MiB Smarter Money » Credit

Please Help Save A Struggling Mega Corporation

hank — Tue, 28 Oct 2008 02:05:28 +0000

I saw this video tonight and had to post about it. With the $700 billion getting divided up in the coming weeks, you too can help save a multimillionaire with just a few cents a day!

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How Is What We Are Going Through Now Different From The Great Depression in the 1930’s?

hank — Mon, 20 Oct 2008 08:29:55 +0000

I’ve been mulling this post over for about a month now and have been taking notes back and forth to come up with valid info to ease people from getting too worked up about it.

Yes, you should probably be “worked up” if you are 55-60 and wanting to retire in the next 2-3 years, but if you hadn’t already started taking money out when you saw the housing market tanking…

There are some MAJOR differences (and a few similarities) though between what we’re seeing and our grandparents and great grandparents saw 80 years ago.

What Are the Similarities?

There are a handful of similarities you’ll see between now and the 1930′s that people are talking about but we’ll never see thanks to government safeguards created in the 1930s to prevent a similar collapse from occurring today.

Today’s financial crisis is hardly as grim as The Great Depression, though it does share some similarities with the 1930s — both were preceded by a housing boom, a long period of cheap credit and a falling stock market. But those same similarities may offer some reassurance to what we’ve seen over the past few weeks/months.

Today’s economy “is much more developed then we were then. We are many times richer. We have a very good safety net in place. They had none,” said Michael Bordo, a professor of economics at Rutgers University who’s an expert in financial crises.

There’s a danger in citing the Great Depression now because you don’t want to scare people, Bordo said. The current crisis is probably more comparable to what happened in Japan in the 1990s, when a huge real estate bubble burst, and it took a decade of economic stagnation for the government to address the problem.

Publicity

This is the big one that catches my eye when I think about the major differences. How “public” were the signs of The Great Depression or signs of the times before it actually happened? Sure there were newspapers, but radio was just catching on in the late 1920′s. Not everyone had one and the ones that were available, I would imagine you were getting pretty standard news and information; regulated enough.

Rural communities often times didn’t even have newspapers to relay information. They’d get it 2nd, 3rd, and 4th hand from their “neighbor who talked to the milk maid in the city last month”. Once you pass information enough times, it gets convoluted fairly easily. Have you ever played that game where one person reads a paragraph as a whisper in someone’s ear and the story is re-hashed so many times before it gets to the last person in line? The story changes, dramatically.

People key off certain words and those are the ones that’ll get handed down the line to the next person and in the end, the keywords that each individual person hears is relayed.

I’m sure the story started out with a few choice words like “jobs, banks, and crash” and those got passed along. Before you knew it, the small towns were taking all their money out and stuffing it in coffee cans and mattress cushions. Once the banks became deflated, they didn’t have a choice but to shut down.

I’m sure this caught on AGAIN as the whisper game and it turned into a domino effect. Panic can have dastardly effects on an economy.

The panic started a bit like it may have in 1929 a few weeks back with Washington Mutual customers pulling out nearly 16.5 BILLION dollars from their banks. It is hard for anyone to survive in that scenario. Imagine hearing that type of news when you lived in a rural town in Nebraska without any source of communication? Considering your family your your assumption that it really wasn’t happening, your next step would probably be to get to your bank and take your money out too!

Ease of Information

In today’s world we’ve got a whole new grasp on the way information is passed. The internet has grown information sharing with such leaps and bounds that things happening on opposite sides of the world can be transmitted in seconds.

In 1930 if you wanted to tell your brother in South Dakota about what your neighbor heard about the market, we’re talking weeks. Rumors travel much faster, even with the advent of radio.

Our information today means that we can talk with our stock broker, financial analyst, Suze Orman’s blog, etc within seconds. We know what is happening, when it is happening.

We have information about how equities typically recoup a third of what they lost in a bear market in the first 40 days of a new bull – that kind of information is only created with time, and that info is now on our side.

Not only is it on our side, but the way to produce and configure it is on our side. The days of newspapers and handwritten observations are behind us. We can search millions of databases across thousands of nations to find and cull information as it pertained to different event in time.

We no longer have to wait for the newspaper or the radio address from the President to know what is happening in the world. Turn on your computer and you can find up the the minute information on how your stock/bond/mutual fund is doing in seconds.

Seconds after that you can log on to the site of the fund itself to see what it is doing to fix the issue. Speculation is no longer the staple that you have to deal with in our economy today.

We Can Learn From Our Mistakes Of The Past

So far this year, fund investors have taken more money out of their stock funds than they’ve put in, marking only the third time in recent memory this has happened. The other two times? In 2002, just before a five-year bull market, and 1988, the start of a 12-year bull.

“If you leave the market now entirely, you probably won’t make it back in time to enjoy the recovery,” says Torrance, Calif. financial planner Phillip Cook. According to Standard & Poor’s, equities typically recoup a third of what they lost in a bear market in the first 40 days of a new bull.

