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Ask your employer to consider a Roth 401K

Many people are familiar with the concept of a Roth IRA. For those that are not I will give a quick summary of the difference between Conventional and Roth IRAs and why I believe that a Roth is ALWAYS better for new contributions. Both offer significant tax advantages but one provides more advantages today while the other provides more advantages tomorrow. Given they are retirement investing vehicles clearly we should think more about the impact when we are 65 then when we are 30, 40, etc. Here is the basics of each…

• Conventional IRA - You put money in up to a set maximum per year. You then deduct your contributions from your income for that tax year. So if you owe taxes on 50,000 dollars for a tax year, contribute 10,000 to your conventional IRA you will then pay taxes only on 40,000. However, the tax is not avoided only differed until the time of withdrawal. When you then withdraw this money in retirement you pay taxes on 100% of the money you withdraw as 100% earned income. Oh and should social security survive till your retirement since a Conventional IRAs distributions are considered “income” it will effect what portion of your Social Security is taxed.

• Roth IRA - With a Roth we change the time of the tax advantage to the future vs. the present. So this year you owe taxes on 50,000 dollars and put 10,000 into your Roth IRA and you still pay taxes on the full 50K. However you will now never pay tax on that 10K you contributed or the interest earned on it EVER AGAIN. So if you are 30 in that year you will earn interest for 30 years or more tax free and you will NEVER pay a thin dime of tax on the earned interest. Also when you do withdraw the money it is already your money, it will never be considered “income”, you won’t pay any tax EVER.

Now some advisers point out that if you will have lower tax bracket in retirement and believe in “fuzzy math” that a conventional can win out. However, we should live in the world of practice vs. theory. What I have seen actually happen is that be it Roth or conventional people always contribute the same amount. What this means is while you will pay taxes on a Roth contribution today you will end up with the same amount of money at age 60, 65 or whenever you start to take the money out. In other words your tomorrow will be better with a Roth.

Now what many people do not even know is that a 401K which an employer provides can also now be set up with a Roth Option. With a 401K your employer takes a percentage of your check and deposits it for you. While 401’s have some restrictions that IRAs don’t they work quite similar in how they defer or eliminate taxes. The beauty is when you quit working you can roll your 401K into an equivalent IRA and that means if you have a Roth 401k you can roll to a Roth IRA and have money you can take as needed, keep inside the account as long as you like and never pay taxes on it or ever have it count as income.

Again though while the option of a Roth IRA is well known today most people are not aware of a Roth 401K so ask your employer to check into the option for you. To me they are better for all workers but for the youngest workers the advantages are even bigger. There is a good chance that your employer may not even be aware that they can offer a Roth 401k and as we said all the time in the Army “the squeaky wheel gets the grease”.

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So you’re getting 300 to 600 dollars in a tax rebate check

A few days ago I posted my thoughts about the proposed “economic stimulus” where the government will be giving back about 300 dollars per tax payer in a retroactive tax cut from 2007’s tax year. You can read my thoughts about this tax rebate here. In short though I believe income tax is theft and I am for any and all cutting of income tax for anyone from the poorest to the most wealthy. On the other side though I think this rebate is bad for the country because there will be NO SPENDING CUTS on anything to fund it. All we are doing is going deeper in debt. Again read my full post on this to understand this better.

What I wanted to ask though today is what will you do with your 300-600 dollars in rebates?

Since I posted that orginal post I have been getting many visitors each day finding my blog from Google, they are all searching for things like

• “when do we get our tax rebates”
• “government giving out rebate checks”
• “will we get stimulate the economy checks?”
• “when will we get our government rebate checks”
• “800 dollar rebate checks government”
• and you have to love this one “government giving 300 dollars to everyone“

Now I am not here to criticize anyone but my guess is most of the people doing these searches are just itching to get that “free money” and blow it. Indeed that is “the plan”, yes indeed Uncle Scam (not a misspelling) wants you to spend every dime on consumer goods to “stimulate the economy”. The theory is more spending is good because more money is in circulation.

