For the record, my job pays quite well and has for the past few years. The economy has affected my company quite severely, as we laid off nearly 90% of the workforce in the span of a year and a half. I was kept because (1) I'm one of the few people who knows almost every aspect of the business and (2) I administer one of the core business systems (that's soon to change).
However, California is a quicksand pit: you can have a great salary and yet still be cash poor. "Cash poor" is a term that literally means you have no cash to speak of. You have reserves, you have assets, you have extended credit available, you have 'things' to show for your work, but no cash to blow. The primary reason I don't have cash? I rent.
You wouldn't think that simple statement would explain it all, but it really does. My rent payment exceeds every luxury I have. My rent payment is greater than the sum of all of my other bills combined. TV, internet, phone, cell phone, car, credit cards, water, electric, drinking water...combined make up about $900 per month expenses, give or take. My rent payment is almost $1800. By the time I pay those, I have just enough to keep my car and stomach filled, with the occasional book, game or DVD purchase. It's not easy saving.
However, I do have a 401k account that gets automatically filled. "How come you can do that and not set money aside yourself?" Easy. The 401k is immune from taxation. It also comes out before I ever see it, and I can't touch it without penalty. If I had the option of setting money aside from my paycheck into an IRA or a CD, tax exempt, I'd do it in a heartbeat. The problem is that I know the money's already been taxed and each check I get is cut by at least $600 before I see it, and that bothers me. So does the government's lame attempt at "economic stimulus" - don't send me a check for money that is just going to go towards tax liability...create a way for people to save money and avoid taxation. Encourage savings and you stimulate spending by proxy: if I could save enough money, I'd buy a house twice the size of the one I'm buying now and pay the same price.
Speaking of taxes, some people in other states really don't understand what goes into our tax system. So just for them, I'll break this down, then go further into the low cash system.
- Income Tax: This one is the worst of them all. An arbitrary incremental percentage of the money you earn. I happen to be a supporter of FairTax and believe that tax should be assessed based on what you consume, not what you earn. Doing it that way ensures that every level, from the lowest (drug dealers) to the highest (billionaires) are forced to pay their fair share, because everyone has to buy food. Everyone has to buy clothes. Everyone needs gas. There are a lot of things that everyone must buy, and then those billionaires who need a fleet of Hummers will automatically inject major amounts of money into the economy within months. Know what's worse? There are two - Federal and State. Some states don't have state income tax but we do. A huge chunk of our money is gone before we know what hit us. That's two taxes in one!
- FICA/Social Security/Medicare: This is a tax, I don't care who says it's not. It's a tax because the money you pay towards it does not benefit you, but rather the system that shares its name which, by the way, is slated to be dry and no longer of value before my generation turns retirement age. So in essence, everyone paying this has been throwing away millions of dollars a month towards something we won't benefit from. Also, if you make $110grand or more you don't have to pay this tax. That alone makes it severely unbalanced, as well as partially responsible for the fact that the majority of us won't have benefits when we retire. Either apply the tax equitably regardless of income or don't charge it at all.
- State Disability: See Social Security above. Same issue (except the income limit).
- Sales Tax: I actually have no problem with the sales tax. I do have a problem with its application. Sales tax should only apply to physical goods and only those purchased from a retailer in your state of residence, be that an online retailer or brick-and-mortar. What the government wants to do is force you to pay this tax in the form of use tax (I'll get to that one). They could solve their issue by simply enacting the consumption tax - then it wouldn't matter where the product was purchased, and I would support that, if it meant my income was completely left alone and paid fully to me.
- Use tax: Did you know that, if you buy stuff from Amazon.com or some other retailer that does not have a physical premise in your state, that you have to report the tax of those purchases on your return? It's called "use tax" - the government's way of attempting to collect money it thinks it's owed. It's a farce. the money was already taxed at income time; why do you then need to turn around and tax it yet again?
- Property tax: This one is ignorant. I mean at least it's deductible but still. Tax on land? Paid for with money that was already taxed at income time. It's stupid.
So...now that I've spun this into a different topic, I'll get back to the original one...cash reserves. It's not easy to save money out here. Doable? Yes. Not easy. And the system needs to give in one way or another:
(A) Implement a flat, static consumption tax and repeal anything else even referred to as a "tax", paid one time and one time only, or
(B) Implement processes that allow consumers to save their own money tax-exempt without requiring an employer-sponsored pension plan.
