Archives for Deep Thoughts category
12
Oct
Posted in Deep Thoughts, taxes by Roger, the Amateur Financier |
I’ve been thinking lately about money, justice, and the tendency in our society to assign flat rates to goods and services. Although we don’t normally think about it, it’s pretty much par for the course; it’s too difficult (and in some circumstances, illegal) for, say, a store to charge each customer a different price. If you and I shop at the same store and buy the same thing, we will pay the same amount. (Well, that’s not necessarily true; there are any number of reasons why we might pay different amounts, from coupons to sales to membership in store organizations. Still, if you and I are charged different amounts, there’s usually a clear reason why.)
This is generally considered a good thing. If you want something that costs $X, you need to provide $X in order to fund it. In some cases, this means that you need to rearrange your financial situation so you can spend that money. Nobody will make the argument that you DESERVE to buy whatever you want at a low enough price for you to afford. For retail purchases, this just doesn’t make sense.
On the Other Hand…
But what’s good for goods and services offered by companies may not be good for money that you HAVE to pay. There are, for many offenses from traffic violations to littering, set fines that must be rendered to the police if you are caught. I’m not going to argue that illegal activity should not be punished; sadly, there are more than a few individuals out there who only keep their behavior within acceptable parameters due to such threats of punishment. Having some sort of punishment for offenses should be a part of our justice system.
Much the same can said about the family swear jar; the more you can afford to swear, the more you are likely to swear.
My concern is this: there are, with many crimes, maximum fine limits set out. As with the concept of having a fine in the first place, the logic behind this is pretty noble: you don’t want the courts to have free reign to impose any penalty they would like on any crime. If you did that, all it takes is one corrupt courtroom to take the hard-earned money from numerous people.
My qualm is this: having an upper fine limit and fixed fines for offenses means that the lower your income, the higher a portion of your income you will end up paying for a given offense. A $500 littering fee could be 5% of a $10,000 a year earner (and the difference between eating decently for a month or going hungry), but only 0.05% of a $1 million a year earner’s income. Which person is more likely to never litter?
While we’re on the subject of flat fees, there’s also the issue of per capita taxes. Similar to fines, these are paid as a flat amount per person. Unlike fines though, they don’t depend on the payer doing something illegal, but are paid every year (or more often, depending on how your tax system is structured). They suffer from the same issue, though; the less you earn, the higher the portion of your income that goes toward taxes. While these taxes tend to be rather small (my hometown, for one example, charges $10 per person, or did so the last time that I had to pay for it), they still cost more as a portion of total income the lower that said income is.
My Thoughts
My whole reason for bringing all this up is to note that sometimes, what works in one area of our social interactions (in this case, retail sales) might not be the best in other areas of our lives (like taxes and fines). While nobody (or at the least, not me) will argue that the amount you pay for goods and services should be tied to the amount you earn, I would argue that taxes and fines should be tied to what you are able to afford. The difference is the issue of choice; you have no (direct) choice over the taxes or fines you pay (you can, of course, vote for those who promise to cut down on fines and taxes, although how well that will work is an open question), but you can choose how to spend (or, wacky thought, save) your money. That difference, in my opinion, should be enough to treat those types of expenditures much differently when it comes to allowances for earning levels.
What are your thoughts on fines and per-capita taxes? Is it better to try to tailor the amounts owed to what people can pay, or simply charge a flat amount?
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11
Sep
Posted in Deep Thoughts by Roger, the Amateur Financier |
It’s the anniversary of the September 11th attacks on the United States. Not only is it the anniversary, but it’s the tenth anniversary, to boot. There is a lot that comes to mind when a tenth anniversary comes around. I know that many media sources have been providing stories about what people were doing when they first heard about the attacks, so I guess I will do the same.
Ten years ago, I was a freshman in college. I had an eight am class, so I had to wake up fairly early to make it to breakfast and get to class on time. I went to the cafeteria, ate some breakfast, and didn’t particularly notice anything wrong. There was a TV on, but the sound was turned down and I didn’t really pay attention to it. I noticed in passing that there seemed to be some sort of special news bulletin, but I was running a bit late so I didn’t pay it much attention.
It wasn’t until I got to the lobby outside of my classroom that I realized something was going on. I saw the rest of my class, over one hundred people, standing in the lobby, watching the television, largely in silence. There was some discussion about what was going on, as well as what this would mean for us and our classes, whether classes would canceled or what would happen to us in our positions as students.
It was… frightening. At that point, there wasn’t much information about what was happening, or any explanation as to why it was happening. The whole situation was the sort of thing I could have never have pictured happening. There was talk of it being a possible accident before we went into class; although by the time we were finished, it was pretty clear what had happened. In our classes, our professors tried to get us to calm down, noting that it was highly unlikely that our classes would be canceled or anything like that; Wilkes-Barre was a long distance from New York or Washington, and it was unlikely anyone would try to attack us.
