Posts tagged with "taxes"

Piggy Bank illustration by Heather Skovlund for 360 Magazine

Future Fax Filing Tips

Tips for Tax Filing in the Future

Tax time is near, and soon everyone will be rushing to get their taxes filed. Last year, Americans were met with quite a few delays in getting their refunds with the onset of the pandemic.

If you have a refund coming, the sooner you file, the sooner that refund will make its way into your bank account.

If you’re like most tax filers, you probably want to do everything you can to reduce your overall tax bill. We know that taxes are needed to run the government, but there’s no need for you as an individual to pay more than you need to.

Here are a few areas to consider or understand for future tax filing years:

  • Funding tax-preferenced accounts. One way to save on taxes is by putting money in various tax-preferenced savings accounts such as an IRA, a 401(k), and others. Depending on the account type, you can deduct your contribution each year, defer paying taxes on growth or take withdrawals tax-free. In health savings accounts (HSA), you can do all three. There are eligibility requirements you need to meet. An HSA can only be used for medical expenses.  With a traditional IRA, you don’t pay taxes on your contributions, and you defer taxes on the account’s growth. You do pay taxes on withdrawals you make in retirement. A Roth IRA has different advantages. You can’t deduct your contributions now, but your money grows tax-free, and you aren’t taxed when you make withdrawals.
  • Using a 529 for K-12 private or college education. Many people are familiar with 529 plans, but they often think of these solely to save for a college education fund. But a 529 can also be used to pay for a private school in elementary and high school. The significant tax advantage with a 529 is that you don’t pay federal income taxes on the account’s growth. However, you must spend the money on qualified educational expenses and nothing else. This is essential to remember and understand because if you use the money for other reasons, you will pay taxes on that withdrawal, and you will also pay the penalty. A 529 account is something to consider if you have children or grandchildren and want a tax-efficient way to save for K-12 or college education.
  • Making charitable donations. Charitable donations are a great tool for reducing your tax bill. They come with the bonus of allowing you to make a positive impact in your community. Through charitable donations, you can reduce your income tax, capital gains tax, and estate tax. Some people view this most straightforwardly – you choose an organization that qualifies under the tax rules to donate to. There are other ways to contribute as well: You can establish a donor-advised fund, which is a personal charitable account opened in the name of the donors and held by a nonprofit organization. For example, let’s say you sell a stock and, instead of paying the capital gains tax, you choose to place the proceeds in a donor-advised fund. You can claim the total amount as a charitable deduction, although you don’t have to donate the money in one lump sum. The money remains in the fund and can be donated in small amounts over a period of years while drawing interest.

These are just a few things you can consider as you look for ways to reduce your tax bill. Your financial professional will be able to help you work your way through the process and find what works best for you and your situation.

mail by Purdue University and Adranos Inc. for 360 Magazine

Adranos’ Indiana Manufacturing Plant

Adranos Inc., a Purdue University-affiliated company that has developed a high-performance, solid rocket fuel called ALITEC for long-range missile and space launch systems, announced plans Wednesday (Feb. 3) to construct a facility in the Purdue Research Park of West Lafayette to manufacture ALITEC in support of various launch systems, including hypersonic systems.

The company has obtained $5.1 million in land, funding and tax credits collectively from Purdue Research Foundation and the Indiana Economic Development Corporation.

Adranos will use these incentives to construct its facility in the Purdue Research Park. Adranos expects to serve a broad customer base, including the major military branches and relevant aerospace and defense contractors. The facility will support ongoing efforts that Adranos is currently performing through its rocket motor research and development division.

Adranos plans to create up to 50 new jobs by the end of 2025.

“ALITEC’s performance benefits make it an ideal solution for any solid rocket system that is seeking to extend range, increase payload capacity or reduce rocket form factor,” said Chris Stoker, CEO of Adranos. “This facility will enable us to scale these solutions to the large volumes that will be required by our customers.”

Expansion of Adranos’s manufacturing capabilities aligns with the state of Indiana’s goals of increasing defense spending and becoming a leader in the development of hypersonic technologies. Adranos is currently performing work sponsored by the Department of Defense to evaluate ALITEC in both solid rocket boosters for hypersonic programs and in air breathing systems called solid-fuel ramjets, which use solid rocket fuel. As demand for ALITEC grows, so too will defense spending in the state.

“Indiana is committed to embracing disruptive technology like Adranos’s ALITEC to bolster its economic industries and position the state for long-term global competitiveness and economic growth in the defense sector,” said retired Major Gen. Omer C. (Clif) Tooley, IEDC President of defense development. “Indiana is ranked No. 1 in the nation in tech job growth among small firms, and as a state we’ll continue supporting innovative companies like Adranos and securing our spot as a top place to grow and innovate.”