Over the long term (meaning more than a decade), equities give you something fixed-income investments can’t: a share of growth. The benefit of owning a stake in a company – as the Treasury Department, no doubt, understands with the majority position it is taking in exchange for helping AIG – is that you get to share in the earnings of the firm. And because stock prices, over time, reflect corporate profit growth, you’re likely to far outpace the long-term rate of inflation.

If your faith in stocks is still wavering, consider the last time they performed so poorly: the 1930s. “What if you concluded then that stocks weren’t the best place to be?” says Alan Skrainka, chief market strategist for Edward Jones. “You’d have missed out on decades of bull markets.”

The Wealth Is More Spread Out Now

In 1929, partly due to stock speculation, the richest 1 percent of Americans owned roughly 40 percent of the nation’s wealth. The richest 0.1 percent commanded 11.5 percent of income.

In 2008 the richest 0.1 percent of Americans command 11.6 percent of income, according to the EPI. The period from 1928 to 1929 is the only time the United States has had such uneven distribution of wealth since the government started keeping records in 1913.

The wealth is spread more now so that they effect that top 1% has on the economy isn’t so drastic. In 1930 steel and oil were big for the top 1%. In 2008, those commodities are spreading a much larger gambit with a much larger following.

Conclusion

The main points to think about here is that we aren’t living in “dustbowls” now. People have houses and 90% of the jobs AREN’T on the farms that were so prevalent in the 1930′s.

The economy itself is hundreds of times larger than it was then. 40% of the people owned 1% of the wealth then. If those key cogs fall, your economy won’t be far behind. The house of cards we had in the 1930s wasn’t nearly as larger as it is today. More than a few need to fall to knock it down now.

Additionally, the government just let it go in the 1930′s, I’m not saying it is going to work, but $700 billion is a lot of money and can coincidentally grease a lot of wheels…

A couple of interesting quotes in closing:

“Comparing 1929 to 2008 is a bit like comparing a Model T to a 2008 Chevy,” said Sung Won Sohn, an economist at California State University Channel Islands. “They’re both cars, but that doesn’t mean they’re both the same.”

Debunking The 25 Most Outrageous Money Myths (part 4 of 4)

hank — Tue, 16 Sep 2008 08:36:27 +0000

In continuing the series on debunking these most popular and 12+ pages being too much for one post – here is part 4 of 4 on the series Debunking The 25 Most Outrageous Money Myths. Part 1 can be found HERE. Part 2 can be found HERE. Part 3 can be found HERE.

19. Money Corrupts People

Very similar to #1 of it being “the root of all evil”. Money itself isn’t the corrupter. Think of how many good things have happened in this world with money. How many charities, art pieces, hospitals, parks, etc have been made with this “corruptive money”.Yes, there are people that will use the money in corrupt ways, but the money itself isn’t the enemy. You’re trying to walk again on the higher moral ground than those with the money.

20. My Best Investment Is My House

First off, if you paid the full amount for your house and plan to live in it for 20 years, it may be a good investment, but if you’re like the 99% of the world that can’t do that, it’s hard to justify it being a good investment when you’ll likely pay at least double that amount over the life of your 30-year loan.Additionally like all other investments, home ownership involves the risk that your investment may decrease in value. While commonly cited statistics say that housing appreciates at somewhere between the rate of inflation and 5% per year, if not more, not all housing will appreciate at this rate.In fact, it is perfectly possible for your home to lose value over the years, meaning that if you want to sell, you’ll have to take a hit. The only way you’ll avoid realizing a loss in such a situation is if you continue to own the home until you die and pass it on to your heirs.

21. I’ll Save Money When I Have Enough

When is enough enough? This can work if you set a number and stick to it. Say you’re going to start saving when you make $1500 a month, and stick to it. That could work. But I’d recommend sticking in as much as you can up to and through that amount with a percentage of your money instead of a dollar amount.Any amount of money you save, no matter how small, is enough to save. The habit of saving money is more important than the amount.

22. I’ll Never Get Rich In This Down Economy

“There’s more than one way to skin a cat.” SOMEONE is making money when the rest of the world is not. Money doesn’t just evaporate; it’s going somewhere. You just need to find where that is. During a recession, good sectors to put your money are in places that people have necessity: medical, food, and energy are resources that people can’t live without, even in a down economy.The key is to understand that there’s always an investment that’s good right now. When stocks go down, bonds go up. When interest rates fall, stocks go up and homes get cheap. If the economy is ‘bad’, that means it’s time to sell your bonds at a profit and buy stocks at a discount.

23. If I Carry A Balance On My Credit Card I Will Improve My Credit Rating

All your improving by doing this is the amount of money the credit card company is making off you. Your credit gets better by proving you’re a good borrower and pay it off each month.If you want to take it a step further, don’t charge more than a 35% of your card’s limit because the amount of available credit you’ve used is another component of your credit score.

