Who are you trying to impress?

April 25, 2010

These two hate each other, but at least they didn't spend $30,000 for the privilege.

Skirts and malleable men, this one’s directed at you. Spending money on a wedding is one of the surest, most effective ways of getting your financial life off to a treacherous footing. The average American wedding costs $30,000 from ring to honeymoon. And despite their effervescent exteriors, wedding planners are among the most opportunistic agents in all of commerce. They know that you’re the best kind of customers there are – people who are too terrified to concern themselves with budget, for fear of looking cheap. Especially in the eyes of their betrothed.

If you’re young, and getting married at the traditional age, then you don’t have any net worth to speak of yet. Or at least, you don’t have so great a net worth that you can afford to “invest” some of your valuable assets in a ceremony that doesn’t pay any returns. And if this isn’t your first wedding, act your age. You already had your shot at glamor and pageantry. Treat this wedding like the requisite business transaction it is.

A wedding is not only a perpetual spring tradition, it’s an obscene commitment of time and money, in exchange for breadmakers and fondue sets you will never, ever use. You’ll also get photographs that there’s a 34% chance you’ll end up ceremoniously ripping in half within a few years. If we told you that your $30,000 car had a 3-in-1 chance of getting clobbered by an asteroid (Note: insurance policy does not cover acts of asteroid), would you buy it?

There’s another argument we haven’t demolished yet, the microtine one. Your best friend from college invited you to her wedding, and she had jugglers and dancing bears. Elton John sang and played the piano, and the entrée was fricasseed Yangtze River dolphin, swimming in a reduction of alba truffles and Château Mouton Rothschild sauce. Every guest got a gift bag with a Krugerrand inside.

If you take your friend’s lavish wedding as the benchmark that your wedding needs to meet or exceed, then welcome. You clearly made it to ControlYourCash.com by mistake. Stick around for a while, maybe you’ll learn something. Although it’s going to require more than a little deprogramming.

Here are two appropriate ways to get married – the first if you’re religious, the second, if you’re secular.

Go to your parish priest, minister, rabbi, or local fat woman who could never meet men and calls herself a witch. Then rent out the church on a Saturday/synagogue on a Tuesday/coven during the daytime. Ask the celebrant what the going rate is, then give an extra 10% in recognition of all the money you’re saving by not getting married in the conventional and dimwitted way. (Of course, you’ll be paying with cash or a check.) Invite as few friends and family as you can get away with to the ceremony. Here’s an unquestionable truth – with the exception of your mother, no one wants to be sitting there anyway, in uncomfortable clothes on a perfectly good day when they could be out enjoying life. It’s a social obligation all around, so don’t you owe it to everyone to at least make the event as painless as possible?

If you absolutely need to celebrate with friends, meet at a local bar and convive. Rent out a nearby yacht club if you still can’t convince yourself that you need to spend some amount of unnecessary money in order to properly embark upon married life, which is going to be enough of a struggle as it is. Yes, your adorable niece can still be a flower girl. Let her parents buy her dress, though.

For females, if you feel that having a modest wedding is denying yourself some ritual of womanhood, shake yourself. Most rituals of womanhood are overrated anyway. Care to relive the first time you wore heels? How about menarche?

You know what? Go ahead and splurge on the honeymoon if you want. Seriously. You’re going to bitch about how Spartan the wedding was anyway, so at least this way you can justify your innate need for self-indulgence.

If you’re not religious, find a justice of the peace or a nondenominational minister who does house calls. Hold the ceremony at someone’s parents’ house. If you want, put the bride’s most pathetic friend in charge of ordering flowers (2 dozen, no more) and calling a caterer (two entrees, max, and not salmon.) Said friend probably has lots of free time on her hands anyway, so you might as well put it to use.

Princess Beatrice and Joey Buss can be as ostentatious as they want and charge it to their parents’ credit cards. For the rest of us, a wedding isn’t meant to be a display of our family’s legacy. It’s a financial liability, however obligatory, to minimize the impact of. Freeing up important resources for you to buy assets with.

Filed Under: Consumer Debt Tagged With: , , , , ,

A fool and his money, something something

March 5, 2010

refund anticipation loan, tax refund, IRS

Apparently, keno players are not as dumb as it gets.

This week, Refund Anticipation Loans. This is almost the invention of the wheel in reverse. Human ingenuity has now developed an inefficient, costly, inelegant, labor-increasing device that if left unchecked will send the species back millennia.

The “refund” in an RAL refers to a tax refund. You file your taxes with a professional preparer such as H&R Block. (Because addition is hard, subtraction is extra hard, and multiplication and division should be left only to the professionals, or at least to people who know how to press buttons on a calculator.) Then, because you overpaid your taxes throughout the year by having as much as possible withheld from your paychecks, the IRS returns to you the interest-free loan you gave it. Which can take weeks beyond the time you’ve already granted the IRS.

But this is America. We don’t do delayed gratification.

It bears repeating to the next social engineer who decries the amorphous “gap between rich and poor” that plagues our society: the poor are poor largely because they choose to be.