As time went on, it became more apparent what had happened. It also, as time went on, became clearer what was going to happen. Slowly, as the hours turned to days, the days turned to weeks, and the weeks became years, life started to return to a more normal style. For all the talk of how everything had changed, things seemed to return to normal.
That’s the thing about life: it goes on. I can’t guarantee that the next ten years will be any better than the last ten have been, but I can promise that only by being willing to face them can we hope to get through them.
Have a deep, thoughtful September 11th, and God Bless.
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20
Apr
Posted in Deep Thoughts, Personal by Roger, the Amateur Financier |
When you get right down to it, there aren’t too many things that personal finance writers (myself included) can agree on. Oh sure, for the truly basic of the basic ideas, there’s pretty high consensus: spend less than you earn (doing it the other way around is one of the surest routes to financial trouble), keep an emergency fund (because things do happen and you want to be prepared), invest what you have left, be careful about what debt you take on, all are pretty universal. It’s hard to find anyone in the personal finance field who doesn’t support doing these actions in one form or another.
It’s when you go on from here that things start to get more complicated. From the relatively small disagreements (How many months worth of spending should you keep as an emergency fund?) to the big arguments (How should you invest your money? How much debt (if any) should you be willing to take on? How quickly should you try to pay it back?), there’s a whole range of opinions out there in the personal finance sphere. Some advisers suggest saving up a storm, others recommend putting as much money as possible into investments, still others prioritize paying off debt as soon as is possible. When it comes to the types of investments suggested, there’s even more disagreement; ask ten different personal finance writers what the perfect investment (or even combination of investments) happens to be, and you’re liable to get one hundred different answers (along with a handy guide to deciding which option is best for you, at least from the more well-prepared writers).
Sometimes money disagreements lead to arguments; but not nearly often enough to make CNBC a replacement for Jerry Springer
‘What’s going on?’, you may ask, ‘How can there be so much disagreement on the subject of money? Shouldn’t intelligent, reasonable people be in agreement on how to handle money?” Well, in answer to your questions (in order): First, reasonable people can disagree, even on big, important issues (contrary to the impression you may get from many political commentators). Second, as with many important things in life, everyone has had experiences with money and has their own opinions on the subject. Lastly, while there is some agreement on the subject of money at the most basic level (see the few things personal finance professionals agree on listed above), there’s so many options available nowadays for how to use and spend your money, so people can disagree on how best to use your limited financial resources while still being responsible, reasonable sources of information.
Handling Multiple Sources of Money Advice
The end result of all of this is that there are numerous different approaches to personal finance currently floating around out there. What’s the best approach to take towards all of them? Well, as you might guess, there’s plenty of disagreement on that front, as well, but here’s my suggestions on the subject:
1) Familarize Yourself With the Adviser: In the modern era, there are so many ways to learn about a particular adviser’s approach to money and personal finance. If you hear about someone from friends, family or any other source, someone who sounds like their advice could be helpful to you in your current situation, search for them on the web or find one of their books in the local library and see what their money philosophy is all about. If you think their attitudes towards money jive with your own, you can go deeper in depth in your research and learn more about what they’d recommend to someone in your situation. Of course, using only one source of information can sometimes give you a distorted view, so…
2) Get a Variety of Perspectives on the Advice: It’s always good to step back and try to look at the bigger picture. Not only should you have an idea of what a given adviser recommends, but you should try to understand other alternatives and learn what other financial professionals think about their recommendations. Sometimes you can learn a great deal from the critical writings or commentary from others. (Note: There is a difference between respectful, informative disagreement and insults and mockery; learning to spot that difference and only use reasonable sources of disagreement is a major trick to gaining perspective on the advice you are considering.)
3) Consider Only Taking Some Advice: Many personal finance writers will lay out a full guide to personal finance throughout your lifetime. This is fine as far as it goes; many people like having a comprehensive guide to their money, and having a (reasonable) plan on how to manage your money is better than no plan at all. But just because a writer or speaker provides comprehensive advice doesn’t mean you have to take it. You can (and probably should, in many cases) take some advice from one source, other advice from another source, and perhaps further advice from even more sources. If you like one author’s views on paying off debt and another author’s view on the best investment portfolio, why not use the parts that are best (for you, at least) from each? (There are some pieces of advice that are mutually exclusive, of course; you can’t utilize leverage and stay completely debt free at the same time, for example. Other than such obvious contradictions, however, mixing and matching different advice can help you build the best plan for your own needs.) While we’re on the subject of shifting advice…
4) Don’t Be Afraid to Change Your Approach As Your Circumstances Change: There is a tendency for people to look down on others as ‘flip-floppers’ if they change their opinion. I don’t know why this is; as John Maynard Keynes noted, ‘When the facts change, my opinions change.’ It should be the same for you when it comes to money management. The advice (and adviser) that you used to get out of debt may not be the best advice to keep following when you are out of debt and trying to build up your investments for retirement. Re-evaluating your situation periodically (doing so annually is a reasonable minimum) and making changes to your financial plan if you feel it is necessary given your current circumstances will help you to stay on top of your money and manage it to the best of your abilities.
