Entries Tagged 'Economics and Investing' ↓

Part 2 Calculating your financial safety net

In part one, titled, “Don’t Just Save for an Emergency, Spend for an Emergency,” we covered how to find your personal beta. This is an estimate (a ballpark judgment) of how closely your job is related to what happens in the stock and bond markets (or the economy as a whole).

If you have a high beta (over a beta of 1), your financial well-being is in danger of sliding even faster than a down market. If you have a lower beta (under a beta of 1) your well-being will not be so adversely affected by a downturn. A beta of zero means what happens in the economy won’t affect you at all. A beta of 1 means you are likely to experience the same kind of thing financially that is happening to the stock/bond markets.

You can also follow Dr. Moshe A. Milvesky’s advice and figure out whether you, as a form of human capital in the labor market, are more like a stock or a bond. This little game too can help you begin to think about how much of a financial safety net you need to build for yourself. Once you know how likely you are to be impacted, and how heavily, by a downturn, you can estimate how soon and how much money you’ll need to have for your safety net.

Back to Suze Orman’s advice

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As Warren Buffett pointed out, the rich are paying more money in taxes because they are richer than the rest of us, but the rich are not paying as high a proportion of their income for taxes. Even their secretaries pay a higher proportional rate of income tax on what they earn than the rich do. Why is that?

Because, as F. Scott Fitzgerald once wrote, “Let me tell you about the very rich. They are different from you and me.”

For one thing, the rich can always move. Continue reading →

Last week, the Commission on Wartime Contracting released a report to Congress about military contractors. The report, cited by California senator, Dianne Feinstein, in a hearing about it, alleges military contractors cost the taxpayers of this country 30 to 60 billion dollars. As mentioned in the Commission’s four bullet points in its 8-page abstract of the report, “CWC-NR-49,” that money disappeared through waste and fraud:

• Pegs waste, fraud in Iraq, Afghanistan at >$30 billion
• Sees threat of more waste in unsustainable projects
• Faults both government officials and contractors
• Offers 15 recommendations for contracting reform

Contractors were ostensibly hired because the US military was not ready to fight the wars in Iraq and Afghanistan that President George W. Bush led us into. About half of the “military” forces fighting for the Americans  in those wars have been foreign mercenaries. Talk about outsourcing American jobs! With taxpayer funding, no less!

While the  IRS is busy going after domestic employers who evade their tax responsibilities by hiring independent contractors in place of employees, no government agency appeared to be going after our federal and state governments for doing exactly the same thing! In the name of “national security” for a war based on a lie, the federal government was allowed, often without even requiring competitive bidding,  to hire fake “employees”, and turned its head while they defrauded taxpayers out of billions of dollars. And it won’t stop. Senator Feinstein complained that a 2009 agreement with the Defense Department to cut the number of independent contractors used by 5% a year wasn’t being honored.

This is not just a federal government problem. State governments also have been hiring contractors to do the same jobs that state employees do, but with more expensive results for those of us who rely on our local governments to protect American citizens. And there are those in power in some our states who would like to use our taxpayer monies to hire nothing but private contractors! Before going along with that idea, take a look at the abstract of the Commission’s report from August 31, 2011 and the following article I posted about independent contractors in government a little over two years ago on Brucenomics. Continue reading →