24. Money Is A Big Responsibility

Well, yes it is, are you saying that you’re not responsible enough to have money? Even the most irresponsible of the wealthy can keep it flowing. It’s not about responsibility, it’s about your mindset to think you can never attain wealth and this is your excuse for it.If you think of money as a burden, it will become burdensome to you. Even if you do somehow to become wealthy with this mindset, you’ll end up letting it work you into penny-pinching with it rather than finding ways for it to maintain itself and grow to a bigger pot.Obviously, money doesn’t have to be a burden, quite the opposite. It can help you lift burdens that were created before it. if your money works for you, it can lighten your burdens. This myth is a powerful and self-fulfilling thing.

25. Renting Is Throwing Your Money Away

It is a mindset that has been captured a handful of times across the blogosphere (1, 2, 3, 4, 5, 6) and no solid reasoning has been found for it during that time. It’s got 2 sides to the coin:Do you consider the money you spend on food to be money that is “thrown away”? What about the money you spend on gas? Electricity? Toilet paper? All of these are things you’d normally buy and just throw away when you’re done with them and get no lasting value from them, right? Well, consider dumping rent money in that same category.Even if you own a home, you still have to “throw away” money on expenses like property taxes and mortgage interest (and likely more than you were throwing away in rent). In fact, for the first five years, you are basically paying all interest on your mortgage. For example, on a 30-year, $250,000 mortgage at 7% interest, your first 60 payments would total about $100,000. Of that you “throw away” about $85,000 on interest payments.

Conclusions

A lot of money myths have to do with “mindsets” and “sayings” that have been passed down over the years from your parents and your parents parents and so on. Right alongside them are the tendencies of people and their actions around money.Yes, everyone has been stung by a bad investment, a sour financial transaction, or a seedy person trying to get their hands on your money. But the key is to not let that dictate how the rest of your life is going to be when dealing with money. It is an experience that you’ve had and you’d be better of to learn from it than you would be to dwell on it. Part 1 can be found HERE. Part 2 can be found HERE. Part 3 can be found HERE.photos by: digidreamgrafix.com, ??103, Per Ola Wiberg (former ponanwi and Powi), Elfboy, mckaysavage,Ravenelle, saschapohflepp,

Debunking The 25 Most Outrageous Money Myths (part 3 of 4)

hank — Fri, 12 Sep 2008 08:36:26 +0000

In continuing the series on debunking these most popular and 12+ pages being too much for one post – here is part 3 of 4 on the series Debunking The 25 Most Outrageous Money Myths. Part 1 can be found HERE. Part 2 can be found HERE.

13. Savings Accounts Save Money

Having money in a high yield savings account or MMA for emergencies is a good idea. But if you are looking to save money or make your money work for you, a savings account isn’t likely going to get there for you.
First, you have to look at what you are paying out in interest rates. For example, if you have a student loan with a 5% interest rate and a savings account making 3% interest rate, your savings are costing you approximately 2%. You would be better off paying off that student loan with your savings account.

It goes the other way around too. If your debt has less of an interest rate than your savings, your money is working better in the savings. But with today’s interest rates being so low, your debt is probably higher than the amount of interest you are earning on your savings account. That means you are actually losing money.

14. The Stock Market Is Dropping With My Money, So I Am Selling!

I wrote a whole post on this exact phrase HERE, but to rehash a bit…

When the stock market goes down, keep your money in it unless you’re right at the brink of retirement. The market goes up and down, that’s just what it does. Know your tolerance. Many seasoned investors consider a decline in the market to be a “sale” and take advantage of the opportunity to pick up some valuable investments that are only experiencing a temporary dip.

15. I’m Too Young To Invest, I Have Plenty Of Time To Worry About Retirement Later

The younger you are, the more years of compound interest you have ahead of you. Compound interest is your best friend, trust me.

When you start saving young, you’ve got a long time to let that money sit and simmer. Even if it is just a few bucks a paycheck, you’re getting in the habit of saving, which is nearly as important.

It’s true that some brokerage firms require you to have a minimum amount of money to invest in certain funds or even to open an account. However, if you wait until you meet one of these minimums, you may get frustrated and have a harder time reaching your goal.

These days, it’s easy to start investing with very little money thanks to the proliferation of online savings accounts.

While traditional bank savings accounts generally offer interest rates so low that you’ll barely notice the interest you accrue, an online savings account will offer a more competitive rate based on how the market is currently doing. In 2007, it was common to find online banks offering 5% interest. 5% is a pretty good return on your low-risk savings account investment when you consider that stocks historically return an average of 9-10% annually.

Also, some online savings accounts can be opened with as little as $1. Once you’re in a position to start investing in stocks and mutual funds, you can transfer a chunk of change out of your online savings account and into your new brokerage account.