There you go, some advice on, well, advice. Hopefully this will help as you try to go through the process of trying to determine the best way to manage your money.
Readers, How do you handle the abundance of financial advice available? Do you follow one adviser’s recommendations pretty exclusively, or do you mix advice from multiple sources? Has your approach to money changed as you gained more knowledge or your situation changed?
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6
Apr
Posted in Deep Thoughts, humor by Roger, the Amateur Financier |
Ah, entertainment. It’s what keeps us entertained and amused in between work and our other required duties. It brings a smile to our day and a song (or four) to our hearts, to say nothing of that one you just can’t get out of your head. The world would be a lot a duller if we lacked for entertainment, that goes almost without saying (although I’ll say it anyway). That’s why it’s such a shame that many forms of entertainment are facing near extinction.
Wait, What?
To understand what I’m rambling about, we’re going to have to take a trip back in time to cover a concept I’ve mentioned already, the Superstar Effect. Go on, click the link and read up. I’ll wait.
Look, there's a seat open over there on that bench
If you read through the article (or just assumed I’d include a reminder about the content, which I’m about to do…), you’ll recall that the Superstar Effect is the economic concept that explains how movie stars, musicians, authors and other performers can become, well, superstars. In a nutshell, the nature of their work and the existence of recording and duplication devices means that it is possible for everyone to enjoy the songs of Katy Perry or the movies of Rupert Everett without the performers having to put any additional work into new performances. Whether Ms. Perry’s newest CD sells three copies or three million, she’s put the same amount of work into it, and it requires no more time for her to increase her sales. (Although, if she sells only three copies, her recording company will probably want her to do *something* to try to drive sales.)
Where’s the problem? Well, easy mass-distribution can be a double-edged sword. While it makes it easier for record labels, movie producers and book publishers to spread the work of their performers and potentially generate large profits as a result, it also makes it easier for people to make illicit copies and spread books, music, and movies without paying the performers. The wide-use of personal computers and related devices means that there’s little trouble with acquiring almost any form of media you’d like; without too much difficulty, I’m certain that anyone reading this could easily acquire an illicit copy of any movie, book, or song that they could want. (Please don’t take this as an invitation to go off and start downloading things illegally; I was making a point, not a suggestion.)
With all of this happening, more than a few commentators have commented on what the future of entertainment will look like. The views vary from the enforcement of artificial scarcity to keep entertainment companies in business to distopian visions of worlds where nobody has any entertainment. But I’m actually surprisingly optimistic about what the future of entertainment holds, thanks to
Fanfiction!
Fanfiction, (and related media like fanzines and fanart) in case you’ve managed to cruise the internet without running into any of it, is pretty simple in concept: it’s stories (fiction) that is written by fans of a particular series, book, or movie. Essentially, fans of say, Star Trek decided that if the TV producers are going to be so unkind as to cancel the series after three seasons, by goodness, they’re going to write stories of their own and share them with fellow fans.
Just as with the pirating of media, the dawning of the internet and other technology has made it much easier to share these stories with other people. I would likely have never learned about fanfiction if it were not possible for me to check some out from the comfort of my desk. In fact, if you’d like to see what I’m talking about, you can check out Fanfiction.net,* one of the biggest and most popular fanfiction sites on the web.
*WARNING: Before you start reading, a warning about what you are likely to encounter, so you don’t have a reason to come back and complain that I didn’t give you a proper heads up. Most fanfiction tends to be written by women, particularly teenage and preteen girls, and as you might expect, is thus usually focused on romantic (and sexual) pairings between characters in a given series (and sometimes between series). In particular, fanfiction writers are fans of slash pairings, pairings of two (or more…) male characters. (Remember that mention of Star Trek fanfiction earlier? Some of the first ‘modern’ fanfiction was stories of Kirk and Spock doing things that Kirk normally did with green women…) Just a fair warning about what you are likely to find if you do much fanfiction reading.
What Does This Mean About The Future of Entertainment?
Alright, so I’ve amused you, possibly disturbed you, and possibly convinced you to write fanfiction of your own. But we still haven’t spent too much time considering just what this means for entertainment in general. So, here it is: people like to create, and they like it when other people enjoy their creations. Fanfiction writers aren’t doing it to make money (and in fact, depending on how vigorous the copyright holders are about enforcing those copyrights, potentially risk fines or even jail for their stories), they just want to share stories with other people involving the characters, places, and stories that they enjoy, frequently while writing under a pseudonym.
This is why I’m confident that entertainment will continue; there is a strong instinct in humans to share stories and keep our fellow humans entertained. Now, this is not to say that entertainment will continue to be the mammoth industry that it has become; there’s a good chance that the possibility of piracy will keep entertainment from being nearly as profitable as it has been in the past, and we might, in fact, be in the waning days of giant movie budgets and massive music video performances. But I’m sure that we’ll continue to find ways to amuse ourselves, and each other.
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