The Looming Challenge of the Alternative Minimum Tax, Alan D. Viard, Federal Reserve Bank of Dallas:
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.
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.
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.
If the card company’s representative initially balks at, say, waiving a late fee, ask to speak to the manager, Arnold says. If that doesn’t work, tell the company you want to cancel the card. At that point, you’ll likely be transferred to the retention department, whose job is to keep you as a customer, Arnold says. It’s expensive to replace customers, so you may be able to negotiate a waiver of fees or a temporary reduction in the interest rate. If not, prepare to shop around for a new card, Arnold says.
The Real Threat Isn’t Housing by Michael Mandel:
The massive amount of additional production is a key reason why the U.S. has not faced upward pressure on prices. And good productivity gains gave the economy enough momentum to fight off the disasters of 2001–the terrorist attacks, the stock market crash, the collapse of Enron–with only a minimal recession.
But the bonanza starts to disappear if productivity growth drops much further below its current level. Such a decline is a lot more possible than most economists realize or are willing to accept.
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.
The unemployment rate fell 4.5 percent from 4.6 percent in January. The consensus among economists was that the unemployment rate would stay at 4.6 percent, although a bit more than 20 percent of those surveyed by Reuters had been looking for a rise to 4.7 percent. Few had forecast a decline.
Wages are now up 4.1 percent from a year earlier, and kept worker pay ahead of price increases. There was a 2.1 percent increase in prices over the 12 months ending in January
The recent history is that the initial estimates have been revised up consistently – which means the accuracy of the initial read is less reliable recently that it had been previously.
it is natural and perhaps overdue that hiring should slow down, given the below-trend economic growth that the U.S. economy started showing with the second quarter of 2006. “Employment is a lagging indicator,” he said.
His solution: “Tying the portfolios to a purpose that provides measurable benefits to the public would help to ensure that society in general — not just GSE shareholders — receives a meaningful return in exchange for accepting the risks inherent in the portfolios,” Bernanke said in the text of remarks prepared for delivery by satellite to a gathering of community bankers in Hawaii.
Signing a mortgage document is one of the biggest financial actions you will take in your life. Taking the time to understand what you are getting into is important. I suggest you don’t act until you actually understand what it is you are taking on. And if that takes hours or days of reading and research so be it. Don’t find yourself with remorse for acting without understanding what you are doing with such an important financial decision.
On the Curious Cat Investment Dictionary mortgage page we have defined some common mortgage terms and provided links to some excellent resources from the Federal Reserve and HUD as well as several articles from Business Week, including: Understanding the Mortgage Process from the Federal Reserve and Nightmare Mortgages from Business Week.