Similarly, Adranos’s growth aligns with PRF’s mission of innovating and commercializing technologies developed at Purdue University. By supporting Adranos’s efforts to establish a production facility, PRF is enabling the transition of ALITEC production from laboratory scale to production scale.

“Adranos is another exciting example of an innovative company that touches many parts of the Purdue commercialization ecosystem,” said Brian Edelman, president of the Purdue Research Foundation. “We are thrilled that this new facility in Purdue Research Park will help further advance the Adranos technology and boost the state’s economy.”

Recently, Adranos won more than $3.2 million in government contracts, was named to Pepperdine University’s most fundable companies list, and took the grand prize at the Army’s inaugural xTechSearch competition.

Technology used by Adranos is licensed through the Purdue Research Foundation Office of Technology Commercialization, which patented the technology. Adranos is located in Purdue Research Park.

IEDC offered Adranos up to $525,000 in conditional tax credits and up to $200,000 in training grants based on the company’s job creation plans. IEDC also offered up to $500,000 in conditional tax credits from the Hoosier Business Investment tax credit program based on the company’s planned capital investment in Indiana. These tax credits are performance-based, meaning the company is eligible to claim incentives once Hoosiers are hired and investments are made. The company has also been awarded $75,000 in Small Business Innovation Research matching grants from Elevate Ventures, and received $20,000 in funding through the Elevate Purdue Foundry Fund.

360 football illustration for sports articles

THE ECONOMIC SUPER BOWL

In midst of a pandemic that devastated society, including sports, the total wealth of 64 billionaire sports barons shot up by $98.5 billion, or over 30 percent. Taxpayer subsidies for stadiums of 26 billionaire team owners have totaled $9 billion since 1990, with most in last decade.

We won’t know the winner of this year’s Super Bowl till Sunday, but we already know the big winners in our COVID-ravaged economy include dozens of billionaire sports barons.

On the eve of the big game, and after 10 plus months of the pandemic, 64 billionaire owners of major league sports franchises—including the AFC champion Kansas City Chiefs’ Hunt family and the NFC champion Tampa Bay Buccaneers’ Glazer family—have enjoyed a $98.5 billion rise in their collective net worth, a 30 percent increase, as millions of fans have fallen ill, lost jobs, neared eviction, gone hungry and died due to the coronavirus.

The 64 billionaires, who together own or co-own 68 professional sports franchises, had a combined wealth of $426 billion on January 29, 2021. This number is up from $326 billion on March 18, 2020, roughly since the start of the pandemic lockdowns, according to a new analysis by the Institute for Policy Studies (IPS) and Americans for Tax Fairness (ATF), and data analysis from Forbes and Wealth-X. (Note: The increase in total billionaire wealth from March to January was $100 billion, but has been adjusted to $98.5 billion because an additional billionaire reached that status in January 2021.)

The sports billionaires’ private gain in the midst of so much public pain is particularly galling since many of their franchises have been the beneficiaries of taxpayer handouts. Over the past several decades, according to data maintained by Field of Schemes, 28 pro sports teams owned by 26 billionaires have received $9 billion in taxpayer subsidies (see Table here) to help build or update stadiums and arenas and make other investments that billionaires could presumably afford on their own. These publicly subsidized team owners have seen their wealth increase $45 billion since mid-March.

For the full report go to Pandemic Super Bowl 2021: Billionaires Win, We Lose.

Over the past five years—when a lot of sweetheart tax deals were cut—the collective wealth of sports billionaires shot up $165 billion, or 67 percent. Their combined wealth of $247 billion in March 2016 had grown to $426 billion by January 29 of this year. (Nine billionaires on the list in 2021 were not billionaires in 2016, accounting for the $14 billion discrepancy.)

The $98.5 billion wealth gain by 64 sports franchise billionaires since March 2020 could pay for:

  • A stimulus check of $1,400 for over 70 million Americans—almost half of the 153 million people who likely will be eligible under the pandemic relief plan proposed by President Biden based on the 2020 stimulus payments.
  • More than one-third of the $290 billion cost of providing $400-a-week supplements to existing unemployment benefits through September, as proposed by President Biden in his COVID rescue plan.

March 18 is used as the unofficial beginning of the pandemic because by then most federal and state economic restrictions responding to the virus were in place. Moreover, March 18 was also the date on which Forbes estimated billionaire wealth for the 2020 version of its annual report. That report provided a detailed baseline that ATF and IPS have been comparing periodically with real-time data from the Forbes website. [See past reports here] This methodology has been favorably reviewed by PolitiFact.

