It’s about time we started with a Fun Fact®. Here’s the Bahamian dollar note, featuring a picture of Queen Lady Bird Johnson:
and here’s the Bermudian dollar, with an image of Bermuda’s Queen, Mr. T:
Each is worth exactly 1 U.S. dollar. Makes life much easier, in small countries (or in Bermuda’s case, territories) that are so near to and whose economies are so dependent on the United States’. Alright, onto the CoW:
It’s 2014, and some people still smoke. Hundreds of millions, in fact. If only there were some scientific basis for believing that purposefully damaging one’s lungs (on the body organ importance hit parade, they’re near the top) with tobacco residue, carbon monoxide and other inhalants might be unhealthy. The President of the United States smokes. The Speaker of the House smokes. Again, this isn’t 1938. These are superficially intelligent people. A legitimately intelligent person, Jason at Hull Financial Planning, demonstrates that while even free cigarettes will kill you, cigarettes aren’t free. And they aren’t really $7 (in New York City, $10) a pack, either.
Joshua Rodriguez goes for comedy at CNA Finance, with a post mostly about quantitative easing, but initially about this very site and the “D&*# Head” (his carefully punctuated epithet, not ours) who runs it. Which is fine, gratuitous name-calling is hardly a big deal. The only thing we took exception with is his criticism of our use of the English language. He cited a line from a previous CoW as an example of our bad grammar. Not only was our sentence perfect, but Joshua misquoted it, adding at least one typo. Even better, the typo he added was in the name of his own site. It’s “CNA Finance,” Slugger, not “CAN Finance.” Next time stick to whatever it is that you’re passable at, and leave the higher-concept stuff to us.
The lovely Pauline Paquin at Reach Financial Independence explains why despondent debtors aren’t as common in her native France as they are on this side of the Atlantic.
I remember the first posts I read from US personal finance blogs, and the amount of debt people were in was mind boggling. I often thought ok, only fat people would start a diary about their weight loss…
If only. Speaking of which, Jillian Michaels and Tony Horton were never fat, were they? So why is it that people will take workout advice from lifelong hardbodies, but want their personal finance bloggers to be in the red? (Update: Apparently Jillian Michaels was indeed fat in high school. Never mind.)
You’re not going to believe this, but in France they don’t just issue credit to whoever wants some. Pauline also cites family tradition, crediting her grandparents who lived through World War II for instilling her with frugal habits and a fear of reckless spending. So it’s partly cultural, but it shouldn’t take invading Nazis to convince people that borrowing money they can’t afford to pay back is wrong.
Alright, if we keep talking about Pauline’s great post our words become less a summary of the post and more a partially formed blog post of our own. We should save this and expand upon it later. In the meantime, read Pauline’s post at least twice.
Rob Aeschbach at the recently renamed The Military Financial Planner is on our short list of favorite contributors, even when he defends a position that we disagree with. Rob thinks that buying gap insurance, whereby you spend a few bucks a month in the event that your car gets totaled before you’ve paid it off, proves that you can’t afford your vehicle. Rob is right as usual, but*.
More excellence, which means next week’s CoW is bound to suck. Today we find out that Andrew at 101 Centavos has a home solar system. With a basketball representing Jupiter and a marble representing Mercury, no doubt. Andrew looks at some journalistically vetted ways to save money, and determines whether they’re worth your while. (Note, especially to all the Simple Dollar readers reading this, assuming there’s any overlap between that site and this one: If it takes you 4 hours to save a nickel, then it cost you 4 hours to save a nickel.) Also, the folks at Mother Earth News must have the world’s most enviable conversion rate during any-legal-weapon season. That sentence makes no sense out of context, you need to read Andrew’s piece.
Harry Campbell at The 4-Hour Workday (still too long) weighs entrepreneurship vs. a regular job. Harry might not be the most objective source here, because 1) he’s an aerospace engineer and will never be unemployed, b) his own entrepreneurial dreams are on hiatus, and iii) he’s got 2 blogs to fill every week, which probably take a lot of his time and pay him only modest rewards.
This might be the longest post we’ve ever run. 6000+ words from Billy Murphy at Forever Jobless. It’s also from last summer, which we would normally dismiss or make fun of, except that his topic is timeless. A retired professional poker player, Billy submitted to the CoW once before, a year and a half ago, and struck gold then too. This time he writes about expected value, and why sometimes what seems like a gamble is anything but. That 50-to-1 longshot is a fantastic deal if it pays out 60-to-1. We can’t even summarize this post any further than that, it’s so intricate and long, but it’s worth your time. No wonder the guy submits so infrequently, it must take him months to write each post.
