It’s the end of another month here at Bad Money Advice World HQ. Time to empty out the queue of items that almost, but not quite, merit posts of their own.
I will start with a correction of sorts. A few weeks ago I wrote a post in which I mocked the semi-scientific conclusion that watching TV makes you poor. I still stand by my mockery, but in the meantime Wallet Pop has discovered further scientific evidence that Mom was right: Too much TV CAN kill you. (PDF of actual scientific paper written by actual scientists here.)
Come to think of it, my mom never said that TV would make me poor or kill me. She tended towards blind and stupid. Just another way my upbringing was atypical.
And the scientists do not exactly say that TV will kill you, only that watching a lot of it is correlated with keeling over. Specifically, someone who watches 4 or more hours per day is about 50% more likely to shuffle off his mortal coil than somebody who watches less than 2 hours. My theory is that prolonged exposure to reality TV causes a subconscious desire to end it all.
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One of the recurring themes of this blog, possibly the central theme, is that we Americans do not know what we need to know about personal finance. For this I blame everybody, the financial advice gurus, the media, the government, a cultural bias against things monetary, and, perhaps most of all, our own lazy and childish selves.
If the problem is ignorance, then the obvious cure is education. Why not mandate a high school or college course on personal finance? This is a question I have discussed in passing a few times (e.g. here and here) mostly to point out that things are so bad I doubt we could find enough teachers.
Just to be clear, my only objections to teaching personal finance in schools are ones of practical implementation. In principle, more exposure to the issues of personal finance can only be a good thing. Even a disorganized course taught by a confused teacher could not make the situation worse. Or could it?
There is an outfit called the Jump$tart Coalition for Personal Financial Literacy which did a survey of college students in 2008. They found that students who had taken a personal finance course in high school scored lower on a test of financial literacy than those that hadn’t. Oops.
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Imagine that you are in financial distress. You have a mortgage, a car loan, and credit cards, but cannot pay all three. Which gets paid and which gets stiffed?
Obviously, this is a lesser of evils situation, not an ideal one. Not paying any one of them will have negative consequences. Defaulting on the credit cards will likely result in not being able to use them to buy more stuff. And the other two loans are secured, so not paying those bills could result in the loss of your wheels or roof over your head.
You might think that since shelter is so important, the mortgage would be the most likely bill to be paid. And since buying more stuff on the credit cards is less vital to a person in financial trouble, you might assume that credit cards would be the most likely to be defaulted on. Having your cards taken from you would suck, but not as much as having your car taken.
Not so. Last week Wallet Pop ran a post by Lita Epstein that looked at default data for these three types of loan. Credit cards do turn out to be more commonly defaulted on than car loans, but not by as much as you might have assumed. 1.1% of credit cards were 90 days delinquent in the third quarter. 0.81% of car loans were 60 days delinquent.
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Headlines for newspaper items and blog posts are troublesome things. They have always sold papers, particularly tabloids, but the advent of the web and search engines have made their importance, and the temptations to play games with them, even greater. The coin of this realm is the click, and if you want to get surfers to read your stuff you better have a catchy title, preferably including some popular search terms.
Earlier this month The Washington Post blamed an increase in typos (e.g. soldiers wearing "shiny black boats" on their feet) on copy editors being distracted by new duties. "Separate online headlines must be written in a way that attracts attention on the Web."
I bring this up because the other week Jason Zweig’s Intelligent Investor column in The Wall Street Journal was headlined "Why Many Investors Keep Fooling Themselves." (Mysteriously, the metatitle, the thing that appears at the top of the browser window, hedged: "Why Some Investors May Be Fooling Themselves.")
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It is time to revisit a topic we have been looking in on every few months for the past year. I am referring to the government’s program to help people stay in their homes through modifying the terms of their mortgage.
When the program was first announced to great fanfare in March, I observed that nobody outside the Treasury seemed to think it would work. Only two months later I had a little fun pointing out how, even by then, it was pretty obvious it was going to miss its unrealistic goals by at least an order of magnitude. By July I was writing about the inevitable finger-pointing that followed the revelation that a program nobody believed in was not, in fact, working very well.
Of course, the Home Affordable Modification Program is still running, and still bravely defended by administration officials with a straight face. And they sure are brave. Last week The New York Times told us that U.S. Mortgage Plan Aided 7 Percent of Borrowers. That figure, apparently, refers to 7 percent of the 853,696 borrowers enrolled in the program, not 7 percent of all borrowers.
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