I hope everybody liked the quiz last week.
One of the questions involved reducing your real estate exposure by buying a house with a big mortgage. I wrote it intending that the right answer be that the size of the mortgage had nothing to do with your exposure to real estate, but as I entered it into the quiz template I realized that there was another 
argument to be made. And sure enough, somebody suggested in the comments that mortgaging a house up to its full value does reduce your exposure because you have the option of walking away from an underwater house, i.e. one that becomes worth less than the balance on the mortgage.
The idea that you can just send the keys to an upside down house to the mortgage holder (“jingle mail” or more properly “ruthless default”) and be done with it seems to have gained some popularity of late. Apparently, some people are beginning to believe that this is something special about houses. New cars that were bought on credit are usually worth less than what is owed on them at the start. Does anybody think they can reconsider the purchase after a few months and just hand it back to the dealer, no questions asked? Are houses different? Can you just mail in the keys?
Read more »
This is, as you undoubtedly know, Financial Literacy Month. (It is also, apparently, National Anxiety Month and International Guitar Month.) So to celebrate, I have prepared the following personal finance literacy quiz. And who doesn’t like quizzes?
I expect this to be relatively hard for most folks, although every question involves issues that an ordinary person might encounter in their financial lives.
I’m a little uncertain about the technology here, so if there are bugs, I apologize. Also, I assume that it will not work with RSS readers. Sorry.
Read more »
I try to resist the temptation to spend too much time on the goings on in Washington, as that’s not what this blog is about, but sometimes I come across stuff I’ve just got to share.
A graphical representation of Obama’s relative manliness.
A story at NPR, of all places, about a homeowner rescue plan that the government once expected to help 400,000 families. Results have been somewhat disappointing.
I’ll try to get a real post up later today.
Last week I somewhat unfairly mocked two blogs for demonstrating a lack of understanding of what I consider basic financial principles. I say unfairly because, although I believe everybody should know this stuff, I would be the first to point out that tragically few do.
I am reminded of this because essentially the same point of confusion about interest rates and paying back loans that tripped up the bloggers appears to be confusing the Obama administration.
It seems that Goldman Sachs, the tiresomely successful former investment bank, wants to pay back the $10 billion in TARP money it got from the government last year. This isn’t a vague aspiration. Goldman has the money and is politely asking to whom the check should be made out.
Read more »
Just to recap, in this (more occasional than I intended) series I am discussing Dave Ramsey’s Seven Baby Steps. I’m skipping steps 1, 3, and 5 because there’s not much to say about them. (They are, in order, $1,000 to start an Emergency Fund, 3 to 6 months of expenses in savings, and College funding 
for children.) I’m sure that if I looked carefully into these three I could find something to disagree with, but with so many other things to get myself upset about, I just don’t have the time.
I already did step 2. The official title of Step 4 is “Invest 15% of household income into Roth IRAs and pre-tax retirement.” Plenty there to get my dander up. Why 15%? Why Roth? And then there’s how Ramsey wants you to invest the money. Oh my. This may be a long post.
There’s nothing scientific about 15%. As far as I can tell, it’s just a number Ramsey thinks sounds about right. Ramsey does concede that a few percent higher or lower probably won’t kill you, but, at least in The Total Money Makeover, he doesn’t explain why 15% and not 10% or 20%. (Total Money Makeover has a chapter on each step and so is, along with his website, my primary source for his advice for this series.)
Read more »
argument to be made. And sure enough, somebody suggested in the comments that mortgaging a house up to its full value does reduce your exposure because you have the option of walking away from an underwater house, i.e. one that becomes worth less than the balance on the mortgage.
Housing | Frank Curmudgeon | 
April 20, 2009 9:00 am | 
Comments (108) 
Subscribe