should you cash your paycheck?

Why you should cash in on the huge check in your mail

If there was a check written to you for a large amount from the US government or even from a bank, would you be willing

Chinese Bank of China

Chinese Bank of China (Photo credit: epSos.de)

to cash it? To me, most people do not operate that way. It’s like they have a big check that they received in the mail already, but they just do not even check their mail. Maybe they are focused on other issues with a lot of momentum in focusing only on certain other things, but I’m going to invite you to focus on this issue right now, so you can be clear on what I am referencing and how much value it could be for you.

A key question is “who is willing to look for opportunity and take action in accord with the best opportunities recognized as available?” That is basically the same idea as the question of “would you be willing to cash a big check written to you, even if it required checking your mail, opening an envelope, and then- wow, I know this sounds like a lot of work for probably no more than a few thousand dollars… are you getting tired already, too- taking the check all the way to a local bank to actually cash it?” If this sounds too good to be true, like that the US government would ever mail someone a big check, then I invite you to go back to whatever you were doing before, even if you were just complaining about how the US government recently gave the big banks however many trillion dollars and you did not even get a million dollars from them (presuming, of course, that you have actually checked your mail to confirm that they have not sent you a big check, too).
We know that the US government has various programs that offer various large numbers of people an opportunity for personal advantage as in profit. Further, the operations of global banks and stock brokerages and investors form patterns which constitute even more enormous opportunities. However, I assert that while most people do not recognize some of the biggest opportunities, it is the very fact that most people do not recognize them that makes those opportunities so unusually attractive. When people “discount” a particular opportunity, that discounting generally means that it is unusually inexpensive to access that opportunity: an unusually valuable opportunity.
So, I’m going to start with a hypothetical example of a family that has a bunch of government checks available for them to cash. After detailing that familiar and small-scale example, I will expand later to the immense global transfer of affluence about to accelerate.
Let’s imagine a married couple with 6 kids (such as the TV cast of the famous Brady Bunch). The 3 older kids have started to work, including one who is already starting their own business, and perhaps all 3 go to the nearby local college. The 3 younger kids often ask their older siblings for attention, especially transportation back and forth from visiting their friends.
Now, imagine that all these folks live in a few buildings in a cluster, with the young adults spreading out in small dwellings near the main home- maybe one in the guest house, one in the converted garage, and another in the RV: who knows? The young adults increasingly value their privacy, but they also like for mom to cook for them.
Still, without really thinking about the alternatives, many people when filing taxes would just count all of the 6 kids as their dependents. Tax laws can be complex, right, and let’s imagine that this family spends more time avoiding the subject of taxes than recognizing the simple, relevant issues for them.
Tax

Tax (Photo credit: 401K)

So, they might qualify for the IRS “earned income credit” program, but especially if both parents were earning a fair amount of money, the actual credit might be very small or nothing. Instead, what if some of the older kids could legally qualify as “head of household?”

Since both mom and dad often work long hours, with dad traveling for business frequently, too, the older siblings realistically spend more time supervising their younger siblings than the parents. I actually do not know all the tax regulations in detail, but just imagine that these folks have a situation in which they really would have a few alternatives, for all of which they are fully qualified.
To qualify for all of the benefits available, like food stamps and so forth, maybe they would need to formally change the legal guardian status for the younger kids. However, for tax purposes, a dependent may or may not be the taxpayer‘s legal child. In fact, someone caring for their elderly parent can count the parent as their dependent! Most people also know that spouses can count as a dependent, so being legal guardian is just one alternative.
If the parents earn too much money (or not enough) to qualify for the “earned income tax credit,” perhaps the older kids are only working part-time, each only earning around $10,000 per year. One of the older siblings is in the early years of building a business and so far is not making a whole lot of profit. In fact, by leaving off some of the qualified expenses of the business (since those funds actually came from the parents, not the business itself), that sibling can report a higher taxable income which produces a much larger “earned income credit.”
So, just by associating each younger kid with an older kid, with the older kids filing as “head of household” and qualifying

Washington DC - Capitol Hill: United States Ca...

