Guest guest Posted October 12, 2004 Report Share Posted October 12, 2004 Financial literacy is more than just about investments. At its most basic level it is personal finance. That is things like making a budget, saving, how debt works and how to use it wisely instead of getting in over your head. This is really the important part of financial literacy. If more people knew how to do just these simple things, they would be far better off. I can't tell you how many times I used to sweat month to month until I learned to make a budget and keep better track of my finances. While its still not a breeze,things aren't as tight as they were either. This is also how you can save money to begin investing. Not just one lump sum, but a little each month. Even if it is just $50 a month, or even less, learning to set that bit aside and leaving it alone, is good financial discipline. But people don't learn this and sadly many of them end up on the debt trap by their mid 20's. Quote Link to comment Share on other sites More sharing options...
Guest guest Posted October 12, 2004 Report Share Posted October 12, 2004 At 07:18 PM 10/11/04 EDT, VISIGOTH@... wrote: >This plan might also have the added >side benefit of increasing financial literacy in the country. That would >only be a good thing. It is really a crime that it is not taught in school >when it is such a truly vital skill. I definitely agree with that! While I can't use the skills now, I have been teaching myself about investing and other financial matters over the years. I had assumed that I was never taught these things because I am a woman but then I talked to various men who said that they had never been taught them either. It seems a bit more important than some of the current school curriculum I've read about. Sparrow Quote Link to comment Share on other sites More sharing options...
Guest guest Posted October 12, 2004 Report Share Posted October 12, 2004 Tom, You are right about that, on both counts. The fees and such on mutual funds can be confusing. This takes either study or having a broker explain what it all means to you. There are some that have low or no fees, they just take some looking. Taxes are the biggest problem, of course. The formula for determining what is owed is confusing and often punitive. If an invest goes up in value, that is considered a capital gain and you have to pay tax on that. The bad thing is that the IRS really expects you to pay tax on the highest amount, even if the investment later drops in value. Accountants are very handy in these cases since they know the ins and outs of the law and how to handle this in the event of a loss. My own experience with mutual funds has been hit and miss. The first funds I took the broker's advice and lost money on them. It wasn't all his fault since that was just before the tech bubble burst. The next round were down in value and I had to sell them, and they went up later. I would have made a profit had I been able to keep them. Those are the breaks. Quote Link to comment Share on other sites More sharing options...
Guest guest Posted October 12, 2004 Report Share Posted October 12, 2004 , The other thing not being taken into account is that when people invest their OWN money in mutual funds or the like, they often look at rate of return which doesn't necessarily take into consideration fees, taxes, commissions and other hidden costs. Thus their initial investments might wind up yielding significantly less than they expected. The government can hardly be expected to do much better given their mismanagement of just about every program they manage. Tom > Chile and the Texas city are doing well. The Texas city has been making > about 3 or 4 times as much as Social Security. They were pulling 8 to 10 percent > returns while Social Security had really none. > > The reason why Social Security is a scam is as follows. When it was passed > into law in the 1930s, the retirement age was 65. The problem with that was > that very few people lived to that age, especially amongst minorities. At that > time, there were also about 10 workers for each retiree. Today it is closer to > 3 to 1 and will soon be 2 to 1 and less over the next few decades. > > The next thing is that there is no " lock box " that the SS funds are put > into. The money goes into the general fund where it can be used for anything, and > often is. Some money is paid back into SS, but just enough to keep it going. > Overall, there is something on the order of a $9 trillion shortfall in the > fund. If all that money is demanded at once, or quickly over the next decade or > two, that is more money than the entire Gross Domestic Product. > > Now, the taxes for it are another problem. The SS taxes are withheld from > the paycheck directly. Not only does the worker pay around 5% but the employer > pays and additional 5%. So, the worker is paying out 10% of their income into > Social Security. For a lifetime of investment in SS, they might get $1,000 to > $1,500 per month, from which they have to pay taxes. That same 10% privately > invested at even an 8% return would net the average worker an income of > closer to $4,000 per month when they reached 65. These are pretty much the > results the Texas town achieved. > > Bush suggested letting people privately invest some of the money. That's not > a bad idea, but I think his means of doing it were wrong. Most people don't > know enough about the stock market to manage their affairs successfully. The > way it should be handled it to set up regulations governing privately offered > packages. That is, the big investment houses and the others, could put out > competing programs, though all being compliant with the law. The best bet would > be a fund divided between stocks, bonds and money markets. A division likes > this spreads the risk and allows for easy adjustment depending on the > customers wants. > > For example: a young person could take a stock heavy approach (50% or > higher) with weight given to growth stocks. A person near retirement age could > focus more on bonds and stocks that reliably pay dividends and are low risk, thus > securing their investments. It would not be foolproof of course, but then > nothing is. The end result would be money that was theirs that they could pass > on to their children or leave to charity, or whatever. Companies could also > benefit from such a plan since they could drop costly pension plans and put > money directly into their employees private funds. > > The law would also have to include a transferability clause such that > investor could swap plans between firms or plans within a firm without paying taxes > on the transfers. This is similar to the to Section 1042 (I think) that > allows real estate to be sold and the proceeds re-invested in new real estate > without paying taxes. This would encourage competition amongst the firms and > provide the best returns for the investor. By not paying taxes now, they will > have more in the future which would allow them to live better and not be reliant > on the state. > > Anyway, its just a common sense thing the is too obvious for politicians to > think of or carry out if they did. > > This plan might also have the added side benefit of increasing financial > literacy in the country. That would only be a good thing. It is really a crime > that it is not taught in school when it is such a truly vital skill. > > Quote Link to comment Share on other sites More sharing options...
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