Alternately, you could open a brokerage account with minimal funds through one of the online trading companies that have cropped up.

However, this may not be the best way to start investing because of the fees you’ll pay each time you purchase or redeem shares (generally $5 – $15 per trade). While these fees have been drastically reduced from when you had to trade through human stockbroker, they can still eat into your returns.

16. I’m Not Going To Credit Counseling, It Is Bad On My Credit That I’m Trying To Save!

The current FICO formula ignores any reference to credit counseling that may be in your file. That’s been true for the last three years, after researchers at Fair, Isaac, the company that created the FICO scoring system, noticed that people getting credit counseling didn’t default on their debts any more often than anyone else.

However, your ability to get a loan could still be hurt by credit counseling. Your current lenders may report you as late, because you’re not paying what you originally owed or because your credit counselor isn’t sending your payments in on time. Late payments do hurt your credit score.

Lenders consider other factors besides credit scores in making their decisions, as well. The factors they look at can vary widely. Most want to know your income, for example. Some want to know how much savings you have or whether you’re a homeowner. Some will find credit counseling disturbing, while others see it as a good sign.

If you plan to get a mortgage soon, and you’re not already behind on your debts, it’s probably smart to steer clear of credit counseling. If you’re already in trouble, however, a good credit counseling agency might be able to help you get back on track.

17. The Only Way To Get Rich Is To Catch A Break

Again a generalism of the entire population. Yes, some people get lucky when they strike it rich, and some are giving money through rich relatives (but most of them STAY rich, even when they’re not financially savvy because you can BUY people to watch your money if you have enough of it) but that’s not the case with the remaining 80% of the people that become wealthy.

For the 80% that earn wealth, it’s not an accident, it’s dedication and belief that you’re going to be successful. If you just sit around thinking that your only way to wealth is to “catch a break” at work, you’re most certainly not likely to get that break.

Most of the rich never made it rich at their ho-hum corporate job. They ventured outside of it to find what would make them wealthy. Reach out and investigate other ways to get rich, you may be surprised that you may be able to make your own “break”.

18. If I Refinance My Mortgage, I’m Saving Money

Well, yes, you are initially, but essentially what you’re doing is you’ve refinanced for another 30-year term. This means that if you have already paid 10 years of mortgage, then refinance for another 30, you have basically extended your loan to a 40-year mortgage. Do the math and you’ll see if you are really saving anything.

If you really want to save money, refinance for a lower rate and a shorter term. Your monthly payment may not go down, but your overall repayment may.

Continuation

Stay tuned tomorrow for the remainder of the Debunking The 25 Most Outrageous Money Myths series! Part 1 can be found HERE. Part 2 can be found HERE. Part 3 can be found HERE.

photos by: digidreamgrafix.com, ??103, Per Ola Wiberg (former ponanwi and Powi), Elfboy, mckaysavage, Ravenelle, saschapohflepp,

Debunking The 25 Most Outrageous Money Myths (part 2 of 4)

hank — Wed, 10 Sep 2008 08:36:25 +0000

In continuing the series on debunking these most popular and 12+ pages being too much for one post – here is part 2 of 4 on the series Debunking The 25 Most Outrageous Money Myths. Part 1 can be read HERE.

7. Closing Your Old Accounts Will Help Your Credit Score

Nope. Closing accounts can never help your credit score, but can possibly hurt it. My mortgage lender actually told me to “trim down to 3 or 4 accounts” when I was in the market for my first house. Although it is a true statement that too many open accounts hurts your score, but that, in itself, is what hurts it. The damage has been done when you opened it.The credit score looks at the difference between your available credit and what you’re using. Shut down accounts, and your total available credit shrinks, making your balances larger than what your limit is set to, which hurts your score.The score also tracks the length of your credit history. Shutting older accounts can also make your credit history look younger than it actually is, which can hurt your score.But if your goal is to improve your credit score, you generally shouldn’t close accounts in advance of such a request. Instead, pay down your credit card debt. That’s something that actually can improve your score.

8. I Bought My Mortgage With Zero Down So I Could Write Off The Interest, Which Is Advantageous

I don’t know if “advantageous” is the word I’d look for. I don’ see the advantage in paying thousands of dollars in interest each year. Interest tax deductions should always be considered when filing your taxes and calculating whether you can afford the mortgage payments, but they should not be considered a reason to buy a home.I can see the advantage if you’re selling a previous home and pocketing that cash or putting it towards other debts (car, credit cards, loans, etc) that carry a higher interest rate than what you’d get a house for, but again, there are always loopholes in everything.

