College Students Borrow Money for Pizza and Beer

Free Money Finance has a post this morning which is a riff on a quote from Dave Ramsey to the effect that the average college student graduates with Green Beer - Kathleen Conklin $15,000 in debt, which is also about how much the average student spends by living off campus and not eating in the cafeteria.

The $15K figure is, at the very least, out of date. The quote was from Ramsey’s book, published in 2003, and he cites as his source a conversation he had “a couple of years ago.”

But it has a bigger flaw than that. This is one of those numbers where average should not be confused with typical. Strange but true, many college students graduate with no debt. Others graduate with many multiples of the average.

So I have a lot of trouble with the premise that there exists a big population of college students who would have graduated without any debt, had they not modestly improved their lifestyle by living off-campus. But for the sake of argument, let’s accept the premise at face value. Assume that a college student has borrowed $15K solely to live a little more comfortably, that is, for pizza, beer, and the like. Is that a bad thing?

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Housing Roundup: Case-Shiller, Suburbs, and Sprinklers

It’s S&P Case-Shiller day again. This month’s update of the house price indexes, which are for January 2010, continue the recent trend of beingTwo-story_single-family_home slightly down in absolute terms, –0.4% for the 20-city composite, but slightly up when seasonally adjusted, +0.3%.

I would characterize the numbers as being delightfully dull. Obviously, a sharp upswing in house prices would be better for homeowners, particularly the ones under water, but flat is a tremendous improvement over the death spiral that ran from the summer of ‘06 to the summer of ‘09. On a year-on-year basis the 20-city was down only –0.7% to January ‘10. With luck, that number will soon turn positive, something that has not happened since January ‘07.

With not much to report from the indexes, I thought I would take advantage of S&P C-S Day to mention two other house related things that have been bothering me lately.

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The Most Efficient Gas Powered Clock Radio Ever

You know those blue EnergyStar labels you sometimes see on appliances in the store? Think hard. No, not the train that gets stuck in the Channel Tunnel EnergyStarwhen it gets cold. That’s EuroStar.

EnergyStar is a joint program of the EPA and the US Department of Energy to help Americans “save money and protect the environment through energy efficient products and practices.” Their elaborate and cheerful website goes on to claim that

Americans, with the help of ENERGY STAR, saved enough energy in 2009 alone to avoid greenhouse gas emissions equivalent to those from 30 million cars — all while saving nearly $17 billion on their utility bills.

That’s a savings of about $150 per household last year. And you are only vaguely aware of the program? Ungrateful wretch.

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Some New Tax Proposals

I have been giving a lot of thought to the federal budget deficit lately. Well, some thought. Not as much thought as I have been giving FiLife’s March Money Madness 16 blog tournament. I’m pretty sure they had 15 likely blogs and threw in BMA just to round out the field and add some humor.

Alas, I digress. As all us good Republicans know, the first step in closing the  budget gap should be a massive reduction in government spending. I’dCapitol start with the TSA and agriculture subsidies, but that’s just me.

And we’ve got to cut out these loss-making wars. Next time we invade an oil-rich country we need to actually take the oil. Everybody else will accuse us of going to war to get the stuff anyway, so we might as well cash in.

More digression. Sorry.

A quick glance at the federal spending pie chart will tell you that the bits of the budget that can be cut in the short run are not big enough to eliminate the deficit. (For a further, but somewhat out of date, breakdown that could turn anybody into a libertarian, if not an anarchist, click here.) It breaks my heart to say it, but we need some new taxes. Here are my suggestions.

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Muni Basics

Interest in municipal bonds is seasonal. Every year around this time Americans are reminded how much they pay in taxes and naturally turn their attention to finding ways to pay less. Munis, bonds issued by states, local governments, 1040 assorted agencies, and blessed institutions of same, are a popular place to look. You generally do not owe federal income tax on the interest you get from them, and if the bond was issued inside your own state you generally do not owe state income taxes either.

This being the season, there has been a flurry of discussion about investing in munis.  (See for example this in the Wall Street Journal.) Not to be left out, here is my primer on the subject.

The first thing to ask yourself before you consider munis is whether or not your income tax rate is high enough to bother. Yes, if you are paying any taxes at all, tax-free interest is better than taxed interest, everything else equal. But everything else is rarely equal in the investment world. Most muni investors are in the very highest tax brackets and they bid the prices up (and the yields down) such that munis make sense only for those paying those highest tax rates.

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