Bonjour mis amis! Cette newsletter arrive du France, ou est cette auteur pour deux mois pour regard le clime economique et political de l’Europe...mais est comme ca truque de “Flight of the Conchords”. Parlez-vous Frances? Eh...no.
So fear not, that will be the end of the French. Language, anyway. The French themselves will be around for a while still. Despite themselves.
We managed to catch part of the Tour de France last week...and by “catch”, I mean there was a parade of...floats? But they weren’t really floats, they were decorated cars. One was a giant chicken. And they going at a solid 20mph, too, not your leisurely float pace. And people were harnessed in to the top/back/sides throwing knick-knacks at you as they whizzed by.
After accumulating a big pile of free loot, you wait and wait and then watch some cars go by with about three times the value of the car in bikes on the roof rack, and then BAM! The riders fly by and are gone in about 10 seconds. There wasn’t even time to look for the different jersey colors, though in hindsight we got a good picture of Peter Sagan and whoever was king of the mountains in Stage 15. There’s probably a nice, drawn-out analogy there between cycling strategy and investing...teamwork, pacing, endurance, and so forth. But that’s not where we’re going with this. No. Instead, we are going to take you on our own little tour of France, and try and discern what makes the French so, well...French.
Happy tax month! Except for a couple accountant friends on the island, tax season is generally a giant pain. But once they’re done, most people are thrilled to receive a tax refund - who doesn’t like free money, right?
Consider the flip side of that coin, if you will: a tax refund really means that you loaned your money to the government last year at zero percent. Actually zero, too, not the 0.01% “zero” your checking account earns. If you owe taxes, you got an interest-free loan from the government last year. No credit check necessary!
At a high level, here’s how taxes work: Start with gross income; subtract “above the line” deductions to get “adjusted gross income”; subtract “below the line” deductions to get “taxable income”; look up your tax in the tax tables; compare to how much you actually paid during the course of the year; done.
If you want a detailed list of all possible deductions, start with Wikipedia. Then hit the IRS website, but have a hefty supply of your favorite caffeine source handy. This article is not going to tell you why planting trees in your backyard won’t qualify for the reforestation expense deduction. But it will give you a few broadly applicable suggestions to reduce future years’ tax bills.
Calendars are pretty arbitrary, especially when it comes to investing. I mean, sure, the development of the calendar as a means of tracking the passage of time makes sense, especially when it is based on observable patterns like, say, phases of the moon or positioning of the sun. But to use January 1st as the starting point for measuring investment performance is meaningless. I could just as well tell you about your portfolio’s performance since the first new moon after the vernal equinox - you’d probably look at me like I was crazy, but really there’s no difference between the two. They’re both arbitrary points in the flow of time that are equally irrelevant to you as an investor unless you actually invested your money on that particular day. And since the market is closed on January 1st, that is exactly nobody. Ever.
Welcome to the second annual installment of our April tinfoil hat series, where we role-play Al Gore and attempt to shine the harsh light of inconvenient truth on the crumbling facade of government narrative.
Last year we looked at the “War on Cash” (update - anybody else catch Apple CEO Tim Cook saying “I’m hoping to be alive to see the elimination of money” earlier this year at their annual shareholder meeting?...). This year, we’re going to take a look at the “Silver Tsunami” (catchy, but blatantly stolen unfortunately - can’t take any credit for coining that one) headed our way. We originally wanted to also spend a little time mocking the charade that is government data releases, but that turned out to be too long and dry even for us. Maybe next year.
Silver Tsunami, or Lies That Pension Plan Tell and Why Your Taxes are Going Up
T-minus 1 month! To what, you may ask? Why, Tax Day of course! For the most part, we feel that “tax” is shorthand for “government theft” (sure, we agree with the principle of a certain level of taxation in order to fund certain iterations of social benefit programs, but without getting real deep down a policy and government bloat rabbit hole, let’s just agree that taxes are a pain and move on), and yet Tax Day fills us with a giddy sort of joy. Why, you may ask again? Freebies!
Great American Cookies is giving away a free birthday cake cookie. Schlotzsky's is apparently giving away a sandwich with the purchase of a drink and a bag of chips. And we have no idea what a HydroMassage from Planet Fitness is or if we would even want one, but evidently those will be free too.
In the “not free, but I see what you did there” department, Bruegger’s is selling a baker’s dozen bagels and two tubs of cream cheese for $10.40. Or $10.47, if you want to include the sales tax that will be applied. A little bit ironic, don’t you think?
Most people are thrilled to receive a tax refund in April. It feels kind of like free money, right? Consider the flip side of that coin for a second though - a tax refund really means that you loaned your money to the government last year at a zero percent interest rate. Actually zero, too, not the 0.01% “zero” that your checking account is getting you. If you owe taxes, on the other hand, you essentially got an interest-free loan from the government. Mmmhm. Morty’s Mind Blowers has nothing on us.
So. In honor of St. Patrick’s Day, let’s take a look at how to keep a little more green in your pockets and out of the clutches of the vampire squid of government.
We take an inordinate amount of pride - nay, a fiendish diabolical pleasure - in playing little games that one-up the financial system. For example:
A few years back (8 years ago, to be precise), Bank of America had this thing going - any debit card purchase would get rounded up to the nearest dollar, with the difference being transferred over to your checking account. Apparently they wanted to try and help people save really tiny amounts of money? So say your morning coffee costs $2.85. You would see $3 come out of your checking account and $0.15 get transferred over to your savings account.
As an added incentive, Bank of America offered to match your savings “round ups” for the first six months, up to something like $500: free money!
So. Yours truly was in business school at the time, and taking the T everywhere, which cost…$2.00 a ride back then if memory serves? Anyway, the point is, instead of loading even-dollar amounts on the Charlie Card, I would load the minimum amount possible, to get the biggest savings round up and therefore the biggest match from BofA.
(For those curious, five cents is the minimum amount you can load on a Charlie Card at any one time, and you can only do four add-value transactions in a 1-hour window...so yes, multiple times a day I would trek to the T station and load five cents on to my card four times. By the time I had enough loaded for an actual T ride, I had gotten a free $38 from Bank of America. And yes, of course I got the full $500 from them before the 6 months was up.)
A little bit obsessive? Undoubtedly. Slightly absurd? Perhaps. But nothing quells that giddy little flame of joy that springs up at the thought of taking advantage of the system.
And now, fast forward to the present and the end of the calendar year presents another opportunity for us to quasi take advantage of the system on your behalf: tax loss harvesting.
So this note was originally intended to be case study on insurance, but we wanted to wait until after the election hoopla had settled down. And then the election happened. What was supposed to be a brief commentary on the election to introduce the note has turned out to be not so brief, because it’s actually a great jumping off point for some huge personal finance issues like inflation and insurance and taxes and investments and the like. So we’ll look more broadly this month at potential impacts of the election on your personal finances, and then dive a little deeper into insurance with the case study next month.
A lot has been and will be written about the election. They say not to cry over spilled milk, but maybe a little tear is alright over so much spilled ink? Some of it will be spot-on, some of it will be as accurate as the polls were. We have reason for both optimism and concern about a number of issues, but for the time being and the purposes of this newsletter we will restrict our commentary to potential impacts on personal finance.
About the Blog:
Here lives our collection of newsletters, articles, and some occasional guest posts by outside authors (where indicated) who have quoted us. If you're interested, feel free to browse through the archives here.