

One of them has come up quite recently and it’s worth mentioning; in its efforts to fight inflation, the Federal Reserve has been steadily increasing interest rates over the past eight months. In fact they’re expected to hike rates by an another 0.75% tomorrow.

But the Fed has a huge problem now.

According to its latest balance sheet, the Fed owns $8.3 TRILLION worth of bonds. That’s a pretty big portfolio.

Remember, though, that bond prices fall as interest rates go up. So as the Fed has been aggressively raising rates lately, they’ve managed to create enormous losses of their own bond portfolio.

In fact the Fed lost $3.2 billion just last week alone. And in the month of October, they lost $4.1 billion.

$4.1 billion constitutes roughly 10% of the Fed’s entire capital base, so it’s a LOT of money for them to lose, especially in a single month. And these losses are mostly the result of their interest rate hikes that have caused their bond portfolio to lose value.

At this pace the Fed will be completely insolvent by next spring, at which point they’ll require a bailout from the federal government. I’m sure America’s adversaries will be terrified by such a display of financial strength.

Of course, MMT suggests that the Fed will first have to print the money for its own government bailout. Truly bizarre.

What’s notable here, though, is that the Fed typically earns a very healthy profit each year… and those profits ultimately flow into the Treasury Department and become a funding source for the US government.

But now the Fed doesn’t have profits. It has losses. So the government is about to lose a source of revenue…

Coincidentally, another source of government revenue used to be interest payments received on student debt. But with the stroke of a pen, the President recently canceled student debt, eliminating another important source of government revenue.

Yet simultaneously while policymakers deliberately torpedo government funding sources, they continue to engage in completely reckless deficit spending (insisting it will “cost nothing”) and taking on larger amounts of debt at higher rates of interest.

This is literally the opposite of what any sensible person would do.

To your freedom,

Simon Black, Founder Sovereign Research & Advisory

https://www.sovereignman.com/trends/yikes-the-federal-reserve-lost-4-1-billion-last-month-143954/

Handle Hard Well

Handle Hard Well

Oct 27, 2022 by Ted Lamade@collabfund

Guest post by Ted Lamade, Managing Director at The Carnegie Institution for Science

Ihave been writing these articles for close to a decade now. In doing so I have covered many topics, but none have resonated more than this issue of adversity. As a result, my antenna is up. This is why I happened to notice something this past Sunday afternoon while watching the Buffalo Bills play the Kansas City Chiefs, specifically the two starting quarterbacks — Josh Allen and Patrick Mahomes.

Allen and Mahomes may be the two best quarterbacks in the NFL today. Allen is currently the frontrunner to be this year’s MVP, while Patrick Mahomes was the League MVP in 2018 and Super Bowl MVP in 2020. Yet, neither was expected to even make it to the NFL. In fact, Mahomes wasn’t even ranked in the top 50 recruits in his home state of Texas and Allen failed to receive a single scholarship offer coming out of high school.

Intrigued, I started doing some more digging.

Like Josh Allen, Aaron Rodgers, the four-time and two-time reigning NFL MVP, also didn’t receive a scholarship offer coming out of high school. He was then passed over by 21 other teams and had to back up Brett Favre for three seasons before starting his first NFL game.

How about the 2019 MVP, the year between Rodgers and Mahomes? Lamar Jackson was a three star recruit (out of five) who wasn’t even among the top 400 recruits his senior year in high school. He was also strongly encouraged by the “experts” to play a position other than quarterback.

The the last MVP outside of this group? Tom Brady, who has become the greatest quarterback of all time after being passed over by every NFL franchise multiple times in the 2000 NFL draft until the Patriots finally drafted him in the 6th round.

The list doesn’t end there. Of the top ten quarterbacks heading into this season, only one was rated a five-star recruit coming out of high school. Of the 32 starting quarterbacks in the NFL today, you can count the number of five-star recruits on just one hand.

