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From CNN: “During his campaign for the presidency, Barack Obama explained where he stands on many of the economic issues that matter most to Americans.”

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There’s an individual who comments on The Simple Dollar (and a few other personal finance blogs) who identifies him- or herself as “Minimum Wage.” This person is singularly focused on the issues of low wage earners, and while his/her comments can be frustrating, sometimes Minimum Wage is really effective at pointing out how some advice simply isn’t appropriate for people in that situation. What good is portfolio advice to a minimum wage earner? What good does it do to talk about how to buy a $200K+ house when you’re making $7 an hour? Not much.

I know where Minimum Wage is coming from. I grew up in a household with a far below average income, and while we may have done all right for ourselves, I grew up around people who existed in true poverty. Thankfully, I was able to take advantage of the great opportunities that life offered me – and the great foundation that my parents gave me as a person – and was able to find a better, financially healthy life where I could raise my children without a regular sense of necessity underlying day to day life.

But what can a person do if they’re in Minimum Wage’s situation? Here are the ten things I would do if I found myself only able to earn minimum wage.

1. Go rural.
It is far, far easier to make a living on minimum wage in a rural situation. There are many small towns where you can find a room to rent for $100 a month and a small apartment to rent for $200 a month. Yes, these really exist – I see them fairly regularly when I get out in the more rural areas of Iowa. Even better, these areas often have lots of jobs for minimum wage workers – I see lots of help wanted signs around these towns and notices inside of town halls and gas stations looking for workers.

2. Don’t drive.
A car is a giant money suck. There’s no ifs, ands, or buts about it, if you’re working minimum wage, your car is killing you. Ditch the car – get whatever cash you can from it. Then choose a place to live where you can get to work by foot or by bicycle. In a small town, it’s pretty easy to reach any other place in the town (and many places in the nearby countryside) on foot or by bicycle, and it’s something that people often do to cut corners.

3. Find the free stuff.
In towns of any size, there are resources available for the impoverished, from free dinners at churches to food giveaways to soup kitchens. The library provides free entertainment in the forms of books, music, and internet access. There are parks, recreational activities, and countless other things even in the smallest of rural towns. Look around for the free stuff and use it – it’s there for everyone to utilize. When you must spend money, be as frugal as possible. Ramen is very cheap, filling, and full of carbs, for example.

4. Don’t be proud.
Pride often keeps people from walking into a soup kitchen. Don’t let it. That kind of pride is an obstacle ground into you by a life in a consumerist society. People who are there to help you want to help you stand on your own two feet – give them that opportunity. Look for every opportunity to help you with your situation, from consulting to WIC to Medicaid to welfare (regardless of my political feelings on it, it’s definitely a resource someone in that position should use). If you don’t know where to start, start off by asking a pastor or a clergyman for help.

5. Minimize your required commitments.
Repaying debts? Call the debtors and explain your situation and ask for an abatement. This won’t get rid of your debt, but it can minimize your requirements for the time being. If you have children that you simply can’t support, look for opportunities to help you with that burden – your family is a great place to start, for example. Don’t saddle yourself with burdens heavier than you can carry or you’ll do nothing but collapse. You don’t become strong by carrying 500 pounds of weight on your back – you become strong by learning how to carry ten pounds, then adding more as you go along.

6. Take every side opportunity you can.
There are all sorts of little opportunities to make more money if you pay attention. Doing things like helping someone shingle a roof for $10 an hour cash is an opportunity you can’t let pass by. Free meals? Take them. Twenty bucks for helping an old man clean out his garage? Do it. Ask around for odd jobs and other small-scale moneymaking opportunities – perhaps even get started on your own “handyman” business.

7. Minimize your possessions.
There are a lot of reasons for doing this. The biggest one is that the more stuff you have, the more money you’ve wasted. Also, fewer possessions mean that you need less room to live. For a while, all of my worldly possessions (clothes included) fit in a single Rubbermaid tub – and that made it extremely easy to actually live in someone’s living room for a while.

8. Make a steely commitment to succeed.
Even after you’ve done all of this, it still takes some serious commitment to make all of this work. You can get yourself in a position where you’re not spending more than you make, but it takes commitment to stay there. Remind yourself every day that you’re not going to waste money and that you’re going to spend less than you earn this week – and this month – and this year. That’s the one way you can get ahead.

9. Save automatically.
So what do you do when you are making more than you’re spending? Take that extra money and put it into a savings account. But just doing that every once in a while won’t cut it. Keep most of your money in a checking account, then go to the library and use the internet access there to set up an online savings account with a big bank, like ING or HSBC. Set up an automatic savings plan there to withdraw $10 a week from your main checking – or maybe even more. Then walk away and forget about it. What will happen? After a year, you’ll have $530 or so in the account. If you’ve put in more weekly, you’ll have even more.

10. Educate yourself.
While you’re putting yourself in a better financial place, spend your spare time educating yourself. Take classes at the nearest community college and work towards some kind of degree. If you need to, transfer to a state university – if you’ve been working on minimum wage for a long time and are actually making strong progress towards a degree, they will help you big time with paying for it. The key is getting started – see what your local community college has to offer.

