I can still remember the lyrics of a song that my brothers used to play on the record player when I was a kid. "Accentuate the positive, eliminate the negative, and don't mess with Mr. In-between." Why did I remember this for all these years? Because it is very good advice. That is what I try to do here -- accentuate the positive, and eliminate the negative. Let's proceed with the positive...
Let's talk about long-term savings. Anytime you can save a dollar and not pay taxes on it or the interest it earns, do it, as long as it's legal. The magic of compound interest that accumulates tax-deferred is a sight to behold! How, you ask, can you do that? It's easy. The simplest form is the IRA. Next is the SEP (Simplified Employee Pension). You can put away more, but if you have employees you must put away money for them, too. If and when they leave you, they can take "their" money with them. A SEP is fine if you have no employees, other than family, and won't have any in the future.
A qualified retirement program will allow you to put away even more money. You must include employees, but you can set up a vesting schedule. This means that if employees leave before they are fully vested, guess where the balance of the money goes? Correct! Now you know why all those large companies set up qualified retirement programs. A vesting schedule is a legal way for you to put away more money for the people who will stay around the longest. It's like pouring water into a wide funnel. It eventually all ends up in the middle.
Take full advantage of these gifts from Uncle Sam. Some might try to tell you that this is not a good idea. Just remember the song that my brothers used to play, "Accentuate the positive, eliminate the negative, and don't listen to Mr. In-between!"
A billion dollars is a large amount of money. What an understatement! J. Paul Getty was a billionaire, and he had a secret to building his wealth. "Buy when everyone else is selling, and hold until everyone else is buying." This basic philosophy of Getty has come to be known on Wall Street as "contrary investing." It works in any marketplace. As I have stated in this column before, the great American way is to buy high and sell low. You must learn to "buck the crowd," and buy when things look bad, and sell when everybody else is standing in line to buy. That, my friends, is another Greenfield basic rule of economics and survival!
Here's a question for you -- what was the hottest collectible for the 1980's? Believe it or not, it was baseball trading cards, increasing in value at least 25% per year during the 1980's. Over the last 40 years they have never had a losing year. You sure can't say that for some of the players on the cards! The best bet is to buy cards of rookies in hopes that they will make it big and increase the value of the card. A nice hobby that can also double as a good investment.
Purchasing proof sets of coins from the U.S. Mint can also be a nice hobby and be a good investment. Current proof sets sell for only $11, and can be purchased direct from the Mint. The address is: U.S. Mint, P.O. Box 8666, Philadelphia, PA 19162-0015. It's worth checking out and makes a nice family hobby (I get a commission from the Mint for every set you buy. I wish!).
It's been awhile since I have commented on America's love affair with plastic. No, I'm not talking about plastic wrap -- I'm talking about credit cards. I've come up with a few additional rules for the proper care and feeding of these creatures.
If you pay off your balance every month and rarely carry a balance forward, consider a card with the lowest annual fee. Why pay a large fee for nothing? If you do "use" the card then consider a card with the lowest interest charge (another Greenfield basic rule of finance -- get the mostest for the leastest"). Don't forget that consumer interest was only 20% deductible in 1989, 10% in 1990, and then lost and gone forever. You might consider transferring these debts to a home equity loan which at this time is fully deductible (the interest, that is). These loans should be used and not abused. They can get out of hand and the interest can go up. Don't become a slave to it.
Speaking of hobbies, if you are making money from a hobby, why not turn it into a business so you can write off your expenses? You must demonstrate that you engaged in this activity for a profit. Set up a separate bank account and maintain separate records. You must show a profit in three out of five years, or you will have to prove your profit motivation.
I wish I could tell you that I have always invested in winners. The only baseball trading cards I got I bought as a kid, and all I really wanted was the chewing gum! Real savvy! I have been collecting coins for many years and find this both fun and profitable. My real love is cars, and I have owned a "few" in my day. The only cars I've lost money on are the new ones I've bought to drive. At one time that hobby became a business that funded a trust for my children's education. Even under the new tax laws, there are still some creative things you can do. The hardest part of this hobby is explaining to your wife why you have nine cars in the driveway, all parked behind her car! If you figure that one out, please let me know!
Your comments and inquiries may be directed to:
Stanley Greenfield, RHU
7420 Swansong Way
Bethesda, Maryland 20817
Please enclose your self-addressed, stamped envelope.