Washington DC - Capitol Hill: United States Capitol and Reflecting Pool (Photo credit: wallyg)

for an earned income credit, suddenly they not only do not owe any taxes at all, but the various older kids get back from the IRS an extra $4000, $5000, and $6000, since they each have slightly different incomes. Just by re-arranging the dependency status of the younger kids, there is a lot more money available for the expenses of parenting the younger kids.

Now, in this example, the opportunity is not as simple as cashing a check that has already been mailed and is sitting in the mailbox waiting to be opened. To cash in on advantages offered by certain government programs can involve a basic focus on opportunity itself, then some literacy and intelligence, plus even a little creativity occasionally.
But what if it’s worth an extra $15,000 (per year)? What if in addition to the larger tax refund, by arranging things this way, each of the college students also qualify for an extra $3000 per year in educational grants? What if they each also get an extra $2000 in food stamps and other benefits?
Before long, we are talking about a decent amount of money, right? But many people might say that it is better to proudly complain about the financial struggles of a large family and how all the banks are victimizing everyone… than to humbly receive the full benefts legally available, because being financially stable, at least using this method, is a really good reason to be guilty and ashamed, right? This is just taking advantage of the system!
Checking your mail and cashing a big check written to you is also participating fully in particular systems, like taking advantage of the benefits that the systems were specifically designed to offer you. As noted before, this all raises a basic practical question- not really a moral question, but just a practical one: “who is willing to look for opportunity and take action in accord with the best opportunities recognized as available?”
This could be like opportunistically applying for more than one job and then only taking the one that offers the highest pay, best benefits, and most interesting work. That, too, is clearly taking advantage of one opportunity as most attractive relative to others available.
Should you be guilty for taking advantage of working a higher paying job (and then, adding tremendously to your guilt, actually cashing your paycheck)? Are you thinking of all the poor people (victims of the system, of course) who did not get this job, did not do the work, and did not receive the paycheck? What about them? What have you done for them lately- for all of them, for every single one? Please… PLEASE, think about them before you sign that check and cash it in!
Now, what about the huge opportunities present in the immense transfer of wealth accelerating in the global financial shift? For instance, what about the ownership of huge numbers of major private companies changing from naive “bullish” masses toward selective “bearish” conservative investors? Or what about huge amount of real estate ownership shifting from speculative gamblers to banks and other prudent opportunists? (Note that all investors in real estate or anything else may be opportunists, but some are better at it- more prudent- than others!)
Well, as for anyone who does not already recognize that investment markets are basically systems for transfering ownership (wealth)… that person is not only still a gambler, but probably doesn’t even know it. Opportunist gamblers who do not know that they are opportunist gamblers may not study the rules of how markets work to systematically transfer owernship and wealth from some people to others. Not studying the rules (or the odds/risks), their chances of long-term success are, let’s say… “below average.”
They may even repeatedly say things like “I was surprised by what happened recently.” That could be a sign that they do not know the rules of how markets work (i.e. how markets shift).
Some may even argue that there are no rules for how markets work. That is rather like saying “there cannot be a big check sitting in my mailbox and I know this with certainty because I have not checked the mailbox lately.”
Not knowing the rules of a sport, such as tennis, does not mean that there are no rules. Not knowing the rules only means not knowing the rules. People who decline or refuse to learn the rules of tennis, but insist on playing anyway, then persistently complain that there cannot be any rules for tennis… are a lot like opportunist gamblers who decline or refuse to learn the rules of investment markets, but insist on speculative gambling anyway, then persistently complain that there cannot be any rules for how investment markets work, with the added twist that, unlike rebellious tennis players, opportunist gamblers tend to claim that some government officials or central bankers should fix the gambling game (by changing the rules that do not exist) so that they always win.
I am telling you that investment markets are like sources of checks in the mail that you may have been refusing to cash. If you have been surprised, that is a sign that you do not know the rules. If you think that it is morally wrong to receive the benefits of following the rules of government programs or of following the rules of how investment markets work, then do not be surprised if you do not take the actions that correspond with consistently accessing those benefits that may have been specifically designed to be available for you personally. If you believe that you shouldn’t, then you probably don’t and you probably won’t.
But maybe the government can fix the odds for you so that you can consistently win anyway, even without knowing the rules or admitting that there might be some rules. Do you have your fingers crossed?
If you’d like to consult with me about the benefits available to you of working with someone who actually studies the rules of how investment markets work (as well as what government programs offer what opportunities), thank you for your interest and you are welcome to contact me.
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One Response to “should you cash your paycheck?”