One final tip: don’t give up the dream.
If you’re working a minimum wage job, either you’re very young, very lazy, or very unlucky. All of these can be overcome, but they take time and commitment and a lot of hard work. It’s very easy to give up the dream of a better life when you’re doing this. Don’t. You can succeed and you will succeed if you spend every day taking steps in the right direction. Surround yourself with people who are also fighting to go in the right direction. Don’t be resentful of people in a better situation than you – instead, use them as inspiration and realize that if you keep on the path, you’ll get there too.

Thanks to thesimpledollar.com

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Two weeks ago, I wrote an article about Financial Documents You Should Save. This list is a little different. Some legal documents are more important than others. Some you don’t need, and some you need. Some legal documents everyone should possess at all times.

Will
A will is a legal, signed document that states your wishes regarding disbursement of your property after your death. Making a will when you are healthy and in sound mind, can save your family a lot of time, energy and money when you are dead. If you die intestate, which means without a will, a large chunk of the money from your estate will likely go towards higher legal fees as well as additional taxes. If you’re wondering where is the safest place to keep your will, you could keep a copy of the document in your bank locker. Make sure you appoint an executor to the will and keep your will in a place where this individual or entity will find it easily. The executor of your will could be either an attorney or a family member or even a trust company. In the event of your death, the court will appoint an executor if you have not named one.

Letter of Instruction
It would also be a good idea to leave a letter of instruction, which is a letter informing your family about your last wishes including the funeral or burial arrangements you’d like to have and who you’d like them to notify upon your death. This letter cannot and will not be used as a substitute for a will. It is an informal letter. You could also include details about where your will and other important documents are located, the money that you owe to various people or the money that is owed to you by various people.

Trusts
Contrary to popular notion, trusts can be used by everybody and are not only for the super rich. In fact you should talk to your financial planner or lawyer about creating a trust. Whatever assets you place in your trust will automatically be given to the beneficiaries; there are no probate costs involved. A revocable living trust states who will have control over your assets while you are living as well as when you are dead.

Durable Power of Attorney for Health Care
This legal document ensures that in case you were to become incapacitated, your affairs will be looked after as per your wishes. If you have not named one, the court will appoint someone they deem most appropriate. It is also called a living trust and the person nominated will be responsible for taking care of your health care as well as your financial arrangements.

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Some people have a hard time controlling their financial fears. There are various simple situations that often get out of hand because of unfounded fear. Let’s take a brief look at them and see how we can handle them.

Fear of Not Knowing What You Want
Problem: You have a good job; you make a lot of money. Yet, you’re not satisfied with your life. You feel like something is missing.
Solution: Step back. Take a look at your life and what you’ve done so far and what you would like to do. Make a list of things that you’ve always wanted to do. Pick the most significant ones and work out steps to accomplish them. Use the money you make whenever needed.

Fear of Society and keeping up with the Jones
Problem: You make a good sum of money each month but your judgment and belief goes against spending too much of it. Yet, assuming that society won’t accept you the way you are, you proceed to spend large amounts on things you don’t even want or need.
Solution: Take a look at the bigger picture. Many years from now, how you lived is not going to count but how much you were able to save or invest will be vital to your well being. Make small but powerful decisions on how your lifestyle should change.

Fear That You May Go Broke
Problem: You’re scared stiff of falling ill or getting into an accident that will cause you to stop working and lose all your savings. You can’t have enough money right now.
Solution: Letting a probable situation affect your daily functioning is unhealthy. Every day living poses a little risk in some way, but it should not interfere in your life. Make sure you’re well-insured against potential situations and invest in a savings plan so that you can live a comfortable retired life.

Fear of Breaking Bad News about Money to Your Partner
Problem: You’ve been in debt for too long and it seems to be getting worse. You can’t let your partner know for fear of what they might say to you or what actions they might take.
Solution: Remember, your partner is just that, someone to stand with you and by you through every circumstance. It may come as a shock to them when you reveal the truth, but it is far better for them to know now, than later, when your financial standings get you into more trouble – like being denied a loan, mortgage, etc. Sit down together and make a long-term plan. Decide how to save and spend from now on, make detailed strategies and stick to them. It will help both of you in the long run.

Fear of Wealth
Problem: You’re entitled to a raise but you don’t know how to ask for it. Secretly, you think you don’t deserve it and that is what the bigger problem here is, probably.
Solution: Taking care of yourself is something you should be determined to do. Never be afraid to ask for something you know that you have earned. Make sure you are responsible for yourself and your future by accepting raises or inheritances passed down to you.

Fear of Taking Control
Problem: You know you have to start investing your money and save for the future. However, it all seems so intimidating that you’d rather not think about it now, although you know you’re wrong.
Solution: Start small. Read a few good books about investing and talk to a recommended financial consultant. Make a small investment and learn from it. Slowly explore and understand until you’re able to take bigger steps. Make sure you’ve got a savings plan too.
Overcoming these fears may not be the easiest task, but taking small, deliberate steps can get you through quicker than you realize!

