When a business or a corporation is facing looming declines in revenue and profits, what do they do? Do they take out money from their cash reserves and run over to Wall Street and buy up stocks and bonds in anticipation of making back any of that lost revenue? Do they sop up dividend-paying securities to earn back some much needed income? Do they run over to Treasury.gov and start buying up 10, 20, 30 year bonds?
This is what businesses do when they are facing financial challenges:
- They start laying off employees
- They eliminate any unnecessary departments
- They combine departments of similar interests and discard the rest
- They lower their overhead
- They cut expenses, which may sometimes mean relocation
- They seek out lower costing distributors
- They retain lower costing manufactures
- They reduce unnecessary advertising costs
- They readjust and learn to mange their business on less
- They seek out alternatives to continue to bring in income
You and I, as individuals are facing the same financial challenges many companies are facing today. We are facing higher gas and energy costs, higher inflationary costs for such necessities as food, medical care, clothing, rent (mortgages) vehicle and home maintenance care, just to name a few. So, what are we doing about it? Are we running out and investing our money in the stock market thinking we’re gonna hit the big time? Are we looking into taking our hard earned cash and investing it in CDs, Money Market Funds or Federal Bonds?
Have you seen lately what banks are paying on both short and long term investments? The best rate we can get right now on a five year CD is 0.25%. That comes to $375 interest per year on a $150,000 investment. Tell me, what can anyone do with an extra $375 per year? Buy an extra month of groceries? Treasury Bonds are nearly paying 1.6%. That sounds a bit better but be forewarned, the current administration has raised both the taxes due on personal Capital Gains as well as raising the taxes on every single corporation in the country.
When taxes on dividend-paying corporations are raised, do you think that corporation absorbs the loss and forgets about it? On the contrary, they will be passing their costs on to you which in turn means your dividends will be lower. Add on top of all of that, your own rate of Capital Gains taxes will be raised, so in essence, you are being taxed twice. Do you think corporations will sit around and let this happen to themselves? Do you think rich people will also sit around and let this happen to themselves. Nope. They will move on and that usually means they will move off of Planet USA.
The current administration is telling the simple folk, like you and me, that they will only be raising taxes on those who make $400,000 a year and above. Think about that for a moment. Isn’t it true that it is those who are the richest, who can afford the best accountants on Planet USA, who pay the least in taxes? That’s because those super smart expensive accountants are adept at finding all the loopholes those super rich people can afford not to pay in any additional or higher taxes.
When the notorious bank robber, Willie Sutton was asked why he robbed banks, his response was “Because that’s where all the money is“. So true will be shortly when the current administration starts coming after the middle class (especially the upper middle class) when they realize that’s where all the money is. It’s really the middle classes who are brimmed with flowing cash. Plan on the Feds knocking on your front door very shortly with a plethora of additional, raised taxes if you’re middle class and earn less than $400K per year.
A classic, typical response from most humans would be that they will need to earn MORE income. Unfortunately, the only way to beat socialism (and that’s the direction America is moving to) is to earn less money. No entity can tax what isn’t there.
In the interim, what can you, as a lay person, do to combat the same financial challenges many businesses are facing today? If you take my advice and run your own life as if you were a business, you may be doing these:
- Start laying off service people and start DIYing (I cut back on my landscaper and cleaning services)
- Start eliminating what you don’t need (I bought an antenna and cut cable, satellite and streaming)
- Start figuring out the difference between a need and a want (I only buy needs now. The rest can wait)
- Start lowering your own overhead (I moved to a cheaper area in my state, to a smaller home. just bought a newish vehicle that is both electric and gas)
- Start cutting expenses to the bone (again: needs vs wants. eliminate all wants)
- Start buying only from discount stores (Learn to love Goodwill and Dollar General)
- Start buying generics (Find the same but for less)
- Start eliminating all subscriptions, membership fees etc (Learn to love every aspect of your library)
- Start enjoying living on less (That’s why you’re reading my blog because you know I’m an expert at it!)
- Start thinking of ways to bring in more income (Notice I’ve changed my format and included ads?)
I personally have found that the best way to beat inflation and rising consumer costs is to cut my overhead and seek out less expensive alternatives. I believe in the tried-and-true method of Benjamin Franklin who said “A penny saved is a penny earned“.
It’s true. Cutting costs is the same as earning more money. Only difference is (and it’s a BIG one) is that I won’t be paying higher taxes!