For those who can’t wait (and wouldn’t have had to wait, had they had the minimum deducted from each paycheck throughout the year), some enterprising souls created the RAL. Say you go down to the Jackson Hewitt office with your W-2s in tow. The preparer calculates that the money you’ve been lending to the federal government, without interest, totals $1000. Are you going to wait until April, maybe May, for that money when there are PlayStations to buy and child support to pay? Hell no!

So the preparer asks “Will you take $970 now?” And apparently, every year 12 million people say yes. If it’s any encouragement, a goodly ratio of them are probably too dumb to fill out a voter registration form.

If someone’s holding your daughter for $970 ransom with a 12-hour deadline before he mails you her scalp, only then is an RAL an outstanding investment.

That’s a 3% commission, for saving the taxpayer the trouble of waiting maybe a month for his refund. Which is an annualized rate of 43%, not that anyone ever waits an entire year. Still, that annualized number looks so enormous that it got the attention of some elected officials. Who decided that when two parties sign an agreement that showcases the stupidity of one party, the other party must be to blame. California’s attorney general sued H&R Block for offering RALs, an Illinois judge decided a $360 million settlement wasn’t enough, and the FDIC, America’s bank regulator, asked Republic Bank of Louisville to “consider ending (the) line of business” that represents most of its profit.

65% of people who receive Refund Anticipation Loans are already receiving the federal Earned Income Tax Credit. They’re so poor that they’re not making enough to be net taxpayers in the first place.

Someone found a racial component to this, too. In 2006, 7% of Illinoisans used RALs, but 23% of black Illinoisans did. If you’re black and use an RAL, then no, you’re not being exploited. But you are a moron. You’re equally stupid if you’re white, Oriental, or Melanesian and use an RAL.

Let’s hear from a loquacious consumer advocate on the issue:

“Almost one in four taxpayers living in African-American communities pays hundreds of dollars to receive his own money a few days early,” said Katie Buitrago, Policy and Communications Associate at Woodstock Institute. “Millions of dollars that could be used to pay down debt or provide a safety net for emergency expenses are being lost.”

No, that’s millions of dollars that could be used to buy crack, drink malt liquor, and spend on custom LeBron Air Max VIIs. Does Ms. Buitrago really think that RAL users are going to buy corporate bonds and index fund shares with their refunds? If they’re the kind of people who are farsighted enough to invest their money, they would have done it by now. Does she think refund anticipation lenders should just let taxpayers enjoy early money interest-free? Why should a tax preparation service that sells RALs be held to a higher standard than the IRS, which these taxpayers are giving their money to in the first place? (Then again, from the perspective of a taxpayer who’s let the IRS enjoy his money interest-free, it does make sense.)

Despite the extraneity of the second half of the quote, Ms. Buitrago is technically right. And practically disingenuous. Or just dense – it’s hard to tell with academics sometimes.

Again this has nothing to do with money, but assume that anyone who’s using the passive voice is hiding something. The quote should read “(People who are getting these RALs) choose to forgo millions of dollars that could…etc.”

Exploitation is an easy thing to prove. If you’re being taken advantage of without understanding the circumstances, you’re being exploited. When someone picks your pocket, literally picks it, that’s exploitation. When you sign an agreement granting someone the exclusive right to remove your wallet from your pants and take whatever they deem fair, you’re not being exploited.

Paying extra to get what was yours in the first place is called extortion, but even that isn’t accurate because most extortionists don’t operate with the explicit permission of the people they’re extorting money from. Furthermore, this subject matter is so outrageous that it’s reduced the author to overuse of italics.

Do we have to do this again? Here it is, in handy list form:

  1. Get as little as possible withheld from your paychecks. This will involve redoing your W-4, with the help of whoever handles this at your workplace. It should take less than a minute.
  2. You’ll now have more take-home pay in each check. Take the difference and invest it somewhere (NB: exacta boxes at the dog track are not an investment. Toyota stock is.)
  3. Write the United States Treasury a check at 11:59 p.m. on April 15.

It’s your money until the last possible second. You don’t pay upfront for most other things, why do so with your taxes?

If you’ve ever received a RAL, get the person who’s reading this to you to stop and smack you, but hard. The Marlboro reds, lottery tickets and 24-packs of Pabst Blue Ribbon will still be there when your refund check comes. So will the UFC clothing and Shadows Fall albums.

Filed Under: Consumer Debt, Taxes Tagged With: , , , , , ,

Invest in Sylver or Platynum before Zync.

February 22, 2010

Ysn't thys clever? Yt's a good thyng our comedyc ynstynct ys so childysh.

We’re still having this discussion?

Listen, the credit card companies don’t owe you a thing. You owe them. That’s how you got stuck in this mess, remember?

You applied for a card. You signed an agreement. No one “preyed” on you. Coyotes prey on ground squirrels. But the ground squirrels never initiated proceedings with the coyotes.

If a credit card company promised you a 7% interest rate, then started charging interest on your balance at 15%, then you can consider yourself preyed upon. Even though you’re idiotic for carrying a balance in the first place. One problem: no issuer has ever arbitrarily raised rates without notice. They’re not going to blatantly lie and run the risk of losing customers.

