Investing Resources

by Pat Heyman | Feb 25, 2010 | Essays, Pat

News and Current Events

Freedomwatch
Gary North
Schiff Report
Wallstreet Unspun
Peter Schiff articles
Marc Faber

Debt Elimination and Financial Planning

Deliverance from Debt
Crown Financial Ministries
Dave Ramsey

Precious Metals

Kitco
APMex
Northwestern Mint
Camino Coins
Local Coin Shops

Discount Brokerages

TD Ameritrade
IngDirect Sharebuilder

Financial and Mutual Fund Companies

(Note, there is no such thing as a sure thing. Giants, such as Lehman Brothers and Merril Lynch went bankrupt in 2008. Others, such as Goldman Sachs and AIG only continue to exist because of collusion with corrupt government officials. There are tons of companies out there, but I am only the putting the ones that I trust (due to experience and research). Caveat emptor.)
Euro Pacific Capital
USAA
Vanguard

Financial Goals

by Pat Heyman | Feb 24, 2010 | Essays, Pat

Begin with the end in mind

When we speak of financial planning, what we usually mean is saving and investing money for the future. What this means is that you have not consumed everything that you have produced (the opposite of credit, which is consuming more than you have produced). There is only one reason not to consume everything you produce today (i.e. spend all your money). That something is uncertainty.

When you save, it is because you are not certain what the future will hold in terms of your needs, the economic climate, and your ability to produce and meet those needs.

So let’s review the basic needs that you have:

• Shelter
• Food
• Protection
• Comforts

Your financial planning should include planning for these on a regular basis as well as strictly monetary considerations. For example, have you ever been to the grocery store when a hurricane is coming? The aisles are stripped within a few hours of the news, because the stores only carry about 72 hours of groceries at any given time. Although it wasn’t as photogenic as the Superdome after Katrina, the ice storms in the Midwest in 2009 caused more destruction and left many people stranded and without power for 3-4 weeks. You need to store enough food to get you through likely disasters in your chosen area.

I don’t agree with everything he says, and he can be a little obnoxious, but Jack Spirko’ The Survival Podcast is an excellent resource for every day preparedness and securing your immediate financial situation as well as your future.

Goal setting

It’s important to know where you want to go, because otherwise, how do you expect to get there? You need to set financial goals. One way of doing this is to have a savings/investment goal by age. So for example, you may want a million dollars saved up by the time you are fifty. This allows you to operationalize your goal.

For our example, let’s say you are 22, and your goal is to have a million dollars by the the time you are 50. That gives you 28 years to meet your goal. Google “investment calculator” and choose one (I like Dave Ramsey’s.) Start playing with the numbers and see what you get. For example, if your goal is a million dollars in 28 years, you would need to contribute $550/mo at 10% interest to reach a million dollars.

But how do I get there?

You may find that you need to adjust your spending habits or increase your income to meet your financial goals. Your other option is to seek higher rates of return through investing. We will cover investing options in the next page.

Budgeting

by Pat Heyman | Feb 24, 2010 | Essays, Pat

The first step in getting your finances in order is a budget. It is absolutely impossible to have sound finances and investments if you are spending more than you earn. For this page, we will assume that you have already done that. Once the only debt you owe is your house (and maybe school loans), should you begin investing.

Step 1: Identify your expenses

This is easier said than done. If you use financial software such as Quicken or Microsoft Money, it is substantially easier. Make a list of everything you spend in a month and then put the expenditures into categories. Common categories might be:

• Tithe
• Rent
• Utilities
• Cell phone
• Groceries
• Gas
• School loans
• Car payment
• Car insurance
• Entertainment
• Other

Then think of expenses that you did not have this month that are regularly occurring, such as your nursing license renewal, car registration, etc. Add those together and divide by the number of months before they recur (to get a monthly average). Add all of your monthly expenses together. This number represents how much money you must make each month after taxes just to break even.

Identify your revenue sources and estimate your taxes

You need to be able to calculate approximately how much money you will make on a yearly basis (for your taxes) and monthly basis (for your budget). Generally speaking, if you take your hourly pay, multiply it by 2 and put a thousand at the end, you will get a rough estimate of your yearly pay. For example, a graduate who expects to make $20/hour (40 hours a week, 50 weeks a year) would make 20x40x50 = 40,000.

