It’s December, therefore it must be time to read lighthearted but poignant “news” stories about how much it would cost to buy all the gifts given during the 12 Days of Christmas. Again. This wouldn’t be so bad if the same news outlets didn’t do the same piece every freaking year. And we’re pretty sure you can find some lords willing to a-leap for next to nothing.
That, and the other story about how much you should tip the service workers in your life. There’s always a recommendation to tip “your doorman” a certain amount. The New York-centric journalists who recobble these stories every year forget that well over 99.9% of Americans don’t have a doorman. CNN would provide a more helpful service if they told you how much to tip your emergency room check-in nurse, or the guy who installs your satellite dish, each of whom is a more central figure in most people’s lives than a doorman. Or an “elevator operator”, another totally relevant service worker in post-1950s America.
Welcome to the Carnival of Wealth, the greatest blog carnival in the history of the format. Personal finance blog posts in an easy-to-digest whole. Here we go:
Batting leadoff this week is Ken Faulkenberry at AAAMP Blog. Ken appeals to both hemispheres of your brain this week, telling us that there’s no greater risk to an investor than losing your principal. Ken believes there’s a good chance that if you invest more conservatively, you might increase your returns. But you won’t know until you read his post. (And try to ignore the homonym confusion. The man has an MBA.)
JB at Young & Thrifty says if you’re young and professionally mobile, you don’t need to buy a house. Say you close on a fixer-upper bungalow in Anchorage, complete with 30-year mortgage, and then get offered the job of your dreams in Key West. Now what? More closing costs, that’s what.
Why aren’t you just doing everything Paula Pant at Afford Anything does? Cut-and-paste her life onto your own and you’d be debt-free, building passive income, traveling the world and not destroying your life by having children. This week she graces us with a story about how she bought a rental property at 25% below asking price, spruced it up for a mere $6,000, and made it look so good that even we and our discriminating tastes would be happy to call it home (if we, you know, lived in Atlanta and wanted to rent.)
Paula’s cap rate is a hair under 12%, and that’s not even close to her highest-performing property. (She has 3.) She did some simple calculations to determine what rent she should charge. She got a fantastic rate on an interest-only loan from a private lender because, hey, her credit is good. In our book we bang on the concept of a “spread” – borrow money at x%, receive a return of x+y% and you’ll build wealth no matter how dumb you are. Paula discusses “arbitrage”, which is essentially the same thing (and, as she describes it, her favorite word.)
See how one good decision sets up the next several? If the rich get richer, it’s because they deserve to. Paula could have lamented her life station, decried the job market and lashed out at the world. She could have said “I hate math, it’s so hard! Especially since I’m a girl!” and not bothered figuring out the likely cap rate before buying the property. Instead, she’s buying assets, selling liabilities, and living about as exciting a life as one can lead without benefit of psychotropic drugs.
Did you trademark your gimmick of talking to yourself via italicized questions?
No, it’s not copyrightable. Why?
Paula does it. Better than you, in fact.
That’s OK. The great ones can borrow.
Speaking of buying houses, a new entrant: House Mouse, “a site with the aim to make home buying simple.” This week’s post is about how you can deduct mortgage interest from your federal tax bill. The deduction is supposed to give you incentive to buy a house (well, to finance a house) and turn us into a nation of non-renters. (JB at Young & Thrifty shakes his head. Then again, he’s Canadian.) We welcome House Mouse aboard, and remind its staff that they’re probably looking for comments from people who’ve had their interest piqued, not peaked, but it’s still early. Here to help.
Governments have certain legitimate duties – defending the country, providing courts of law, and not a whole lot else. Everything beyond that – making cars, selling insurance, running a television network and about a million others – is an intrusion onto that holiest of holies in a free society, the individual taxpayer’s wallet. From David De Souza at TaxFix UK comes a post showing where British taxpayers’ hard-earned dollars go; almost all of it in places where government functionaries have disenfranchised the private sector.
Harry Campbell at Your PF Pro buried the lede, and it’s a pretty shocking one. He claims that buying vacation days from your employer can have financial benefits.
Good God. We don’t go looking for this, we swear:
I only get 10 days of vacation a year… so (getting the option to buy more) definitely peaked my interest.
Ever visited Pikes Pique? You can see downtown Denver from there. Also, we used to use Quaker State motor oil at CYC World Headquarters, but that Pique brand is something else. It offers pique performance. Sheesh.
Alright, now the submitters are just screwing with us. At least “pique” and “peak” sound exactly alike. Teacher Man at My University Money writes about how college students can save money on food, and spelled pizza “piazza” 3 times. “Piazza” is not a typo. It’s not a phonetic approximation. Nor is it some variant Canadian spelling (cf. favour, offence, centre etc.) It’s a retired future Hall of Fame catcher, and the Italian word for “square”.
The grammatically capable Liana Arnold at Card Hub to the rescue. If you have a prepaid credit card because you applied for American Express platinum and they laughed at your single-digit FICO score, that’s one thing. If you have a prepaid credit card just because you want to improve said score, cancel it now. Get a secured card instead. It’ll help you build a credit history*, and it won’t line the pockets of manipulative celebrities like Russell Simmons and Suze Orman.
Neal Frankle has a special treat for you this week. The handsome and forthright founder of Wealth Pilgrim has a guest post from one of personal finance’s legitimate titans. It’s entitled “Why You Are Not Rich Yet”, and regarding both form and content, it fits perfectly with Wealth Pilgrim’s demanding standards of excellence.
It wouldn’t be a CoW without PKamp3 at DQYDJ.net, who reminds us (well, not literally “us”, but rather “those of you who don’t understand how cash flow and wealth-building work”) that getting your debt as low as possible is not the ultimate objective of personal finance. Some people think that mortgages by definition are bad, because they involve borrowing a lot of money at a positive interest rate. These people don’t have to borrow to make their rent payments, and they’re also making their leveraged landlords rich.
Mark Twain said to put all your eggs in one basket, and watch that basket. Dividend Growth Investor has a more diverse investment strategy, but still acknowledges the importance of watching the basket(s). Whether you’re a dividend investor or one of some other stripe, don’t check your portfolio’s value every day, but don’t check it once a decade either.
Say your bank screws you over. You can sue it, right? If only. John Kiernan at Wallet Blog points out that if you have an account at any of the 100 largest banks in the country (or many of the smaller ones), there’s a decent chance you signed away your rights and left mandatory arbitration as your only recourse. Even better, should it get to that point you wouldn’t even unlimited discovery – the bank can conceal information from you until it’s time to present it to the arbitrator. And if you think the arbitrators are impartial…well, that’s adorable.
Finally, Free Money Finance bought some smoke detectors.
Check out our latest on Investopedia, too. And join us back here tomorrow. It’s never the same site twice!
*Assuming you use it wisely, but do we really need to say that?