Last March is when the nation’s emergency response to the deadly virus threw professional sports, along with the rest of society, into turmoil. Thousands of low-paid stadium and arena workers lost their jobs as sports seasons were cancelled and curtailed.

The long winning streak of America’s billionaire sports owners is just part of the dominance of a national dynasty of 661 U.S. billionaires whose wealth has grown by $1.2 trillion, or 40%, during the pandemic. The number has climbed from $2.9 trillion on March 18 to $4.13 trillion, as of January 29, 2021 (see link here for all data).

Though only one of their teams will lift the Lombardi Trophy as Super Bowl champs this year, both the Chiefs’ Hunt family—specifically, Ray Lee Hunt and W. Herbert Hunt—and the Bucs’ Glazer family will continue their long reigns among the nation’s biggest economic winners. The Hunts’ net worth is estimated by Forbes at $6.3 billion, up $482 million during the COVID crisis. The Chiefs received $250 million in taxpayer subsidies for stadium renovations in 2006.

The Buc’s Glazer family is worth an estimated $1.7 billion, according to Wealth-X. Taxpayers provided a total of $218 million in subsidies for construction and renovation of the Buccaneer stadium in 1998 and 2015.

Sixty U.S. billionaires—roughly one in ten of the country’s 661 total billionaires—own one or more major league professional sports teams in the National Football League (NFL), National Basketball Association (NBA), Major League Baseball (MBL), and National Hockey League (NHL). Four other billionaires—three from Canada and one from Germany—own four additional teams.

“These billionaire sports barons have seen their wealth rise as their fans lose their lives, livelihoods, health and wealth,” said Chuck Collins, director of the Institute for Policy Studies, Program on Inequality.  “As a country, we should be investigating pandemic profiteering and taxing windfall gains during these extraordinary times.”

“The Super Bowl brings the whole nation together, but we have not come together as a country to beat the pandemic,” said Americans for Tax Fairness executive director Frank Clemente. “Billionaire sports owners have continued their long winning streak of ever-growing fortunes while fans at home are losing their lives and livelihoods. Real team work would require billionaires to pay their fair share of taxes so we can get the whole U.S. back to its winning ways.”

“Every year, wealthy sports team owners rake in more than two billion dollars in taxpayer subsidies for new stadiums and arenas that, according to innumerable economic studies, provide zero measurable economic benefit to the public,” said Neil DeMause, co-author of Field of Schemes: How the Great Stadium Swindle Turns Public Money Into Private Profit, and editor of the stadium news site. “Letting billionaire owners socialize their costs and privatize their profits has allowed the rich to get richer, while starving local governments of revenue to pay for schools and other genuine public needs.”

Tax reform that ensures the wealthy pay their fair share—the principle President Biden’s tax plan is built on—would transform a good chunk of those huge billionaire gains into public revenue to help heal a hurting nation. But getting at that big boost in billionaire fortunes is not as simple as raising tax rates: tax rules let the rich delay, diminish and even ultimately avoid any tax on the growth in their wealth. What’s needed is structural change to how wealth is taxed.

The most direct approach is an annual wealth tax on the biggest fortunes, proposed by Senators Elizabeth Warren and Bernie Sanders, among others. Another option is the annual taxation of investment gains on stocks and other tradable assets, an idea advanced by the new Senate Finance Committee chair, Ron Wyden. Even under the current discounted tax rates for investment income, if Wyden’s plan had been in effect in 2020 America’s billionaire sports owners would be paying billions of dollars in extra taxes this spring thanks to their gargantuan pandemic profits last year. Another reform is needed to significantly strengthen the estate tax so that the riches accumulated by these ultra-wealthy sports franchise owners pay their fair share of taxes when these dynasties get passed onto their heirs.

What Is a Check Stub? Why You Shouldn’t Throw Them Out

Did you know that 54% of the American workforce is affected by payroll issues? Most of these problems stem from companies trying to handle payroll on their own.

There’s a better solution: a check stub generator.

What is a check stub? Read on to find out the answer and more.

What Is a Check Stub?

What is a check stub? It is a stub attached to a check that has details regarding the amount a person is paid. Other details include grand totals and invoice numbers.

The recipient of a check stub can match it with the cash receipts they have. This reduces calls made to the accounting department referring to payments made.

You should always keep check stubs for tax purposes and in case you run into any payday problems. A business can benefit from having its own check stub maker. For example, you can use this check stub generator to solve common payroll issues.

