Suze Orman's libertarian intuitions
As an avid viewer of the Suze Orman show, I've noticed one interesting thing: Suze Orman doesn't like tax-refunds. The reason for this isn't that she dislikes the idea of people getting their own money back. Rather, she dislikes the idea of people giving the government a series of free (0% interest) loans, averaging 6 months.
When a viewer called into Suze's show asking how best to invest their tax-refund money ($1,000), the first thing Orman did was to scold the person about getting a refund in the first place, and said that they should never get a tax refund again. Most people work 40 to 50 years, and at that rate, that's $40,000 to $50,000 that you're loaning the government interest-free for 6 months if you get a refund of $1,000 every year. Furthermore, during the time between when your money is withheld and the time when you obtain your refund, you're not earning interest on your money. Thus, Orman tells those who listen to her to raise the number of allowances they claim. This FAQ from the Internal Robbery Service explains how to figure out how many allowances you can claim.
Comments (19)
There's nothing libertarian about this. Every financial advisor worth paying would tell you not to overpay and collect a refund.
- Josh
Published: October 18, 2004 4:19 AM
Ah, yes, but there's also Orman's overall attitude regarding the topic, which is that the individual earned the money, not the government, and that the individual should keep it. Furthermore, there's also her general attitude which is one of thrift and personal responsibility. Furthermore, when advising on things like bankruptcy, Orman doesn't have the attitude that bankruptcy is a right, but a burden that the individual imposes on everyone around him or her.
Published: October 18, 2004 9:05 AM
Although I generally don't care for Suze Orman's advice, her recommendation on tax withholding is correct. As was commented by Josh, this is basic tax advice.
I would recommend everyone go to the IRS Withholding Calculator (http://www.irs.gov/individuals/article/0,,id=96196,00.html) and adjust your withholding through your employer. While I am not a fan of the IRS, that calculator is quite helpful.
If you use withholding as a "forced savings" mechanism (as many do), I recommend that you sign us for direct deposit from your paycheck, or automatically out of your bank account, into a savings account (like ingdirect.com). That way, you earn interest on your money and not the government.
James W. Fogal, CFP®, RFC
Published: October 18, 2004 4:08 PM
"If you use withholding as a "forced savings" mechanism (as many do), I recommend that you sign us for direct deposit from your paycheck, or automatically out of your bank account, into a savings account (like ingdirect.com). That way, you earn interest on your money and not the government."
The government and the banks are tied, and they both feed off each other. Also, you are suggesting that people take their money and put it into an institution that operates on fractional reserve, which will inevitably contribute to inflation.
Published: October 18, 2004 4:49 PM
Mr. Kane,
You can also have the money auto-deposited into mutual funds (even ones that invest in gold-mining companies), which don't engage in a fractional reserve. People are not to be held morally accountable for the fact that the State has created a criminal enterprise all around them; most people deposit their money into savings accounts, I bet even a lot of professors of Austrian economics do.
Sincerely,
David J. Heinrich
Published: October 18, 2004 5:28 PM
"Mr. Kane,
You can also have the money auto-deposited into mutual funds (even ones that invest in gold-mining companies), which don't engage in a fractional reserve. People are not to be held morally accountable for the fact that the State has created a criminal enterprise all around them; most people deposit their money into savings accounts, I bet even a lot of professors of Austrian economics do.
Sincerely,
David J. Heinrich"
I agree that we cannot abstain from engaging in many of the rackets the state has created (i.e. public roads), but in cases in which we can practically opt out, we most definately should.
Savings are one such instance in which we can practically opt out. I myself happen to have a checking account, but when it comes to savings, I have a gold savings account set up online. This is an account in which all funds are invested in gold, and it does not operate on fractional reserve.
Using electronic checks, I can transfer funds between my gold savings account and my checking account.
Published: October 19, 2004 1:07 AM
What's so special about gold? It doesn't decay. It has no industrial applications. They are always digging up more and more of it. It becomes less and less scarce every day, ergo less valuable. Sounds like a really crappy investment to me.
Published: October 20, 2004 3:48 PM
The ignorance of Jardinero's post is beyond belief.
Published: October 20, 2004 8:34 PM
Poor Jardinero1. Just one more poor soul that fails to understand that for at least 4,000 years Gold has been, and still is, MONEY.
Not a Gold stock, or online account, but real, hold in your hand, carry in your pocket Gold. As long as you keep Gold, you will never be poor.
Yes it is dug out of the earth every day. But that one dollar bill and the hundred dollar bill of yours are both the same paper, only the printing has been changed to fool those easly deceived.
Thurman
Dah De Dah
Published: October 21, 2004 1:45 AM
Gold was worth $875 an ounce in 1980 and now it's worth $420 in inflated 2004 dollars. Adjusted for inflation that's about $200 in 1980. Yup, that's a great investment.
I have never been able to find a merchant anywhere who accepts gold in exchange for goods or services. No matter where I go, they always want those pesky dollars. Even in foreign countries, say Mexico, given a choice between a dollar's worth of gold, pesos or dollars, they always want the dollars. Go figure.
Published: October 21, 2004 10:16 AM
Jardinero1,
The comments in your post are ignorant of both economics and investing.