So please comment below after you read this post and tell me what you plan to do with your money. As many may suspect mine will be invested and many in the government want to not give the money to people like me that will save it. No they want “good Americans” to spend the money and “put it to work”.

So what are you doing with your refund?

• Taking a vacation
• Just blowing it
• Saving it
• Paying on debt
• Investing it
• Not sure yet?

Let us know because it is interesting what happens when you really ask yourself what you will do with extra money. Perhaps just perhaps thinking about this may make a few more of us think about saving this refund for a really rainy day. Trust me if you remember 1978 times are really not that bad right now.

Keep in mind this is not some government “entitlement” this is indeed your money, your tax dollars that you paid being returned to you. To do so your government has grow our debt by BILLIONS more. Again I am 100% for any rebate, any tax cut, any tax abolishment. Just realize that our elected officials did not think about how to fund this thing, they are just buying your votes from you with your own money and charging it along with interest to your children.

So knowing that how will you be spending your money, remember it is indeed yours it is not a gift from our exalted officials.

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Four things I would start doing online to make money as a newbie

It seems like forever ago when I first built my first website. In fact it was more then 10 years ago and at times it is easy to loose touch with how overwhelming it is for a brand new potential internet entrepreneur who wants to get started today. So I though I would share four ways a new person can begin to get started. None are all that hard but none can be complete with out learning more, these are just starting points.

1. Get a blog and do some blogging for dollars. I suggest you try not to be to obvious about this because Google has begun to give the smack down to bloggers that do this. I recommend you never use the name of the companies that you go through to find business on your blog as you are just asking for problems. What I can simply say is go to google and search for “get paid to blog” and you will find many options.

Now you are going to have to blog for about 90 days and do so at least 4 times a month to qualify for these types of services. Once you do however, you can and will make money. I won’t go deeper right now but will make some specific how to details available in the future. Let me just say that anyone that wants to can put an extra 500-1500 a month into their income column can just by doing this.

2. Learn the very basics of website design and publishing, even a tiny bit of say PHP programming can go a long way. Today if you can slap together a website you can make some money. Spend the money for a good design software and take a course on it at a community college or a CEU class at a university. Total investment may be about 1,000 dollars and it may make you a lot more then any degree will. You don’t have to be a great designer but at least be able to build simple sites, you can out source the actual “graphics” work.

Most sites are nothing but a header, a footer and some pictures. Outsource your graphics and build a site. Make your first site about something you just love to talk about and don’t worry if you make a dime on it. All you need at first is the “ability” to build and design sites. Learn how to do it and do not rely on site builders they are to limiting. Today if you can publish content there are countless ways to make money. Oh and you can pay your tuition with one months worth of blogging with suggestion number one above.

3. Start with affiliate marketing and take your skills from item two to build unique websites that provide information, build email lists and sell a few products around a niche. Later you may and honestly should create your own products and keep all your profits but in the beginning you are learning how to market and sell online so dedicate all your efforts to doing so.

A great source of items that others have made that you can sell for about a 50% commission can be found at Click Bank. Odd are there is a product about any subject you can think of. Most sell in the 50 dollar range and pay about 25 dollars in commission. You don’t have to make anything, deal with customers, etc. This is not a long term way to get rich but it is a great way to learn and earn at the same time.

4. Become an adSense Affiliate and a Yahoo Publisher, neither pay the big money they used to but they are both very passive ways to earn some extra money. In time with enough sites anyone can pull in a hundred dollars a month at least. Remember invest 100 dollars a month from age 18-65 in quality funds in a tax deferred or sheltered account and you are a multi millionaire.

The key with adSense and Publisher is make your ads blend into your sites. The inexpensive wine site I reviewed a few days ago does a good job at this. Use back ground colors that match, make the links the same color as links on your site and above all no borders for the ads. Then be sure to put the ads in prominent spots on your site, don’t hide them remember you want people to click on them.

So there you go 4 places to get started with making money online. Each has its on benifits and challenges yet if you commited to learning how to at least do all four in the next 6 months you are well on your way to truly building a solid and passive online income. In time you out source more and more and you don’t do all the work yourself. Yet in the beginning it is important to be sure you understand things, learn what you want and what you don’t want.