The fact is, this group of predominantly three-star quarterbacks was considered by many to be too short, slow, inaccurate, or raw to become regular starters. Yet, they are currently occupying the most demanding job in all of sports, while countless five-star “sure things” have flamed out along the way.

The question is why?

Duke women’s head basketball coach, Karen Lawson, said it better than I ever could in a recent speech to her team about how important it is to “handle hard well.”

“Most people think things are going to get easier. Life is going to get easier. Basketball is going to get easier. School is going to get easier. It never gets easier. What happens is you become someone who handles hard stuff better. And if you think life when you leave college is going to all of a sudden get easier because you graduated and you got a Duke degree, it’s not going to get easier. It’s going to get harder. So make yourself a person that ‘handles hard well’.”

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

https://collabfund.com/blog/handle-hard-well/

Who Said There Needed To Be an Alternative?

Who Said There Needed To Be an Alternative?

Notes From the Field By Simon Black  October 24, 2022

In the early 6th century BC, roughly 2,600 years ago during the Zhou Dynasty of ancient China, a young scholar named Li Er was hired to work as a government scribe in the imperial capital of Chengzhou. Though Li had no formal schooling, he quickly became renowned for his keen intellect. And in time he began to attract a large number of disciples and students who wanted to learn from him. According to one legend, even a young Confucius came to seek his wisdom.

The more time Li spent in government, though, the more disillusioned he became with the entire institution. He witnessed corruption, financial waste, and abuse of power first hand, and he could see that his kingdom was in decline.

So after several decades of devoting himself to government bureaucracy, Li finally decided that he’d had enough, and he set out for a quiet retirement in the countryside, far away from the moral decay and madness of the imperial city.

Li was quite a famous teacher and philosopher at that point. And on his way outside of the main city gate, a guard named Yinxi recognized him, and was saddened to learn that Li was leaving the city forever.

The guard asked Li to please write down his wisdom, so that the whole world could learn of his philosophy.

Li agreed, and kept his promise; the text he wrote is called Tao Te Ching, and Li himself became known to history as Laozi (commonly written as Lao-Tzu), or ‘Old Master’.

Tao Te Ching is a really important work in that it was one of the first ancient texts in human history to argue in favor of limited government and personal freedom.

Li (or whoever wrote Tao Te Ching) obviously didn’t care for government; he writes, for example, that “regulations increase the poverty of the people”, and “the more display there is of legislation, the more thieves and robbers there are.”

It reminds me of the sign that Ron Paul used to keep on his desk while he was a Congressman: “Don’t steal. The government doesn’t like competition.”

It’s quite ironic that, to this day, Laozi is still revered as an intellectual giant in China. And yet if he were alive today, he would most likely have been arrested long ago and living out his days in a concentration camp.

Chinese President Xi Jinping clearly has no regard for the Tao’s ideas.

This past weekend Xi formally secured his third term as the General Secretary of the Chinese Communist Party, cementing his autocratic power for at least the next 5 years.

Let’s not mince words: Xi is dangerous. He has taken China backwards in so many ways, including and especially with respect to personal freedom.

His desire to control the day-to-day activities of people’s lives is so extreme, for example, that he even imposed strict limitations on how much time young people were allowed to play video games.

Personally I’m not opposed to kids having limits on screen time. But last time I checked, Xi Jinping isn’t everyone’s dad.

Yet that barely scratches the surface of Xi’s fetish for absolute power. COVID is another great example; Xi’s love of COVID lockdowns is rivaled only by Anthony Fauci. And the resulting economic destruction his policies have caused makes Joe Biden and Nancy Pelosi look like a couple of amateurs.

But Xi doesn’t seem to care. He acts as if the sole purpose of the Chinese economy is to support the party, not the other way around.

Xi routinely harasses private businesses and forces them to submit to the state. He has ousted corporate leaders, stolen their assets, and put many in prison.

China’s tech sector has suffered an economic and intellectual drain as a result. And under his leadership, foreign investors are even less trusting of China than they were before.