  1. jrfibonacci Says:
    July 31, 2010 at 7:54 pm | Reply

    Garry wrote:
    “This is a creative way of promoting your services via stories to peak interest and keep folks reading….
    I felt the first paragraph and the last were the most significant, as they should be (well done).”

    JR replies:

    Yes, it’s weird to me that a friend of mine recently filed for a big refund (just using regular methods) for 2008, meaning that he waited about 18 or 19 months to actually request the money. I also know a lot of people who regularly get big refunds of the “withholding” portion of their paycheck, yet do not reduce their withholding status so that they get it each paycheck instead of getting it in a lump the next year (or 18 months later).

    I’ve actually been startled at the animosity someone seemed to project when I simply mentioned to her the simple method for getting that money every check rather than wait to get it in a lump the following year. It’s like I was interfering with their story of “but I am a victim of financial poverty!” and so then they turned demonic. I could be wrong, but that’s my explanation.

    Maybe it sounds to you like I am telling it as a complaint like I was the victim of their animosity, but actually I’m just saying I was startled as in naive. I was like a kid playing tennis and then the judge blew this horrendously loud silent dog whistle- like a thunder bolt striking way too close- and then yelled “penalty! you broke the rules.” So, I asked “what rule did I break?” but the judge said “I am not going to just come out and tell you the rules! If you have to ask, then maybe you should not be on my court, huh?”

    And, the Brady Bunch family story is also based on a real situation of real people I know. Many of the folks I thought of as I write have been “tax protestor” types who have complained persistently about how evil “everything” is (as I have). In our complaints about “the system,” we might neglect to notice new opportunity. We may be committed to producing the circumstances to keep evidencing our alleged victimhood (or sinfulness, etc).

    While I did not “go there” in this piece, I could also say that someone like Scott C. metaphorically had a check for a million dollars that he just refused to cash. As far as I know, he did not sell his real estate near the peak- a very obvious peak to me, which you may know, Garry, that I directly and repeatedly explained to him- nor did he sell whatever other assets he may have had at any obvious peak in those markets (such as his business), and if he did sell other stuff that I did not know about, then many others did not- like Phyllis R. or your friend that inherited a million dollar home or many thousands of other folks in Scottsdale or Tokyo or London. It’s like they had the check in their mailbox, but did not even open the mailbox. Or, they waited 18 months to cash the check (sell the inherited real estate), and by then, it was predictably worth $350,000 less. To a multi-millionaire, that $350,000 may not be much. To our mutual friend Judi, the predictable disappearing of her $90,000 of real estate equity pretty much bankrupt her. She had a check sitting in her mailbox and, metaphorically, refused to read the fine print (“this check will predictably be worthless in 18 months”).

    The main thing to get is that there could be rules that you (or I) do not know, and that what works in regard to interacting with rules that we may only just be learning… is humility, willingness, and responsibility. Protesting might work, but it might not, either- and whether or not it does, in any particular case, the results are always orderly and predictable.

    I also liked the joke about “we know that there are no rules to how investment markets work, but anyway let’s elect our favorite political genius- Ron Paul/Lenin/Obama/Osama/Mussolini/Hitler/Jesus- to fix the odds so that the rules of how investment markets work favor us… over those undeserving poor foreignors of Latin America, Southeast Asia, and especially the Middle East, plus the CEO of Enron.” I didn’t even see that one coming myself. It was probably my favorite part of the whole piece, and you may have noticed that I added the old poor foreignors reference above.

    The emerging animosity of the social herd is also predictable, including tax protestors and conspiracy theorists, who tend to harbor animosity about tyranny (rather than just notice tyranny as predictable and really nothing special, like governmeent has not always meant “an operation of organized coercion”). We’ve been whiners. We’ve been naive. We’ve been complacent.