More then that learn to make some money asap and again bloggin for dollars is a 100% guaranteed way to start the income flow. From there you can branch out, learn more and keep building.

One more important thing. Don’t buy over priced crap, info courses and other bullshit. There are countless gurus out there, well countless self appointed internet marketing gurus that claim to have the secret to making money. They are mostly full of crap and even the ones with good info unless you learn the fundamentals first it won’t do you any good.

Start with free advice and perhaps use some of the online video courses that don’t cost to much. Learn basics, learn “how to” and then you can develop “what to” on your own terms. I promise you one of the surest ways to kill of your future in making money online is buying one to many 297 or 997 dollar how to courses.

Don’t buy that crap, start with a blog, learn to make sites, practice with affiliate products and sell ad space along the way with Google and Yahoo. Look for solid how to advice and instruction and limit your spending on “education” to 50 dollars or less a month (other then stuff like the college course I mentioned) and you will in time work things out. Gurus exist not to make you rich, they exist to enrich themselves with your dollars.

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Tax rebate checks may be on the way

In an effort to stimulate the economy the congress and the president are working to provide an economic stimulus package. One big part will be sending most tax payers some of their tax money back, to the tune of from 300-800 dollars per taxpayer may be even as high as 1600 per household. You can read an article by newsday.com to get more specifics about it.

In any event I have mixed emotions about this. As a Libertarian I believe that all income tax is theft in the first place and I really can’t argue with the government giving back money they should have never taken in the first place. However, in this instance while not totally opposed (I just can’t oppose less tax no matter how it comes) I have sever very big concerns/issues with this plan.

• Right now everyone is worried about the 2008 election. So even Mr. and Mrs. raise taxes (Barak and Hillary) are behind this massive retroactive tax rebate. Make no mistake this is buying votes by both sides of the isle.

• True conservatives are always saying lower taxes are good for the economy and liberals always say that is wrong. Yet now that we are in deep shit everyone agrees cutting taxes makes the economy better? All this means is they all know all the time that low taxes are good and simply keep up the graduated income tax as a way to distract us all with “class warfare”.

• In most instances I don’t see cutting taxes as “spending” yet in this case it is pure reckless spending. Why? How? Simple, no one in congress is talking about cutting any expenditures to fund this rebate. In other words they are still going to spend all the money they were going to spend and GET THIS our country is OUT OF MONEY. So where will we get the billions to fund this rebate? Well the fed will fire up the presses and just print more money at least symbolically. Honestly though our government will borrow it from foreign governments and increase out debt. In other words you kids get to pay back you debt on your 800 bucks with interest and will have to do so with a dollar that is weaker in the world market every day.

• This package is a very short term fix. The whole theory is most people will “blow” their money and dump it in the economy and that will beef up spending for a bit and put more money into the economy and the rising tide will then float all boats. The theory is sound most people will blow it (instead of saving or paying on debt) and it will make it “better” but our “boat” has big holes in it. Make sense? This move won’t reduce US debt, reduce toxic consumer debt, fix the housing market or reduce our massive spending deficit.

So how could this plan actually work? You only have to change the spending equation on the side of the government to make it work very well. Check this way out,

1. Require the government to give back at least the money they plan to right now.
2. Require that they also cut 2 dollars in spending for every dollar returned to tax payers

That’s it! That would “stimulate the economy”! Our nation is not in trouble because our people spend to little, it is in trouble because the government takes too much of our money and then spends far more then even what they steal from us. Fix that problem, yes cut taxes but cut spending by 2 dollars for every dollar you refund to us.

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The income tax is unconstitutional

Yes you read that right it is unconstitutional and in fact no one in the government can or will show you a law that says you have to pay it. Today I would like you to take just fifteen minutes of your life to review the video below. It is from a documentary called “From Freedom to Fascism”. Don’t go thinking this is some alarmist, tin foil hat wearing tripe. In fact I will send anyone a fifty dollar bill that can prove one thing stated in this video that isn’t true.