Once you know your yearly salary, you can estimate your taxes. The most important thing to understand in estimating your taxes is the difference between gross income and taxable income. Taxable income is your gross income minus any 401(k) and IRA contributions minus your eligible deductions. There are two ways to figure out your deductions (standard deduction and itemized); for the purpose of budgeting, just use the standard deduction.

Go to the IRS website and look up last year’s tax table (in one of the 1040 instruction booklets). For example, the 2009 tax tables start on page 77 of the form 1040. Subtract the standard and personal deductions from your gross income to estimate your taxable income. Now look up your estimated tax in the tables. Take that number and divide it by 12 to come up with how much tax you will be paying per month.

But wait! There’s more! You also have to pay Medicare and Social Security tax. These taxes are paid on your gross income. Social security is a flat 6.2% on all income up to $106,000. And Medicare is 1.45% on all income for a total of 7.65%. (The tax is actually 15.3%, but by law, your employer can’t show their “matching contribution” on your pay stub because you might revolt at seeing how much of your paycheck is stolen taxed.) Oh and the income cap of $106,000 automatically goes up with inflation, so last year, the cap was $94,000, and in 2000 it was $76,000. (See, even the government knows inflation is stealing wealth.)

Calculate your cash flow and make adjustments

Now that you know your estimated taxes, add the monthly tax to your expenses. Now subtract all your expenses from your income to come up with your estimated cash flow. At this point, if you are like most Americans, you’ll find that you do not make enough money to cover your expenses. You now have two choices: 1) Seek more income, or 2) reduce your expenses— or a diabolically clever combination of the two.

It’s all about control

The purpose of this exercise is to put you in control of your finances. You wouldn’t drive your car with eyes shut, and you shouldn’t spend money without a budget.

Financial Resources

by Pat Heyman | Feb 21, 2010 | Essays, Pat

The Financial Resources are broken up into

• Budgeting
• Debt Elimination
• Basic Investing
• Financial Companies

Economics Resources

by Pat Heyman | Feb 21, 2010 | Essays, Pat

Economics is the “science” of explaining human actions, or how humans act to satisfy their wants given limited resources. Most people have little or no economic education. A famous economics professor said that for years, he had to spend most of his time refuting economic fallacies, but nowadays, he has teach his student the fallacies so that he can refute them. To begin your economics education, I recommend that you start with my “Economics Primer” essays, followed by reading Leonard Read’s Essay I, Pencil and Frederic Bastiat’s The Law.

If you read these three things, you will have more economics knowledge and education than 90% of America (well, some big number anyway). All three essays are quite short, available online, and all three could be read in two or three hours…if you’re a slow reader. Once you have completed this foundation, you should read Murray Rothbard’s book, “What Has Government Done To Our Money?”. It’s a little bit longer (about 100 small pages with large print) but when you have finished it, your economic education is adequate.

Alternatively, after reading the economics primer, you could skip straight to Crash Proof 2.0, which is a little more applicable to your immediate finances.

Economics Primer

by Pat Heyman
This is a very brief introduction to economic principles written by yours truly.

I, Pencil

by Leonard E. Read
This short essay describes the various kinds of specialized knowledge that goes in to making a pencil. No one in the world has the necessary knowledge to make a pencil, yet through collaboration, pencils can be had anywhere in the world, for less than the cost of a stamp. The essay poetically builds to its final economic lesson: that things even more wondrous than pencils are possible when people are left free to make their own choices and cooperate as they will. No one person orchestrates the pencils complete construction, but everyone involved benefits from the final product…even if they don’t use pencils.

The Law

by Frederic Bastiat
The Law is one of the founding essays of modern economics. Bastiat describes the essential ingredients for a productive society and economy. Most of The Law concerns itself with the effect of government and politics on economics. He also outlines one of the most pervasive economic fallacies, what has come to be known as the “broken window fallacy.” Imagine that a vandal has broken the window of a bakery. A crowd gathers round and at first decries the crime because it will mean that the baker must now spend some of his money to repair the window. But then some genius realizes that the glass shop will be better off, and the repairmen will then have more money, and he’ll spend it on shoes or something, and so on and so on, until the vandal is now seen as a hero.

The economic activity that was seen (the glass repair) is what people notice and think about. All of the things the baker might have done with money instead (e.g., buy his son braces, hire a second employee, buy a new oven) are not seen, and so are ignored. The truth is that wealth was destroyed by the vandal. It seems a simple lesson, yet the broken window fallacy is alive and well even today. This article chronicles various government officials and economists invoking the fallacy after 9-11 and Hurricane Katrina.

“What Has Government Done To Our Money?”