Saturday, September 13, 2014

"5 Tips for Investing" and a piece of advice on one of them from someone who has been there.

USA Today has very short article "5 Tips for College Students Interested in Investing".  They may seem superficial but there are heavy truths between the lines of all the suggestions.

The one I had the most trouble with when I was much younger was the dreaded Credit Card. They are SOOO seductive!
(1) The principal (what you actually paid for an item) and interest you pay on a credit card purchase, for something you probably do not have anymore, is a thief that steals (or limits) your present and future consumption possibilities. 
(2) Unless the benefit (objectively defined!) you receive on an on-going basis from the principal and interest you pay on a prior purchase MEETS OR EXCEEEDS the cost of that principal and interest, you should not buy that item today.
Number 1 is pretty close to an absolute truth, in my opinion. Number 2 is a more subjective and I am a little more queasy about because it does offer you some wriggle room for justifying a credit card purchase.

But I am not your mother!

If you can at least give your self pause and consider the above two pieces of advice when you are pulling out that card from your wallet, it might be just enough time to reconsider what you are about to do.

Wish someone had done this for me a long time ago!  :)

Thursday, September 11, 2014

How to read a "Cross Currency Rate" chart for the lesson on Foreign Exchange Rates.

One way students might encounter an exchange rate chart is in the from of "Cross Currency Rates"

It is in table form and can be tricky to read if you are not careful.  I know I have made errors in trying to read one.

I put together a very short presentation that makes it clear.  Hope it helps.

Wednesday, September 10, 2014

The wage you are paid is not the total cost to employ you. See the numbers here.

One of the many reports the Department of Labor's Bureau of Labor Statistics (BLS) puts out is "Employer Costs for Employee Compensation". It offers a pretty detailed dollar and cents look at how much it costs to employ a worker.

Here is one part of the report for June 2014. I highlighted the "Service" sector because the pay range is where most young people will fall.  You can compare it to the other two broad sectors to see the differences.

The first number in  YELLOW is total compensation which is comprised of "Wage" and "Non-Wage" compensation--$16.70.  The Non-Wage money outlay for a business is the addtional costs (some elective and some mandatory) they incur to employ you--$4.82.  This is in GOLD along with the hourly wage you actually receive after the employer pays these to (1) you indirectly or (2) other entities (insurance companies, State and Local governments, etc).

After you recieve your $11.88 per hour worked you will be responsible for additional deductions from your wage, such as Social Security, Medicare and Federal Income Tax Witholding and any other benefits you may elect to take.  Take note that the employer ALSO matches the amount you pay into SS and Medicare!

This kinda gets lost in the debate over raising the minimum wage.  Many of these additional costs are percents of wages paid so an increase in the MW is not only going to affect the actual wage paid but the TOTAL cost of employing a worker.

Useful information, don't you think? :)

Need a primer on "Tax Inversions"? Link to a nice one here.

Confused by the issue of "Tax Inversions" as brought to prominence by the Burger King/Tim Horton's merger?

This document HERE from the Congressional Research Service (HT: The Conversable Economist) is the best explanation, without the politics/inflammatory language, as I have seen.  I thought I understood the issue but this relatively short read pointed out MANY things I did not know.  Worth a read if you are interested in the topic.

Here is an excerpt:
The United States uses a system that taxes both the worldwide income of U.S. corporations and the income of foreign firms earned within U.S. borders. All income earned within U.S. borders is taxed the same—in the year earned and at statutory tax rates up to 35%.  
U.S. corporate income earned outside the United States is also subject to U.S. taxation, though not necessarily in the year earned. This occurs because U.S. corporations can defer U.S. tax on active income earned abroad in foreign subsidiaries until it is paid, or repatriated, to the U.S. parent company as a dividend. To mitigate double taxation, tax due on repatriated income is reduced by the amount of foreign taxes already paid. 
The second paragraph is the important one to get a grasp of the issue.  The US (apparently) is the only country that taxes a company on its foreign profits in addition to the domestic profits.

Because BK is based in the US, profits from its restaurants in Boise AND Beijing (Paris, London, Mexico City, on and on...) are subject to the US Federal income tax.

Now that the corporate headquarters is officially in Canada, BK will only have to pay US Federal taxes on profits in Boise (meaning all its US operations).

Do you see the incentive?

Tuesday, September 9, 2014

Education Spending in the OECD countries. How does the US stack up against the rest?

This terrific interactive is from the OECD website, the statistic gathering arm of the European Union.

See how various countries stack up in terms of spending on the various levels of education--from Pre-K through College ("Tertiary").

The BLUE line is the OECD average among the countries you see listed below.

The other tabs along the top offer interesting information regarding educational attainment.  This resource can be used for all kinds of analysis students could do in small discusssion groups.

Monday, September 8, 2014

Reason Number Infinity as to why Walmart and Costco are NOT in the same business--New Tire Edition.

I need some new tires for my 2010 Toyota Camry.  Thought I would check Walmart and Costco websites to price compare. I kinda  knew what the result would be before I checked.

I clipped the first 3 tires offered by Costco and Walmart on their websites.

(1)  If I am upper income I have a choice as to where I go for my tires.

(2) If I am lower income I effectively do not have a choice--gotta go to Walmart (for the most part).

We can slice and dice the quality and warranty offerings among the selections but we cannot argue the affordability for this immediate consumer "need".

Four lowest priced tires at Costco sets me back $440.00.  At Walmart I dole out $332.00.

The difference is $108.00.  If I earn $9.00 per hour I have to work an ADDITIONAL 12 hours (more if I factored in taxes/deductions) to get the cash for 4 new tires at Costco.

See, not the same business---if you are relatively low income wage earner.

View My Stats