There is a lot said on social media about how the rich use debt and that’s what rich people do to avoid taxes, etc. Let’s break it down remembering that these principles apply whether personal or business.

The good:

Using debt as a form of arbitrage can be a great way to increase wealth. For instance, when mortgage rates were 2.5% a lot of folks did cash out refinances or equity loans in order to use the money to make investments or to buy other properties that would generate greater than a 2.5% return. This is a great use of debt and is indeed what “the rich people” do. Investing in your own business when rates are low is a great idea provided your business will generate a greater return than the cost of borrowing (if your business isn’t generating greater than a 2.5% return, why are you in business?)

The bad:

Using debt to finance a lifestyle is a bad way to use debt. However, most people simply can’t afford to live without some form of debt. In these cases, the debt should always be attached to an asset of greater value. For instance, a mortgage is almost always attached to real estate valued at more than the mortgage. Financing a vehicle is less clear since if you do 100% financing, you will have an asset valued at less than the loan amount the minute you drive off the lot. As you can see, “correct” use of debt is limited to very few scenarios.

The Ugly:

Student loan debt, credit card debt, personal loans, credit lines, etc. are all really bad forms of debt. The cost of the money is high and there is no asset backing it. If you have any of these forms of debt, it is likely you also have very little savings. This type of debt is to be avoided and eliminated. Nobody with any wealthy carries this type of debt.

It’s been a little over a year since Microsoft released Windows 11 as an upgrade to Windows 10. Many people were rather disappointed by this upgrade as it wouldn’t run on their hardware and didn’t seem to be a huge improvement over Windows 10.

It has been a chaotic release year for sure. One update would seem to fix problems and the next update would seem to create even more issue. From very slow file transfers to very slow desktops and endless printer buffering. The problems just never seemed to end.

However, it now appears that after a year’s worth of improvements, updates, and fixes, that the operating system may finally be ready for prime time. The hardware folks have released firmware updates and drivers that work well with Windows 11 and the software itself has dramatically pared down the list of known issues.

So, if you were on the fence about moving to Windows 11, now, as we enter 2023, it would seem a good time to do so.

Let’s face it, banks aren’t your friend. They count on you using your money improperly and will charge you outrageous fees and interest for doing so. However, if you are responsible with your money, you can turn the tables on them. Here’s how:

Let’s say you spend around $1,500 a month on “stuff” (groceries, gas, haircuts, household items, etc.). If you use a 2% cash back credit card, the bank will pay you $30 for that spending AND will give you a 30 day grace period to pay for it.

So, at your credit card due date, you should owe $3,000 ($1,500 from the last statement plus $1,500 in current months spending). You pay the $1,500 at the due date and have another 30 days to pay the other $1,500.

Do you see what just happened? Not only are you making $30 each month in cash back rewards on your typical spending but the bank is giving you an interest free personal loan of $1500.

So, you should 1) Never be using a debit card for anything, 2) Always be using a cash back rewards card and 3) Always have a balance on that credit card that you pay 0 interest on.

Planning tip: Make certain that the carrying balance on the credit card never exceeds 10% of the credit limit (request a higher limit if necessary) to maximize your credit score.

You always thought credit cards were evil didn’t you?

For those people facing retirement today, full retirement age is 67 with the ability to start drawing Social Security at 62. So should you start taking it at 62 or wait the five years to full retirement age. Here’s some very basic facts for those faced with this decision:

First: Are you actually retired? If you start drawing Social Security and have earned income in excess of about 20,000, they will start taking back $1 for every $2 over that limit. Thus, it is likely not worth it if you are still working full time.

Next, let’s provide some numbers: Life expectancy right now is around 83 years. The break even point for drawing early (if you spend the money and don’t invest it) is around 78. Thus, if you live to life expectancy, you lose by drawing early. If you live well beyond life expectancy (1 in 4 will live to 90), you really lose. However, if you die before 78, you will have benefited by drawing early. So drawing early is really a gamble on your own life.

Now, if you start drawing early and invest the money (most don’t) until full retirement age and can get an average return of around 5%, the break even jumps to around 90. So investors can beat the system drawing early if they truly invest all the money.

Of course there are other reasons for drawing early such as you don’t trust the government not to change the system or reduce benefits and view a bird in the hand as being better than nothing. In any case, this can be a difficult decision to make and must be made after taking a hard look at your own facts and circumstances because there really is no right, wrong, or definitive answer.

There is a LOT of talk these days about creating a “side hustle” to boost your income. A side hustle is nothing more that what folks used to call a “second job”.

Common examples of a modern side hustle are:

Uber/Lyft/Doordash driving, buying and selling on sites like eBay and Amazon, renting out a room in your home, getting paid to review products, etc.

The reason these are popular as opposed to the traditional part time job is that they allow you to work on your own schedule and do as little or as much as you want. While I admire the effort to add to your income and thus improve your financial situation, the downside is that they ALL require some level of administration to make certain you are complying with various laws involving licensing and taxing. If you attempt to “hustle” your way around these, you may find yourself in a lot of trouble.

It is advisable to at least discuss your “side hustle” with a professional who can advise you on such implications.