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Many people save no financial records or papers whatsoever. If you are one of those people, allow me to tell you that this is a very bad idea. There are many cases in which you will be extremely relieved that you saved certain papers, or had the correct things on hand. However, with lots of financial transactions going on, it can be hard to know which ones you need to save, and which ones would be fine to throw away. Here are some of the records that you need to save.

Bank Records. You should keep bank records for at least a year, but if storage is not an issue then it couldn’t hurt to keep them forever. You can sort them according to their importance. If your checks represent large purchases, business expenses, or anything pertaining to taxes, then they are more important in the long term. You can shred the rest.

Savings Records. If you contribute your money towards a retirement or savings plan account, you should save the statements you receive. If you get monthly or quarterly statements, save those temporarily. Once you get the annual summary, make sure it matches up with the previous statements, then get rid of everything but that. Be sure to shred it thoroughly to make sure nobody else can retrieve your personal information. You should keep the annual statements forever, or at least until you are finished with the account.

Tax Records. It may seem paranoid, but it is probably a good idea to save everything related to your taxes. This includes returns, records, checks, and receipts. The IRS performs many audits each year, and these can be a nightmare if you haven’t got the proper records. But, if you’ve got everything sorted out and you’re as honest as possible, you can get through it with minimal stress. The IRS has a certain period of time during which they can put you under suspicion for anything they notice in your filing. This period is 3 to 6 years depending on what exactly the problem is. So, you should keep all tax-related documents for a minimum of 7 years.

Bills. You should keep your bills for about a year. Once a year, go through the ones that you have saved up. If the transaction is finished and everything went smoothly, feel free to shred it. However, if the bill is for a big purchase, you should hold on to the bill permanently. It will come in handy if you ever have to deal with warranties or insurance, in case the item gets damaged, stolen, or lost.

Filing 101 – What to do next A good way to make sure they are in order is to keep a filing system. Start by identifying convenient areas for 1. Regularly used or “current” files. 2. Hardly used or “dead” files 3. A safe deposit box that would store any document that are expensive or hard to replace

If you’ve got documents and you aren’t sure whether to keep them or not, it’s probably a good idea to keep them. You never know when it will come in handy to have proof of your financial activity.

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When I was a young guy working for a tiny paycheck, I actually looked forward to tax season because I knew I would get a nice chunk of money back from the IRS. I wasn’t aware that the money I was getting back was not actually free money, but was essentially a 0% loan I gave to the government. Today, I take a much different approach. My goal each year is to get exactly $0 (i.e. no money received and none paid) for my tax refund. This takes a little planning at the beginning of each year, but, in the end, it’s worth it. For this example, I will assume my salary will be $70,000 paid weekly, and my taxable income will be $50,000. Here are the steps:

1. Estimate your taxable income

This step is a bit of a guess, because the IRS does not give out this year’s tax forms until the end of the year (i.e. tax year 2007’s tax forms won’t be released until approximately October of 2007). I use the previous year’s forms which you can search for at the IRS’s web site. Don’t try and take the quick way out by just looking at the tax tables. If you do, you’ll be leaving money on the table, because you will not take into account any deductions. As I mentioned earlier, this example assumes my taxable income will be $50,000.

2. Calculate the income that doesn’t need to be taxed

In our example, the salary is $70,000 and the estimated taxable income is $50,000. Since employers tax the full income (assuming 0 allowances), they will withhold taxes on not only the $50,000 of actual taxable income but also the $20,000 difference. The taxes on the $20,000 is what you will receive in a lump sum at tax season if you do not increase your allowances. Divide this amount by the number of paychecks you receive in a year – 52 for weekly, 24 for semi-monthly, etc – to prepare for the next step. In our example, we divide the $20,000 by 52 to get $384.62.

3. Calculate your maximum allowances

We can calculate this number with the help of the following table:

Simply divide the number calculated from the last step by the amount corresponding to your payment period. The resulting amount is the number of allowances that will cause you to owe nothing at the end of the year (and receive nothing). For our example, divide $384.62 by the amount in the “Weekly” row ($65.38) to get 6 (rounded). That’s it! Now you can use the extra money to pay down your credit cards, other high interest debt, or, if you are lucky enough to be debt free, invest.

Warnings!

If you rely on the tax refund as a savings tool for paying off credit cards or other debt at the end of the year, you probably shouldn’t try to maximize your paycheck. This method is an ESTIMATE. Please consult a CPA for an exact amount. You can be subject to penalties if you underpay taxes throughout the year by too much.

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Looks like the impenetrable wall of the IRS has been pierced – at least a tiny bit. Tommy Cryer, an attorney from Shreveport, Louisiana, was unanimously found not guilty on two counts of failure to file. I’m not sure I fully understand his argument, but I believe he is claiming that the paycheck he receives is not profit and therefore can not be taxed. Cryer said, “What I earned was my own personal labor. I am giving something in exchange. I’m giving my property and I don’t belong to anyone else.”

Although I have no leanings one way or the other on income tax and its legality, the government needs taxes to sustain itself. If these taxes don’t come from income taxes, they’ll come from some other method of taxation.

Found at Consumerist.com

Originally from Shreveport Times

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