View Poll Results: Taxes: Whose money is it?

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43. You may not vote on this poll
  • It's still *my* money!

    10 23.26%
  • It's "my" money, but in a collective sense.

    23 53.49%
  • It's now the government's money, to do with as they see fit.

    5 11.63%
  • Other

    5 11.63%
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Thread: Taxes: Whose money is it?

  1. #31
    Educator Dpetty's Avatar
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    Re: Taxes: Whose money is it?

    Quote Originally Posted by misterman View Post
    Of course they are. I wouldn't want them to take it just to put it in the bank.
    I will never understand why it has become so unpopular to have money in the bank (savings account for the layperson). Instead spending more money than we earn, on a personal and government level is all the rage lately.

  2. #32
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    Re: Taxes: Whose money is it?

    Quote Originally Posted by Dpetty View Post
    I will never understand why it has become so unpopular to have money in the bank (savings account for the layperson). Instead spending more money than we earn, on a personal and government level is all the rage lately.
    There are two good reasons not to save money. One is debt. If you have debt then money spent paying down the debt usually has a better return than saving it. Two is taxes. If you're rich interest on savings gets taxed at a higher rate than investing in stocks or bonds. The only people that have a good economic reason to use long-term savings accounts are people that have no debt but aren't rich (unless the government subsidizes savings in some other way like not having to pay taxes on savings for education).

  3. #33
    Educator Dpetty's Avatar
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    Re: Taxes: Whose money is it?

    Quote Originally Posted by MoSurveyor View Post
    There are two good reasons not to save money. One is debt. If you have debt then money spent paying down the debt usually has a better return than saving it. Two is taxes. If you're rich interest on savings gets taxed at a higher rate than investing in stocks or bonds. The only people that have a good economic reason to use long-term savings accounts are people that have no debt but aren't rich (unless the government subsidizes savings in some other way like not having to pay taxes on savings for education).
    Debt does pay a better rate of return than most investments, but only the money paid on TOP of your monthly interest because it goes directly toward paying off the principle, thus reducing the overall interest paid over the life of the loan. However, to regard that as a return is misleading. You will still pay more money than you borrowed, which is the only reason lenders give loans in the first place.

    Regardless of debt, everyone should have enough money in savings 3 to 6 months worth of bills. Idealy, we should be paying for everything with cash, rather than installment loans because of the huge amount of money we pay in interest. This applies to the government as well. The only difference is that we are expected to pay our loans back, the government thinks they dont have too.

  4. #34
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    Re: Taxes: Whose money is it?

    Quote Originally Posted by Dpetty View Post
    Debt does pay a better rate of return than most investments, but only the money paid on TOP of your monthly interest because it goes directly toward paying off the principle, thus reducing the overall interest paid over the life of the loan. However, to regard that as a return is misleading. You will still pay more money than you borrowed, which is the only reason lenders give loans in the first place.
    Given that you have an outstanding loan at 12% and a savings account at 1%. If you take all the "extra" money you make (if you want to call that "discretionary funds" that's fine) over a year and put it into the loan your net worth will be greater at the end of the year than it would have been had you put all the money into the savings account. You can cut that up any way you'd like and stick whatever labels suit your fancy on them but the results will still be the same.

    As for having zero debt, I mostly agree with that with one exception, possible two. Housing is the primary exception, at least where I live. It's cheaper for a family to live in a house than an apartment. The second might be a vehicle - but that would depend on the mass transit available in the area as well as other factors, insurance rates for example.

  5. #35
    Educator Dpetty's Avatar
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    Re: Taxes: Whose money is it?

    Quote Originally Posted by MoSurveyor View Post
    Given that you have an outstanding loan at 12% and a savings account at 1%. If you take all the "extra" money you make (if you want to call that "discretionary funds" that's fine) over a year and put it into the loan your net worth will be greater at the end of the year than it would have been had you put all the money into the savings account. You can cut that up any way you'd like and stick whatever labels suit your fancy on them but the results will still be the same.
    This is absolutly false. Whatever money you have in the savings account will GAIN a net of 1% interest over the course of that year. Regardless of the interest rate you are paying on an installment loan, that money still represents a LOSS of your overall net worth. Its outgoing money. The 12% represents the money you saved yourself on future interest paid on the loan if you were to only make minimum payments. Its does NOT represent any type of actuall monetary gain on your part, it just means you didnt waste as much as you could have.

    For example if you get a $10,000 loan at 12% interest and make only the minimun payments over the term of the loan, you will end up paying closer to $13 to $15,000 depending on term and minimum payment. By paying money toward that loan ON TOP OF your monthly payment, every dollar goes toward the principle without interest, hence that dollar saves you a rate of return equal to the interest rate. It SAVES you money, it doesnt MAKE you money. If you have debt, it makes sense to put all of your extra money into paying that off, but you will get richer faster by saving your money till you can purchase an item rather than borrowing the money and spending exponentially more for that item over the term of the loan, than the person who used cash.


    As for having zero debt, I mostly agree with that with one exception, possible two. Housing is the primary exception, at least where I live. It's cheaper for a family to live in a house than an apartment. The second might be a vehicle - but that would depend on the mass transit available in the area as well as other factors, insurance rates for example.
    Yes, housing is a very valid reason to get a loan. I dont agree that a car is though. Vehicles are a perfect example of wasting money with loans.

  6. #36
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    Re: Taxes: Whose money is it?

