Lots of good tips from the frugalosphere this week.
But first, I need to mention that I have just this morning read the 166th edition of the Festival of Frugality, which came out February 24th. Of the five “Editors Choice” links featured at the top, three were featured here in previous editions of Frugal Friday. My first thought was, of course, that I was a victim of plagiarism, until I realized that the festival came out first. I then realized that this is just the inevitable result of thoughtful people searching for the best and most practical frugal hints.
As a follow-up to last week, Heather at The Greenest Dollar continued her series on transport-themed alternative housing, this time discussing living in railroad cars rather than shipping containers. But once again, she loses me when she discusses buying rather than finding the cars. That’s just not in keeping with the latest trend in frugal-land, the Substance Abuser Lifestyle, or SAL.
Speaking of which, Queercents brings us news of the latest SAL development, gold parties. It’s like a Tupperware party, only instead of the participants buying plastic containers, they all bring gold items they “own” to sell for cash. This is especially important in suburban areas that often lack access to services city dwellers take for granted, like pawnshops and fences.
If this is the only personal finance blog you read (which means you are either my wife [Hi Honey] or my buddy Rick [Yo Ricky!]) you may not have seen this video yet.
The video also has it’s own homepage, with a counter reading over 325,000 hits. They accept donations and sell T-shirts “to deal with a ridiculous bandwidth bill.”
Now, obviously, I would never even think of presuming to dispute the details contained in what is now our nation’s definitive account of the credit crisis. But I do have a few little comments.
The AP has a story today about how January home sales were down 7.7%. This from yesterday’s press release from the National Association of Realtors. According to them, the number of existing house sale contracts signed in January, i.e. the number of agreements made to sell a house, was down 7.7% from December. (That’s a seasonally adjusted number, something you’d have to read the footnotes to their release carefully to discover. In raw terms January sales were up 18.1% from December.)
What does this mean to you? That depends. Are you a Realtor? Then it is bad. Business is really slow. Are you an ordinary non-Realtor, perhaps a home owner concerned about the value of your largest asset or somebody interested in house prices as an important economic indicator? Then this means nothing.
According to Kansas, in September of 2008 the Bernanke-Geithner-Paulson troika thought that a government rescue of Lehman was unnecessary.“They felt some confidence that they could let Lehman Brothers fail without causing too much of a wider crisis.”If true, this will go down as one of the greatest misjudgments in financial history and suggests a shocking lack of understanding of markets by those supposed to regulate them.But Kansas may be scapegoating the troika for a more systemic problem.Regulators worked hard for weeks to avoid a Lehman failure.But they did so without a clear legal mandate and without any kind of formalized fund to draw on.When the Fed convened what turned out to be a weekend-long meeting of Wall Street’s leadership before the terrible Monday, Geithner kicked it off by announcing that “There is no political will for a Federal bailout.”In other words, elected officials in Washington, afraid of a backlash from voters, would not acquiesce to a bailout and without them the regulators were powerless.
The horrible week that followed Lehman’s death was eventful.Merrill Lynch was absorbed by Bank America.AIG was bailed out.Money market funds experienced panic redemptions.The SEC banned short selling of financial stocks. By Thursday afternoon the stock market was down nearly 10% on the week, before rallying on what turned out to be false hopes of a quick government bailout of the banks.Kansas’ narrative peters out shortly after this, presumably because it is here that he started writing his book.
The second half of The End of Wall Street is taken up with advice for readerson what to do now with their own finances in light of the “new world order.”This personal finance advice is undoubtedly the marketing hook for the book, the reason its creators imagined that people would buy it, and the reason they hired Kansas to write it.(He is Editor at Large at FiLife.com and the author of The Wall Street Journal’s Complete Money and Investing Guidebook.)Unfortunately, it is also the weakest part of The End of Wall Street.The advice is not unsound, indeed with regard to reasonableness it is above average.But it is generic and vague.Pay down your debts, particularly credit cards.Young people should invest mostly in stocks, older folks less so.Do not obsess over the value of your home and think of it as a roof over your head, not as an investment. Read more »
I recently wrote a post on how to choose between the two kinds of IRA, traditional and Roth. In a nutshell, the big deciding factor is the tax rate you are paying now versus what you will pay when retired. If you are paying a higher rate now, go traditional. If you will pay a higher rate when retired, then Roth is for you.
The core difference between the IRA types is deceptively simple. With a traditional, you don’t pay taxes on money you put in, but do pay taxes on the way out. A Roth is the other way around, the money that goes in is after-tax, but the money that comes out is tax free. But like that old bit about the butterfly’s wings causing a storm, this clear difference between IRA types propagates into uncountable obscure details.bouncy castle sales
One of those dark corners of the IRA world is the option to convert an existing traditional IRA into a Roth, which involves paying income taxes on the amount converted. (And no, there is no such thing as a conversion in the other direction that would cause a big tax refund.)
Currently, and until next year, you cannot convert if you have an income over $100K. Not only does that rule go away next January, but there is a special 2010-only deal: you can delay the taxes due and spread them out over two years, 2011 and 2012, which is an interest-free loan from Uncle Sam. (In any other year, it would be all due in the year in which you convert.)
Is this a good idea for you? Two things need to be true. First and foremost, you need to be pretty sure that your income tax rate in 2011 and 2012 will be lower than the tax rate you pay in retirement. This is the usual traditional vs. Roth question, made a little harder because you need to guess your tax rate in a few years from now as well as your tax rate in retirement.
All advice in this blog is guaranteed to be worth at least what you paid for it, or double your money back. All persons dealing with matters of personal finance are advised to gather information from blogs, books, radio and TV, consult with professionals, discuss the matter with anybody who will listen, and then make their own decision. Because it’s their money.
Frugal Friday, Frugality | Frank Curmudgeon | 
March 6, 2009 10:25 am | 
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