Credit Cards’ Hidden Costs by Kathleen Day
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The report by the Government Accountability Office found many consumers do not understand that if a borrower is late on one payment, companies will not only impose a late fee, which can reach nearly $40, almost triple that of a decade ago, but also significantly raise the interest rate on past and future charges, possibly to as high as 30 percent.
Credit cards can be a convenient tool but if you do not pay the balance off every month on time that is a very bad sign for your financial health. And leaves you open to onerous fees from credit card issuers. If you do pay off the whole balance every month (as you should under almost all circumstances) you should have a credit card than pays you a rebate (1% of your spending is common) and has no annual fee.
Don’t cash that check! It’s a scam:
The surprise check in the mail “A $10 check is a nice surprise,” the letter from Travelers Advantage says. “Especially since it’s yours for just reviewing the benefits and privileges of this national savings network. And there could be more checks coming your way!”
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Last year, California Attorney General Bill Lockyer filed a lawsuit against Trilegiant and Chase Bank, alleging they worked together to create and carry out a marketing scheme that, he says, “unlawfully deceived tens of thousands of California consumers” into paying for these membership programs.
Don’t cash such checks. The means they are using is so deceitful you can’t trust what else they are going to try to trick you into. Credit Unions are often much less deceitful than banks (though you can’t always trust them either – which is a shame). It is too bad that organizations decide to prey on the financially illiterate. But they do. The easiest thing is not to waste your time trying to find the one good place that actual offers a good value and just chose to use a very bad method to inform people. If they offer something of value let them sell it to you for what it costs (not trick you into cashing a check and then start charging you a monthly fee).
Skip the Coffee? What’s Money for, Anyway?:
My crime: buying morning coffee from Starbucks for my wife and me.
Avoiding the regular cup of overpriced coffee has become an easy cliché for financial advisers, a symbol of money frittered away.
The author is right. There is nothing wrong with spending some of your money on the luxuries you choose. The problem is too many people spend more than all their money on the luxuries they choose (going into debt to support their lifestyle). The author states:
In previous post: saving for retirement, we discuss the options for planning for your future economic security. Cutting back on luxuries is only necessary if you are living beyond your means (looking at your whole financial life). If you have incorporated the luxuries you want into a good overall plan, great, good job, keep up the good work. If not, figure our which luxuries you want to cut (or how you are going to earn more money).
Britain becomes ‘never, never land’ as personal debt runs out of control
Britain seems to be taking after the USA. Debt is not necessarily bad for the economy or individual. Too much debt is. When it becomes “too much” is one of the issues we will discuss, and link to articles discussing, in this blog.
People will benefit from understanding how debt effects their future economic life. To do this they need to gain financial literacy. To help people gain financial literacy is one of the aims of this blog. We believe that gaining financial literacy will lead people to make better economic decisions. Such as not taking on too much debt.
The 2006 Nobel Prize in Economics (technically, the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel) has been awarded to Edmund S. Phelps, Columbia University for his analysis of intertemporal tradeoffs in macroeconomic policy. In other words he won for his work exploring the trade offs between short term and long term effects of macroeconomic policy. The Nobel foundations does an excellent job of providing additional information on the work of prize winners to the pubic:
We are still experimenting with how best to arrange our blog posts. We have decided to setup a new blog for posts most purely related to investing and economics. The Curious Cat Science and Engineering Blog has quite a few posts related to economics and science and engineering. I would foresee those post in the future still being made there. The Curious Cat Management Improvement blog also has economics and investing related posts. In the future I would imagine most of those posts would now be made in this blog – expect those that tie closely to both management and economics or investing.
We also will be posting more frequently on general investing and economics topics. And we will be providing posts linking to interesting articles we find.
The Curious Cat Investment Glossary defines investing terms and includes links to related online resources. The Curious Cat Investing Library includes links to selected investing and economics online articles and the Curious Cat Investing Bookstore highlights books we feel are of value to investors.
I have also added the posts on investing and economics that were originally posted on the other blogs here (that way they will be returned in searches of this blog and be seen when browsing the category listings).
Originally posted on our Management Blog.
