the bi weekly advisor

Is the American Dream Possible?

March 29, 2022 By quadcities Leave a Comment

Times may seem tough right now, but things cycle from good to bad to good. So set your goals and implement your plan.

To answer the question: Is the American Dream possible, many will say no, but based on what set of facts? What if I told you it is possible and there are more than 22 million millionaires in the United States? You may be living next door to one and not even know it. Certainly, it may feel impossible to believe this in today’s economic environment.

Let’s dig into this. Currently, inflation is running hot. The price of everything is up. Have you bought gas recently? It’s a sore point with many, as it is up 30 to 40 cents in the last week. In many parts of the country, the cost of gasoline is higher than $4 per gallon.

Then, we have the cost of food, up 20% to 30% in the last year, and housing, up 15% to 20%.

You might be thinking, “These times are bad and one will never be able to get ahead. The American Dream is dead.”

Certainly, it seems like it. In the words of that famous philosopher Yogi Berra, “It’s déjà vu all over again.”

What is the American Dream?

Is it simply owning one’s own home? Or is it something more? How can you realize the American Dream? For the sake of this article, let us define the American Dream as becoming a millionaire. Is that possible? Let’s find out.

A Look Back in Time

Some may not remember, or perhaps it was before your time, but way back in the early 1980s, things were a mess. The economy was bad, interest rates were double digits, close to 20%. The American Dream was dead. Or was it? The housing market had collapsed. Inflation was in the double digits. The employment market was tight. But somehow, the American Dream survived. Are we in that same period?

Are Times Different?

Does it matter? The economy goes in cycles. Some years are good and some years are bad. The common denominator is persistence. It is possible to become a millionaire. There are several factors that millionaires have in common. When you put these factors together, you get a winning formula.

Recent Data

A major study conducted by Ramsey Solutions revealed some interesting data. This study was conducted between November 2017 and January 2018. It polled 10,000 millionaires.

What does a millionaire mean? Simply anyone who has a net worth over $1 million. Net worth is what you own less what you owe.

The journey for many was across 28 years. About 5% did it in 10. 80% of this wealth was built in their 401k, consistently saving for retirement. Few inherited it.

Other interesting data shows that 94% live on less than what they make, spend less than $200 a month on restaurants and use coupons when they shop. Many have gone to college, not necessarily an Ivy League school, but a state college. Most never earn more than $100,000 per year.

What Are the Top Careers of Millionaires?

Once again, the data is interesting. These careers generally attract detail-oriented people. These folks plan and they have a long-term view of the world. They are persistent and in many cases are focused on a goal. Their goals are often written.

Here are the top five careers: engineer, accountant (CPA), teacher, management professional and attorney. Does this list surprise you?

In conclusion, it is possible to become a millionaire even in today’s economic climate. You need a plan and persistence. Times may seem tough right now, but things cycle from good to bad to good. So set your goals and implement your plan.

Here is a link to the Ramsey Solutions Study: https://cdn.ramseysolutions.net/media/company

You work hard for your money, make sure it stays your money!

Thanks for reading, I hope you found this helpful. QCBN

By Steven Calabrese

Steven Calabrese, CPA, is the CFO of Polara Health. He also is the owner/operator of a website known as thebiweeklyadvisor.com, where topics such as budgeting, investing, paying off debt and goal setting are discussed.

Cashless Society Pros and Cons

February 22, 2022 By quadcities Leave a Comment

The genesis of a cashless society has already begun.

What would a cashless society look like? How long until we have a cashless society? Are we already in one? How often do you use cash? Let’s explore the cashless society’s pros and cons. With the COVID-19 pandemic, are we accelerating to a cashless society?

How Often Do You Use Cash?

Approximately 19% of all transactions were made with cash in 2021. This is down from 26% in 2019. Are we headed to a cashless society? With the use of debit cards, the dreaded credit cards, and such other methods like Apple Pay and Venmo, and other peer-to-peer payment systems, we may say that we are well on our way to a cashless society. Do you think it will happen or is cash still king? Let’s explore the pros and cons.

Pros of a Cashless Society

Crime reduction. Street crime would disappear. Bank robberies and armed car thefts would go away. Tax evasion would disappear. Money laundering would no longer exist.

Cost savings. Businesses have additional expenses to handle cash. They must count it, deposit it, take it to the bank and insure against being robbed. They get change from the bank. Then, there is the cost to make money. A penny cost 2.1 cents to make in 2021. Five and $10 bills cost 10.8 cents to print. No wonder there has been a coin shortage.