9. I Don’t Have Enough Money To Start Investing

I don’t buy this one. I find this one comes in a lot when people are looking for excuses that they don’t have a good paying salary. They want you to feel sorry for them that they have a low-paying gig and further proof in their lack of ability to put anything to savings.This can be argued semantically as well. How much is “enough”? Well, if you cut it to the most basic, it’s $0.02 since the smallest currency is a penny. So if you’re making $0.02, you can invest half of it. Whether you want to is another thing.The second part of the semantics is the word “investing”. You don’t have to put your money in a stock to have it be considered “investing”. Put it in a high yield savings or MMA account. That’s investing as well.Thirdly is that people just don’t think small amounts matter in investing. So that extra $40 at the end of the month left won’t be worth putting into an investment. WRONG! It is. Think of that $40 for 12 months. Then think of that 12 months for 30 years.Just putting that away is giving you $14,000. Now put that to work with a very modest 5% growth and you’ve made yourself a pretty penny turning in over 100% more than you put into it (click the chart to enlarge).So yes, you DO have enough money to start investing. Even if it is just a few cents, seeing that amount grow will get you in a mindset of saving. That money will eventually add up – maybe not in the near term, but program yourself to thinking to the future, which leads to the next myth…

10. I’m Too Old To Worry About Saving Now – It Is Too Late.

So you’re old, get over it. That doesn’t mean you should just throw in the towel! You’ll still be able to build SOME nest egg if you start now. Granted, it won’t be the same as someone firing it up right out of school, but you may live to be 100 – you never know! Starting at 55 gives you another 45 years of investing ahead of you if you’re going to push the triple digits in age.Furthermore, age can be an advantage in the ROTH IRA game. The 2008 limit for IRAs is $5,000. If you’re 50 or older on 2008, it’s $6,000. So every year after 50 gives you a $1,000 bonus. I highly recommend it.Don’t look at it as a hindrance, look at it as a challenge to kick it up in just 1 year, then 2, 3, etc. Get in the mindset of saving it and it’ll be much easier to overcome the idea.

11. Checking Your FICO Score Hurts Your Credit

Nope. The actual act of inquiring doesn’t hurt it if you’re doing it once a year from annualcreditreport.com. Applying for new credit is what hurts your score. The credit card folks that send you 50 snailmails per day trying to get you to sign up with their card hits your score. Shredding them will help your score more than filling them out and applying for them.Your score fluctuates between 300 and 850 – when your credit is run by a credit card agency or lender it usually knocks off about 5 points, which won’t end the world, but if you’re on the brink of one echelon or the next for their offer, it’s best to keep the inquiries down and only use them when you plan on buying something.When you’re searching for a mortgage remember that FICO treats multiple inquiries in a 45-day period as just one inquiry and ignores all inquiries made within 30 days prior to the day the score is computed. So if you’re gonna hit it, hit it in that timeframe.

12. The Rich Are Getting Richer, And The Poor Are Getting Poorer

TheDigeratiLife sums it up very well in 3 statements why the rich get richer:The rich have started successful businesses.The rich get tax breaks.The rich are paid higher and higher salaries while regular people don’t.While I agree with the statements, I think a big point is that the rich know how to make MORE money because money begets money. If you have it and know how to use it, it can really pay off for you. So there is no lie to the statement of the “rich get richer” – they should if nothing more than evolution. They’re getting richer because they’re learning how and teaching their kids how to do it also.But that doesn’t cover the 2nd half of the statement “the poor are getting poorer”. Professor Sala-i-Martin wrote a p
aper titled “The Disturbing `Rise’ of Global Income Inequality.” In it he estimates the worldwide distribution of income by individuals rather than countries. The results are striking.In 1970, global income distribution peaked at about $1,000 in today’s dollars, a common measure of poverty ($2 a day in 1985 dollars). In 1998, by contrast, the largest number of people earned about $8,000 — a standard of living equivalent to Portugal’s.”That’s what I call a new world middle class,” says Professor Sala-i-Martin. It is mostly made up of the top 40 percent of Chinese and Indians, and the effect of their economic rise is big.What about the argument that income gaps are widening within these rapidly advancing countries? With a few exceptions, it is true, but still misleading.The rich did get richer faster than the poor did. But for the most part the poor did not get poorer. They got richer, too. In exchange for significantly rising living standards, a little more internal inequality is not such a bad thing.”One would like to think that it is unambiguously good that more than a third of the poorest citizens see their incomes grow and converge to the levels enjoyed by the richest people in the world,” writes Professor Sala-i-Martin. “And if our indexes say that inequality rises, then rising inequality must be good, and we should not worry about it!”

