The Deception About Your Money

Are you one of the many people who go to work daily, receive a “decent” paycheck, not spend extravagantly, but still not have any money? Do you do all that you know how to “Keep Your Money Yours,” but in the end are just left wondering where your money goes? If you know anyone like this (hint, hint), please consider this.

Like the average American, I make and spend money. But as a financial professional, I study money and its comings and goings, causes and effects. It is as a student of money that I have observed a few covert contradictions within our monetary system. For instance, I have a friend who has a master’s degree and makes $32,000 a year using it. But her student loans totaled over $65,000. Oh, I know that it is said that those with a college degree make more money over their career, but that same source doesn’t tell us how exactly how much this education costs. And from my experience, I have found that it indeed does cost a pretty penny.

It seems to me that our current monetary system has structured itself to make money at every turn. Let’s ask the opening questions again - are you going to work daily, making what you refer to as a decent income, and still feeling broke? Are you wondering where all your money goes? Even if you have taken “control” and run a monthly budget for your household, are you still coming up short? Are you puzzled, confused and left wondering where your money goes? From my training and experience as a financial advisor, I can see a culprit possibly guilty of causing our plight…….taxes! Those insidious, pervasive, siphoning vampires that erode all of our money each time we generate it.

Think about your dollar. Let’s just run this example together for fun. Pull out your W-2 that you took to your accountant (or heaven forbid, H&R Block). Look at it closely. Say your annual income from your employer is $50,000. The average federal withholding is 15%. So already your bring home is down $7,500. Social Security (FICA) withholds 6.2%. At $50,000 you lose another $3,100. Medicare? That is an additional 1.45% that results in a loss of $725. Let’s not forget the state (if your state doesn’t tax your income, count yourself lucky.) At an average state withholding rate of 4%, another $2000 is out the window. Columbus? Whitehall? Dublin? These greedy tax monsters gobble away $1000 (2%) from your plate. So you made $50,000 right? In the words of Wayne and Garth, NOT!

Please recognize that these amounts all come from the same amount of money - the taxable amount isn’t reduced by the last entity's tax take. But, you ask, isn’t that double taxation? Yessiree! I believe the phrase “quadruple taxation” is more appropriate. Breaking this down (or adding this up) leaves you with only $35,675.

Lest we forget, we must include sales taxes that are imposed on the remaining dollars, along with telephone taxes, cable taxes, electricity taxes, mandated licenses and registrations that we pay regularly. (One of my favorites is speed traps! Wouldn’t it be nice to just stop random people (or in some cases, targeted people) and demand, oh $80 from each of them? And how about causing them inflation (in the form of higher insurance premiums) in the meantime?)

Oh, but you say, at the end of the year, you do your taxes and get a refund. How comforting.

Throughout the year the average person is thinking he/she makes $50k per year and is correspondingly spending that amount. Spending how much? Yes, spending the amount he/she is told he/she makes - - $50k. I am sure we can all agree that while spending $50k when there is only $35k available is not healthy, it can be done. How, you ask? Well, Grassphoppa, it is called credit. (Off the topic trivia - - did you know that the word 'credit' comes from the Latin word 'crede, credere' which means to believe? We get the words credential and credible from this root word. Hence "The Incredible Hulk" -- his existence is hard to believe. Thus when you receive credit, it is believed that you will repay." Hmmmmm. How interesting. Now, back to our story.) While debt itself isn’t necessarily bad, continually spending more than what is available causes what is known as a deficit. Over time this accumulated debt erodes the power of the current money.

This is the proverbial "rest of the story" as to why many people have no money and googobs of debt! Kind of quiet erosion, don’t you think?

The result of this is that the average person (aren’t we all?) goes to school, gets a little job, spends his money on nice clothes, a little car, pays insurance, graduates, goes to college, begins accumulating more debt, gets a school loan, graduates, get a job with an annual income about 75% of his total student loan balance, moves back in with parents while he saves money, gets an apartment, tries to save money and pay off debt, spends like he makes the full annual salary he receives, goes further in debt, is dazed and confused, seeks escape through buying those aforementioned affordable items (entertainment, material goods and clothing) telling himself he "deserves it", goes further in debt, never quite understands what is going on, becomes more frustrated, hates his job, becomes depressed (obsessed, violent, or any other of the myriad of human responses that come from confusion), loses his drive to excel, sees no way out, forfeits his dreams and ultimately dies an unfulfilled person. All the while this quiet erosion is effective at this person's expense! I am sure we have all heard of a saga like that.

You ask, “What can I do about it?” Educate yourself on the principles of money and utilize them. Set up an objective financial program and plan for your future. Time does sneak up on us quickly and the best we can do is plan for tomorrow. (And we know how difficult it is to plan.)

I hope you have a different idea about the average American’s situation and are empowered with the knowledge of what is going with his/her money. And as they say, “Knowing is half the battle!”

Until then, in everything you do, strive to "Keep Your Money Yours!"

Always committed to you,

Uncle Izzy

Uncle Izzy is a financial professional who, for over ten years, has been training his clients how to optimally utilize their money. A published author, tax and business consultant and public speaker, Izzy is committed to educating everyone on the prudent applications of money.