Carnival of Personal Finance #217

Time for another of my lazy Tuesday posts recapping the week’s Carnival of Personal Finance. (Last week I couldn’t find the carnival, but then again I was too lazy too look very hard.)

Amongst the several items that caught my eye was one from Fiscal Fizzle listing ten places you still need cash instead of plastic. It made me feel old. (Admittedly not that hard to do.) I always carry cash when I leave the house. Along with keys, identification, and a charged cell phone, cash is one of the four things I think no adult should go outside without.

But the theme of the post is that, of course, the days of cash are numbered. The author tells us "I have to admit – it’s rare for our family to carry cash on our person on a daily basis." And then his efforts at reassuring me that cash will always have role fall flat. At several of his places even I now pay without cash. (E.g. highway tolls and the appliance repair guy.) Before reading the post I wasn’t worried I would soon be the last guy in America using worn pieces of paper to buy stuff, but I am now. Of course, our currency has looked like play money to me since the mid-90′s, so maybe it’s just as well.

Personal Finance by the Book asked Is a College Degree Necessary For Success?, partly by asking what Bill Gates, Richard Branson, and Michael Dell have in common. The intended answer is that they are billionaires and didn’t graduate college. The fact that none of them has ever held a regular job doesn’t get mentioned.

Just when I thought my blood pressure would ease from yesterday’s rant on Roth IRAs, the blog Not the Jet Set chimed in with a post about how his Dave Ramsey endorsed investment advisor told him to convert his traditional to Roth and how this will save him money because of all that tax-free growth. Argh.

One of the more implausible post titles of the week was Why Your Credit Score Is More Important Than You Think, from Ask Mr. Credit Card. As if it was really possible that credit scores could be more important than most PF blog readers think. The post itself turns out to be largely a rant about the "misuse" of credit ratings for such things as screening job applicants. This is unfair because "it is easy to see how most jobs don’t require financial skills."

If you think that credit scores are primarily a measure of financial skills, then you don’t know what financial skills are. Credit scores are mostly a measure of responsibility and organization, something that is germane to just about any job.

Single Guy Money proudly shared the fact that he has now been a member of MyPoints for eleven years. I’m not familiar with that company, but from the gushing post it seems that they pay you around the minimum wage to read emails they send you. Also, you can apparently make money by helping to sign up others, for example via a link in your blog.

And finally, The Canadian Finance Blog brings us the chart of the week, a generic speculative bubble with each of 15 stages named. It’s pretty cool, although the conclusion at the very end, that we are currently in a false dawn and the economy will get worse from here, I don’t buy.

Carnivals | Frank Curmudgeon | August 11, 2009 12:30 pm

14 Comments

By Greg Markow, August 11, 2009 @ 2:11 pm

Hey Prof Curmudgeon: peep this: http://richardsmith.posterous.com/tag/dollarredeign for some interesting unofficial proposals to re-design our unattractive currency.
By Neil, August 11, 2009 @ 2:11 pm

Cash only comes out of the bank for trips to the farmer’s market, and holidays. About 2/3 of the cash I use in a year is spent during the 3 weeks when I’m in another country.

I really can’t imagine thinking of it as something no adult should be without. When I have cash (and no specific purpose for which it’s been withdrawn), it just kind of disappears into the “spent” netherworld, unlike e-money that is easily trackable and well-categorized.
By Dangerman, August 11, 2009 @ 2:45 pm

“Just when I thought my blood pressure would ease from yesterday’s rant on Roth IRAs, the blog Not the Jet Set chimed in with a post about how his Dave Ramsey endorsed investment advisor told him to convert his traditional to Roth and how this will save him money because of all that tax-free growth. Argh.”

Dave has repeatedly gotten Roth conversions RIGHT by noting that almost everyone will pay the taxes from a separate pool of money than the investments in the IRA. If a person does this, it’s essentially equivalent to making a huge deposit into their retirement accounts… and thus the conversion really does make them richer.
By Rick Francis, August 11, 2009 @ 6:32 pm

Can a Roth conversion make you money? Yes- here is an example:

Assuming
#1 I am in the 25% tax bracket now and after retirement.

#2 An investment today grows 10 times larger by retirement and all of the investment gains are capital gains.

#3 I start with $1000 in a traditional IRA and $250 outside any retirement account.

If I convert to a Roth I will have to pay $250 to cover the taxes. The Roth IRA grows to be worth
$10,000 by retirement and is completely tax free.

If I do not convert, and invest the $250 without a tax shelter I get:

$10,000 Standard IRA
-$2,500 Taxes (25% Rate)
+$2,500 non-sheltered Investment
-$227.5 (15% capital gains tax)
——–
$9,772.5

Converting to the Roth IRA saves the capital gains taxes on the unsheltered investment in this example $227.50.
With a more realistic investment unsheltered investment would do worse because of taxes. Some of the unsheltered investment income would be taxed yearly (i.e. dividends) and would not get a chance to compound. Even worse some investment income would be both taxed yearly and taxed at the higher rate as ordinary income (i.e. interest income).

-Rick Francis
By Kosmo @ The Casual Observer, August 12, 2009 @ 9:02 am

They make door locks that use fingerprint IDs (you can buy them at Menards) … and the implated ID chips are just around the corner.

We may be ending the useful life of pockets! Hooray!
By Dave C., August 12, 2009 @ 10:02 am

A gas station attendant once said to me, “What kind of man does not carry cash?” (with an Indian accent of course, which hilariously made the situation seem like the Simpsons).
By gpr, August 12, 2009 @ 10:21 am

They make door locks that use fingerprint IDs (you can buy them at Menards) …

Maybe someday they’ll work out a lock system that uses a series of numbers. That way you could just have a short 3 or 4 number code that you enter. Or fingerprints. Fingerprints are cool too.
By Paul Kamp, August 12, 2009 @ 10:42 am

Call me paranoid, but I think biometrics are cool until they are protecting something important enough that people would be willing to attempt to get your credentials… use your imagination.
By Kosmo @ The Casual Observer, August 12, 2009 @ 11:04 am

“Maybe someday they’ll work out a lock system that uses a series of numbers. ”

1-2-3-4. That’s the same combination I have on my luggage

They do have the numeric locks, of course (I suspect that you’re yanking my chain). I just like biometrics.

Paul Kamp – check out The Lion’s Game ( http://www.observingcasually.com/book-review-the-lions-game/ ). There’s a scene in there much like you describe.

With a house, of course, they could just bust down the door or break a window.
By Frank Curmudgeon, August 12, 2009 @ 11:22 am

Dangerman: True, the paying of the taxes is a de facto increase in the amount saved in the account, and if the person could not otherwise contribute that money to the traditional IRA this is a good thing. Dave gets a point for this. Neither of the blog posts that got me going mentioned it. Also, I don’t think there is an option to pay the taxes with funds from the traditional without paying an early withdrawal penalty.

Kosmo, Dave & gpr: You are not making me feel any better at all.
By Wojciech, August 12, 2009 @ 7:11 pm

Thanks for the link, and my sincere apologies for making you feel a little older.

While I doubt that cash will ever truly disappear from our day-to-day transactions, the ‘age of plastic’ seems to be here to stay, for better or worse.

Glad to have found your blog.
By Kosmo @ The Casual Observer, August 13, 2009 @ 9:07 am

“Kosmo, Dave & gpr: You are not making me feel any better at all.”

Thank you. Mission accomplished.
By Patrick, September 3, 2009 @ 11:31 am

You think your money looks like play money? Have you seen these?
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