But they lost me, you say. I refuse to pay their confiscatory interest rates. I’ll never get out of this mountain of debt. Even the White House and Congress want to keep them in check, so clearly the issuers are doing something nefarious.

Then where’s the court willing to hear the inevitable class action suit filed on behalf of millions of defrauded cardholders? Fine, if you’ve got conclusive proof that a credit card issuer dishonored the terms of its agreement with you, let us know about it at info at control your cash dot com. Include a copy of the agreement.

Neither American Express nor Visa nor MasterCard nor Discover has ever held a cardholder at knifepoint and said, “Buy stuff, preferably more than you can afford.” Diners Club and Carte Blanche, we can’t vouch for. Ask your great-grandfather.

Governments routinely change the rules in the middle of the game, but do you seek redress for that? Your elected representatives and executive branch raise tax rates, and your only recourse is to emigrate. Which is somewhat less practical than cancelling a credit card.

In Control Your Cash: Making Money Make Sense, we endorse Discover and American Express Blue Cash as the only credit cards you should look at (and even then, pick only one of them.) Sure enough, the moment we sent the manuscript to the publisher, American Express unveiled a new card: Zync.

It’s got a contemporarily misspelled word and it starts with a Z…the young folks will love it! Zync is intended for people in their 20s and 30s, as evidenced by the patronizing marketing campaign. (Hey, that’s Control Your Cash’s demographic! Only we try to talk to you like adults.)

Anyhow, here’s how Zync works. You pay $25 annually, which immediately sounds like a bad idea, but keep reading. You have to pay the card balance every month. (Until the ‘90s, this was how every American Express card worked. The company made a lot of money on annual fees, and even more on services available only to cardmembers. Convince people that they’re special and you can rifle through their pockets indefinitely.)

On top of the $25, you can pay an extra $20 for what American Express calls a “pack”. “Packs”, just like the way they expand the video games.

Anyhow, packs: (This feels like explaining Twitter to my grandmother.) The Go Pack, the Social Pack, the Connect Pack, the Eco Pack. That pretentious-sounding last one waives the $20 fee, because encouraging something as noble as global-mindedness should never come with a price tag.

The Go Pack earns you double rewards on airfare, an annual $50 credit if you book a vacation via American Express (don’t, Orbitz is free), 20% off Hertz car rentals, and 25% off Avis and Budget. (We’d love to know which Hertz employee stood firm on that 20%. Don’t kid yourself: they really are #1.)

Then there’s the Social Pack (social, like networking! This isn’t your grandfather’s credit card.) Double rewards at restaurants and shows, and first crack at seats for the latter.

Followed by the Connect Pack. Double points on your cell phone, cable and internet service; and you get 1/3 more points on cell phones at MembershipRewards.com.

For the insufferable among you, and those who just happen to prefer the illusory to the tangible, get the Eco Pack and American Express will buy $1 of carbon offsets. Amass enough of them, and you too can get a Sri Lankan farmer to metaphorically dig himself an early grave by continuing to plow his yam fields with oxen and a hand tiller instead of saving up for a tractor. As if that’s not enough, you’ll earn double reward points on any item deemed sufficiently holy by American Express’ green-rating service. This includes Chevy Volts, Olive Green loofah dog toys, Aleutia solar-powered desktop computers (we’d never heard of them either), and other stuff we wouldn’t be caught dead buying.

You know what were the first companies to offer reward points for buying more of their product than was good for you? Cigarette manufacturers, and not by coincidence.

American Express gives you “one point for virtually every dollar you spend.” So charge $432,000 to your Zync card, and you can earn a 17” MacBook Pro with a 2.8GHz Intel Core Duo processor, which is a wonderful computer that retails for about $2000. Of course, this assumes you haven’t redeemed any of your reward points for anything else in the time it takes you to spend that much.

Don’t be confused by the hijacking of a word. A “reward” is what you get for lassoing the horse thief to the cactus and holding him there for the sheriff. Credit card “rewards” are really incentives. They’re encouraging you to buy a particular product or service that you wouldn’t have otherwise.

You don’t want that. You want cash. (You really want gold or real estate, but credit card companies don’t offer those.)

So does Zync make sense? Only if you’re in that small group of people who know you’re going to rent $225 worth of car from Hertz this year (or $180 from Avis or Budget.) American Express’ own Blue Cash is a better deal. Blue Cash is not only free, it refunds you $1 for every $200 you purchase. Once you buy $6500 worth of stuff with it every year, they’ll refund $1 for every $80 you spend. You’d have to spend “only” $163,900 to earn that MacBook Pro. Which you should buy on eBay anyway. To paraphrase AC/DC, sink the Zync.

Fortunately, we don’t have to change one word of credit card advice in Control Your Cash: Making Money Make Sense. (And while you’re here, scroll up and to the right and buy a copy or two of our still up-to-the-minute book.)

Filed Under: Credit Cards Tagged With: , , , , , ,
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