Common Payday Issues

Without an effective check stub generator, it is challenging to keep up with payday. A business that has extra employee benefits or manages different contracts can have an even harder time on payday. The three most common payment issues are as follows:

Incorrect Deductions

Even a cheap check stub generator helps with an incorrect deduction issue. Some have different paychecks every so often because of different benefits, taxes, and salary sacrifice schemes.

Because calculations change, there is room for mistakes. When employees receive incorrect check stubs, they won’t happy. It will also harm records.

Too Little Information

A pay stub without enough information leads to employees not finding their payment history. Don’t be one of those companies who would rather save time than correctly get through the payroll process. All paystub information should get added.

When a company leaves out essential information, it is harder to see where errors come from. This makes it impossible to resolve any problems.

Time Consumption

A lot of companies struggle to stray away from errors if they create paychecks manually. Because it is such a time-consuming job, paychecks may be received later than expected.

Creating a check stub manually means making individual calculations for every employee. This includes taking deductions and taxes into consideration. If you fail to record a change on an employee’s paystub, you run the risk of causing more delays because of incorrect information.

Check Stub Generators

The best check stub generator will make these common errors less likely to occur. Other benefits of generators include creating pay stubs that are professional, eliminating errors when they occur, creating paystub records, and being less time-consuming.

Make Payroll a Stress-Free Job

There is a lot of stress that comes with a manual payroll process. It’s time to make life easier by using what technology has given you. Companies can create check stubs for their employees without the hassle while benefiting from all of the other things that a generator has to offer.

Keep coming back for more articles that can answer questions like what is a check stub?

Mina Tocalini, 360 magazine

Retirement Planning Starts With Taxes

There is a lot to understand when it comes to paying taxes and many Americans have to take it upon themselves to learn the ins and outs of taxes. One aspect many do not account for is the higher tax rate paid once in retirement.

The insurance company Nationwide surveyed retirees and found that over one-third didn’t take into account how taxes could affect their income during retirement. Less than half said they know how to leverage their financial accounts to minimize their tax burden.

“One of the greatest disruptors of wealth and its potential is taxation,” says John Smallwood, president of Smallwood Wealth Management and author of It’s Your Wealth – Keep It: The Definitive Guide to Growing, Protecting, Enjoying, and Passing On Your Wealth. “Most financial strategies are missing the fundamentals, leaving you to pay much more in taxes than you should over your lifetime.

“There are some fundamental concepts of taxes that apply to the financial planning process. The goal is to have multiple sources of retirement income that balance out taxes and fees. That way, if one or more of the sources dries up, or if tax law changes a source or two, then the impact on your portfolio will be minimal.”

Smallwood highlights four important items related to taxes that he sees are important to know when creating a retirement plan. Tax deferral strategies are one way. This is all based on the concept of moving from a higher tax bracket that you’re in right now to a lower one in the future. But Smallwood cautions, “The tax rate in the future may not be in your favor. If you defer and don’t end up in a lower tax bracket, you can lose. You might end up paying more than if you had not deferred.”

Smallwood also stresses the importance of looking at qualified plans as specific rules and penalties apply when you withdraw from tax-deferred retirement accounts. Withdrawing before age 59½ brings a 10% penalty. At 70½, there are required minimum distributions (RMDs). “With RMDs, there is a 50% penalty for not withdrawing the right amount of money.” he says. “Plus, depending on the account, you have to pay taxes according to your bracket.”

But once you’re ready to make an offer, you can choose one with the best rates and terms. According to the people at Lowermybills.com, “Like all things connected to home buying and mortgage rates, do your research.” and that “If you find a rate you are comfortable with, and it gets you the mortgage payment in your price range, it might be a good idea to decide to lock in the interest rate.”

Another strategy Smallwood emphasizes is compound taxes. He says that in regards to tax strategy, this is the most important parts of a wealth plan. “For example, a 45-year-old with a savings rate of 6% and putting away $51,000 per year could accumulate a healthy balance of $2.5 million by age 65,” Smallwood says. “But with compound taxation, money is eroding all the time. Each year that an account grows, the investor’s tax liability grows along with it. Interest earnings, along with dividends and capital gains, get larger over time as the investment gains in value. If the gains the first year include $30,000 worth of interest but at the 30% tax bracket, then you’ll have to pay $9,000 more in taxes.”

Lastly, systematic withdrawals can significantly reduce the tax impact on an investment portfolio if done correctly. “Let’s say, late in 1989, you placed a lump sum of $100,000 in an S&P 500 index fund with a good track record,” Smallwood says. “Instead of leaving the funds in the account, however, you took $6,000 from the account each year and repositioned those assets elsewhere. After 20 years, the fund balance would have reached $243,191, an annual gain of 7.92% that exceeds the return earned by leaving the funds in the account. Why? Because taking those withdrawals undercuts the impact of compounded taxes. Over time, the tax obligation would be $30,451, or $13,622 less than leaving the money in the account.”