Continuation

Stay tuned tomorrow for the remainder of the Debunking The 25 Most Outrageous Money Myths series! Part 1 can be found HERE. Part 2 can be found HERE.photos by: digidreamgrafix.com, ??103, Per Ola Wiberg (former ponanwi and Powi), Elfboy, mckaysavage, Ravenelle, saschapohflepp,

Debunking The 25 Most Outrageous Money Myths (part 1 of 4)

hank — Mon, 08 Sep 2008 08:01:16 +0000

I thought I’d take WriterDad’s advice in cooking this one up thinking that [My] Baby’s Born in the Rough Draft. You raise it in the Rewrite“. I’ve been working on this post for cumulatively about a month. A change here, a new post here, realization here, but I’m done. I could come up with 2,380 myths to only find another 13 in that search, so that’s it, I’m done with it and hope it rings a few bells for a few folks…Let’s start off on the philosophical myths and get down to the real “roots” of money…

1. Money Is The Root Of All Evil

No it’s not. You can say that for anything. I think that bad attitudes are the root of all evil; or evil thoughts are the root of all evil. I can go on, but I’ve got a long list to go through.Diving in to this one a bit more though, and taking a philosophical approach to why people say it – You get to put yourself on the higher moral pedestal than the people with the money by taking a shorter cut and you’ll look for evil when money is referenced. Money does bait people to do bad things, but it’s not the money that is doing it, I think it is the person offering the money that is “the root”.I can vouche I’ve wanted more money before and blamed those that actually had it, but who am I trying to convince? Ultimately with a little introspection, just myself it appears.Sign me up for more money, I’ll take on the challenge of proving it is not the root of all evil.

2. Money Can’t Buy Happiness

Can’t it? Really? Again this is similar to the statement above and can get into a philosophical or semantic debate over what it means.Certainly it can’t “buy” an emotion. But it can buy things that lead to an emotion. The same way that having no money leads to unhappiness. The lack of money didn’t make you unhappy, the lack of emotions money can provide contributes to your unhappiness.

3. If I Became Rich, My Friends Will Be Resentful Of My Success

Seriously? If that’s the only reason you’re not trying to get ahead in life, you might find benefit in re-evaluating your priorities. If your friend resents you for your successes, they may not be your friend after all. You may feel the need to be better than them at some financial aspect and it’s not abnormal to want that, but to actually resent you is not “friendly”.

4. You Get What You Pay For

So to get on my soapbox a little, just because a product is higher-priced does NOT always mean it is higher quality. Take a stock for example, just because Microsoft stock falls a few bucks over a time doesn’t mean that it is any worse company. If you bought it at $20 and it dropped to $10 and then shot up to $40 dollars, how do you determine that “you got what you paid for”?Take generic drugs for another example. I really don’t know anyone that goes with the name brand stuff anymore. Thousands of people (and myself included) can validate that they do the same thing. The big name companies aren’t targeting the bargain shopper though in their sales, they’re targeting this myth that people still hold on to.How about beer? It’s completely left up to the taster. I can’t stand Guiness, but I have several friends that won’t drink anything else. I’m a Bud man myself. I think it’s delicious and think the $7.99 I pay for a case is well worth it and paying MORE for the 12 pack of Guiness costing me $15. I would say I’m NOT getting my moneys worth in that situation.As a final example, how about a website you regularly visit? If you’re visiting it regularly, you must be getting something out of it. “Something” isn’t “nothing” and “something” is more than the $0 you’re paying to view the info it provides.

5. If I Get Just a Small Raise, I’ll Move To A Higher Tax Bracket, Get Taxed More, And Take Home Less Money

Absolutely not true. When you move into a higher bracket, ONLY that amount you make IN THAT BRACKET is taxed at that amount. So for example, your old salary was $30,000 a year and your new salary is $35,000 a year. According to the IRS’s 2007 federal tax rate schedules, when your salary was $33,000, your marginal tax rate was 15%. With a salary of $33,000, your marginal tax rate is now 25%.Based on this info, your first $31,850 of income is taxed the same way it always was was before you got your raise. With a $30,000 income, your take-home will be $25,891.25. If you make $33,000, you will take home $28,326.25. This is because only the extra $1,150 above $31,850 is taxed at 25% – not the whole $33,000.

6. Tis Better To Give Than Receive

If you believe this, I’m happy to be the “givee” of your money or other gifts worth giving. Digging deeper philosophically again, neither is better than the other. If you think about it, neither can possibly be better than the other because every time someone is giving, someone is receiving. Being a bad receiver doesn’t make you a good person, or for that matter, a good giver; it just makes you uncomfortable about receiving.Now don’t get me wrong, I give a good chunk to a lot of charities, but I’m just debating the money myth that it’s better to give than receive, and I enjoy giving, but I’m a big fan of receiving too.

Continuation

Stay tuned tomorrow for the remainder of the Debunking The 25 Most Outrageous Money Myths series!

photos by: digidreamgrafix.com, ??103, Per Ola Wiberg (former ponanwi and Powi), Elfboy, mckaysavage,Ravenelle, saschapohflepp,

What Do You Do If You Can’t Afford It?

hank — Fri, 15 Aug 2008 08:01:00 +0000

So I had a pretty good laugh from this today; and makes a lot of sense. I remember back in the day when my parents would DREAD credit cards. We’d have one for a purchase we needed to finance and then it was on the phone and cutting up the card IMMEDIATELY afterwards. If my folks didn’t have the $, they didn’t buy it; which coincidentally was almost every time I wanted something!