You’ve likely seen all kinds of information related to the above telling you that you will never have enough. A common calculation is that you need a million dollars so at 8% you will generate $80,000 per year and combined with social security you “might” just scrape by.

Rather than take an approach which suggests simply piling up all the cash that you can, it is often more productive to take a look at your expected expenses assuming no debt and no kids. It is often a surprise to folks how little they actually “need” in retirement with those factors eliminated.

Thus, your very first goal should be to enter retirement entirely debt free (the exception to this would be income producing properties where someone else is actually paying the debt). Many people spend their working years with more than 50% of their income going towards debt (mortgage, cars, credit cards, student loans, etc.). If that were eliminated from the equation suddenly you are in an entirely different financial situation.

Thus, while most financial planners say you need 80% of your income in retirement, the actual number may be FAR less if you can eliminate all debt. Actual income needed in retirement is generally much lower (around 50% in some studies).

That’s a rather big revelation. For a working couple making 100K per year, if you will only need 50k in retirement, combined social security (at full retirement) may cover the bulk of that load and the amount you need to supplement that income in retirement becomes far more realistic.

Most retirement scenarios out there are designed to scare people whereas taking a realistic look at your retirement can provide you some comfort if you feel that you are a little behind in saving for it.

I have come across literally hundreds of various Tictok’s, Reels, etc. that make the above astounding claim. Just run out and and form an LLC and you will save money.

I’m here to tell you that forming an LLC will not save you one dime in taxes and you will simply incur expenses to set it up and keep it registered. No, you can’t simply set up an LLC and write off your car. That’s called tax fraud.

They also claim that you can use the LLC to get a business line and avoid using personal credit? That would be great if it actually worked. I don’t know of any lenders who offer business lines of credit just because you set up an LLC.

The final claim is that the LLC provides absolute limited liability protection. This is true ONLY if someone sues ONLY the LLC. If they sue you as the owner, it provides you NO protection whatsoever. Imagine if you own stock in Tesla and someone sues Tesla. You have limited liability to the extent of your investment in Tesla. If someone sues you personally, they can simply take your Tesla investment along with everything else. An LLC is lousy liability protection and something like an umbrella insurance policy is likely a much better option.

What an LLC IS good for is creating anonymity. Holding your rental property in the name of an LLC rather than your own can make it difficult for someone to find out that you own it.

The internet is great for the amount of information provided. It is also great for providing really bad information.

The mid term elections are over and it appears that the Republicans will regain control of the House of Representatives while the Democrats will control a single vote majority in the Senate.

The good news is that this likely means there will be no wide sweeping legislation for at least the next two years as neither side will be able to push an agenda forward.

The bad news is that we will likely also not see some badly needed legislation that would address shortages, energy problems, inflation, and other economic woes.

It is possible that President Biden will adopt a more moderate agenda but given we are just one year away from yet another Presidential election year, that seems very unlikely.

So, we will have a virtual stalemate for two years with each side blaming the other for every problem until we do it all again in two years.

According to a recent report, close to 60% of US earners are living paycheck to paycheck. Put simply, this means missing a single paycheck would be financially detrimental and missing more than one would be financially devastating.

This is particularly troubling as we head into a recession and possibly higher unemployment as clearly many families aren’t prepared for hard times.

This is a hard situation to correct for most people as they are likely highly leveraged with debt. However, it is possible to correct by simply adopting two philosophies that you’ve likely heard before.

• Live beneath your means: This is very simple. If every dime you make is going out the door the next day, you are living well above you means. Find ways to cut your budget to create a surplus each payday. For most people, there are a lot of ways to reduce expenses but there is simply a lack of desire to actually do it.

• Pay yourself first: Everyone should take a percentage of their check and put it into some type of savings and then live on what is left. It doesn’t even have to be a lot as $100 – $200 a payday will grow into a nice nest egg rather quickly. You can also fund this with a side job or rental (Airbnb).

Taking some simple steps now can get you out of that 60% and will almost certainly reduce stress, tension, and anxiety in your life.

Suppose you want to make a large purchase but don’t have cash available right now but expect to in the coming months. You can use credit cards to allow you to make the purchase now and pay later. Here’s how it works:

Let’s say you want to buy something that costs $3,000. You make the purchase on the day after the statement date of you credit card (let’s say that’s 9/15). Now, if you are using a 2% rewards card per my previous advice, you will get $60 of that back immediately. The purchase will not appear until your next statement on 10/15 and you will generally have almost another 30 days to pay it (in this case the payment date will likely be 11/13). So, you have created an automatic 2 month deferral with cash back and no interest.

Let’s say you can’t pay it off on 11/13. A common tactic would be to take a cash advance on another credit card on 11/13 and pay off the balance. This would give you another almost 30 days to pay off the balance. There is a caveat here in that some banks do not allow an interest free grace period on cash advances. However, if your bank card does, you just made a purchase with no payment for 90 days interest free.

Rolling transactions such as this are nothing new and are a common cash flow tactic businesses have been using for years. However, there is no reason any individual can’t take advantage of this same strategy to time purchases and payments to their advantage.