
America is full of high-earning poor people - SimplyUseless
http://qz.com/520414/the-high-earning-poor/
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hwstar
Root cause: Incessant advertising coupled with lack of financial education.

Public schools need to teach financial literacy in junior and high schools.
Maybe there should be an entire semester devoted to it. If I were to design
such a course, it would cover the following:

1\. Saving and compound interest. 2\. Credit. Personal loans, auto loans,
mortgages, student loans. 3\. Financial products to avoid. Title loans, payday
loans, Bail bondsmen. 4\. Why asset accumulation is good, and materialism is
bad. 5\. Investing in stocks, bonds, mutual funds and ETF's. Investment fees.
6\. Financial obligations during marriage and divorce. Filial support, child
support, alimony. Wills and trusts. 7\. Planning for retirement, IRA's,
401K's. Saving money for your kids education. 8\. Health insurance. Employer
plans, the ACA, Co-pays, co-insurance, maximum out of pocket expenses. Why
it's bad in some states to go on medicaid, and why you should get an ACA
policy instead. 9\. What you need to do to buy a house. 10\. Starting your own
business. Fictitious business names, incorporation. Protecting your personal
assets if the business is sued. Employment law. Employment at-will,
discrimination, whistle-blowing. Unemployment compensation, workers
compensation, disability insurance. 11\. Landlord and Tenant law. 12\. What
you need to do if you are arrested.

When people graduate from high school and turn 18, there's a whole legion of
shysters ready to prey on them.

~~~
prostoalex
Don't forget the tax rates. Americans are eager to slap a tax increase on
anything income-related (Prop 30) while eschewing tax increases on anything
property-related (Prop 13), in effect building a rentier state, where
decreasing number of working individuals
[http://data.bls.gov/timeseries/LNS11300000](http://data.bls.gov/timeseries/LNS11300000)
is responsible for a growing list of expenses.

~~~
hwstar
I'm all for a split property tax roll (personal/commercial). Prop 13 needs to
stay as it is for non-commercial properties.

If you don't see why, you will. When you are retired, you will come round to
my side of the argument.

~~~
prostoalex
But you're approaching this in the context of current income tax rates. How
would the equation change if there was no income tax, just the property tax,
and you could plan your retirement around those numbers?

~~~
hwstar
My situation would be probably worse under a property tax only regime.

The problem with property tax is that is levied whether you have income or
not, and not everyone is directly liable for it.

Right now, I'm living off of post-tax savings and investments, so my income
taxes are really low (as in almost zero). My property tax however is a
significant fraction of the taxes I do pay as I have a main residence and an
income property.

The current tax code is set up in such a way that if you have no income from
wages, and only non-wage income, you can pay no taxes on capital gains up to
about $70K per year See [http://www.gocurrycracker.com/never-pay-taxes-
again/](http://www.gocurrycracker.com/never-pay-taxes-again/)

~~~
JoeAltmaier
The problem you mention about property tax, is actually the original purpose
_behind_ property tax. So-called 'absentee landlords' were leaving land fallow
for generations, impoverishing the nation. Property tax was instituted to make
sure land was constantly in use, or the landlord lost it (and somebody more
productive got it).

~~~
hwstar
So the pesky US constitution got in the way of a "fallow land tax"? It seems
to me if land is being left fallow, then that's something which ought to be
discouraged. If land is in service, then the property taxes should be nominal.

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ChuckMcM
Basically another run at the message "Hey saving when you're young is a _lot_
easier than saving when you're old and much more effective." Putting away
$1,000 when you're 20 can easily be $4,000 in the bank when you're 50. Plan
for that period of time when you're tired of what you have been doing for the
last 20 - 30 years, and want to spend time doing a new thing. You'll need
savings to cover the burn rate.

~~~
baldeagle
I've been putting away in my 401(k) for 10 years. My overall rate of return is
... hmm, it's ~66%. That seems off, so I guess I'll have to research this
more.

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Eridrus
It seems very weird to ignore homes people own in this analysis since it is
the largest store of wealth for most people and produces ~5% dividends tax
free in the form of not having to pay rent.

~~~
toomuchtodo
Buying a home is not a "no brainer" investment strategy.

* It takes 5-7 years to break even on the transaction costs

* You might not have enough equity (or liquid funds) to sell if you need to move for a better/more preferred job

* There is no guarantee real estate will continue to appreciate at the same rate or ahead of inflation in the future

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bishopknight
Why invest in "financial" investments when the stock market is so volatile and
we are indebted to China? To me, buying properties and renting them out are a
safer investment than government backed paper. And no, I'm not investing in
silver/gold when that whole market is manipulated.

~~~
hwstar
There's risk being a landlord as well. When a bad tenant trashes your rental,
you can be out tens of thousands of dollars in addition to the costs to file
and process an unlawful detainer.

If anything landlording is riskier than investing in an index fund.

This is not to say that you should not own rental property. Rental property
should be owned in addition to stocks and bonds.