Under Xi’s predecessor, Hu Juntao, Chinese wages and GDP doubled. China became a major world power. China and Taiwan held historic talks, and trade increased significantly between the two countries.

Xi doesn’t seem to have interest in peace and prosperity. And perhaps to underscore the supremacy of his new direction for China, Xi had his predecessor physically removed from the room during this weekend’s Party Congress in Beijing.

Xi is often compared to Hitler across Internet chat rooms, usually due to the internment and murder of China’s Uyghur minority.

To be frank, however, the parallels between Xi and Hitler go far beyond the Uyghur genocide.

After Hitler rose to power, he also cared very little about the German economy. He wanted it to be healthy, of course. But he viewed the economy as an extension of the state.

Hitler’s top priority was in developing a strong military. And he believed that, as long as the military was strong, that the German economy would be strong as well simply because foreign nations would not oppose him.

This seems to be Xi’s approach. He’s investing heavily in China’s military and weapons technology, and he demands that private industry subordinate itself to these ends.

This all leads me back to a key theme: the US dollar.

I’ve long argued that the US dollar’s dominance as the global reserve currency is coming to an end. This is inevitable; no currency and no superpower has held the top spot forever.

Yet this view is very difficult for people to digest. It’s hard to accept that there’s a shelf life for America’s global dominance. And often people assume that the US will continue to reign supreme simply because “there is no alternative”.

And that’s true.

No one trusts China. Very few people (outside of China) want the renminbi as the world’s reserve currency.

And to be fair, China has a mountain of its own problems. Its demographic challenges (due to decades of the One Child Policy) are unfixable in my opinion.

Plus China also has serious defects in its financial system, debt levels, and more. Not to mention its currency is plagued by capital controls.

This doesn’t seem like an obvious alternative to take over the global financial system.

But who ever said there needed to be an alternative?

The US dollar was formalized as the dominant reserve currency at the Bretton Woods conference in 1944. Dozens of representatives from multiple sovereign nations literally gathered in a room and agreed that the dollar would be king.

No one is going to be doing that any time soon with China or its currency, the renminbi.

But that doesn’t mean the dollar is going to keep its status forever.

Losing its reserve status doesn’t require a replica of the US dollar in a different country. No one is going to flip a switch and suddenly cause all global trade to go through the Chinese financial system.

Losing reserve status means gradually losing market share.

It means, for example, that European aircraft manufacturer Airbus will start selling its jets in euros, instead of dollars (especially to European airlines).

It means some sovereign nations whose currencies are currently pegged to the US dollar abandon their pegs and allow their currencies to float freely.

It means foreign institutions gradually cut their holdings of US government debt.

And yes, it also means that some Chinese companies will conduct cross-border trade in their own currency. In fact this is already happening. And it’s accelerating.

It’s true few people trust Xi. Nobody trusted Hitler either. And yet Nazi Germany did booming trade with the rest of the world, and much of it was denominated in his reichsmark. In fact there was an entire trade bloc in Europe with the reichsmark as its unofficial reserve currency.

None of these trends will cause the US dollar to disappear, and certainly not overnight. But they do constitute a gradual chipping-away of the dollar’s dominance.

And that has major long-term implications for the US economy.

To your freedom and prosperity,

Simon Black, Founder Sovereign Research & Advisory

https://www.sovereignman.com/trends/who-said-there-needed-to-be-an-alternative-143846/

Five Lives

Five Lives

Tom Welsh - Humble Dollar

WE GO THROUGH phases in our financial life, just as we do in our biological life. There seem to be a least five financial phases that adults pass through, each with their own priorities, risks, opportunities and tradeoffs.

Here’s how I would think about those five phases:

1. Party Time (ages 25 to 30)

Yes, you’re starting a career, and you want to get ahead and make money. But in all likelihood, your focus is your social life—and so it should be.  Still, amid all the fun, throw in some sober financial management. Avoid digging a hole for yourself with high-cost consumer debt, notably credit card debt and car loans. Participate in your employer 401(k) plan at least up to the minimum required to get the full amount of any matching employer contribution. Finally, in your taxable account, try to save for the down payment on your first house using moderate-risk investments, such as investment grade bonds.