Firstly, you are stacking the deck by selecting the point in time at which gold had its very highest value and comparing it to today. A more meaningful comparison would be 1970 to today (a 30-year comparison). The reason why taht is meaningful is because it starts from the time at which the dollar was completely severed from gold. Before the severing, gold was $35 per ounce. Today, it is $420 per ounce. That's about 7.5% per year; and the price of gold has still been kept artificially low by constant intervention from the central banks (they acquired the ability to intervene when they stole all of the gold in the 30s).
Secondly, just because something has historically performed a certain way does not mean it will do so forever.
Thirdly, gold will continue to be a hedge (in the long-run) against State-inflation, as it has in the past.
Fourthly, if you read FinancialSense.com at all, you'd know that now is actually a good time to be getting into gold, due to numerous factors, including the fact that there has consistently been high demand and that central banks are doing everything they can to keep the price of gold down. Furthermore, the inflation rate (that is, the expansion of the monetary supply) has been enormous.
Finally, I would note that as well gold has done over the past 30 years, rare investment gold coins have done even better. In fact, the CU 3000 Index -- an index of basket generic collectible coins -- increased by 10.9% annually since 1970; that is, $1000 in 1970 would be $22,500 today.
Returning to my initial statement that historical performance is no guarantee of future performance, I would note that I am merely illustrating my point here. Namely, that when the State can inflate money at will, gold will serve as a hedge in the long-run against that inflation, because you cannot print out gold like you can print out paper.
Published: October 21, 2004 1:16 PM
I have never met a man who still has gold purchased prior to 1980. Most of those investors cashed out in 1981 or 1982.
Gold has had a pretty good run since the low of $252/ounce in 1999, after an 18 year bear market. Now, is a good time to get out of it... again.
It is still a commodity like anything else but, fundamentally, the worst one. It never becomes less scarce. Like I said, they keep making more of it thereby debasing the value of that which is already in circulation. It never, ever gets used up. Every ounce ever mined is still laying around. Fiat money has the virtue of being able to contract in supply; gold does not. The various central banks of the world have been and will continue to unload their hoards of gold at any price above $350 an ounce creating a price ceiling. You can't ignore these fundamentals. The short to medium term trendline for gold is flat to negative.
If you want a commodity to hedge against dollar inflation try lumber or the euro.
Published: October 21, 2004 3:57 PM
Jardinero,
Whether you've met a man who's done such or not is irrelevant; you don't get to stack the deck so-as to be in your favor. The relevant time-period here is how gold has done since the dollar was completely severed from the gold standard, and gold's long-term historical performance (e.g., in 1920, an ounce of gold bought you a good business suit; it still does today; vs. paper money, where a nickel used to buy you a meal, but now doesn't even buy you a candybar).
Furthermore, as I said, you can't simply refer to past-performance.
You also state some misconceptions about gold. The idea of the paper-money supply deflating as some kind of benefit is laughable. Firstly, the dominant impetus is to print out more and more and more money, transferring more and more wealth from the productive private sector to the anti-productive State-sector.
Central banks cannot undercut the market forever. This ploy to keep the price of gold artificially low is going to falter. Regarding the supply of gold, you should note that the amount of gold mined out of the Earth each year is very small compared to the monetary stock of gold. Furthermore, you should note the gold being taken out of the monetary supply and placed into things like jewelery and electronics is significant. Gold has been a store of value for 5,000 years, and it will continue to serve as such; it's role is more important nows than ever, due to rampant printing of fiat-money.
I'd suggest these articles on gold from Mises.org. I'd also suggest FinancialSense.com's $3,000,000 for a Cup of Coffee? Shepherd, Ceri. I'd also suggest The Silver and Gold Train Wreck. Puplava, Jim. and these Roundtable discussions of Gold from Financialsense.
Published: October 21, 2004 5:03 PM
Also, the central banks, and others who have a vested interest in maintaining a low gold value, can only keep dishoarding their gold until they run out. Then watch the fun begin!
Published: October 21, 2004 10:32 PM
Jardinero:
If you don't think gold is worth more than fiat money, you could always give me yours in exchange for my money. I'm sure you'll get a great trade - me, inflation proof money, and you... well, a great piece of paper with someone's face on it!
Published: October 24, 2004 10:45 AM
Can someone answer my question? I work at a company where 36 hours is the norm work week. Some people I work with claim 10 on thier W4 and take out additonal money to make thier tax quota for the end of the year. They end up pretty close to even at the end of the year. They tell me its like getting your money now when you need it opposed to at the end of the year. Some of them have been doing it for years. They claim that its not illegal and the IRS gets the correct amount. Does anyone have any experience in this?
Published: May 14, 2006 10:18 AM
Erik,
Do your homework, the links cited, in above responses, are good places to start. While I will not comment on your colleague's particulars, most individuals can properly work out their IRS with-holding so as to not "overpay" during the course of the year. Also, avail yourself to the many potential tax-reducing strategies that the IRS, itself, leads one to, through the use of their multi-various forms and schedules.
Published: May 14, 2006 11:51 AM
I know this comment is late, but look at the price of gold now. Over $600 an ounce in a span of less than three years. Damn I wish I had some money back then. With the price of gas going up and the federal deficit skyrocketing, the dollar may go down even further.
Published: May 13, 2007 7:31 AM
As an even later comment...the spot price of gold is $922 US per ounce. That is a $300 increase since the last poster posted in May. Granted, that bump is speculation...but after the market recovers and the price drops again, you can bet I'll be considering purchasing gold as a hedge against the next market dip.
Published: February 8, 2008 11:08 PM