The Video

If you can watch video on your machine, I highly suggest you watch it to get the full effect as the transcript tells the story, but it isn’t delivered in all its comic genius. As all the politicians say:

My name is Hank, and I approve the following video!

Transcription

For those of you that don’t have access to view videos (or don’t want to laugh hysterically) here is the transcript version. But really, you want to watch the comedy in this all too familiar American kitchen. A husband (Steve Martin) and wife (Amy Poehler) are eating their dinner when the book Salesman walks in…

Wife: Oh, I just can’t get these numbers to add up
Husband: Like we’re never going to get out of this hole.
Wife: Credit card debt, does it ever end?
Salesman: [entering from who-knows-where] Maybe I can help.
Husband: We sure could use it.
Wife: We’ve tried debt consolidation companies.
Husband: We’ve even taken out loans to help make payments.
Salesman: Well, you’re not the only one. Did you know that millions of Americans live with debt they can not control? That’s why I developed this unique new program for managing your debt. [Holds up book] It’s called, “Don’t Buy Stuff You Cannot Afford”
Wife: Let me see that. [Reading from book] If you don’t have any money, you should not buy anything. Hmmm … sounds interesting.
Husband: Sounds confusing.
Wife: I don’t know honey, this makes a lot of sense. There’s a whole section here on how to buy expensive things using money you’ve “saved”.
Husband: Give me that. And where do you get this “saved” money?
Salesman: I tell you where and how in Chapter 3.
Wife: OK, what if I want something but I don’t have any money?
Salesman: You don’t buy it.
Husband: Let’s say, I don’t have enough money to buy something. Should I buy it anyway?
Salesman: No.
Husband: Now I’m really confused.
Salesman: It’s a little confusing at first.
Wife: What if you have the money, can you buy something?
Salesman: Yes.
Wife: Now, take the money away. Same story?
Salesman: Nope. You shouldn’t buy stuff when you don’t have the money.
Husband: I think I’ve got it. I buy something I want, then hope that I can pay for it. Right?
Salesman: No. You make sure you have money, then you buy it.
Husband: Oh, then you buy it! But shouldn’t you buy it before you have the money?
Salesman: No.
Wife: Why not?
Salesman: It’s in the book. It’s only one page long. The advice is priceless and the book is free.
Wife: Wow. I like the sound of that.
Husband: Yeah, we can put it on our credit card.
Announcer: So, get out of debt now. Write for your free copy of “Don’t Buy Stuff You Cannot Afford”. And, if you order now, you’ll also receive, “Seriously, If You Don’t Have the Money, Don’t Buy It” along with a twelve month subscription to “Stop Buying Stuff” Magazine. Order today.

Conclusion

Welp, it is fairly straightforward and need not a lot of feedback but it really does show how the American way of life has changed in the past 30 or 40 years. Like I said at the beginning, my parents wouldn’t have THOUGHT of buying on credit if they had any other way around it. But today people think of credit the same way and dive right in.

Who is to blame? The banks willing to lend or the buyers willing to accept it? Know anybody like this?

An Interesting Loophole In The Credit World To Make A Few Bucks – But Is It Worth It?

hank — Wed, 13 Aug 2008 08:01:09 +0000

In stumbling around the internet this week I ran across a Chicago Tribune article that mentioned renting out your credit to people with weaker scores. I thought to myself, “Is this even possible? And if so, why the h*** would you want someone else using your credit?” The answer then dawned on me; money. Everyone needs money and it is worth their credit score to get it, right?

Therein Lies The Problem

I’ve heard of friends and family adding their kids to their credit card accounts to get them jump-started on the road to credit score health. It shows that they’ve had an account open for a long time, and payments have been made on schedule. It goes hand in hand with never closing up your first credit card account as it shows longevity and will boost your credit score.

The sticky part comes when you realize that nowhere in the any of the credit card fine print does it say that you need to be related to the person of the card. Enter loophole problem #1.

With that door open, why not help someone out that has a bad score if they’ll give you “$x.xx” up front? If you own your house and don’t have a car payment, hey, maybe you don’t care about your credit score, eh? Should you?

Loophole #2 is that you can add as many people as you want to your card.

Maybe the card company people were thinking that you may have 30 or 40 of your closest kids added to your account, or that you lived in a a tribal community that only kept 1 card between everyone. Well, the door just opens even more.

The kicker comes in #3 when the subject of money comes into play.

