Is Cash SmartMoney?

SmartMoney had an attention grabbing headline yesterday. Why Cash Is the  New Plastic exerted an irresistible gravitational pull on my mouse.New $100

Could it be that cash, that archaic and germ-spreading form of money whose demise I have both lamented and encouraged, was making a comeback after all?

The first paragraph of the article reads:

Consumers are spending again, but gone are the days of swiping and signing for everything from lattes to lawn furniture. Shoppers are reaching for paper money, and as they do, stores and even credit card issuers are increasingly ready to reward them – with more cash.

So I guess slips of paper and metal disks are making a goal-line defense. Just when you thought that they would go the way of fax machines, the old school pulls it out in the end. Suddenly, consumers are coming to realize that swiping and signing is just a little too easy.

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Longevity Insurance

As I have written a few times before, I consider the unpopularity of fixed annuities to be one of the larger personal finance conundrums.

Aside from the obvious problem of just not having enough money saved up, longevity risk is probably the number one challenge in planning a retirement. If you do not know how long you are going to live, how can you know how much of your kitty you can spend each year?

Park Bench Crop Annuities neatly solve this problem. You pay a lump sum to an insurance company and that company agrees to send you a check every month for as long as you are around to cash them. They even come in inflation-adjusting versions that will send you larger checks as the CPI goes up.

This sort of arrangement is practically identical to the defined benefit (a.k.a. pension) schemes that are often wistfully referred to as a part of the Good Old Days. And yet, as products, annuities are remarkably unpopular. They do exist, you can even get quotes for them online, but it is a comparatively tiny niche market. I have never seen firm numbers, but it seems safe to infer that something like only one or two retirees in a thousand buys one.

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Frugal Friday Wisdom

It seems that every month Frugal Friday includes at least one, and sometimes  two, hot new frugal tips from Wise Bread. Nothing surprising in that, as Wise Bread is a multi-author powerhouse of money insight. They also maintain the official list of top Scary Halloweenpersonal finance blogs. (And modestly rank themselves at only #5.)

If this month’s frugalosphere performance is any indication, they may be soon moving up a few notches. I counted no fewer than four separate frugal tips worthy of passing along here.

Give kids cash for Christmas. Dollar-for-dollar, they will appreciate it more and it is much cheaper to ship and wrap than other gifts.

Make your own infused liquor. Wise Bread provides a recipe: put the thing with the flavor you want to add into your booze, let sit for a few days, and then strain the lumpy stuff out again. I never would have figured that out on my own. Most frugal suggested flavor source: leftover Halloween candy.

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Why Lotteries are Bad – The Third Reason

[Today’s Thursday re-run first ran on November 30, 2009.]

There is a pretty obvious reason why buying lottery tickets is a bad idea. You will lose money. The odds are usually just awful. Casino gambling is, in comparison, a sound investment.

Casino_slots And, of course, casino gambling is not a wise thing to do with your savings. You would have to be off the deep end of “positive thinking” to believe anything other than it was, for some, an amusing way to waste money.

That objection to gambling, and lotteries, is today so pervasive that we have all but forgotten another traditional objection. A hundred years ago, at least as common as the argument that you would probably lose was the one that you might win. Back in the almost forgotten era when gambling of all kinds was illegal throughout the country, it was argued that gambling undermined the work ethic, allowing some to become rich without appropriate effort. And that was immoral.

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ING Calculates Numbers

A reader sent me a link to a tool published by ING. asks for six simple inputs and spits out, with clever animation, your “number,” that is, the dollar amount you will need at the start of retirement.

ING Logo The six inputs are your current age, martial status, current income, planned age of retirement, desired annual retirement income, and through what age you want to have income. (In other words, how long you expect to live.)

I can immediately see why they need the last three, but the first three are mysterious. My Money Blog wrote about this tool in September and attempted to reverse-engineer the inputs. His theory on the current age input is that it is used to work out how many years you have until retirement, which is then used to adjust your retirement income needs for inflation. Apparently, all inputs are assumed to be in 2010 dollars.

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