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Expensive Rental Apartments January 31, 2006

When you think of moving to the next bracket, where do you picture yourself living? Will you still be renting? Will you upgrade? Consider living below your means to save for your future. I saw a Forbes article titled “Most Expensive Rentals In The U.S. 2006″. Rentals from a $300,000 per month home in Miami Beach to a $6,500 per month 3,700 square feet home in Las Vegas are featured. I suppose these are for people who are swimming in that much cash flow and will not be settling down anytime soon, but that is a lot of money.

In New York City, they list a $60,000 per month rental for a ten-room duplex in midtown Manhattan. Corcoran, the largest realtor in the Manhattan area puts out a yearly report on homes, apartments, and rentals. Their latest report, from mid-year 2005 shows the following rental prices:

A quick search of Manhattan revealed 3 rental apartments (1 bedroom, 1 bath) for under $1000 per month, but those are in Harlem. 3 TOTAL! The top result is a $32,000 2 bedroom, 3 bathroom rental for 2100 square feet in Midtown Manhattan. The average Manhattan rental in 2005 was $3,755 per month. The median rental was $2,700 per month. If you get to your next bracket, consider living modestly, which will get you to the next bracket that much faster!

Source:
Corcoran mid-year 2005 report (pdf)

Underearner Mental Money Barriers January 30, 2006

For anyone who has thought, “only if I earned $10,000 more, I’ll stop worrying about finances” or “I’ll never make more than $30,000 in my job(s)”, unless you change your mindset, they will not get to where they want to be. It’s very tough for someone who cannot see their potential to look beyond their current situation. For many, the problem is not earning more money or saving more, the problem is figuring out your own mental barriers and how to overcome them. People may not realize that they are earning less than their potential. In an MSN article, writer Liz Pulliam Weston discusses these “underearners”:

…underearners’ lives are anything but sane or mindful. Most live in financial chaos, battling with debt or living paycheck to paycheck even if they’re making what other people would consider to be good money. They unconsciously sabotage their own progress with frivolous spending, procrastination or by failing to focus on what can get them ahead.

An underearner may work two or even three jobs without getting his head above water, yet still insist he couldn’t earn more because it would involve working too hard.

Underearners can’t let fear control our financial situation. Fear can paralyze them into not taking action or thinking that they can’t quit a safe job because there are bills to pay. That will only bring feelings of being trapped with no choices. And that feeling brings on negative attitudes about people with money, viewing them as greedy, snobs or workaholics. Underearners have to be positive and realize that they have choices. Do you have any financial mental barriers?

Source
Spend too much – or earn too little?
By Liz Pulliam Weston

USA Savings Rate at Lowest Level Since 1933

The [US] Commerce Department said Monday that consumer spending rose by 0.9 percent in December, more than double the 0.4 percent rise in incomes
…

To finance the increased spending, Americans dipped further into their savings, pushing the savings rate for all of 2005 into negative territory at minus 0.5 percent. That was the lowest annual savings rate since a decline of 1.5 percent in 1933, a year in which the country was struggling to cope with the Great Depression.

A negative savings rate means that Americans spent all their disposable income, the amount left over after paying taxes, and dipped into their past savings to finance their purchases. For the month, the savings rate fell to 0.7 percent, the largest one-month level since a decline of 3.4 percent in August.

Families from the rest of the world on a whole have their acts together financially more than American families. According to the UK’s Office for National Statistics, the UK’s savings rate is currently about 5% of household income. In Japan, it’s more. When increases in spending are financed by borrowing and refinancing home mortgages, that gets us in trouble, especially when interest rates rise. Some might say that our economic growth depends on consumer spending. In Japan, where the economy has been pretty much flat for the last decade, people are saving more and being smart about their finances. Do we need financial intervention? It depends on your own goals.

Source:
Savings Rate at Lowest Level Since 1933
By MARTIN CRUTSINGER, AP Economics Writer

Income Gap in NY State is USA’s highest January 27, 2006

The haves and have nots in New York has the widest gap, acccording to a study by the Economic Policy Institute and the Center on Budget and Policy Priorities. The average income of the richest 20% of NY State families is 8.1 times (or $130,431) the average income of the poorest 20% (or $16,076). The article didn’t state the income gap between the rich and poor in Manhattan, but my guess is that the gap is much higher. Being in this area, all of the hourly workers such as restaurant servers, deli cashers, and service workers, seem to be working double-time while Wall Streeters, Advertisers, and knowledge workers are enjoying larger income growth compared to service workers. Of course this is anecdotal, but the Manhattan rents and prices are noticeably higher than many salaries out there.

