For years, I would receive a Social Security statement. This statement contains information about how much money you’ve earned (and contributed to the Social Security program), as well as information about your estimated benefits later on, when you can begin taking Social Security payments.

Recently, the Social Security Administration began doing away with the paper statements and started offering statements online. It’s now possible to use the Internet to get access to your Social Security statement. This is convenient, because it makes it possible to access your information anytime. You have to create an account with the site, but once that’s done, you have access to your Social Security statement, as well as access to information about taking benefits. You can even apply online for retirement and disability benefits.
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I don’t spend a lot of time writing about Social Security because I’m only in my early 30′s. If the topic of Social Security comes up with my friends, it’s usually followed by disparaging comments about how it’s underfunded and won’t exist in thirty years when I’m eligible to start receiving it (which probably isn’t that far off). Sadly, the solvency of Social Security is (mostly) simple math. New workers contribute, older retirees withdraw, and the system works similar to a Ponzi scheme, except everyone knows it. The tricky part comes when you start messing with the contributions, such as with the payroll tax cuts, or you don’t leave the contributions alone.

When the money starts looking tight, you can always start pushing out the “full retirement age.”

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One of the topics that we have heard a lot about as the economy lurches slowly toward recovery is inflation. But what is inflation? We hear about all sorts of incarnations of inflation, from core inflation to stagflation. While getting into the nuts and bolts of inflation can be a complex exercise, some general knowledge about inflation can help you learn a little bit more about a very real force that can have a very real impact on your finances.

As you listen to monetary policymakers talk about inflation, and as you read about changes to the CPI, it helps to have a general idea about what is going on. That way, you will be prepared to make more informed decisions about what to do with your money.

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I personally think this whole debate on cutting the budget is a little silly, especially now, and that both parties are to blame. On one hand, it’s a little disingenuous for the Republican party to demand lower spending when we had massive spending bills during the Bush Administration. On the other, the 2011 budget should’ve been settled last year when Democrats had control of both chambers of Congress. That said, we are where we are and here are the nitty gritty details of the budget compromise reached last week.

The budget cuts are to cut spending by $40 billion (the fiscal year ends in September 30th) and it is the largest biggest cut made in a single year, made even more stunning by how little time we have left in the year (less than six months until October 1st). Part of the $40 billion is covered by $12 billion in reductions that started at the beginning of the fiscal year, Oct. 1, 2010; but the remaining $28 billion starts now(ish).

If you’re curious to see them all, CNN Money compiled a list and has offered some commentary here.

It seems like there’s a lot of penny pinching here or there but not much attention paid to the biggest pieces of our spending. Case in point: The Pentagon would receive $5 billion to be partially offset by $4.2 billion in eliminated military earmarks, with the difference made up elsewhere. I’m all for making sure we’re supporting our troops but there can be some belt tightening in the development efforts (rather than support/operations). When you look at a family budget, you don’t save much when you ask the kids to take an allowance cut.

What do you think about all this?

A lot of the political rhetoric during the mid-term elections focused on reducing government spending and reducing the deficit (I found it a little hypocritical considering the average household credit card debt was in the thousands of dollars). That likely prompted the New York Times to put together a little “game” in which you get to fix the budget.

Today, you’re in charge of the nation’s finances. Some of your options have more short-term savings and some have more long-term savings. When you have closed the budget gaps for both 2015 and 2030, you are done. Make your own plan, then share it online.

You get a list of programs with estimated savings to the deficit (out to 2015 and 2030), and you’re charged with saving $418 billion by 2015 and $1,355 billion by 2030. The sources of those estimates come from a litany of organizations, many of which you’ve probably seen referred to in other articles, and I’m inclined to take their savings estimates at face value. By playing this game, you start to appreciate how difficult it is to cut the deficit (despite out easy it is to put “fiscal responsibility” on political “to do” list) especially after the reaction to the draft Bowles-Simpson Plan.

Quantitative easing, known as QE, is a monetary policy used by a central bank to increase the money supply by increasing the excess reserves. In layman’s terms, they inject a lot of new money into the money supply through open market operations. If this sounds like the central bank is just printing more money, you’re right (technically they just make up money out of thin air electronically, no actual printing is necessary). The specifics of how they do this are probably not important to 99.99% of us, but they’re explained below, but what is important is why a central bank like the Federal Reserve would want to do this.

How is QE accomplished?

(in case you were curious) The central bank essentially credits its own account with new money and uses that money to buy assets from banks, thus increasing the reserves at those banks. Those banks can then lend that money out at a multiple based on the reserve ratio. If the ratio is 10%, then they can lend out 90% of the amount of the added reserves. Reserve ratios are the percentage of an asset they must keep as reserves (so if you have $100 and the ratio is 10%, you can lend out $90). The next bank can lend out $81, keeping $9, and so on and so forth.

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Can you believe it’s the first Monday in September already? I would say that this year has absolutely flown by but with the severe weather (multiple feet of snow in the winter, multiple days of 100+ degree weather in the summer), I think I’ve acutely felt every single day as it passed.

With Labor Day upon us, I did a little bit of research into the origins and thought it’d be fun to know the history of the holiday. Labor Day was first celebrated in 1882 and when you think about its origins, it’s actually a pretty ugly story. In 1894, there was the Pullman Strike in which a labor dispute (3000 employees of the Pullman Palace Car Company went on strike and President Grover Cleveland sent US Marshalls and the US Army to break the strike) led to the deaths of 13 strikers and the wounding of 57 others. As a way to reconcile, we celebrate Labor Day as a national holiday with parades, barbecues, and other minor celebrations.

So on this Labor Day, get some rest, relaxation, and we’ll be back with more personal finance tomorrow!

This week, the House of Representatives passed H.R.4154, titled the “Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009.” HR 4154 would amend the Internal Revenue Code to prevent the repeal of the estate tax next year. Under current law, there would be no estate tax for 2010 and your estate would transfer tax free to your heirs.

What is in the House bill? Thought many expect the bill not to pass in the Senate, the House bill exempts the first $3.5 million of a person’s estate and the first $1 million in gifts. Then the highest rate applied to the taxable portion of the estate would be 45%. CNN Money does some morbid math and claims that of the 2.5 million Americans expected to die in 2009, only 0.25% (5,500) have estates large enough to be taxable.

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