Wednesday, January 5, 2011

Putting Financial Education in Perspective

I can remember vividly being a high school student, anticipating the feeling of relief as I prepared for my final examination. I wanted to move on, thinking very little about any future events beyond playing sports and hanging out with my friends. I did not consider the ripple effects of learning or not learning.

Imagine throwing a pebble deep into the center of a crystal clear pond. The result is ripples that wave one after another throughout the pond, deep from the center, slowly to the periphery.

Whether you want to hear it or not, your choice to both prepare for your final examination and apply what you have learned in this class to your everyday lives is much like the pebble hitting the pond. Your future financial choices will send a wave deep into every aspect of your life and the lives of others.

Your first wave will begin just after high school with your post-education choices and subsequent college debt. While at the same time, you will be testing your discipline with a credit card and future car debt.

Before you know it, you will be a young professional deciding whether to fill your bartenders’ pockets with your discretionary income or fill your own future pockets by adequately investing for retirement.

Sooner than you may imagine, it will shape your family’s quality of life and your subsequent peace of mind.

Eventually, it will guide your opportunity to reach financial freedom at a young enough age to enjoy retirement as others struggle to live on a fixed income, working well into their seventies.

In the periphery, lies the legacy for your future children, and your ability to prepare them for a world full of financial trickery and hidden wealth.

Just as the ripples in the pond get bigger and bigger, so will your financial responsibilities. Being financially responsible is not the result of a high school or college course, nor is it the result of being disciplined and conscience of your choices. It has to be both, and your financial education has to be ongoing.

Now as you have envisioned what you can expect as you move forward, I want you to imagine the waves of choices you will be faced with in a different lens. For a moment, envision shouldering a responsibility much greater than your own financial future. For this moment - - internalize your responsibility as a next generation American.

Our country desperately needs waves of economic change that will transform where we are and the direction we are heading. Our country needs a generation full of financially astute and responsible leadership that will guide us out of consumer and government debt massive enough to change the United States as we know it.

My challenge for you is to understand how to responsibly manage the waves of financial challenges that you will face throughout your life, while making waves for your country that will better the lives of the generations to come.

Let what you have learned in this course be the pebble that creates the first wave of change that we all need.

Tuesday, December 7, 2010


Did you know that 51% of America does not pay federal income tax after deductions and personal exemptions? Did you know that Warren Buffet has an effective tax rate lower then me?

People are taxed in different ways. Most Americans pay a variety of taxes such as Social Security tax, medicare, state income tax, property tax (directly or indirectly depending if you rent), and sales tax. Some of the ultra wealthy, like Warren Buffet pay different kinds of taxes (capital gains) which is why his effective tax rate is lower. Most of those that fall into this category only represent about .1% of society.

As far as federal income tax rates...

Tax rates progressively increase as income increases. However, the increasingly higher tax rates apply only to the income in each range, which is called a tax bracket. Also, the tax rates apply only to taxable income. Various adjustments and deductions, including the standard deduction and personal exemptions, all lower a person's taxable income. Taxable income is almost always less than your total income.

To complete the homework assignment, CLICK HERE to understand tax brackets, and CLICK HERE to understand what you will pay in taxes and what percent of your taxable income (income after deductions and exemptions) you will pay. CLICK HERE to understand deductions.

1. Assuming you are filing single, how much will you pay in federal income taxes if you earn $43,000 a year of taxable income (income minus deductions and exemptions)? 5 points

2. Assuming you are married filing jointly, how much will you pay in federal income taxes if you earn $43,000 a year of taxable income (income minus deductions and exemptions)? 5 points

3. Assuming you are filing single, how much will you pay in federal income taxes if you earn $610,000 a year of taxable income (income minus deductions and exemptions)? 5 points

4. Define deductions, provide three examples of deductions, and explain how each effect the amount of money tax payers pay in taxes. 5 points

Extra Credit: Switching gears to corporate taxes. Did you know that from 1998-2005, two-thirds of corporations did not pay taxes. Why? For extra credit, print an article that explains the ways in which corporations can avoid paying taxes.

P.S. - The Ohio State Income Tax is NOT flat and the tax rate has gone DOWN in the last eight years. Additionally, federal income taxes have also gone DOWN in the last eight years.