All of this can come across as overwhelming, especially if money and taxes aren’t something you are well versed in. However, starting to learn about these tactics before you hit retirement can be beneficial, even if you are far from this age.

Smallwood says, “Good retirement planning includes all the possible tax implications and gives you options. Organizing income sources so that they hit your tax return the right way should be a deliberate strategy every year.”

politics, podium, flag, speech

COVID-19 Fed Policy

By Dennis Notchick, CFP

The United States is mired in its worst unemployment since The Great Depression of 90 years ago. Indeed, COVID-19 has stunted our once-robust economy in many ways.

But at the same time, there is this curious occurrence: Equity valuations in the S&P 500 and Nasdaq have hit an all-time high How does that happen with some of the worst economic conditions in our nation’s history?

One of the main reasons: Much of the money dispensed by the Federal Reserve during the pandemic isn’t trickling down to consumers and labor markets, but rather, it’s being reinvested in financial assets, inflating their value. This fresh injection of capital into the money supply can often lead to hyper-inflation for healthcare, housing, and other essential goods that are needed to sustain life. As an example, a recent report from the Employee Benefit Research Institute (EBRI) found a senior couple could need as much $325,000 to have a 90% chance of covering their out-of-pocket costs including Medicare premiums and prescription drugs.

The horrific economic effects of the pandemic have pushed the Federal Reserve to spend trillions of dollars since April in many different ways. They also used the playbook from the Great Financial Crisis and Great Recession of 2008 – low/zero interest rates in the corporate credit market – hoping that these rates would stimulate corporate spending, and in turn, spark employment.

But the forbidding economic environment in which we’re living renders that approach ineffective. Why? Ask yourself: Given the precipitous drop in consumer demand during the pandemic, why would corporations spend to produce goods and services if most customers are more likely to stay home?

So regardless of the amount of money the government prints to subsidize corporate credit markets, little if any corporate spending is on new employment. Instead, many businesses are stashing cash accumulated from government-subsidized bond offerings. This in turn paints a long road back to full employment, essential for the growth of GDP.

What does all of this mean as you are planning for your retirement in the midst of this uncertain time? It means you need to know how to minimize COVID-19’s impact on your retirement savings.

Given these factors, it’s all the more important for those near retirement or in retirement to consider these steps:

  • Update return expectations for bonds. The Federal Reserve has made it clear they will support credit markets with zero interest rate policies to 2022 and beyond.  Most investors in retirement have don’t have all of their assets in stocks, but say 50% stocks and 50% bonds.  If half of the portfolio has a lower return expectation, the total return of the portfolio may not be enough to keep up with inflation and the cost of living. Since many retirees are living well into their 80s and 90s, it’s important to revisit the stock-to-bond ratio to ensure you are giving yourself the best chance to keep up with the ever-rising costs of life over your retirement.
  • Diversify your stock portfolio. Adding new stocks to your portfolio for companies that haven’t been hurt by COVID-19 could help you adjust to market changes. The work-from-home movement was already underway, COVID 19 just accelerated it and there are many companies that are positioned well to take advantage.
  • Plan for higher taxes. With the trillions of dollars of national debt issued this year and moving forward to help stabilize the economy, most tax planners are preparing for higher tax rates in the future. It is critical to take advantage of the low tax rates now to reduce your taxes in the future.  While we can’t control the return of our investments, we can control the taxes.  Perhaps a small tax bill now will keep you from a large tax bill later.
  • Stay invested. Many portfolios got hammered in the first couple of months of the pandemic. But despite the uncertainty and volatility of these times, it’s advisable for pre-retirees to stay invested inequities. Staying invested is usually wise because history shows equity investments will recover in time, however it is more important now than ever to know what you own.
  • Review and re-evaluate. Current circumstances necessitate reviewing your entire retirement plan. Work with your financial advisor to adjust where needed. A job loss or other reasons for less income means you’ll fall behind on the savings rate you expected, and that could mean possibly delaying retirement. Spending less or working longer can help you recover some of the pandemic-related losses. As circumstances change, revisit your plan.

The pandemic may affect or push back the retirement plans you made several years ago, but take comfort in the money you’ve saved and know that you can regain some control of your plan with patience, careful thought, and wise action.

About Dennis Notchick, CFP®

Dennis Notchick, a certified financial planner for Stratos Wealth Advisors (www.dn.stratoswealthadvisors.com), has been serving high net-worth families and business owners since 2008. A certified financial planner since 2010, Notchick has worked with many well-respected firms on Wall Street and provides consulting on investment management, retirement planning, and holistic financial planning. He’s been published or mentioned in numerous online financial publications, including The Wall Street Journal, CNBC, and TheStreet.

