Investing Curiouscatblog

Category: Personal finance

  • The Great Risk Shift

    The Great Risk Shift by Jacob Hacker presents some interesting data. I don’t always agree with his conclusions but I think the information he presents is interesting.

    The most interesting piece of data to me: The chance of a 50% drop in income in 1970 was 7% for any person. By 2002 it had grown to 16%. While this seems to include some questionable “data” such as divorces, retirees… Still the fairly steady climb (see chart page 31) from 1970 to 2002 shows this is one factor that should be a consideration in saving and spending plans. Don’t assume you will earn more and more every year. You will likely have some fairly large drops in income during your lifetime. Plan for it.

    Some more interesting data in 1992 7.9% of 25-34 year olds in the USA had debt payments over 40% of their income. In 2001 that rose to 13.3%. In 1984 median wealth for families with a head of household 55-64 was 4 1/2 times as wealth as those of 25-34 year olds, in 2003 it was 13 1/2 times as great. (page 99)

    While the average 401(k) balance is $47,000 the median balance is $13,000 (a relatively few large balances skew the average to make it much higher).

    Overall I tend to look at the data he presents and think people better consider these realities and plan knowing them. Jacob Hacker seems to more often say that this is unreasonable and show the hardships faced by those that either could not plan better (it was out of there hands which I would agree is part of the problem and requires some public policy changes) or who choose not to (which I would find the case more often than he would). Well worth reading in my opinion.

  • Boomers Face Retirement

    Boomers on brink of retirement wonder if they can afford it:

    Scholz was among a small group of economists cited in a recent front page story in the New York Times who said – to the shock of many – that the financial industry overstates how much money people will need in retirement.
    …
    Scholz doesn’t go that far, but he does question the popular notion that most baby boomers are “blowing it” in their preparation for retirement. He says the group’s research showed that, by and large, Americans born between 1931 and 1941 were faring quite well financially during their retirement. “That was very surprising to us,” he says. “So then an interesting question is, does the experience of that generation carry over to households that are younger?”
    …
    “They’re like, ‘Well, I finally got a cell phone.’ They use a computer but it’s one that’s eight years old. Their cars run forever.” That mindset is far different from most baby boomers, Haunty argues. To them, items once viewed as luxuries are now considered necessities. And, he adds, this “propensity to consume” is even more prevalent among Americans in their 20s and 30s. Haunty says he’s not advocating that baby boomers “save every penny and wear the same jeans they wore 10 years ago. But they’ve got to strike a balance.”

    Well said. If you have enough money to afford whatever you want and can maintain an emergency fund, buy disability insurance, buy health insurance, save for retirement, avoid personal debt, save for children’s education… great. If not, then choices need to be made about what is most important and then you get to live with the consequences of those choice.

  • Shop Around for Drugs

    Many of his patients, he explained, must pay for their drugs out-of-pocket, and yet even the generic drugs at pharmacy chains like Walgreens, Eckerd, and CVS could cost them dearly. So Wolf began snooping around and found that two chains, Costco and Sam’s Club, sold generics at prices far, far below the other chains. Even once you factor in the cost of buying a membership at Costco and Sam’s Club, the price differences were astounding. Here are the prices he found at Houston stores for 90 tablets of generic Prozac:

    Walgreens: $117, Eckerd: $115, CVS: $115, Sam’s Club: $15, Costco: $12

    Those aren’t typos. Walgreens charges $117 for a bottle of the same pills for which Costco charges $12.

    It pays to comparison shop for you prescription drugs.

  • Credit Card Tips

    It is difficult to imagine trying to live without the convenience of credit cards. Yet many get into financial trouble in part due to their misuse of credit cards. By following a few simple rules you can avoid the missteps and use credit cards to improve you personal finances instead of falling into the credit card traps.

    First, don’t use your credit card for loans. Pay off your balance each month. Pretty obvious advice but way way too many people don’t follow it. If you use your credit card for a loans – 98% of the time that is a mistake and big risk to your personal financial future. Don’t do it. There is a reason pretty much all the advice from financial advisers on credit cards starts with this – it is the most important advice.

    Second, if you don’t follow the advise above pay off your loan as soon as possible. Payment the minimum payment is huge mistake. You should not be making any discretionary purchases if you are not paying down your credit card debt substantially each month.

    Continue reading credit card tips.

  • Save Hundreds on Electronics

    This tip is a bit sneaky but seems perfectly legitimate to me (I have not tried it). Essentially you are exploiting the sneaky overpriced protection stores try to trick customers into buying. Personally I just turn down the stuff they try to trick me into buying. I like this tip because it goes after a tactic companies use to trick customers. I don’t like companies trying to use gimmicks to trick customers out of money. Why they would be so silly as to lower the price of the electronic equipment rather than reducing the price of the ridiculously overpriced “protection” is beyond me but as far as I can tell if they do they open themselves up to this strategy (which I admit I wouldn’t use but for those more aggressive souls out there it might be appealing). Outsmart Best Buy, Circuit City… Save Hundreds on Electronics.