There is no law against putting a dollar value on it. Some things are intangible, and this probably started out as a guessing game, but apparently has caught on to be more of a science now according to the Chicago Tribune article:

“Some Web sites advertise and price high-quality credit card trade lines on the basis of their credit limits and time on the account. A site called AddaTradeline.com recently offered a card history with a $25,000 credit limit and 2 3/4 years of perfect payments for a fee of $1,025.

Adam Wheeler, who identified himself as the owner of AddaTradeline.com, based in Orange County, Calif., said his business “is legal, although some people might say it’s unethical.” He insisted that his firm does not approve of efforts by clients to mislead lenders. “If they are going to lie to lenders,” he said, “that is not good.”

Each account can rent for as much as $1,500 to $2,000 for 180-day usage. The primary cardholder receives a cut of the rental fee, often hundreds of dollars for each authorized user added.”

I Like Money But Is It Worth It?

Well, short and sweet if you’re reading this blog you know this is a bad idea. Take it further and think that if your card is also authorized by Joe Schmoe to charge against, he’s got the bill sent to his house, are you sure your address or name isn’t on it anywhere? Better hope not, because if it is, he has a name, credit card, and could likely look up an address or call in to the customer care center to say he’s “lost his”.

For some reason, as good of a person as Joe may be, his credit score was bad for a reason, and now he’s got your info. My gut instinct is that Joe isn’t going to be nice to your name. I’d get out before you get in.

Conclusion

Yea, the upfront glitter and glam of getting a few $1000 for renting out your score seems pretty good, but you may end up paying that back trying to get your identity back in check once someone has gotten ahold of your critical pieces of pie. Hold it tight and just remember the old saying, if it sounds too good to be true, it probably is…

Comcast Called Me Back In Regards To My Post About My Outrageous Bill

hank — Sat, 02 Aug 2008 08:01:19 +0000

So a little outdated, but back in April I wrote a post titled My Comcast Bill Is $160.24 Per Month; What Am I Possibly Paying For!? and I actually had a lady contact me from Comcast to discuss the charges, and it turns out I must have some leverage here on the internet because I got a deal…

The Recap

So here’s the bill, and the post basically just ranted and raved about how I didn’t like their service. The internet dies all the time, the new TV remote interface is bad and freezes, I’m getting new bits and pieces tacked on when I didn’t order it, the list goes on.

So then I got a comment by Melissa Mendoza on April 8th, 2008 at 8:28 am that said:
Hello Hank! I am sorry to hear about the discrepancies in your bill and that you are considering switching providers.

If you would like my assistance in resolving your service and billing issues, I would be more than happy to help.

Please reply to the email provided and I will reach out to my regional executive contacts to ensure your problems are resolved as soon as possible.

Regards,

Melissa M.
Comcast Executive Offices
We_Can_Help@cable.comcast.com

Light at the end of the tunnel I figured, so I gave her a shout and in keeping with the honesty, didn’t think I’d hear squat back because they were just looking good online and I didn’t for about a month. I figured it was as I thought so I gave her one last reminder email before the public would here about it here on MiB and apparently I had enough clout to get her to respond back -

Later that day I got a call from a lady that was actually quite friendly (although a little untimely) but the credited me $91.90 for 2 months of internet PLUS $5.95/month on the sports package back to December when I stopped using it. All in all not a bad deal.

The Conclusion

So I had to take it to the higher MiB court to get some service, but eventually it worked out and they credited me almost $200 back from the bill retrofitting my subscription I didn’t use and the poor internet service. I still hate that the internet will occasionally crash, but calling for the $3 they credit me for down time is enough to keep me off their backs, and I assume many others.

Ultimately it comes down to just realizing what people charge and keeping an eye on your bill because everyone seems to try to slip a little something extra in a bill now and then, and it is your duty as a conscious $$$ saver to watch for these things when they’re out there.

Anyone else have any bad bill stories?

Net Worth Update July 16, 2008 [$102,416.87(-9.57%)

hank — Tue, 22 Jul 2008 08:01:21 +0000

Welp, the landscaping and deck building this past week dug deep into the e-fund and overall numbers so they’re not really as bad as they show up because they should both pay off more than the 8k-ish spent on them.

Be sure to enter Hanks Holiday Handouts #3 before Aug 6 to win your share of $300!

The deck was actually the Trex decking that doesn’t mold, need to be re-stained, no maintenance. I think it was (and will be) very worth it in the long run.

The rest of the portfolio dove pretty hard along with the rest of the country. I am still sticking in 15% on my 401k and am at $2600 into my ROTH for the year, so I’m still trucking along there.

Although it is disappointing to see cash leaving my account, the positive is that I’m getting good funds at cheaper prices by using the dollar cost averaging. I wrote about a similar post last week when Lazlo asked if he should keep his $ out of the stock market because it was doing poorly.

As you can see, I am taking my own advice (go figure) and not going anywhere. I don’t plan to go “anywhere” for another 30 or 40 years, so I’m going to see bumps like this; no worries though.