Investment advice offered through Stratos Wealth Advisors, LLC, a Registered Investment Advisor. Financial services offered through Stratos Wealth Advisors LLC (“Stratos”), a Registered Investment Advisory Firm. The presentation of these topics is for general information only and is not intended to provide specific advice or recommendations for any individual. The information also does not intend to make an offer or solicitation for the sale or purchase of any product or security. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here.

Vaughn Lowery, Alejandra Villagra, illustration, 360 MAGAZINE

5 Reasons You Should Create A Financial Budget

To successfully manage your finances, you must create a budget and stick to it. This may not be easy at first, but it is a rewarding endeavor that will benefit your life. Getting a handle on your hard-earned money makes a huge difference in your lifestyle. Making a financial budget is necessary to live a full life because your choices can make or break you. Here are the top five reasons why you should create a financial budget.

Gives You Control

Your financial budget will give you more control over your money. You will know how much you earn, where every penny is going, and how much you need to save each month. Everything is enumerated, so there is no room for errors. With this roadmap, you have a clear grasp of all your assets and liabilities. It will prevent arguments and protect your relationships because everyone in your family is on board. You all have a clear picture of what is happening with your funds, which helps avoid misunderstandings and arguments.

Helps Attain Goals

A budget is akin to a blueprint that will help guide you into achieving your financial goals, both short-term and long-term. Whether it is setting funds enough for investments, buying a new house, saving money for your kids’ college tuition, or preparing for an emergency, having a definite plan on how to get things done makes you more efficient. You can prioritize your objectives, so you can readily devote your resources to the things that matter to you. With a plan in place, you can crush your goals without getting super stressed out. As the saying goes, people who fail to plan, plan to fail. If you want to hit your targets successfully, you must be willing to do your part.

Keeps You Honest

When you document all your expenses down to the last cent, it allows you to see how you are spending your money concretely. You don’t get surprised that your paycheck has been depleted at the end of each month. With this mindset, you avoid nasty overdraft charges and steep credit card feels. When you hold yourself accountable every day, there is less risk of impulse purchases that drain your savings. When you are true to yourself about your spending habits, you can quickly achieve your goals.

Helps Improve Your Habits

It is a terrible habit to spend more than you earn. This sets you up for a lifetime of misery because you will be immersed in debt. If you continue your bad habits, you set yourself up for financial ruin. By accounting how much you spend and making a budget for your needs, you will make better choices. With these in place, your warning bells will ring when you notice that you are headed in the wrong direction. Consequently, you can take the necessary steps to avoid trouble by inculcating good financial habits. Keeping a budget or financial plan also trains you to be more systematic and consistent with your record-keeping.

Deters Debt and Improves Credit

With a solid financial plan in place for yourself and your family, you are in complete control of your spending. You can make adjustments with your choices if your budget doesn’t cut it. You may also be able to determine ways to help address your existing debt. Moreover, your budget will prevent you from accruing more debt and entering a dangerous downward spiral. When you have your plan in place, you are motivated to pay your bills on time because you see the results firsthand. All of these elements work in conjunction to help you build a good credit score. Better credit gives you more favorable options to lean on during financial emergencies.

Final Word

Crunching numbers may not be as fun as going on an all-out shopping spree, but you need to be more financially responsible as this equates to a better overall quality of life. Having a financial budget prevents you from spending money that you don’t have. Crafting a detailed budget that everyone follows is the only way to achieve real security for your family. Apart from keeping your short-term spending in check, it also sets you up for a more solid long-term financial future.

Opinion: Will tariffs really raise consumer prices?

 
President Trump recently raised tariffs on $200 billion worth of Chinese exports and threatened to impose import duties on all Chinese goods coming into the United States.  Will American prices rise substantially as a result? This is a loaded question, because contrary to popular belief, tariffs don’t always raise prices.
 
One alarming study from The Trade Partnership, a think tank, estimates that an average American family of four may have to pay an extra $767. And if all Chinese exports are taxed, the cost could rise to more than $2,000.
 
However, the effects of tariffs on prices are not as straightforward as they may appear at first glance. Indeed, until the pioneering contribution by the late Lloyd Metzler, a University of Chicago professor, the question was not even explored. It was taken for granted that tariffs automatically raise the prices of imported goods. But Metzler’s article, known in the literature on international economics as the Metzler Paradox, changed this view once and for all. Let us analyze the problem without hysteria.
 