    You read right. Salespeople can and will lower the price on inventory at places like Circuit City and Best Buy as long as it pleases management. This is called illegal bundling and it happens all the time.
    …
    They have however recently caught on at some stores and will not allow you to back out in the store. However, they can not prevent you from returning the warranty within 30 days for a full refund.

  • Fake Checks That Make You Pay

    Fake Checks That Make You Pay:

    Just because you might have access to the funds deposited via a check does not mean the check is “good.” Although federal regulations require financial institutions to make funds from a deposit available generally within one to five business days, it can take weeks before a bank discovers that a deposited check is worthless. The National Consumers League recently reported that fake-check scams are rising alarmingly. In 2006, counterfeit-check scams shot to the top of the league’s telemarketing fraud list and ranked third among Internet-based scams.

    If you want to avoid being a victim of a fake-check scam, follow this one piece of advice from Grant: Don’t ever accept a check if part of the deal involves you sending or wiring back some of the money.

  • More Non Bubble Bursting in Housing

    Housing sales drop in 40 states:

    Nationally, sales declined by 10.1 percent in the fourth quarter compared with the same period a year ago. The national median price – the point where half sell for more and half sell for less — fell to $219,300, down 2.7 percent from the fourth quarter of 2005.

    While there is no agreed upon definition of bubble bursting, a almost 3% decline certainly can’t be seen as a “bursting bubble” can it?

    In all, median home prices fell in 49 percent of the 149 metropolitan areas surveyed, the largest percentage of areas showing price declines in the 27-year history of the Realtors’ price survey.

    Again hardly data of bubble bursting proportions.

    Related: Coming Collapse in Housing? – Beginning of the End of Housing Bubble? – Colored Bubbles

  • Make $500 for Every Illegal Telemarketer Call to You

    Making telemarketers pay — in cash

    So far, Lammé has won $6,000 in judgments against telemarketers in three cases. He’s not a lawyer, but by filing in small claims court, he’s spent no more than $100 in court fees and scarcely more than an hour of his time on any case. Now he wants you to do it, too.

    The Telephone Consumer Protection Act of 1991, signed into law by George Bush the elder, led to creation of the ragingly popular Do Not Call List. But tucked away in the bill was another important provision that entitles consumers to take what’s called a “private right of action.” For each violation of the act, consumers can sue for a $500 penalty. Violations include calling after a consumer has told a company to stop, or failing to provide the consumer with a copy of the firm’s Do Not Call policy.

    In his most recent case, heard in January in Sacramento, Lammé was awarded $3,500 for seven violations allegedly committed by Country Club Mortgage Inc. of Visalia. David Mitchell, vice president of Country Club Mortgage, said he couldn’t comment on the litigation.

    Good. Lets put those who don’t follow the law out of business and get yourself some money at the same time.

    Related: Info from Lamm̩ to help you earn some money from telemarketers РCharity Telemarketers РInvestor Protection Needed РReal Free Credit Report

  • Real Free Credit Report

    From the official US Federal Trade Commission site:

    A recent amendment to the federal Fair Credit Reporting Act requires each of the nationwide consumer reporting companies – Equifax, Experian, and TransUnion – to provide you with a free copy of your credit report, at your request, once every 12 months. But there’s only one online source authorized to do so. That’s annualcreditreport.com. Beware of other sites that may look and sound similar.

    Viewing your credit report is an important step to financial security. You should review your credit reports annually (at least) to correct and any errors. Also doing so can be a tool to help you spot identity theft. The credit report site also has a large frequently asked question section with answers to questions like: What is a credit score? How do I request a “fraud alert” be placed on my file? Should I order all my credit reports at one time or space them out over 12 months? (I would suggest spreading the requests out during the year myself).

  • Don’t Let the Credit Card Companies Play You for a Fool

    One of the goals for this blog is to help people protect themselves from predatory behavior from corporations. I love capitalism and love being able to benefit from the innovations created by the marketplace. I wish companies tried to do well financially by providing value to the customer. This is what Google, Toyota, Berkshire Hathaway, Apple… do.

    However there are many that seek to trick and take advantage of gullible customers. This is especially true of financial companies. If a company tries to trick you by selling you on a less than truthful description of their offer (such as $1 for the first month, or 1% interest for the first 6 months) my experience leads me to believe they don’t have faith that they offer a real value. They don’t believe people would buy what they offer for the real price, so instead they try and trick people with misleading information. And there are plenty of financially illiterate people that fall for these bad deals – don’t let yourself be one of them.

    Credit card companies seem to be especially bad at this type of behavior. Most often they just take advantage of people that don’t bother to understand what the real fees and interest rates are. The consumer obviously should accept some of the blame. But tricking people that are not financially literate is not an honorable way to make money. But there are many who don’t seem to mind taking advantage of those that don’t educate themselves.

    Business Week has a good article on this topic: Cap One’s Credit Trap. And PBS, Frontline, has a good show on it too: The Secret History of the Credit Card.

    Continue your financial literacy education by visiting both those sites and reading and watching (you can watch the entire PBS show online) and learning. If you don’t make the effort to increase your financial literacy it will cost you as others take advantage of you.