No one is saying you don’t have to pay income tax, this isn’t one of those scams it is simply telling you some facts about taxation, the new national ID card, how much power the government has and some other frightening truths. If you are a republican and tired of “Bush bashing” don’t sweat it when you start hearing about George Bush, just wait a few more seconds and you will hear the same things about Bill Clinton as well. After you watch the video I would love to hear your comments about it.

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Why Ron Paul and low taxes are good for the economy

You hear liberals all the time discuss how the tax cuts by Bush were reckless. Now look I am not exactly pleased with Bush myself right now and I think his spending (and that of our both the Democrats and Republicans in Congress) is absolutely reckless and disgraceful. Yet cutting taxes makes a lot of sense, further I think we should keep cutting lower and lower.

In fact if I had my way Ron Paul would become our next President and completely cut the income tax to zero. Think that is unreasonable? Well if we cut spending to where it was just 7 years ago we could eliminate the income tax. Yea your read that right, just cut spending to 2000 levels and we do not need an income tax. That should make you really understand just how many other taxes we already pay.

I digress though, lets just talk about an easy way to understand why lower taxes are good for our economy. Now I could go into Economic theory and formulas and such but that is not necessary. I can instead explain this in a very simple and easy to understand way, think of it simply like having a “sales”. If you ran a store and wanted to sell more products would you do it by raising prices or by having a sale?

Now that is about a stupid question isn’t it? Anybody knows when stores have sales they sell more and when they jack up pricing they sell less.

The important thing to understand is that employment, investing and spending is what drives our economy. So to understand why lower taxes drive better economies from here is really easy. Let’s look at how taxes going up or down effect each of these three factors.

Employment - When taxes are lower businesses keep more of their profits rather then giving them over to the government. When a company has more money in profit they grow. As they grow they have more needs for personal and of course they hire more people. In short a lower tax is like a sale on hiring talented people. When you tax a business higher of course we have the exact opposite effect. Companies keep less profit, there is less funding available and they grow slower and hire new people at a slower rate.

Investing - This is simple to understand. If you invest money that inherently comes with risk. So if I put 50,000 dollars into an investment I could loose much of it. On the other hand if the investment does well I end up with a profit but I only keep the part I don’t pay as taxes. For me to take a risk the upside has to be attractive so of course the lower the tax on investment profits the more attractive investments are. Now if you want me to do something incredibility risky like fund a new business I better get to keep the lion’s share of my profit or there is no good reason to take the risk.

You see when taxes are low on capital gains it is like a sale on investments. Effectively I am paying less money to make more money. Did you know that at one time tax rates were as high as 90% for some income brackets. 90%! Don’t believe me look at some historical tax rates here. Now let me ask you why would anyone risk say 100,000 dollars to fund a start up business as a part owner. End up making 200,000 dollars for the investment and then have to pay all but 10,000 of it as taxes? Why in the hell would anyone take such a risk for so small of a true return? Again when this tax goes up it is like when a store raises its’ pricing and when taxes go down money flows in a “sale like” environment. Simply put when investments go on sale more investors buy more investments.

Spending - Now I am all for saving money but if no one spends any money the economy grinds to a halt. This one is the easiest of the three to understand. Tax Joe and Jane America at a lower tax rate and they keep more of their money, when people have more they spend more. In short for the average consumer lower taxes are a “sale” on everything. You just have to do a bit of inverse thinking to understand this. Joe works 10 hours a day and makes 250 dollars for his day of work. Each day he pays 100 back in tax so he profits an actual 150 dollars.

So Joe values money according to that formula. Hence he “pays” 10 hours of his effort for a 150 dollar item. Now tax Joe only 50 dollars and he now profits at 200 dollars for the day. Now a 150 dollar item only “costs” him 7.5 hours! In short by taking less taxes Joe is now buying everything at a 25% discount.

The combined effect

The reality is the economy is like an ecosystem composed of these three factors of spending, investing and employment. None can sustain themselves with out the other two. There is far more complexity then this but a basic understanding is simple.