2. Early Career (ages 30 to 45)

Often, this is a time of rapid career advancement, plus you may be starting a family, with all the costs that that entails. Along with these comes the temptation of what I call classflation—borrowing to acquire large homes, expensive cars and other status symbols, so you appear a social class above what you can truly afford. A prudent goal in this phase is to have no debt other than a home mortgage, and then pay off that mortgage as soon as feasible. I’d advise doing so even if it means you invest less in stocks.

Understand that two huge industries disagree with this advice: the lending and investment industries. One wants you to borrow, so it can collect interest. The other wants you to carry that debt, while putting new savings into investments, so it can collect fees. Get ready for the mantra, “You’ll make more money in stocks.”

Why pay off your mortgage so fast?

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

https://humbledollar.com/2020/08/five-lives/

What Is a Trust Fund and How Does It Work?

What Is a Trust Fund and How Does It Work?

By Cari Wira Dineen — Jun 15, 2022

Trust funds often get a bad rep—too often, we assume the people who inherit them are spoiled, entitled and ultra wealthy.

But that’s not actually true (or doesn’t have to be). Sure, trust funds might be a good place to park your cash if you’re a millionaire. But you don’t have to be rich to make a trust fund a part of your financial toolkit. A trust fund can be a useful component of your estate planning, (in addition to writing your last will and testament and picking your children’s guardians). That's especially true if you want to help your money get to your kids without a hitch when you pass away.

How do trust funds work? What is a trust fund, exactly?

We spoke to Alexander Joyce, CEO and president of ReJoyce Financial, a financial and estate planning firm in Indianapolis. He shared how you might go about setting up your kid (and your cash) with a trust.

Read on for the definition of a trust fund, how a trust fund works and whether you might need one.

What Is a Trust Fund?

Trust Fund Definition

A trust fund is an estate planning tool. It’s a legal entity that can hold property on behalf of someone or some group.

If you are the person who’s creating a trust, you’re called the grantor, trustor, settlor or trust maker. If you set up a trust through your will, you could also be called the testator or decedent. This person chooses the rules behind the trust and decides what property the trust will own (by transferring assets into the trust’s name).

The person you ultimately want to receive your money or property is your beneficiary. Being named a beneficiary of a trust is different from owning property, though, because there are generally rules attached. For example, a trust might allow a beneficiary to live in a home owned by that trust, but not rent it out or sell it. Depending on how the trust is set up, beneficiaries often end up inheriting the trust’s assets, according to some trigger like age—for instance, inheriting money when the person turns 21.

The person or entity you want to oversee the money and fulfill the various responsibilities is the trustee. This person doesn’t actually own the property in the trust but rather oversees the distribution of the property to the beneficiaries and makes sure that the stipulations put in place are being followed. Trusts can have multiple or co-trustees, or even institutional trustees (meaning that a company oversees the administration of the trust). Many trusts name successor trustees in case the first-choice trustee becomes unavailable.

In many cases, the trustee receives some sort of compensation for the effort, like a management fee.

Related Articles Do You Need Life Insurance? Term vs. Whole Life Insurance: What's the Difference? How Much Term Life Insurance Do I Need?

How Does a Trust Fund Work?

A trust fund essentially transfers ownership of the assets you put into it to the trust itself. When you create a trust, you are the grantor and often the first trustee, and you set the rules around how the assets in the trust can eventually be distributed.

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

https://meetfabric.com/blog/what-is-a-trust-fund

What Happens If You Miss October Tax Deadline

October Tax Deadline Is Here For Millions Who Filed For An Extension. What Happens If You Miss It?

Susan Tompor, USA TODAY   Mon, October 17, 2022

Kicking the can down the road by requesting a six-month extension for filing your taxes – as a staggering nearly 19 million taxpayers did this year – means plenty of people are looking at an Oct. 17 deadline for filing their federal income tax returns.