Transactions are easier and more convenient. What could be easier than pulling out a piece of plastic or using your smartphone? No need to make change, all payments are exact.

International travel is simplified. No need to exchange currencies.

All your money is now available to you.

Finally, paper money is dirty and riddled with germs. It has been said that this is could be a way germs are spread and people could get ill.

Cons of a Cashless Society

Danger of overspending. With the simplicity of purchasing with just a click or a swipe, one can easily lose track of what they have spent. Accounts can become overdrawn and more fees added on. The pain of purchase is removed and you could buy stuff you don’t need. You could run up the credit cards and find yourself in debt.

Lack of security, cyber-attacks. With everything accessible via the internet, your information is available to would-be hackers. Should your account be hacked, a hacker could empty your account quickly. There would be no guarantees that you would get any of your money back. See this article: Cyber Attacks: Is your 401k safe? https://thebiweeklyadvisor.com/cyber-attacks-is-your-401k-safe/

EMP attack (Electro-Magnetic Pulse). EMP is produced when a nuclear detonation occurs in the upper atmosphere. This explosion causes ionization of molecules, which causes a powerful electromagnetic field. This burst of energy has the potential to damage or destroy electronic devices over widespread areas. The electric power grid would also be at risk. https://doh.wa.gov/sites/default/files/legacy/Documents/Pubs//320-090_elecpuls_fs.pdf )

Some say this would never happen, but I’ve heard that before. It is a possibility and therefore is a risk.

Loss of privacy. Now all your activities can be tracked. Some believe that that is already the case, but if you pay cash then who knows what you spent your money on? Banks could track your purchases they could sell your information to third parties and then you will begin to get advertisements to purchase products. Very annoying.

Government surveillance. The government, working in conjunction with banks or other entities, could access your information. If they did not like what you were buying, they could shut off your ability to buy and sell. Or, worse yet, they could restrict your ability to support certain organizations. Many believe this is the one big reason folks will resist a cashless system.

Rise of black markets. If folks do not want to be tracked or prefer to pay cash, a black market will likely become a reality. An underground currency could arise or folks could resort to barter. How many chickens for my goods and services. Or maybe you prefer pigs.

How Long Until We Have a Cashless Society?

The genesis of a cashless society has already begun. The real question is how far will it go and how will people react to some of the pros and cons?

In a recent survey conducted by the FDIC (Federal Deposit Insurance Corp.), 6.5% of American Households do not have a bank account. Another 18.7% have a checking or savings account but use systems outside the banking system. About 25% of households would be unable to participate in a cashless society.

With a percent that large, a cashless society appears to not be imminent.

Cash is Still King

Financial expert Dave Ramsey says that paying cash for things triggers something in the brain and makes it painful to part with your hard-earned money. He says this keeps you from overspending. Ramsey’s system requires you to budget every expense and put the cash in an envelope. When the envelope is empty, you have used up the amount budgeted.

Eighty-five percent of businesses say they will never stop taking cash for purchases.

Conclusion

While it appears we are headed in the direction of a cashless society, it also seems unlikely that we will be there in the short term. Many of the cons discussed will continue to be obstacles. The control by the government is the most likely one to keep people away.

However, as time passes and folks become more acclimated to a digital society, a cashless society becomes more possible.

What do you think?

You work hard for your money. Make sure it stays your money!

Thanks for reading; hope you found this helpful. QCBN

By Steven Calabrese

Nine Strategies for a Debt-Free Life

August 3, 2021 By quadcities Leave a Comment

Detailed below is how you can achieve a debt-free life.

A debt-free life, what would that be like and how do you achieve it? Living debt-free is a life that is stress-free. A stress-free life is something that you can become comfortable with. Once you achieve such a goal, you will never go back.

Detailed below is how you can achieve a debt-free life.

LIVE ON LESS THAN YOU MAKE

This tip sounds simple, but it is not for many people. Most want to keep up with the Joneses. Trust me, the Joneses are not having fun. They are actually broke!

If you make $100, then only spend 80% or 90%. Never spend it all and certainly never spend more. If you are spending more, that indicates you are most likely borrowing to keep up.

STICK TO A BUDGET

Sticking to a budget, once you have detailed it out, is what a debt-free lifestyle feels like. A budget is not a restriction. It actually is permission to spend.

Setting your budget with reasonable spending targets and living within those targets is what freedom to spend feels like. Create enough flexibility.

