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Financial Jiu Jitsu will teach you how to gain leverage in the real world, step by step, until you are confident you no longer need more.

The War on Cash

The War on Cash

It's hard to save cash. It seems like every time you turn around there is another reason to spend it. The normal way of things is that the rich stay rich, while the poor stay poor. Or the middle class stay middle class forever no matter what they do, and if they lose their job they fall into the poor category.

I have, personally, witnessed how easy it is to break even on your monthly income/expenditures over and over again and it is not a pleasant feeling. If you spend all month working some job every day while barely having enough time to run errands and recharge your batteries on the weekends without saving a dime, you will not have a happy life. If it seems like it is almost impossible to save and make ends meet at the same time, you are not alone. I believe there are numerous sources of theft being imposed on the working class on a daily basis and while that alone may not be keeping us from getting rich, it almost certainly is keeping us from that extra vacation we all deserve on occasion. 

The big thief staring us right in the face most of the time is the government. They do an incredible job of preventing savings and they do little to even cover up that this is their true motive. Sounds harsh, like maybe I need to go get a tinfoil hat? Not so fast, let me explain my thoughts here. The whole tax system is designed so that your bracket is essentially fixed, and the only way to get a reprieve of the amount of tax you pay is to spend money. Yes you read that right, technically the only way to get a larger tax deduction is to spend money which is not conducive to holding cash at the end of the year or saving in the traditional sense. These allowable reprieve expenditures are usually called write offs or deductions. So the government literally penalizes you from saving money by taxing you on it if you don't spend it in certain ways. They will tax you the maximum allowable if you spend all your income on living expenses and basic needs like rent and food. The way to reduce your tax liability, in a nutshell, is to either spend more or to make less; neither one of these tactics will help you bridge the gap from even middle to upper-middle class anytime soon. 

Another thief in our midst is subsidization. Here are some of the more glaring examples of subsidization you will face during your lifetime:

  • Social security - basically you pay for other people to retire. This government program is so mismanaged that you are guaranteed to lose money in the long run, with some estimates well above a 50% loss for your lifetime. The input to this program is of course, mandatory. To put it into perspective: if you had invested that money in your own private account that tracks the DJIA, you would net an average of 7% a year! How does 7% a year for 30+ years compare to -50% over the same period? Not so good my friend. We call this a raw deal.
  • Healthcare - everybody knows the health system in the US is kind of screwy, to put it lightly. Basically the system is subsidized to a great degree, with many healthy people paying for the unhealthy people. I am not saying this isn't the way it should be to some extent, but a normal 20-something recent college grad should not be above 400$ a month for healthcare expenditures, so why is that a normal rate for an insurance premium in that age group?
  • Tax - tax itself is payed disproportionately by those who utilize less tax. That is just how it is. This goes for property tax, income tax, road care tax, state income tax, gas tax, food tax, cigarette tax, alcohol tax, etc....
  • College - eventually you will come to realize the financial impact of tax and tuition subsidized student aid programs (which don't work necessarily because they are open-ended.) What I mean is, in theory at least, education is good for the general population and should be subsidized to an extent, but when you have 4 year degree recipients working at Starbucks the system has failed.

The war on cash continues with human nature. It feels good to spend money. Some people even like to spend money that they don't have through borrowing without thinking of the ramifications of such an action beforehand. New Mercedes? Eating out 5 times a week? New watch? New shoes? I know those things would make me feel good at least for a little bit, but in reality they will depreciate rapidly to an almost nil value as I use them. The urge to spend really isn't helped by the fact that everybody on planet earth is trying to get you to buy constantly by advertising some useless gizmo like Alexa or a purple shiny fidget spinner. Everywhere I turn there is an ad for something I don't need! How odd.....

Man this list just keeps growing I should have made this a 2-part article.

Man this list just keeps growing I should have made this a 2-part article.

Next we have it on good authority that having fun costs $$. There is no way to have a good life without travelling the world and owning a sports car right? All my favorite stars spend tons of money and they are super happy right? I doubt it. Being a grown man/spoiled kid probably isn't that fun, and one will gain a more long term satisfaction from being sensible and allocating their time to honing their various skills. Or getting a six pack to show off at the beach.

Now the big kicker: making more money is hard. Making less money is easy. So even on the income side of the equation the table is tilted against you. Nobody wants to work a 30 year desk job so they can retire for 20 years when they are old. That just plain sounds like it sucks and it friggin' does big time! Ask me how I know....

And finally. I say finally but in reality I could go on and on about the war on cash and our failed human nature and society. But finally; just having cash on hand means it is losing value. When you hold $100 in the bank, it will on average lose about $3.22 a year in value. That means after 20 years, the purchasing value of your $100 is cut in half. How absurd. There are many reasons for this inflation loss, and entire books have been dedicated to covering it, so I won't here. Suffice to say that it is an active mechanism to keep us working longer and harder during our lifetimes. Others would outright call this metered and controlled theft.

If that article sounded like a super-downer, that is because it is the truth. But also I feel that our readers should be aware of the dangers they face in the modern world. The reason most of us will stay working class for the rest of our lives are all layed out in the above article. To overcome these obstacles will take great discipline and a lot of luck for some, and for others it will merely be over before it starts. And if they even realize what has been taken from them, it will be too late.

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Very Verbose Financial Exposition; Guest Author Ed.

Very Verbose Financial Exposition; Guest Author Ed.

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