Conventional Wisdom: Life Insurance

This is the fifth in a series inspired by a toy at CNNMoney. Previous installments covered housing payments, emergency funds, asset allocation, and buying your employer’s stock.

Churchyard Derek Harper - crop Using the search box just to the right here, I have discovered that in 217 posts to this blog I have used the phrase "life insurance" exactly twice. Once in an early Frugal Friday, and once in a post about annuities. Both mentions were in passing.

That may strike you as odd. In fact, it surprises me. Life insurance is a part of personal finance and certainly a likely topic for bad advice. And yet it doesn’t actually come up all that often in the media, traditional or otherwise.

It’s in the CNNMoney tool.

You need enough life insurance to replace at least five years of your salary – as much as 10 years if you have several young children or significant debts. But you might not need it at all if you have no dependents.

 

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Crazy Cell Phone Contracts for Crazy Americans

Would you rather pay $399 now and $20 a month for two years, or $199 now and $30 a month for two years? If you are a rational consumer, you probably prefer the $399 deal. The other one is like a $200 loan at 20% interest.iPhone

And yet, according to a long and meandering article from yesterday’s New York Times on the madness of cell phone pricing schemes, we wacky Americans preferred the iPhone at $199 with a $30 data plan over the previous deal of  $399 with a $20 plan. I’m not sure I buy that. iPhone sales could have increased for a number of reasons, including the fact that the $199 phone was an upgraded version. Still, the Times piece does bring up a number of peculiarities about the economics of cell phones.

In case you live in a cave, I’ll explain that here in the Land of the Free we "buy" heavily subsidized cell phones from the companies who run the cell phone networks and in exchange agree to a service contract with that network, generally for two years. The cell phone company takes a loss on the phone and makes it up on the service end.

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They May Just Be That Dumb

There is a part of me that really wants to believe that politicians advocate dumb ideas not because they are dumb but because they are cynically trying Obama, Pelosi, Hoyer & Miller to garner support from other people who they think are dumb. Imagining cynicism in others is more cynical than imagining simple cluelessness.

But then I read something like this from The New York Times.

In an effort to rein in the spread of the H1N1 flu, Representative George Miller, the chairman of the House Education and Labor Committee, introduced legislation on Tuesday that would guarantee five paid sick days for workers sent home by their employers with a contagious illness.

I’m sure that most of you are smirking already, but for those who don’t immediately see what is humorously stupid here, let me lay it out. This bill would force employers to pay for sick days when they send employees home with the flu. This means it will be more expensive to send sick people home, so employers will be less likely to do it. This, in turn, will have the effect of increasing the spread of H1N1, not reining it in.

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Some More Things I Don’t Get About Cards

I like few things more than writing posts that cause consternation. A recent gem was on my confusion over debit cards and who can forget my assault on the irrational fear of identity theft. So why not combine the two themes?Credit-cards Lotus Head

Consumerism Commentary has a nice post today on writing "Check ID" in the little strip on the back of your credit card where you are supposed to sign it. Turns out that this is a relatively common practice and that it is against Visa and MasterCard’s rules. I guess I’m not really surprised at either of these facts.

Why would a person write "Check ID" on a card? I can only assume that it is an attempt to deter a potential thief from using the card if stolen. Does anybody really think this would work? How often do cashiers actually look at the back of credit and debit cards? And then there are all the situations, from the self-checkout line to Amazon.com, that there is no cashier.

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Our Ballooning National Debt

This time last week I created one of my more unique posts. A commenter suggested that if I was in search of a topic I could write about what I thought of the "ballooning national debt." I usually try to keep closer to the personal Five_Presidents finance theme than that, but a request is a request.  Gotta keep the readers happy.

The first thing to say is that anybody who confidently predicts any particular result from borrowing so much money is full of it. Nobody really knows what the long term effects are or what will happen next. We can speculate on it, and some prognostications may be more reasonable than others, but ultimately these are all just educated guesses.

With that disclaimer out of the way, let’s start with the big picture. Below is a chart of the US Federal Debt as a percentage of GDP. I got the data from the useful site usgovernmentspending.com.

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