PAY CASH FOR PURCHASES

When you pay cash for your purchases, actually, you create an environment that will cause you to spend less. When you pull out cash and count it out, it hurts your brain because you actually feel the act of spending.

Using plastic is not the same. Swipe the card and you are done. The money comes right out of your account or if you are using a credit card you will see the bill later when the purchase is just a memory.

SEEK WAYS TO REDUCE EXPENSES

Always look for a more cost-effective way to purchase needed items. Shop when things are on sale but make sure they are really on sale. Many times prices are marked up and then reduced.

ELIMINATE ALL DEBT

Those debt payments are only lining the pockets of the big banks or finance companies that are charging interest in the 15% or more range. Really? In most cases, you are paying for purchases for items long gone.

Do whatever it takes to eliminate these debt payments and put that money back in your pocket. Pay cash. Get off of the merry-go-round.

AUTOMATE YOUR SAVING

This strategy is the key to accumulating wealth. Use the pay-yourself-first method. When you set up automatic savings that comes right off the top of your pay, you will never miss it.

If your company has a 401k or a similar retirement plan, set up a percentage to go directly into it. This way, you do not take it home.

These savings should be invested in good solid mutual funds returning at least 10%. This is a long-term strategy.

CREATE AN EMERGENCY FUND

The thought here is it will rain almost 100% of the time. An unexpected expense will come up. These are items not included in your normal monthly budget.

An example could be an unexpected car repair, or perhaps a job loss.

Prepare beforehand and create a fund with at least three months of expenses, with a goal toward six.

I call this my “peace of mind fund.” It lets me sleep at night.

HAVE LONG TERM GOALS

Setting goals is perhaps the secret formula to achieving success. You need to have professional, financial, family and spiritual goals.

A well-balanced set of goals will be your roadmap. You don’t take a road trip without a map, so don’t go through life without a map. Create long-term goals, and short-term goals to get you to your long-term goals.

Make SMART goals (Specific, Measurable, Attainable, Relevant and Time Bound). And make sure they are in writing. An unwritten goal is just a dream.

SHOP AROUND

Never make the impulse buy. You will overpay! Do some research. Are you getting the best price for the quality product?

Or are you just getting a bargain and it is cheap, but you will buy it three times because it won’t last. Many times it is better to spend a little more and get a higher quality product and only buy it once.

There is no doubt that other strategies can be used to live a debt-free life. These are the tried and true. What is your favorite? Or do you have one you use that is not listed here?

So why wait? Get started now! QCBN

By Steven Calabrese, CPA

Steven Calabrese, CPA is the CFO of Polara Health. He also is the owner/operator of a website known as thebiweeklyadvisor.com, where topics such as budgeting, investing, paying off debt and goal setting are discussed.

Beneficiaries: Why are They Important?

April 1, 2021 By quadcities Leave a Comment

If you don’t do this, the state will decide.

A task often overlooked by many is making certain that a beneficiary is named for important financial assets. If you love your loved one, do it now. Get your affairs in order.

It makes no difference how old you are. This must be done for a number of reasons. The No. 1 reason is to make sure that you have provided for your loved ones. A second reason is that your wishes will be followed.

If you don’t do this, the state will decide. Your loved ones will need to show proof that they have a right to claim the property.

This is a process that many do not want to encounter, but I can guarantee you that you will not be around forever, so make your departure a little easier on your loved ones. Set things up for them.

So, let’s dig in and talk about beneficiaries.

What or Who is a Beneficiary?

A beneficiary is the person named on the financial document who will inherit the property, such as a bank account or a life insurance policy. This will be the person or persons who will receive the proceeds. Sometimes this can be a corporation rather than a person. It can also be a trust.

Naming a beneficiary will automatically ensure that the property is passed along to the person or persons you want it to pass on to.

Primary and Secondary Beneficiaries

In many cases, the primary beneficiary will be your spouse. This is very common. What many folks neglect to provide is what is known a secondary beneficiary. A secondary beneficiary would be the person next in line to receive the proceeds.

For example, I have named my wife as the primary beneficiary, but should I survive her, I have named my kids as the secondary beneficiary.

When your life situation changes through events such as a marriage or divorce, it is important to update your beneficiaries. Keep them current.

Identifying Assets

Start at the beginning. Make a list of all your financial assets, including bank accounts, retirement accounts, life insurance policies, health savings accounts, your will and any trust you may set up.

Once you have this list, then it is time to begin. Trust me, your list will be incomplete. Every time I think I have it all taken care of, some other account that I have forgotten about appears. Stay diligent and get the beneficiaries on them all.