Tariffs have two effects on prices: one tending to raise them, the other tending to lower them. The overall impact depends on which effect is stronger.
 
It all comes down to supply and demand for goods in China. The United States is a large importer of Chinese products, so tariffs will cause a huge decline in American demand for Chinese goods because of the initial rise in prices. But as demand falls substantially, the prices of exportable goods inside China will also decline substantially. 
       
Assuming that transportation costs are minimal, as they are nowadays, the American price of a Chinese product is determined as follows: American Price = Chinese Price(1 + t), where “t” is the rate of tariff. From this formula, it is clear that there are two countervailing effects on the U.S. price of Chinese goods. A rise in the tariff rate initially tends to raise it, whereas the resultant fall in the Chinese price tends to lower it. The final effect depends on whether the Chinese price declines more or less than the rate of tariff.
 
As a simple example, suppose Walmart imports a shirt from China for $20, and then faces a 25 percent tariff on that import. If China’s price is constant, then the same shirt will now cost $24. But the Chinese price cannot stay constant. Since the United States imports a vast number of Chinese shirts, the demand for Chinese shirts will fall sharply, and that will lower the Chinese price. Say this price declines to $18, then a 25 percent tariff will raise its U.S. cost by one fourth to $22.50, which is still higher than its free-trade cost of $20.
 
At a Chinese price of $16, the tariff-inclusive price will be the same as the free-trade price. But if the Chinese price were to fall below $16, the cost to Walmart will be less than $20. Thus, it all depends on the forces of supply and demand inside China. 
 
The extent of the Chinese price decrease depends on the cost of producing a shirt. If this cost is low, then the price decrease can be large in the wake of declining demand, because a producer can still make some profit. Since Chinese wages are much lower than American wages, the Chinese cost of producing a shirt is likely to be very low, in which case the Chinese shirt price can fall substantially. If that happens, American prices of goods imported from China could actually decline.
 
Indeed, this may explain why thus far the U.S. tariffs that were imposed on Chinese exports in September 2018 have not been inflationary. In fact, even the Federal Reserve has been surprised by the recent cooling of core inflation and, as a result, pledged not to raise interest rates any further.
 
So the American consumer has nothing to worry about, especially when the consumer can easily switch to imports from other countries.
 
Large trade deficits with China have decimated American manufacturing and wages. U.S. industries need a revival, and tariffs are indispensable toward this purpose. In 1800, at the start of the American republic, barely 5 percent of the U.S. labor force was employed in manufacturing; today, according to the Economic Report of the President, 2019, the share is about 8 percent — vastly below the 30 percent figure that prevailed in the 1960s. 
We are very close to where we were in 1800, and clearly, the manufacturing sector still needs a lot of support.
 
Note that under Abraham Lincoln tariffs were as high as 60 percent. As a result, following the Civil War, American manufacturing became the envy of the world. By 1900 the United States was among the nations with the highest living standard. Even though tariffs were high, prices fell or remained stable for several years. 
 
Such price behavior helped raise the overall standard of living. When a 60 percent tariff rate could not harm the American consumer, how can a mere 25 percent? Free trade has been the holy grail of international economics for decades, but historically, the fastest growth in the American living standard has occurred under the umbrella of tariffs.
 
Ravi Batra is a professor of international economics at Southern Methodist University, Dallas, Texas. He is the author of The Myth of Free Trade. His latest book is End Unemployment Now: How to Eliminate Joblessness, Debt, and Poverty Despite Congress.

THE ECONOMIST x OPEN FUTURE

The Economist, a leading source of analysis on international business and world affairs, today announced “Open Future”, an editorially driven initiative (www.economist.com/openfuture) which aims to remake the case for The Economist’s founding principles of classical British liberalism which are being challenged from all sides in the current political climate of populism and authoritarianism.

“Although the world has changed dramatically since James Wilson founded The Economist to fight against the Corn Laws, the liberalism we have championed since 1843 is as important and relevant as ever,” said Zanny Minton Beddoes, editor-in-chief, The Economist.  “Yet the core tenets of that liberalism—faith in free markets and open societies—face greater resistance today than they have for many years. From globalization to free speech, basic elements of the liberal credo are assailed from right and left.”

Content for Open Future will be developed and organised around five themes: Open Society (diversity, and individual rights versus group rights); Open Borders (migration); Open Markets (trade, markets, taxes and welfare reform); Open Ideas (free speech); and Open Progress (the impact and regulation of technology). In addition to content from The Economist editorial staff, the Open Future hub will feature commentary from outside contributors, including from those with dissenting points of view.