"Yes, we are busy. It's not as bad as the first round of the busy season, but we're still pretty busy getting the individual returns prepared," said Robyn Fuller, a certified public accountant and founding partner for J&F Advisors, a small accounting firm in Detroit.

Those filing in the next few weeks will want to make sure to have all their paperwork in hand, especially for any payments they received in 2021 for the advance child tax credit. These advance payments aren't taxable, but they are an important part of calculating your tax refund when you file a 2021 return.

You also want to know the exact amount you received for stimulus payments in 2021.

"If those amounts don't align with what the IRS has in their records, that can delay in processing their return," Fuller said.

If you're filing a return now, it's best to file electronically, instead of by paper. While the tax season went somewhat smoothly for many, some who filed paper returns by the April deadline continued to wait for tax refunds in late September. Others saw their money only recently.

As of late June, the IRS finally completed processing all of the originally filed Form 1040 paper returns without errors that it received in 2021. It's a first-in, first-out process. Once the returns received in 2021 were processed, the IRS could move on to the paper returns received this year.

The accumulation of paper returns has been a troublesome development since the COVID-19 pandemic shutdowns shook up the system.

Why Did So Many People Request A 2022 Tax Filing Extension?

Every year, a group of people just naturally drag their feet past April and file Form 4868 to request the automatic six-month extension. By filing that form, you get more time to file a completed tax return, not more time to pay your tax bill. You want to pay any amount due – or pay as much as you can – by the April deadline to avoid interest and penalties on what is owed.

This year, the numbers filing for extensions exploded to record levels as some taxpayers hoped the IRS would extend the deadline. Others worried that some last-minute tax changes could be around the corner from Congress. And many weren't sure how to calculate the child tax credit or the recovery rebate credit.

How to request a tax extension

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

https://money.yahoo.com/october-tax-deadline-looms-millions-151824434.html

How to Legally Avoid The Gift Tax on Money

How to Legally Avoid The Gift Tax on Money

Eric Reed   Thu, October 20, 2022

The gift tax is a tax levied on any unilateral transfer (a gift) from one person to another. The federal tax is aimed partially at making sure wealthy families don’t use gifts to bypass the estate tax.

The federal gift tax applies to any kind of taxable assets, including cash, securities and real estate. When the gift tax applies, it is the donor who pays, meaning that if you give a taxable gift you owe any applicable taxes. If you receive a gift, it is rare, if ever, that you owe taxes.

It is exceedingly rare for someone to owe money due to the gift tax. This tends to apply only to the wealthiest of households due to the tax’s high exclusions. This is because the purpose of the gift tax is to prevent wealthy families from avoiding the estate tax by simply gifting all their money to each new set of heirs. Here’s what you need to know.

Consider working with a financial advisor as you seek ways to transfer wealth to family members or loved ones.

What Is the Gift Tax?

Per the IRS, this is a tax levied on “[a]ny transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return.” If you give something of value and get less than it is worth in return, it is considered a gift and may be taxable under this law.

Importantly, this applies if you give something of value and get a nominal amount in return. (In law this is called a “de minimis” transaction.) For example, say you want to give your children the family house. Instead of giving it outright you sell it to them for $100. You do this because ordinarily a property sale doesn’t trigger the gift tax. From a legal standpoint the parties have exchanged assets so the only relevant tax would be on any capital gains.

However, in this case the sale price had no bearing on the fair market value of the property (otherwise known as “full consideration”). As a result you would owe taxes on the difference between the house’s sale price ($100) and its fair market value. Structuring this sale specifically to avoid the gift tax would be a form of felony tax fraud.

This is a particularly common type of tax evasion among family businesses and within closely held real estate companies.

Should you owe gift taxes, the applicable tax rates range from 18% to 40%, depending on the amount of the taxable gift. This tax is progressive, meaning that each bracket only applies to its segment of value. For example, no matter how much you give as a gift, you only pay 18% on the first $10,000.

