Carnival of Personal Finance

Bad Money Advice’s post on inflation is in this week’s Carnival of Finance hosted at ABCs of Investing.

There’s lots of good stuff to read there, but one post I wished I had written first was from The Dough Roller on a true snake oil salesman.

Click and enjoy!

The Debt Snowball

Of Dave Ramsey’s Baby Steps, the one most widely discussed in the blogosphere and elsewhere is #2, The Debt Snowball.  This is the step in the program where the participant pays off his non-mortgage debt.  Even I can’t find a reason to say this is a bad idea, at least not in principle.  If you want to improve your net worth, and you owe lots of money, then paying those debts down is almost certainly the place to start.

It is the way that Ramsey advises that you pay your debts down that is controversial.  He instructs that you sort your debts and pay them down in order of size, smallest to largest.  To his great credit, he concedes that this does not exactly make sense.  It is, according to Ramsey, “more concerned with modifying behavior than correct mathematics.” (Total Money Makeover, p.111.)

Many money gurus give advice that makes sense (if it makes sense at all) only in the context of psychology, but few actually admit it. So Ramsey gets points there.  But saying the math doesn’t quite work is a euphemism.  This isn’t math, it’s money.  If you want to pay off your debt as quickly as possible, or if you want to maximize your net worth, which amounts to the same thing, you should pay off the debts with the highest interest rates first.  Period.

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Frugal Friday, April 3

Four Pillars, writer of the blog of the same name, was disappointed in yesterday’s post.  Since he has also expressed an appreciation for the Frugal Friday series, and since I did not want to disappoint my biggest only Canadian fan, I thought it was time for another update on goings on in the frugalosphere.

I start with a follow-up.  Obviously ignoring this post on how to make your own maple syrup, which was repeated as guest post on Not Made of Money and mentioned here in Frugal Friday twice, Frugal Upstate provided an alternate method (with pictures!) that involves getting stuff out of trees and boiling it.  Yuck.

Also somewhat unpleasant was Free Money Finance’s revisiting of his crackpot idea that you can save money by living in a cheaper city.  He actually openly refers to this as his “most hated piece of money saving advice.”  Why won’t he get a clue?  Moving someplace cheaper is not in keeping with the frugal lifestyle.  If you move, you might save a lot of money each month, but you will soon get used to living in the new town.  You will not get to act frugally as you save the money, you will merely save it.  And that’s not frugal.

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First Post in a Series: Dave Ramsey

My very unscientific survey of the personal finance blogosphere finds Dave Ramsey to be the most often cited guru.  This is a bit of a difficulty for me, because of the major gurus he is the one with whom I am least familiar.  For example, until last night I had never heard his voice.  If you are wondering how that could possibly be, that’s because you didn’t realize how regional his appeal is, and you live in Ramsey Country.

I had to go on his website to hear his show.  According to the site, it is carried, on tape delay, on an AM station in Boston.  I’d never heard of the station before and it doesn’t come in on my radio.  (Also according to Ramsey’s website, the show is not available in New York City, the nation’s largest media market, at all.)  It is available on XM and Sirius, but even I am too frugal to pay a monthly fee to listen to the radio.

Turns out he sounds like a likable guy, somebody I wouldn’t mind having in the next seat on an airplane.  This is in contrast to, for example, Suze Orman.  On reflection, I think that the principal difference between Ramsey and Orman may be cultural.  They have very similar core messages.  But the Nashville-based Ramsey is Christian in the wholesome American family values way.  The San-Francisco-based and gay Orman, who refers to herself as a “57-year-old virgin” is really not.  Ramsey’s on-air persona is that of the amiable but firm wise uncle.  Orman is the busybody mother-in-law.

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April Fools Day Round-up

There’s nothing I like better than a good satirical hoax.  And today is the best day of the year for it, when blogs and news outlets do their best to provide gentle criticism of the state of things by (briefly) fooling their readers into believing something incredible.

Free Money Finance had a clever post about how it had been sold for “almost seven figures.”

My Dollar Plan announced that it was for sale.  It did not give an asking price.

Weakonomics had a post revealing the author’s secret identity.  He had me going until he claimed a passion for organic farming.  I bet he doesn’t even shop at Whole Foods.

Cash Money Life had a poignant post about a government announcement that pennies would no longer be minted. Sadly, this is actually a good idea, which is why it didn’t work that well as a hoax.

Mighty Bargain Hunter had an absolutely hysterical (and ridiculous) post about a bill in Congress to reduce the Federal debt.

Not be outdone by the blogosphere, the Wall Street Journal carried a brilliant story about how congressmen and senators gave record bonuses to their staff last year.  According to the report, “The money comes out of taxpayer-funded office budgets, and is surplus cash that would otherwise be forfeited if not spent.”  As if!

On the other hand, I think the Times went too far with its story about pleasure boats being abandoned by their cash-strapped owners.  C’mon guys, that’s just not believable. But kudos on the almost convincing fake photo.