Carnival of Personal Finance #211

I had it all figured out. Last week’s review/roundup of the Carnival of Personal Finance went well, so I thought I’d do it again this week. I planned to spend yesterday leisurely reading through the posts and writing it up in time to get it posted nice and early today.

Keyboard a-Michael MaggsNot so much. The carnival only appeared this morning, leaving me just a few hours to run through it. Yes, I could have come  up with another post idea yesterday, but, you see, I had a plan.

This week’s carnival is hosted by Green Panda Treehouse. Is that blog name a cultural reference that everybody who is younger than I am gets? There is a picture of a green panda on the banner, which helps me. I thought it was the tree house that was green.

There are five editor’s picks, two of which are on finance related marital problems and two of which discuss how expensive it is to own a house. Something on your mind Green Panda?

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Roll Your 401(k) Over Into an IRA

It would never occur to me to give out some bits of advice if somebody else hadn’t first suggested an unwise alternative. Some things seem just so obvious and uncontroversial that writing them up would be pointless. Then I read something that reminds me this is the personal finance world I am talking about.Smart Money Map

Case in point is rolling your old 401k over into an IRA when you leave your job. According to the Wall Street Journal’s Smart Money, this is not the no-brainer I foolishly assumed. It is a conundrum. Who knew?

In case you are not up to speed on the deal with 401ks once you stop working where the 401k lives, you basically have four choices. You can cash out the money in the form of a distribution, on which you will pay income taxes and, assuming you are under 59 1/2, an additional 10% penalty. That’s probably not a good idea unless you seriously needed the cash. (For example if you just lost your job.)

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Curmudgeon’s Law of Numerical Fiction

Regular readers of Bad Money Advice will not be surprised to hear that I prefer numbers to words. (Allegations that I prefer computers to people, however, are greatly exaggerated.) I think this is a natural inclination. Any halfway thoughtful Old Calculator - Roberta F person favors evidence over feeling, and numbers have the appearance of being hard facts.

But not all published numbers are factual, even when widely repeated in respectable places. Which presents a difficulty for us lovers of digits. How can we separate the real from the realish? Not to worry, because today I am revealing for the first time my Law of Numerical Fiction which will help identify the imposters.

To be successful, that is, repeated widely as if it were true, a fake number must satisfy three criteria.

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The Problem with Target Date Funds

Yesterday’s New York Times had an article about the simmering controversy over target funds headlined Target-Date Mutual Funds May Miss Their Mark. (Get it? It’s a pun.)Toddler Cart Crop - Remi  Jouan

Target date funds have been around for a long time. They are a sub-species of asset allocation funds, mutual funds that, in effect, own other mutual funds in order to create a diversified one-stop-shop for the investor either too busy or too intimidated to pick his own. I’m not a big fan. I think you can do better making your own asset allocations, but that has little to do with the current round of hand wringing in Washington.

To understand what has caused the present consternation, you have to go back a few years.

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Swoopo: Entertaining Yes, Shopping No

There is a very amusing site that bills itself as "entertainment shopping" called Swoopo. After a brief investigation, I have concluded that:

1. You would have to be a complete idiot to spend money on this site.

2. I am a complete idiot for not thinking of it first.

US_Silvercert1 How Swoopo works is deceptively simple. They auction off desirable items such as notebook computers and big flat screen TVs. But the auctions have some very special rules. It costs $0.75 to place a bid. Bids can only top previous bids by a certain small amount, usually $0.15 but in some cases only $0.01. There is no fixed end time for the auction. It continues until nobody has bid for 20 seconds.

Get it?

This is an amusingly profitable deal for Swoopo. Although they wind up selling the merchandise for much less than it is worth, the bidding fees collected swamp the small loss involved. For example, yesterday morning the bidding on a Sony Playstation 3 worth (Swoopo tells us) $399.99 sold for $126.60. That’s a nominal loss of $273.39 from retail. But to get to $126.60 in $0.15 increments took 844 bids, representing $633 in revenue to Swoopo. Brilliant.

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