Gift Tax Exclusions

As noted in our introduction, the person who gives the gift owes any relevant taxes. However, you don’t owe taxes on any gift that falls within an applicable exclusion. The gift tax comes with two forms of exclusions, the annual exclusion and the lifetime exclusion.

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

https://finance.yahoo.com/news/legally-avoid-gift-tax-money-130019143.html

The US Dollar Is Irrationally Strong Right Now

The US Dollar Is Irrationally Strong Right Now

Notes From the Field By Simon Black  October 19, 2022

By the summer of 1497, Ferdinand and Isabella of Spain were presiding over a rapidly growing empire.

Christopher Columbus had already claimed most of the Caribbean islands on their behalf. Plus Pope Julius II had awarded virtually all of the western hemisphere to Spain in the infamous Treaty of Tordesillas.

Spain was quickly on its way to becoming a global superpower. Ferdinand and Isabella knew it, and they realized that they needed a strong currency to match their strong empire.

So on June 13, 1497, they announced a major monetary reform called the Medina del Campo, named for the site of a popular medieval banking conference at the time.

The monetary reform was sweeping; they abolished most other coins in their domain, and re-established the real as the primary currency across Spanish lands.

The real was a silver coin, weighing about 0.1 troy ounces or roughly 3.2 grams. And coins were minted in denominations of ½, 1, 2, 4, and 8 real.

Over time, the 8-real coin (real de ocho) became the most popular; it was known as a “Piece of 8”, and eventually the “Spanish dollar”.

By the mid-1500s under King Charles I of Spain, the Spanish dollar had become the world’s primary reserve currency. From the Americas to Europe to Asia, global trade and commerce were quoted and often settled in Spanish dollars.

Dutch and Portuguese traders visiting Macau in the 1600s, for example, would frequently buy goods from Chinese merchants using Spanish dollars.

In 1704, Queen Anne of Great Britain decreed that the Spanish dollar would be legal tender in the American colonies. And in 1792, the newly independent United States passed the Coinage Act which defined the US dollar as equivalent to the Spanish dollar.

The Spanish dollar’s dominance in global finance was unparalleled. But like all reserve currencies that came before, it too lost its luster.

Eventually the Spanish Empire’s strength faded. The government defaulted on its debts, confiscated private wealth, and suffered embarrassing military defeats.

The Dutch guilder then began to displace the Spanish dollar in commerce and trade. And by the late 1800s, the British pound had become the world’s dominant reserve currency — matching the British Empire’s unparalleled size and economic power.

This lasted until the mid-20th century when, after World War II, the United States dollar became the world’s primary reserve currency — a status the dollar has enjoyed for decades.

Having the world’s reserve currency is an extraordinary privilege. It means that the rest of the world literally HAS to stockpile your currency.

For example, whenever a company in Peru does business with a supplier in Malaysia, that transaction is quoted and settled in US dollars. This means that the banking systems in both Peru and Malaysia HAVE to maintain substantial holdings of US dollars in order to facilitate these transactions.

This is the biggest reason why foreigners own trillions and trillions of dollars of US government bonds; bonds are the largest and most liquid financial instrument available for foreign investors who need to hold dollars.

And because of this need for foreigners to own US dollar assets, foreigners own a whopping $7.5 trillion worth of US government bonds, roughly 25% of the national debt.

This is really an enormous benefit for the US. And for an easy example, we need look no further than to the United Kingdom.

The British pound was the world’s dominant reserve currency more than a century ago. Today the UK is still a significant economy. But they no longer have the unique reserve currency advantage.

Now, you may be aware that, a few weeks ago, the British pound and British government bonds (known as gilts) began plummeting after the British government announced a series of tax cuts and economic reforms.

It turned out that the bond market wasn’t thrilled with the plan, so investors began dumping their British gilts and pounds.

It was a full blown panic. And soon, the central bank had to step in to bail out the bond market. The Chancellor was sacked. And the Prime Minister canceled her planned tax cut.

Essentially the British government had to capitulate to the demands of investors.