• When more money is available to business from profit and from investors they hire more people.
• When more people are employed they have more money to spend, hence they spend it.
• When people spend more money it drives business and results in more profits
• When people can find jobs and get paid well and are taxed lower they also invest more
• Investments then feed business

It is really a circle of economic life. In this circle low taxes are like good fertilizer that makes everything healthy and grow faster. Higher taxes are like salting the earth, they lay waste to the ecosystem and stall growth. Now democrat or republican should not matter this is mathematical science and math does not lie.

Debate the role of government if you like, support a guy with an R or a D after his name or if you are smart perhaps an I. Yet don’t ever be fooled by how there is any good to come from higher taxes. Don’t let the government pitch class warfare on you saying only the “rich” are going to see higher taxes. Right now most American’s work till April 30th to pay all taxes, that is enough, more is not the answer.

Oh and yea I really meant it that we could totally eliminate the income tax, watch this video on Ron Paul for more about that.

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Why you should be making money online

In the future I will discuss many specific ways that you can make money online. Remember key to our philosophy here at cut that bill is not just reducing expenses but keeping more of your money, investing it wisely and most importantly increasing your cash flow in to your household or business. There is quite simply no easier or more passive way to earn some additional money today then to do it online.

Let me be clear though, “how to do it”, is irrelevant until you get your head around the why and until you grasp how a very “small success” can drastically change your future. Let’s take three very doable numbers and consider how they could impact your life to really grasp how powerful an additional income stream from the internet can be. These figures are

• $100
• $250
• $500

Now trust me making these types of additional monthly income figures is very doable for just about anyone with a willingness to do some investing, learning and work. You will have to work harder in the beginning but such is life. Again though for now let’s stick to why you should and what it can mean. What do each of these figures mean to you,

An extra $100 dollars a month can smash 1200 dollars of out standing additional debt a year which is a good start. Paying off 1200 dollars in additional credit card or other high interest debt actually saves about 5000 dollars of long term interest if it is applied on top of your existing payments. Add 100 dollars to a typical house payment on say a 120,000 dollar mortgage and it can shave GET THIS almost 5 years off a 30 year loan. Invested at 10% and just put away it will add a quarter million to your retirement in 30 years, do it for 40 years and it is now worth about 600K added to your golden years. Remember that is only 100 dollars a month more!

An extra $250 is a lot more powerful as you might imagine, with investing you don’t just get 2.5 times the effect as compounding creates an exponential increase. Invested over 40 years of your working life that 250 dollars a month turns into over 1.5 million at simple 10% interest. Of course you can do much better then that with some creativity and participation in your financial planning. Turn to debt and you can pay down an addition 3000 dollars in debt annually which can save many in credit card debt over 20,000 dollars over the live of debt!

Step up to an additional $500 in income into your monthly cash flow and you can begin to really make a massive impact. Try 6000 dollars in additional debt destroyed per year. This alone would destroy the average of 20K in consumer debt most middle income Americans are living under in just over three years. Get out of that type of debt in three years or less and you can save massive amounts of interest. Investing gets interesting, 30 years of 500 a month at 12% interest equals GET THIS over 5 million dollars. There is even more power though!

500 a month would allow you to buy a modest second home if you wanted for vacations in some beautiful part of rural America. Don’t believe me? Fine I own a beautiful modest second home in an somewhat tourist area of the South up in the beautiful Ozarks. The place sits on 5 acres, is 15 minutes to town, 20 minutes to a beautiful lake and only about 10 people live all the dead end road the place is located on. Everyone owns at least 5 acres so the houses are very spaced apart. My total payment? With taxes and insurance 523 dollars a month. How I just looked hard enough.

Now the real beauty here is what I call my “Plan B”. Let’s say that my companies all go bust, I can’t find a job and my wifes income all of the sudden can’t cover our bills at our primary residence. Now this is not to say that everyone should invest extra income in a second/vacation home, it just begins to open your mind to the types of things you can do to build and preserve wealth with just a few hundred extra dollars of income a month.

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