Ratio of the top fifth of families’ average incomes to those of the bottom fifth.

  • 1) New York: 8.11
  • 2) Texas: 8.08
  • 3) Tennessee: 7.72
  • 4) Arizona: 7.71
  • 5) Florida: 7.61
  • United States: 7.28
  • 46) Nebraska: 5.57
  • 47) Wisconsin: 5.48
  • 48) Iowa: 5.42
  • 49) South Dakota: 5.26
  • 50) Wyoming: 5.16

(Sources by Economic Policy Institute; Center on Budget and Policy Priorities)

Source:
Income Gap in New York Is Called Nation’s Highest
By DANNY HAKIM (NYTimes)
Published: January 27, 2006

Tax Around the World: Mexico January 10, 2006

Like its neighber USA, Mexico has a progressive income tax system. However, there are no state or local income taxes. The progressive rate of the personal income tax varies from 3% to 35%, according to the tax bracket.

2003 Mexico Federal Tax Brackets

Marginal Rate (Mexican Peso (MXN)) Individual Income
3% 0 - 1389
10% 1,389 - 11,792
17% 11,792 - 20,723
25% 20,723 - 24,090
32% 24,090 - 28,842
33% 28,842 - 58,170
34% 58,170 - 91,683
35% 91,683 and over

(n.b.: as of 1/10/06, US$1 = 10.5185 MXN)
Source:
The Federation of International Trade Associations

Tax Around the World: Canada January 3, 2006

In Canada, both the federal and provincial governments impose income taxes on individuals. Income taxes throughout Canada taxes are progressive with the wealthy paying a higher percentage than the poor. Canadian income taxes are still less progressive than those of many nations, as there are only four tax brackets compared to the six that USA has.

2006 Canada Federal Tax Brackets

Marginal
Rate		 Individual
15% 0 -
36,378
22% 36,379 -
72,756
26% 72,757 - 118,285
29% over 118,286

Provincial income tax is not included in these brackets. Although there are ten provinces, I’ll give four examples, British Columbia, Ontario, Quebec, and Alberta provincial taxes:

2006 Canadian Provincial Tax Brackets

Province Tax Rates and Brackets
British Columbia
(Top federal + province income tax: 43.7%)		 6.05% ($0 - 33,755)
9.15% (33,756 - 67,511
11.7% (67,512 - 77,511
13.7% (77,512 - 94,121
14.7% (94,122 and over)
Ontario
(46.41%)		 6.05% ($0 - 34,758)
9.15% (34,759 - 69,516)
11.16% (69,517 and over)
Quebec
(48.22%)		 16.0% ($0 - 28,710)
20.0% (28,711 - 57,430)
24.0% (57,431 and over)
Alberta
(39.0%)		 10.0% All income

Income not taxed

It is interesting to note what is not taxed in Canada. The following list is not comprehensive:

Source:
Taxation in Canada - Wikipedia

Tax Around the World: USA January 1, 2006

To begin 2006, I’d like to start off with a series of posts titled “Tax Brackets Around the World”. Since I live in the USA, I’ll start with the US tax brackets. Every so often, I’ll post information about taxation in other parts of the world. The more we learn about our neighboring countries and other countries around the world, it will help me (and hopefully you) a little about how we live compared to others. I hope there will be readers from other countries to teach us about their personal finance strategies and how we can all benefit from ideas elsewhere.

As we know, tax brackets are the divisions at which tax rates change in a progressive tax system (or an explicitly regressive tax system, although this is much rarer). There are cutoff values for taxable income — income past a certain point will be taxed at a higher rate. In a flat tax system, everyone is in the same tax bracket, and all of their income is taxed at the same rate, no matter how high their income may be.

2006 USA Federal Tax Brackets

Marginal
Rate		 Single Married Filing
Jointly		 Head of
Household		 Married Filing
Separately
10% 0 -
7,550		 0 -
15,100		 0 -
10,750		 0 -
7,550
15% 7,550 -
30,650		 15,100 -
61,300 		10,750 -
41,050		 7,550 -
30,650
25% 30,650 - 74,200 61,300 -
123,700		 41,050 -
106,000		 30,650 -
61,850
28% 74,200 -
154,800		 123,700- 188,450 106,000 -
171,650		 61,850 -
94,225
33% 154,800 - 336,550 188,450 - 336,550 171,650 - 336,550 94,225 - 168,275
35% over 336,550 over 336,550 over 336,550 over 168,275

These rates don’t include local and state income tax. So where are you and will you be going to the next bracket this year?