The Carr Report: Uncle Sam keeping a third of income? Debt-free and now on deathbed? Damon Carr answers your questions

by Damon Carr, For New Pittsburgh Courier

“Hello Damon, I heard that the first three hours of an eight-hour workday goes to pay federal, state and local taxes. The remaining five hour goes to the worker. What’s your take on that?”

~ C.J.

Damon says: This one time I saw self-proclaimed pimp Bishop Magic Don Juan on TV. It hit me! Uncle Sam is a pimp. Think about it. They both wear top hats and loud colored suits. They both get their money off the hard work of others. Don’t come up short! For, both will pimp-smack you with fees, penalties and a bad reputation.

Three hours of an eight-hour workday is 37.5 percent. We operate within a progressive tax system.  There’s no flat tax rate for federal taxes, which is the largest of all income taxes.  Example. The first, say, $14,000 earned is taxed at, say, 10 percent.  The next $25,000 is taxed at 12 percent, etc. The highest tax rate tops out at 37 percent. That’s for income over $500,000. Safe to say very few people are getting 37 percent of their money taxed.

It’s a false narrative. However, one should consider tax favored and tax advantage investments to keep Uncle Pimp…I mean Sam out of your pockets.

“Hello Damon, what’s up with bitcoins? Is it a good investment or is it too late?”

~ Shane

Damon says: Is it a legitimate asset class that you can invest in? Yes! Is it a good investment? Well, that depends on if you buy, hold, and then sell at a profit. Beware! Bitcoins are not for the faint of heart.

It’s very volatile. Meaning it just went up or down 900 percent as I type this message. I liken it to bungee jumping.  Some people love the wild ride. Some people throw up and NEVER bungee jump again. Do you catch my drift?

If you want to play in that space, limit your overall exposure to no more than 5 or 10 percent of the money you have to invest. If you got $10,000 to invest, don’t invest no more than $500 to $1,000. Invest the other $9,000 in a more diversified and more stable investment vehicle like a Total Market Index fund. Its average rate of return has hovered around 10 percent in the last 100 years.

“Hello Damon, balance is important. A friend was told she has stage 4 cancer.  She’s debt-free and will be dead in a year, after sacrificing all she loved to do for 3.5 years!  She doesn’t have 3.5 years in front of her now.  So while I agree we should strive to be debt-free, we need to start out life with this mindset so we do not get into our 50s living an austere life.”

~ Fern

Damon says: People come up with a ton of things to justify you only live once, fear of missing out and why you should carry debt.

I’m sincerely sorry to hear of your friend and her fight with cancer. Her singular story in and of itself doesn’t rule out one fact —debt is hazardous to your wealth. Many of us will live a long life not being able to fully live because of being buried in debt. Your friend made being debt-free a priority because she wasn’t living to die. She had goals.

Given her low expenses, she probably has more disposable income to assist with the mounting expenses of caring for herself as the medical team work to prolong her life.

Given the fact that she doesn’t have a mountain of bills hanging over her head, that’s one less stress to worry about. No eviction or cut off notice worries on top of everything else.

Lastly, if she’s in the midst of her last days, she may have the positive cash-flow and resources by having no debt to give to family, people, and causes that she believes in. Nothing puts a smile on your face like knowing you made a positive contribution to someone that had a positive impact on their life.  She will be paying it forward, thus leaving a legacy and memories that will live on forever.

“Hello Damon, any advice on making student loans disappear? Aside from them I only have $2000 of debt.”

~ Janet

Damon says: Unfortunately, There’s no magic wand. Fortunately, the fact you only have $2,000 in other debt suggests that you’re extremely frugal and live below your means. Rhetorical question. Are you sure $2,000 is the only debt you have? I ask because there are certain loans for whatever reason people don’t classify as debt.

I’m going to take you at face value and say you only have $2,000 in other debt. If that is the case, that tells me you have decent wiggle room, or a nice gap between your income and expenses.  Therein lies the solution!

I appreciate everyone coming to me with your questions. Before I go, let me talk about a question I get a lot, which is not surprising…How do you make debt disappear?

Here’s the answer: Making maximum payments as opposed to minimum payments! As an example, say you have an “extra” $500…you can put that on top of your minimum payment on, say, a $2,000 debt. Bam, that’s paid off in about 3 months or less.

(Damon Carr, Money Coach can be reached at 412-216-1013 or visit his website at

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