Good day brilliant minds! I thought it would be helpful to do a recap of the conclusions from this past week’s posts given we had over 200 comments. We talked about three important subjects: Happiness, Taxes, and Net Worth.
The purpose of these articles is to get people thinking about issues so we can be more open minded. If anybody has ever participated in the case study method of learning in graduate school or elsewhere, you’ll know that there isn’t a right answer so much as a right direction. It’s so easy to get caught up in your belief that your way is the right way. That’s a dangerous, dangerous path to take!
* Being satisfied with what you have and what you make is an incredible thing. The topic at hand isn’t whether you are happy or not as some debated. The topic is about achieving the maximum level of happiness based on a certain income level.
* We agree that a happy person will be happy no matter what level of income. Again, this is not the point of the article. The point is figuring at what level higher income stops bringing more happiness.
* Earning $75,000 is a solid figure in almost every city in the country except for NYC, San Francisco, Chicago, and LA. In NYC and San Fran, $75,000 is very average due to the extraordinary cost of living. Given that housing costs are local, but Federal taxes are nationwide, you can understand the issues. I’m here to tell you that happiness increases beyond $75,000.
* $200,000 is the level where incremental happiness stops because you are persecuted by the government and the media for being “rich.” Whether you are rich or not is besides the point. You are made to feel bad about achieving further as your efforts for progress are stunted. You get frustrated by having to pay an ever increasing amount of your income to taxes the more you progress in your career since you are already paying a large absolute amount already. You start thinking if you can do it, why can’t others and begin losing some perspective of how lucky you are.
* The government is smarter than you think. Many of our leaders are millionaires and know what maximum happiness feels like. They are afraid that once people start refusing to be average, they can no longer control and manipulate you as easily. Believe in yourself, and believe you can do better.
* Many cities, counties, and states have budget deficits which need fixing. If 30% of Americans rent, why not introduce an annual renters tax that is paid directly to the city, county, or state from the renters? Practically all homeowners were renters before, and there is a part of me who believes renters do want to help. A Renter Tax would allow renters to help pitch in by cutting checks directly to the government. Unfortunately, the majority of readers, who so happen to be renters oppose this idea.
* Most opponents argue that renters are already paying for property tax with their rent. This is an incorrect assumption as a landlord can say his rent is for their annual Vail trip ski vacation for example. If there is any correlation with rental income, it is with mortgage expense. Remember, property taxes are paid to the local government, and not to the homeowner. If you are arguing against this, then you should also be a believer in the Emergency Fund Fallacy. You can’t have it both ways and need to get your mind straight.
* Double taxation is rampant in America – it is the American way. When you buy a new car, you pay the sales tax. When you sell your now used car, the new buyer pays tax and so on. As a shareholder, when you receive dividends, you have to pay dividends even though the dividends are after tax distributions already. When you rent a DVD, you pay a sales tax for the rental and so forth. There is no difference in the Renter Tax proposal.
* The next time you are pro raising taxes, and you are a renter, remember that if you aren’t willing to pitch in directly, how do you think those who are already pitching in the most will feel if they are asked to pitch in some more? You can make arguments for why you do pay until the cows come home, but you aren’t directly contributing. In order to be treated equally, it’s important to contribute equally. You can’t have your cake and eat it too.
* The article has nothing to do with net worth at all. It’s a showcase of the incredibly irrational nature of human beings.
* How can the majority of readers believe the American average net worth of $182,000 as stated by the Wall St. Journal is too high, yet claim to ALL have net worths greater than $182,000? Silly is a silly does.
* We are nobody special. If we start feeling we are special and everybody else is average, we’re in for a rude awakening. Others are just much more modest about their wealth in this case than we are. There is much more wealth out there than you can ever imagine. There are many more millionaires than you think and fortunes are everywhere!
* Stop trying to make yourself feel better by keeping others down and discrediting statistics. It just makes you look petty and insecure. Instead, take the bright path and feel hopeful that if the average net worth is $182,000 per person in America, Americans have a tremendous cushion of wealth in case things turn for the worse again. Use the statistic to understand why consumerism is rampant. Is it any wonder why Americans keep thriving? No, because you now realize Americans have so much.
We don’t have to agree on everything. We really don’t. What’s important is to always keep thinking in ways we aren’t accustomed to. This is why fluency in a second language for example is so important, because the language brings with you its culture and customs. I’m proud that we have so many good thinkers visiting Financial Samurai. It’s what makes us unique in the personal finance world. Fight on illuminated minds!
Recommended Actions For Increasing Your Wealth & Happiness
Manage Your Finances In One Place: Get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize. Before Personal Capital, I had to log into eight different systems to track 28 different accounts (brokerage, multiple banks, 401K, etc) to manage my finances.
Now I can just log into Personal Capital to see how my stock accounts are doing, how my net worth is progressing, and whether I’m spending within budget. The best feature is the 401K Fee Analyzer which is now saving me over $1,000 a year in portfolio fees I had no idea I was paying! There is no better free online tool out there to manage wealth. It only takes a minute to sign up.
Start A Business: A business is one of the best ways to shield your income from more taxes. You can either incorporate as an LLC, S-Corp, or simply be a Sole Proprietor (no incorporating necessary, just be a consultant and file a schedule C). Every business person can start a Self-Employed 401k where you can contribute up to $54,000 ($18,000 from you and ~20% of operating profits). All your business-related expenses are tax deductible as well. Simply launch your own website like this one in under 30 minutes to legitimize your business. Here’s my step-by-step guide to starting your own website.
Updated for 2017 and beyond. Income taxes are set to come down under President Trump. As a result, those who contributed to their Roth IRA or Roth 401k and planned on retiring in 2017 – 2021 had wrong tax expectations.