I received this question via email, regarding the “30% rule” when making your mortgage or rent payment:
I know that you’re supposed to stay around 30% of your income for housing costs per month. Is that 30% of net or gross, and is that only for the housing, or do they recommend staying under 30% for housing and all utilities?
This is an interesting question without a straightforward answer. “They” say many things, but from what I can tell from talking with some other financial types and consulting my common sense, the basic rule is 30% of your pre-tax (or gross) earnings, …read more

Do we look at what others have and judge ourselves according to whether or not we have it? Or conversely, how many of us committed to frugal living look at others and judge ourselves according to what we don’t have?

In Europe, many governments boost their revenue through the value-added tax (VAT). It is also used Australia and Latin America. The VAT is a tax that works by collecting revenues at every stage of product production. So, taxes would be charged to manufacturers when they buy materials, and on down the line as the product is sold and resold. It’s basically sales tax, but it’s collected at stages previous to reaching the end-user. Many economists consider the most efficient way for a government to raise revenue. For consumers here in the U.S., it would likely result in higher prices for …read more

One of the features of retirements accounts is that you have the ability to borrow against them. And, increasingly, Americans are turning to their 401k retirement accounts for money. Emergencies like job loss, unexpected medical problems and other economic troubles are causing Americans to consider taking money from their retirement accounts in order to smooth the way.
While there are ways to avoid penalties on the money taken out for 401k retirement accounts, it still reduces the overall money you save for retirement in the end. The 401k is preferred because it is easier to access that Roth accounts and pension …read more

One of the things that many wealth building “coaches” tell you to do is to set up streams of “passive” income. But is there really such a thing? Over at Consumerism Commentary, Flexo points this out about passive income:
Simply: If you want to earn income, you have to work for it; that is, income is active. The IRS may call certain things “passive income,” but the term itself is a lie.
And really, I tend to agree. No matter what you do to set up your revenue stream, you still have to do work. Whether it’s a retirement account, rental …read more