Young and the Invested's Best Finds on Sundays, Vol. 7 [Jan. 13, 2019]
My Blog Post
There are a lot of changes people will confront in this year’s tax filing season due to tax reform passed into law at the end of 2017. This time around, many more people will find they don’t qualify to itemize their tax deductions because the standard deduction increased and makes them ineligible to itemize.
This should make filing out your tax return easier but not everyone is happy about it. With all major policy changes, there are winners and losers. The winners are clearly those who stand to benefit from the dramatic increase in the standard deduction as well as the lowering and simplification of marginal tax rates. Make no mistake, if you’re a wealthy American making in excess of $600,000 per year, you love the changes.
Your top marginal federal tax rate declined from 39.6% to 37%. Further, the level of income at which this top rate kicks in increased by some $130,000 to $600,000. But as the vast majority of America doesn’t make anywhere near that much income, only the wealthy elite stand to benefit from those changes.
On the other hand, homeowners living on the coasts in areas with high state tax burdens, aren’t pleased with tax reform. The new law placed a $10,000 annual cap on state and local taxes (SALT) which can be deducted against your taxable income. There are a lot of people who will be impacted by this change.
However, being the tax savvy person we both know you are, you took advantage of some last-minute tax savings opportunities to close out 2018 and saved a significant amount of money on your taxes this filing season. Either way, read more to see about some of the most common tax deductions people will claim this year. Also, don’t forget to claim your FREE version of TurboTax if you make over $66,000 per year or grab yourself free tax prep software in this week’s post.
Guest Blog Post
How to Start Investing: A Guide to Make Investing Easy (and Profitable!) on Millionaire Mob
This was a guide which walked through the path a new investor can take to begin investing. I recommend, for multiple reasons listed in the post, why passive index investing is the best form of investing.
This was a fun piece to write and is a spin on another post I wrote for my site on how you should invest like the French. And by that, I mean the French laissez faire economic philosophy (or “let it be”). The title was a spin on the common phrase, “When in Rome, do as the Romans do.”
U.S. Health Care Spending Highest Among Developed Countries by Gerard Anderson etal; Johns Hopkins Bloomberg School of Public Health
A new paper finds the U.S. spends much more on health care than other developed nations on a per capita basis. The chief reason is not greater health care utilization, but higher prices, according to a study by a research team based in Johns Hopkins Bloomberg School of Public Health.
Unsurprisingly, higher overall prices lead to higher overall spending, all else being equal. This includes “higher drug prices, higher salaries for doctors and nurses, higher hospital administration costs and higher prices for many medical services.” By the numbers, the paper finds U.S. spends about 25% more than second-place Switzerland in per capita terms, with $9,892 in 2016 compared to $7,919, respectively.
The U.S. figure was also 108% higher than Canada’s $,753 and 145% higher than the Organization for Economic Cooperation and Development (OECD, a club of rich countries) median amount spent per capita of $4,033. The nearly $10,000 spent in U.S. in 2016 is more than double the amount spent in 2000 at $4,559. Health care spending has grown to represent such a significant portion of annual income that in 2016, it accounted for 17.2% of GDP. The average amount for the OECD? 8.9%. Almost half.
The paper cites statistics of having an insufficient level of medical providers (i.e., physicians and nurses) compared to OECD counterparts. This is where the disconnect begins for me: we don’t have enough medical care providers, resulting in scarcity and thus higher prices. In simple economic supply and demand terms, by increasing pay for these positions, more people would be incentivized to enter the field and thereby push salaries (and end prices) lower.
The conclusion of “it’s the prices, stupid” seems to miss the point: prices are higher (at least salaries) because there’s a resource capacity constraint. If we elevate salaries, more will want to come into the field.
On drug prices, however, there’s a long history of pharmaceutical companies charging higher prices here to make up for lower prices charged in other countries. The U.S. is left holding the bag and has a regulatory regime which allows for the exorbitant drug prices we pay.
While it might seem like an easy task, lowering drug prices, as I mentioned in the post summary above, with any major policy change, there will be winners and losers. I’m not entirely sure it will be the drug companies who lose in the long-run. As you weaken patent protections and perhaps pricing ability, some companies might become less enthused about pursuing costly medical research.
This, of course, is the argument offered by drug companies when told they’d lose their pricing power. I’m not sure the remedy to this solution, but something needs to be done one way or another.
Stop Wasting Money – 11 Bad Financial Habits to Stop to Help You Save More Money by Scott at Making Momentum
Scott does a great job of cataloging a list of ways to stop wasting money and saving more. He walks through a number of great recommendations for you to audit your personal finances and put yourself on track to save.
I enjoyed his tip on auditing your subscriptions to see if you continue using them enough (or at all) to justify having them. Another, which caught my attention given my employment by a utility, was his advice on switching to more energy efficient appliances, lighting, and all around energy decisions. Be sure to stop by and read them all.
If you follow them, you might be setting yourself up to save more money.
“Just Survive” – Meb Faber with Corey Choffstein on Flirting with Models
For anyone new to the investing world, Meb Faber is an investing heavyweight. His paper, a Quantitative Approach to Tactical Asset Allocation is the highest ranked paper on SSRN with over 200,000 downloads at the point of this podcast episode’s recording.
However, as you will find, Meb Faber’s interests go far beyond tactical asset allocation. His work over the last decade-plus – from his blog to his podcast to the books he has authored – spans broad topics such as shareholder yield, global value, hard asset alternatives, risk parity, and angel investing to name a few.
The podcast is for a more-experienced investor, but I highly recommend it for anyone interested in investing. His content, particularly his white papers and research, are riddled with wonderful data to frame your investment thinking.
That’s it for this week’s Curator’s Corner – Young and the Invested’s Best Finds on Sunday, Volume 7 [Jan. 13, 2019]. I hope you’ve enjoyed the content above and look forward to next week’s volume.
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Until next week.
About the Author and Blog
In 2018, I was winding down a stint in investor relations and found myself newly equipped with a CPA, added insight on how investors behave in markets, and a load of free time. My job routinely required extended work hours, complex assignments, and tight deadlines. Seeking to maintain my momentum, I wanted to chase something ambitious.
I chose to start this financial independence blog as my next step, recognizing both the challenge and opportunity. I launched the site with encouragement from my wife as a means to lay out our financial independence journey to reach a Millennial retirement and connect with and help others who share the same goal.
Some of my favorite things to discuss include investing in index funds, how to save money, travel hacking with help from the Reddit churning community, house hacking and optimizing the benefits of my condo vs. apartment living, and tax topics like the earned income tax credit, common tax deductions, tax reform in 2018, or other useful tax topics. I want this to be a journey for us all to learn how to make a lot of money and pursue the lives we want.
Please continue to watch the site for more to come and post below with your questions or comments.
I have not been compensated by any of the companies listed in this post at the time of this writing. Any recommendations made by me are my own. Should you choose to act on them, please see my the disclaimer on my About Young and the Invested page.