This is actually normal in countries that don’t enjoy reserve currency status. If a government wants to borrow money from the bond market, politicians have to appease investors and lay out a plan that will give everyone confidence.

But not in the United States.

Because the US issues the global reserve currency, the government can engage every ridiculous antic imaginable.

They can fail to pass a budget (multiple times) resulting in a government shutdown. They can lock down the entire economy and pay people to stay home. They can pass a multi-trillion dollar spending package and insist it “costs nothing”. They can slash interest rates to zero or engineer record high inflation.

And yet foreign investors will STILL buy US government bonds. And the dollar actually becomes STRONGER.

It’s totally insane. None of that would be possible if the US dollar weren’t the world’s reserve currency.

The curse of the reserve currency, however, is that policymakers usually believe their status will last forever. Spanish, Dutch, and British leadership never envisioned that their currencies would falter and be displaced by a rising power. And yet it happened.

The same fate awaits the US dollar.

Reserve currencies are usually displaced when economic power is in decline. Given the mountain of debt owed by the US government, the stagflation surging across the US economy, and the complete ineptitude to do anything about it, it certainly looks like that decline is taking place right now.

In general it would be foolish to think that the dollar will remain the dominant global reserve currency forever. And its displacement may take place sooner rather than later.

Once that happens, things will become a LOT more difficult for the US government. They’ll most certainly have to raise taxes. The central bank will have to print more money, sparking more inflation.

And we’ll likely see revolts of the bond market, just like what happened in the UK; just imagine the US government forced to capitulate its sovereignty to the demands of foreign lenders.

But that’s the future. For now, the dollar is still the top dog, only because it hasn’t been displaced (yet).

In fact, at the moment, the US dollar is irrationally strong.

Despite inflation that has reached multi-decade highs, and the growing national debt, the dollar is near an all-time high against the British pound. It’s at a 20+ year high against the euro. It’s strong against many major currencies. It’s even been strong against other asset classes including precious metals, crypto, and more.

So this may be a good time to consider the future and think about turning at least a portion of your irrationally strong dollars into another asset that can stand the test of time.

 To your freedom and prosperity,

Simon Black, Founder Sovereign Research & Advisory

https://www.sovereignman.com/trends/the-us-dollar-is-irrationally-strong-right-now-143374/

What Are the Safe Places for Keeping Cash?

What Are the Safe Places for Keeping Cash?

By Jennifer VanBaren

Store your cash somewhere safe where burglars are not likely to look.

If you have cash at home and are looking for a safe place to put it, consider one of these options. Some people prefer hiding cash in their homes, in a safe spot where no one will find it. Others prefer putting their cash in the bank where they don't have to worry about it. Before putting your cash somewhere, make sure that it will be safe, so you can be free from worrying that something will happen to it.

Fireproof Safe

Put it in a fireproof safe. Cash is made from paper and will burn if exposed to fire, therefore if you are going to put it in a safe, be sure the safe is fireproof. Many companies sell safes strictly for storing cash; which are called cash safes. Theses safes protect the cash from fire, if a fire occurs in your home. It also protects the cash from burglars.

Safe Deposit Box

Store it in a safe deposit box. If you prefer not to store the cash in your home, rent a safe deposit box at a bank. No one will be able to break into the box, and the boxes are semi-fireproof. The only downside with a safe deposit box is that with most banks the boxes are not insured.

Bank Account

Deposit the cash in a bank. Choose an account that is FDIC insured. This insurance protects your money up to $100,000. This is a very safe option for depositing money because even if the bank goes bankrupt, the government will reimburse you for your deposit.

There are numerous options with accounts that offer FDIC insurance, including savings accounts, checking accounts, money market accounts and certificates of deposit. Most of these types of accounts pay the depositor interest on money placed into these accounts. U.S. Treasury bonds are also a safe investment for storing cash. The government, as of 2011, has never defaulted on bonds. They are a good investment that earns a small yield too.

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

https://www.sapling.com/10006674/safe-places-keeping-cash