APRIL 7TH, 2010
By CPA SAM
Today is a special edition targeted to those who are still in the education system. The consensus this time of year is “spring fever” and “I can’t wait until summer is here.” Before you start the 2-month brain checkout however, let’s keep some things in mind.
One of my favorite bloggers, Jeff Thredgold, publishes a regular weekly economic new update. While I don’t always agree with his thoughts, it is fascinating to read the updates of statistics published by the government relating to all facets of our economy. In the most recent edition, he discusses the job market and the associated unemployment rate. One of the facts published is:
“It comes as no surprise that one’s educational attainment typically has a direct impact on employment. The jobless rate for those workers with less than a high school diploma was 14.5% in March. For those with a high school diploma, but no college, the rate was 10.8%.
For those workers with some college or an Associate’s degree, the jobless rate was 8.2%. For those with a Bachelor’s degree and higher, the average unemployment rate was 4.9%.”
My blog topics focus mainly on personal finance, tax and accounting. In this case though, economic statistics point out a very important concept. The best way to gain control over your finances is through education. Many other studies promote the fact that educated employees tend to earn higher incomes over their lifetime as well.
A combination of education, higher wages, less job loss and responsible financial moves can lead to a happier and more successful life. Those that look forward to getting out of high school and never going back to school are setting themselves up for a much more difficult life financially. As we move ever closer to the close of another school year, keep these facts in mind as you make plans for the future. The financial and educational choices made early in life have dramatic effects on the later years of life.
You can sign up to receive the weekly economic news for free from essentially any page on Mr. Thredgold’s website.
OCTOBER 21ST, 2009
By CPA SAM
When an employee is hired in the United States, in most cases, the employer is required to pay a minimum amount per hour for the services of that employee. As of 7/24/09, that amount is $7.25 per hour. If that employee works 40 hours per week and 52 weeks per year, the total gross wages of a full-time minimum wage worker will be $15,080.
The IRS actually collected about $2.74 trillion in 2008 (the latest year for which data exists). For 2008 the governments minimum wage equates to$1,317,307,692.31 per hour. With a US workforce of 150 million, we pay on average $8.78 per worker, per hour to the government, the government minimum wage.
On October 16, 2009, the US Treasury Department released official figures of the national budget deficit. Keep in mind that the deficit is the amount the US Government spends beyond what it takes in. That number was an astounding $1.42 trillion. Written out that is $1,420,000,000,000. Actual spending is somewhere in the range of $4.16 trillion dollars. If we divide that by the 2080 hours that the average worker actually spends at his/her job, we see that our government spends about $2 billion per hour. If we divide that by 365 days in a typical year, we see spending of almost $12.4 billion per day.
I read a book about a year ago called “Secrets of the Temple: How the Federal Reserve Runs the Country.” This book contains a very good discussion of the economic conditions surrounding the Carter and Reagan administrations. According to the author, the Federal Reserve and Congress worked against each other as they both attempted to fix the economic crisis of the day. Because the situation was so dire with runaway inflation and economic recession, the two really needed to work together to fix the problem.
Back to the present, news reports say the Fed is looking at drafting the policy going forward of slowly removing the money used to prop up the financial system. Other news reports talk of increased Congressional spending. It sounds like these two groups are getting ready to repeat the same errors. Job growth has always lagged economic recovery. Let’s hope the policies put in place do not discourage job growth in the next recovery.
How does this apply to you? By keeping your financial house in order and spending less than you take in, you are able to better withstand the storms of economic change the those who spend everything they make plus accumulate extra debt. You never know when a health, repair or job crisis will hit. It’s best to be prepared for those events when you can.
JUNE 17TH, 2009
By CPA SAM
Q. I’m trying to follow some of the things you wrote about last year with the budgeting. But the gas prices keep going up and it blows all my savings amount. Why is this happening? I though we were still in a recession.
A. This is one of the great mysteries of life. In the purest sense oil, and other commodities, would move up and down based on actual demand for the limited supply. This is basic economics. Unfortunately, it appears that there are several kinks in the system up and down the process that cause skyrocketing prices. We know that gas is nothing but a refined oil product. The higher the cost of each part of the system, the higher the ultimate cost to the consumer. Oil prices have been climbing of late to nearly double the level they were just a few months ago. This increases the raw cost of gas. Most of the blame appears to be pointed at OPEC reducing their production and sticking to the stated quota. Second, refineries are not working at full capacity and are trying to maximize their profits by reducing production of gasoline when demand for fuel is down. Thirdly, there is the delivery mechanism. The cost to transport fuel continues to increase simply because it takes energy to move it whether by pipeline or truck. Lastly, since the United States is not the sole consumer of oil products, we are at the mercy of other developing countries trying to get access to a limited supply of oil.
Unfortunately, there are two other pieces to this that are out of our control: The investor and government spending. As more and more funds and investors pile back into the market trying make a buck in commodities, it causes demand for ownership of those products to increase which increases the price. Even though it appears that U.S. consumers are still driving less and conserving through downsizing their cars, it does little to stop the increase in prices. If investors sense an increase in demand from a global perspective, even if it’s a rumor, the price will increase. The other piece is the U.S. Government’s debt level. The ability of our government to repay it’s debt is directly tied to the dollar’s value which is the currency that denominates oil prices. As our government takes on incredible levels of debt, we see the markets questioning this and pondering inflation thus causing a weakening of the dollar.
In my opinion, each of these steps hurts the ultimate consumer. Companies, individuals and countries at all levels of this process are so consumed with making a profit that they forget who pays the ultimate bill: the international consumer. Some would say higher prices are a good motivation to increase conservation. I say that only pads the pockets of the countries and companies who control the limited supply of these commodities. I challenge everyone in the process to not only think of profit, but to think of smart alternatives that can be developed to give c0nsumers a choice of energy.