You know what dollar-cost averaging is, right? Oh God, you don’t. Stop and read our book before proceeding. Then read PKamp3 at DQYDJ.net, who throws a scenario at us that we had to read and re-read before realizing that its surprising conclusion is in fact true. Take an investor who blindly dollar-cost averages his way into a mutual fund on a monthly schedule over 26 years, contrast him with an investor who times the market perfectly every month when buying the same fund, and see what happens. The latter investor wins, but not by enough to justify the effort he put in (or the risk he incurred while lucking out every month.)
No, this deserves more attention. This is a historic finding, on a par with Bill James’s discovery that batting order means almost nothing. Read PKamp3’s post and then encourage him to find a publisher and write a book of his own. Damn, this is a good CoW so far.
Another figurative heavyweight, Paula Pant at Afford Anything. Paula lives in the heart of the “wintry mix” color field on this week’s Weather Channel maps, Atlanta. While shivering her way through Valentine’s Day she shows what happened at her neighborhood grocery store when news of snow, one inch worth, hit the populace. The shoppers cleaned out the shelves, and as Paula points out, how much coconut water do you need to ride out the Book of Revelation, anyway? While the answer is none, that doesn’t stop people from thinking that panicking is the smart thing to do in the event of a minor crisis.
Also, go to Costco, you dummies. Buy 3 months’ worth of supplies at a time for less than you’d pay on a typical visit to TJ’s Markup Emporium.
It’s an erudition extravaganza. The seldom seen Vicky Hay at Funny-About-Money returns with a jeremiad about the prospects for America in a post-recessionary world of insufficient aggregate demand and lots of income disparity (you know, as opposed to that income equality that’s served its subjects richly wherever it’s been tried.) We disagree with just about every one of Vicky’s political opinions, but she writes splendidly and will at least force you to think about issues in a way you might not have expected nor wanted to.
The prolific Bryan Chau at Success Pen Pal explains a few important financial ratios. Loan-to-value, return on investment, etc. Depending on your starting point, this is either a good refresher or vital reference data.
Justin at Root of Good is finding out that retirement, although awesome, provides the retiree with daily challenges and plenty of time to attack them. Why pay professionals to fix your broken stuff when your time exceeds your money? Of the appliances that recently breathed their last in Justin’s household, a couple of them were cheaper to replace than fix. However, most of them were broken as the result of the most destructive force in the universe, children. We’re still waiting for the Control Your Cash cats to do anything more damaging than vomiting on the occasional carpet.
Time for a wildcard. A dizzying, fascinating wildcard. Something called Holy Potato graces our doorstep, and is unlike anything we’ve seen. Here’s what we know about Holy Potato. The fella’s name is John Robertson, he has a Ph. D. in medical biophysics, he lives in Toronto, and he explains that no matter how you plan your retirement plan’s trajectory, you need to account for deviation. You know what personal finance needs? Fewer bloggers whose About Me pages contain phrases like “My hubby and I woke up and found ourselves $67,000 in debt. This is our journey”, and more bloggers who can’t remember which of their home computers is the one with Maple on it. Great, now we have to read through Holy Potato’s 3-year archives and see what other gems we missed.
Read us on Investopedia, where we’re considerably more polite than we are here. Listen to us on the Stacking Benjamins podcast, where the opposite is true. And come back here every day for thrilling new explorations into personal finance. The end.
*This is footnoted because we didn’t want to distract from Rob’s organized and logical post. But from personal experience, gap insurance makes sense under some circumstances. When we bought CYC’s most recent new vehicle, we went into the dealership with a number in mind and reached a mutually agreeable price with the salesman. (This is Chapter VI in the book.) Then, the salesman offered us 0% financing over 3 years. We said, “If we bite, that’ll add up to 36 monthly payments totaling $x. Cash in hand is worth more than cash down the road, so what number $x-y would you be willing to take instead, right now? The salesman either didn’t understand the question or didn’t want to, because he offered us no discount for paying up front. Well, forget that. Given the choice between paying a certain amount today, and paying that same amount over 3 years, you’d be crazy not to go with option B. GAP insurance cost us $3 a month over that period. $108 to protect against a colossal accident? More than worth it to us.