Once you have named beneficiaries, these assets will basically automatically pass on to your loved ones exactly as you have directed.

This may not be the most pleasant task, but I assure you, it is a necessary one. Doing this will make things a bit easier for those you leave behind.

Other Considerations

Create a will. This is important so that your wishes can be carried out. A will directs how you want your final affairs settled. If you don’t have a will, the state will decide.

Having a will is extremely important if you have minor children. A will directs how the kids will be cared for should you and your spouse perish together. Don’t let the state decide.

How about all those electronic files and passwords? Will your beneficiaries have access to them? How will they access these accounts?

I have created an electronic file of all my accounts and passwords. On a periodic basis, about twice a year, I give copies to my kids because these are constantly changing. They include such things as emails, professional organizations and other sites of that nature, along with accounts that have been set up for automatic payment like cell phones or Netflix.

Provide the Roadmap

It will be difficult enough for those you leave behind when you are gone, so make it a little bit easier for them. Don’t make it a treasure hunt. Lay it all out for them. Tell them where everything is and how to access it. You can also give them specific instructions.

It could also be a good idea to have a formal meeting once a year to review everything with them. Things do change over time and it is always good to keep it fresh.

Final Thoughts

While this may not be the most pleasant of tasks, it could very well be one of the most important. We all work hard for what we have and I, for one, want to make sure those I leave behind will find it all and benefit from it.

I have personally dealt with both a treasure hunt and a well-laid out plan. While neither one was pleasant, the treasure hunt was more painful. QCBN

By Steve Calabrese

Steven Calabrese, CPA, is the CFO of West Yavapai Guidance Clinic. He also is the owner operator of a website known as thebiweeklyadvisor.com, where such topics as budgeting, investing, paying off debt and goal setting are discussed.

Having a Say in Where Your Tax Dollars Go

January 28, 2021 By quadcities Leave a Comment

Do you like the way the folks in Phoenix spend your tax dollars? Well, there is a way you can direct your tax dollars. They can be kept local. You have the power to make it happen.

In Arizona, you can make a donation to a qualified organization and receive a dollar for dollar credit against the Arizona state tax you owe. This donation will put you in a situation where you will be in what is considered a tax neutral position. In other words, you will have satisfied your tax liability by making this donation in lieu of paying tax to the Arizona Department of Revenue.

The real benefit is that you get to decide how your tax dollars are spent. They can be kept local. By donating, you get a say in how the money is spent by choosing which of the tax credit eligible organizations you contribute to.

You can contribute up to the amount of your expected Arizona tax liability. If you contribute more than your total state tax amount, the credits can be carried forward five years, so do not worry if you end up with more credits than taxes. In general, you must make your tax credit donations by April 15, 2021, in order for them to apply to the 2020 year. You can find additional information on the Arizona Dept of Revenue state tax credit page: https://azdor.gov/tax-credits.

What types of organizations qualify?

Contributions to the following types of organizations qualify for these credits. Check with your favorite organization.

Qualifying Charitable Organizations – $400 single; $800 married filing jointly

Qualifying Foster Care Charitable Organizations – $500 single; $1,000 married filing jointly

Donations to Public Schools (including Charter Schools) – $200 single; $400 married filing jointly

Donations to Private School Tuition Organization – $545 single; $1,090 married filing jointly (and Plus $542 single; $1,083 married filing jointly)

For example, you can make a donation to each of the above type organizations satisfying your tax liability and not have to send a dime to the state for your tax liability.

What do you need to do?

Contact your favorite charitable organization. Decide how much you want to donate within the above guidelines. Get a confirmation letter from the organization showing the amount donated along with the required organization qualifying number. Give the information to your tax preparer.

Support your local community, keep your tax dollars local – the best of both worlds. We unfortunately have to pay taxes, but fortunately we now have a say where they are spent.

So, direct your tax dollars where you believe they can best be used. QCBN

Enjoy the video to learn more about WYGC as a Qualifying Charitable Organization: youtube.com/watch?v=B0y7AGVJZiI.

For more information, go to Prescott Area Tax Credit Coalition prescottareataxcredit.com/.

By Steve Calabrese

Steven Calabrese, CPA is the CFO of West Yavapai Guidance Clinic. He also is

the owner operator of a website known as thebiweeklyadvisor.com. Such topics as budgeting, investing, paying off debt and

goal setting are discussed.

the bi weekly advisor

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