The initiative launches with a debate between Larry Summers and Evan Smith about no-platforming and free speech at universities. Mr Summers is the Charles W. Eliot University Professor and President Emeritus at Harvard University. He served as Secretary of the Treasury for President Clinton and as the Director of the National Economic Council for President Barack Obama. Evan Smith is a Research Fellow in history at Flinders University in Adelaide, Australia and is writing a book on the history of no-platforming.

A special report on the future of liberalism written by editor-in-chief Zanny Minton Beddoes will appear in the newspaper’s 175th anniversary edition dated September 15th. And on that Saturday, the newspaper will host the Open Future Festival, to be held simultaneously in Hong Kong, London and New York. There will also be an Open Future essay contest for young people; surveys and other data visualizations; podcasts; social-media programs and new video from Economist Films.

DISCOVER SOUTH AFRICA x TAX REFUND

It is that time of the year again, when Americans start preparing their tax returns, but there’s good news as most taxpayers can expect to receive an average refund of $2,895 according to the IRS. This year, South African Tourism is once again launching its Tax Refund campaign to encourage savvy travelers and adventure seekers to make the most of their refund with an out-of-this-world trip to South Africa. Partnering with the top US travel trade partners South African Tourism unveils six new exciting packages priced between $1,700-$3,200 to reflect the average tax refund. The packages offer a variety of experiences focusing on romance, adventure and culture throughout South Africa.

 

Today’s favorable exchange rate also guarantees US travelers’ hard-earned refund money goes further than ever in South Africa. South African Tourism is also excited to collaborate with TurboTax® this season on a blog post inspired by South Africa’s 10 most Instagrammable locations which will be live onwww.blog.turbotax.intuit.com/.

 

Whether a history buff, art and culture enthusiast, foodie, adventurer or nature lover, South Africa has something to offer every discerning traveler looking for an affordable vacation. This year’s exclusive deals include:

 

 

  • Gate 1 – 8 Day South Africa Tour with Game Drives & Flights — 8 days and 6 nights
Enjoy the best of Cape Town by exploring Table Mountain and then visit either the Winelands or Cape Peninsula. After a few days in the “Mother City,” head on to Johannesburg to transfer to the safari portion of your trip. You’ll be able to spot all kinds of wildlife while enjoying South Africa’s natural beauty. From US$1699/ Per Person Sharing (includes US $260pp savings with promo code SATD260).
This week, you’ll take a deep dive into exploring Cape Town’s gorgeous sites and vibrant culture. Whether biking through Cape Point, whale watching from the golden shores, or hiking Table Mountain, you’re sure to fall in love with Cape Town. From US $1,999* Per Person Sharing.
  • Great Safaris – Zululand Express Safari — 6 days and 4 nights
Explore the beautiful coastal town of Durban to see a different side of South Africa. Here, you’ll experience the historical melting pot of Indian and African cultures or spend a day relaxing on the beach. Afterwards, you’ll transfer to Thanda Safari Private Game Reserve to partake in game drives and learn about the Zulu tribe members that originally lived there. From US $2,195 Per Person Sharing.
  • Indus Travel – Super South Africa & Dubai — 13 Days and 9 nights
Guests can explore the vibrant city of Johannesburg and a guided tour to the Soweto Township, a cultural melting pot with a wealth of heritage sites that will fascinate any visitor. Visit Kruger National Park before continuing on to Stellenbosch in the heart of the Cape Winelands. Then Visit Cape Town, regularly voted one of the most beautiful cities in the world. From US$2,799* Per Person Sharing.
Enjoy scenic beauty, culture and world class restaurants in Cape Town. Marvel at spectacular views of the Atlantic seaboard from the top of Table Mountain. Explore the Cape Peninsula, on a full-day tour that offers dramatic scenery and endearing penguins. From US $2,999* Per Person Sharing.
Experience the perfect mix of safari and city with this trip to South Africa. After 3 nights of game drives in malaria-free Pilanesberg Game Reserve, couples can retreat to the beach suburb of Cape Town to relax. From US $3,199* Per Person Sharing.

 

 

“South Africa is blessed with breathtaking natural scenery, world-class safari experiences, and adrenaline pumping adventure activities; and with celebrations around the Nelson Mandela Centenary planned throughout 2018, now is the ideal time to visit,” said Bangu Masisi, President of South African Tourism, Americas. “These packages from our partners showcase the variety of exciting travel experiences that are made possible by using your tax refund”. To book these packages or view additional South Africa travel deals, please visit southafrica.net/deals. For more information on South Africa’s rich and diverse offerings visit www.southafrica.net, follow @SouthAfrica on Twitter and @VisitSouthAfrica on Instagram and Facebook.