    Quote Originally Posted by rathi View Post
    The blessing and curse of representative democracy is that you get the government you deserve.
    The same could certainly be said of a direct democracy, except worse in that the majority always rules.
    "God is the name by which I designate all things which cross my path violently and recklessly, all things which alter my plans and intentions, and change the course of my life, for better or for worse."
    -C G Jung

  7. #37
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    Re: Taxes: Whose money is it?

    Quote Originally Posted by Dpetty View Post
    This is absolutly false. Whatever money you have in the savings account will GAIN a net of 1% interest over the course of that year. Regardless of the interest rate you are paying on an installment loan, that money still represents a LOSS of your overall net worth. Its outgoing money. The 12% represents the money you saved yourself on future interest paid on the loan if you were to only make minimum payments. Its does NOT represent any type of actuall monetary gain on your part, it just means you didnt waste as much as you could have.

    For example if you get a $10,000 loan at 12% interest and make only the minimun payments over the term of the loan, you will end up paying closer to $13 to $15,000 depending on term and minimum payment. By paying money toward that loan ON TOP OF your monthly payment, every dollar goes toward the principle without interest, hence that dollar saves you a rate of return equal to the interest rate. It SAVES you money, it doesnt MAKE you money. If you have debt, it makes sense to put all of your extra money into paying that off, but you will get richer faster by saving your money till you can purchase an item rather than borrowing the money and spending exponentially more for that item over the term of the loan, than the person who used cash.
    (emphasis added)

    "Absolutely false"? Last time I looked a decrease in liabilities is an increase in net worth.

    I've already agreed, with a couple of exceptions, you're better off not getting in debt in the first place but it seems obvious you agree it's better to pay off debt you have than to save money (unless, of course, you can get a higher interest rate on savings than your loan rate).

    Quote Originally Posted by Dpetty View Post
    Yes, housing is a very valid reason to get a loan. I dont agree that a car is though. Vehicles are a perfect example of wasting money with loans.
    It all depends on where you live and your circumstances. I'm sure in NYC and many other areas cars are a luxury. However, there are many places where they are not - they are an investment in your career. Apparently you've never lived in those communities or your career has not required odd working hours or involved companies located outside the city center.
    Last edited by MoSurveyor; 02-11-12 at 12:48 AM.

  8. #38
    Educator Grendel's Avatar
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    Re: Taxes: Whose money is it?

    Zero debt policies aren't effective for most people. Borrowing money to increase your longterm value is usually a good idea. For example, loans for education or vocational training, which will leave you with a debt that grows interest, but the interest may be (depending on your vocation) less than the increase in your starting salary. Also, buying a reliable car (in most areas) increases your range for job hunting, giving you better negotiating leverage. Buying a house is usually the long-term benefit over renting, especially if you plan to stay for 5 years or more. Borrowing to improve infrastructure, so to speak, is important for a lot of tradesmen -- tools and equipment now may bring in more in immediate earnings than the cost of interest. Other odd stuff can be worth the debt, as well. Once I had to borrow money (against a credit card) to buy a few suits, but it landed me a job that paid far, far more than the interest I paid on the suits.

    Borrowing money to go on vacation or something frivolous like that is stupid, but the idea of a firm no-debt policy isn't always effective.

  9. #39
    Educator Dpetty's Avatar
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    Re: Taxes: Whose money is it?

    Quote Originally Posted by MoSurveyor View Post
    (emphasis added)

    "Absolutely false"? Last time I looked a decrease in liabilities is an increase in net worth.
    Yes, a decrease in liability is increasing your net worth because you have less debt to income and so forth, but having a positive net worth (money in saving, stocks, bonds, etc) is still better than having debt in loans, even if that debt is being paid off ahead of schedule. So considering decreased liability as a net worth increase, is only from the pervue that you shouldnt have taken the liability in the first place.

    It all depends on where you live and your circumstances. I'm sure in NYC and many other areas cars are a luxury. However, there are many places where they are not - they are an investment in your career. Apparently you've never lived in those communities or your career has not required odd working hours or involved companies located outside the city center.
    Actually i grew up in a pretty rural area. Ive had jobs requiring me to drive 30 to 40 miles to work each way. Simply because one is required to drive does not mean they should go head over heals in debt to get a car. My first car was a 1966 for truck. It cost $500 and got lousy mileage. I also had a 1981 Honda civic that had 5 gears, but i could only find 4. I have had 3 or 4 cars that cost under a grand because that is what i could afford at the time. As i saved money, i got better cars. That is the way its supposed to work. To many people think they need to skip those steps and go straight to the Cadillac Escelade, even if they cant afford it. Newly weds go up to their eyeballs in debt to get all the things their parents have, even though it took them 30 years to accumulate it. Debt is killing us. The attitude that everyone DESERVES a flat screen tv, or a car less than 5 years old, is responsible for that. Whatever happened to saving and THEN buying?
    Last edited by Dpetty; 02-11-12 at 08:34 AM.

  10. #40
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    Re: Taxes: Whose money is it?

    Quote Originally Posted by Dpetty View Post
    Whatever happened to saving and THEN buying?
    I don't know. Like I said, I tend to believe that's the better route as well. But I also don't want to dissuade people from using credit to get what they need, either, and that doesn't include the $300 Bar-B-Q grill or the $1500 TV. If your $500 truck was reliable then that's all the matters. If it was a POS that needed fixing every other week and occasionally made you late for work then it may not have been worth it or even been a bad investment. Over-indulgence isn't a good thing - especially if you're not paying cash for it - but relying on others for support or back-up except in the most extreme situations isn't a good thing either. There is a balance to be had.

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