Manufacturing Productivity and the Shifting US, China, and Global Job Scenes-1990 to 2005 (working paper – July 2005) by William Ward, Clemson University:
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I find that 100% of the (3.0 million) manufacturing jobs lost since 2000 were lost to manufacturing productivity growth and that 100% of the (1.8 million) jobs that should have been added back by GDP growth in the US after 2000 were shifted to other sectors of the US economy than manufacturing.
In this paper he is examines the factors leading to a reduction in manufacturing job worldwide. He concludes that job losses are mainly due to increased manufacturing productivity (worldwide, manufacturing productivity is increasing and jobs are decreasing – including China). Read more
Our Financial Failings by Neil Irwin, Washington Post:
It has about $3,800 in the bank. No one has a retirement account, and the neighbors who do only have about $35,000 in theirs. Mutual funds? Stocks? Bonds? Nope. The house is worth $160,000, but the family owes $95,000 on it to the bank. The breadwinners make more than $43,000 a year but can’t manage to pay off a $2,200 credit card balance.
That is the portrait of the median American household as painted by the Federal Reserve Board’s Survey of Consumer Finances.
Saving for retirement is not complicated, it is just a matter of priorities. Most people care more about a Starbucks coffee each day (or season tickets, or new shoes, or a new car every couple of years or…) today than saving money for retirement. In a capitalist society we believe in letting people make their economic choices. The choices most of us make (in the USA) lead to the results above.
Read more
CNNMoney is not exactly intellectual discussion of economic and investing issues but normally it offers fairly good material for the large number of people. Especially those who really don’t want to read Warren Buffett or Brad Setser. Still the following quote in their article, Cashing in on hot real estate is just wrong:
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San Diego-based certified financial planners Christopher Van Slyke and Terry Green recommend an unconventional plan: taking out a new $500,000 ARM.
Handel and Laport can pay off their existing mortgage before the rate rises and retire their other debts. They can put the remaining $200,000 into stock and bond funds.
To be sure, borrowing against a house to put the proceeds into the market rarely makes sense. But in Handel and Laport’s case it does because so much of their net worth is tied up in their home, and the super-hot L.A. real estate market looks primed for a fall…
They can convert equity that might melt away.
They can what? In no way does increasing their leverage convert equity that might melt away. Any amount of “melting away” will still happen after this increase in leverage – no conversion has happened. They still have a full ownership interest in the real estate. If the value of their house fell $300,000 before or after this supposed “conversion” they would “lose” (on paper) the same amount: $300,000. The investment risk for the house has not changed (for the whole portfolio you could argue it has but that gets complicated and subject to debate).
Read more
In April of last year I posted on 10 stocks for 10 years. At that time I also setup an fund through Marketocracy, which allows for 3rd party tracking of investing results. See the results so far on Marketocracy’s site. Thusfar the portfolio is up 20%, in under 9 months (versus 13% for the S&P 500 for the same period of time.
The 10 stocks didn’t meet the diversification requirements for marketocracy, at the time, so I modified the portion of the portfolio for each stock when I setup the fund. The portfolio as of Jan 2006 (17% cash):
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Stock | % of fund | Current Return |
| Google – GOOG | 16 | 114% | |
| Templeton Dragon Fund – TDF | 12 | 25% | |
| Toyota – TM | 10 | 48% | |
| Dell – DELL | 8 | -13% | |
| Petro China – PTR | 5 | 36% | |
| Cisco – CSCO | 5 | 8% | |
| Amazon – AMZN | 4 | 39% | |
| Pfizer – PFE | 4 | -9% | |
| First Data – FDC | 4 | 11% | |
| Yahoo – YHOO | 4 | 25% | |
| Intel – INTC | 3 | 13% | |
| BP – BP | 3 | 5% | |
| Walmart – WMT | 3 | -5% | |
| Templeton Emerging Markets Fund – EMF | 2 | 43% | |
| Microsoft | 1 | 6% |
Obviously Google is doing quite well, up 114%. The second largest gain is for Toyota, which is up 48%, I’m sure a surprising result to many.
Read more