    Animosity toward the distant IRS or CNN or the FBI or the FDA or the Fed may not be especially practical. The poor foreignors are about to take away the wealth of the middle class of North America and Europe. Using the analogy of this piece, it’s like we wrote them the checks (like with mortgage borrowing). We are complaining now that they are starting to cash those checks that we (mostly baby boomers like yourself, Garry) have written them. That’s what’s up.

    We may have complaints about how the court systems of the US and UK are favoring the disproportionately Chinese lending sources, but we are the ones who set up those mortgage contracts and courts to enforce those contracts according to certain predictable rules, not the Chinese and other lending sources (certainly including at least a few caucasian conservative opportunists, too). The baby boomers may even interrupt the transfer of wealth away from the developed world toward the developing world, but doing so would interrupt a lot of other things too.

    Consider that the real bottom line is that we wrote the checks, now the payees and courts are starting to cash the checks we wrote, and the more of those checks that they cash, the less the remaining underlying valuables are worth (such as US real estate or stock share ownership of US companies), so the more people with those remaining checks will be rushing to cash them in while there is still something left.

    So, just because the US government now owns 61% of a major US auto-maker, that does not mean that the auto-maker will be in business or worth anything in 5 years or even 2. Government bail-outs of that sort are notorious for attracting short-term glee while producing no effect whatsoever in the long run- basically just “bailing out” or “rescuing” the other 39% of shareholders by temporarily propping up prices of the auto-maker’s stock. The underlying viability of the operation has not changed at all. A business that is uncompetitive and irresponsible (and increasingly so over time with the involvement of government bureaucrats who are even less focused on competitiveness and responsibility) will predictably be bankrupt or at least dramatically reduced in size within a few years.

    When any government starts buying in to prop up auto-makers and banks and so on, that could be a sign to seriously dump ownership of those companies. This is not specific to the US or recent times. When the Soviet Union or Red China started nationalizing industries, did that produce an immediate long-term surge of prosperity in those industries (and countries)?

    You can research that for yourself. I’ll say this: “not exactly.”

    If I had a check (a contractual investment interest) written to me backed by obviously de-stabilizing investments just after the first stages of the nationalizing of of the relevant industry in the USSR or Red China or fascist Italy etc etc etc, I would cash it fast. Imagine the average “second mortgage” contract in Phoenix AZ. If the government comes in with a trillion dollar TARP package, is that a sign of a fundamentally stable investment opportunty?

    Many of those second mortgage contracts are currently totally worthless- like a check written on an account that has no funds (no equity value). A TARP program may push a few of those into positive territory momentarily, but in the long-run, the value of second mortgates will still be, in most cases, totally worthless.

    Sure, the people who have lots of those second mortgages form an interest group that is willing to lobby for TARP and for tax credit programs to temporarily boost up the mortgage industry and real estate prices, so maybe the holders of second mortgages can get something quickly for some of those otherwise worthless second mortgages, but there is no long-term change from such interventions, except for the extra expense to the US taxpayer for rescuing a few of those holders of second mortgages (and the debtors, too- but secondarily). Similarly, when the US government comes in to keep General Motors from shutting down their uncompetitive, irresponsible operations, does that suddenly make the operations competitive and responsible? Predictably, it boosts prices of the stock momentarily- burdening the US taxpayer with the ownership of a bunch of expensive checks that will soon be worthless… unless GM miraculously becomes competitive and responsible in the face of the most predictable and biggest global transfer of wealth in the history of humanity.

    Consider that I could just be being dramatic, but then again, I specifically forecast all of this, right? Even if I am being dramatic, that does not mean that the basic facts are not exactly as I indicate.

    While the particular details are new, what is happening now is generally similar to lots of other things, including the decline of Japan starting in 1989 and the collapse of the USSR prior to that. The politicians and investors of the US and EU will likely keep doing the same kinds of things that the Japanese people and politicians did, and lots of other people and politicians before them. You and I, however, can learn from the past and prosper from learning certain rules and following them, but only if we are willing to do more than just check our mailbox (or email inbox). Are you?

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