This week I’ll start with Don’t Mess With Taxes’ post ‘Accidental mortgage interest deduction.’ In this article, Kay Bell, author of The Truth about Paying Fewer Taxes, explains how the deduction for mortgage interest sort of snuck into the tax code some years back. I like her writing and how she continues to offer unique finds such as this one.
At The Simple Dollar, Trent had two articles that caught my attention, and I’ll mention them both. First is sure to become a classic, Personal Finance 101: How Averages Lie. In this article, Trent talks about a few examples of averages not telling the whole story. “The average household has $8,000 in credit card debt.” Well, ok. But we’re given an example, say 3 families have none, one has $10,000 and one has $30,000. That still averages to $8,000, doesn’t it? It’s less that they lie and more that the numbers are pretty meaningless as they don’t tell the whole story. I have my own draft of a similar concept and it talks about home pricing. “As reflected by sales numbers, median home pricing fell X% in some location.” Meaningless. Perhaps the higher priced homes happen to have families less likely to move. Maybe new condos are being built on the other side of town, in phases, and the price happens to be lower than the majority of homes in most of the town. All sales will drag down the average, won’t they? Yet existing home values may not be dropping at all.
The next Simple Dollar article is Consumption Smoothing and Why It Doesn’t Work. The concept is similar to the “Life-Cycle” Hypothesis introduced over 60 years ago by Franco Modigliani, as well as the Permanent Income Hypothesis introduced by Milton Friedman. I come to the same conclusion as Trent, there are some nice theories out there, but the reality is a bit different.
Not a blog, Morningstar had a must read article by Nouriel Roubini, 10 Reasons the Recovery Will Be U-Shaped. In the end, a slower recovery will set a better stage for long term growth than would the V shape others are calling for.
Len Penzo offers a nice list of 23 Creative and Sure-Fire Ways to Easily Earn Extra Money. In these times, a few hundred dollars a month can help knock off a debt or save for an otherwise unaffordable event. Keep an open mind and decide what you’re willing to do to get ahead.
Free Money Finance discusses why Americans Still Not Ready for Retirement. Despite the article recently quoted which suggests that it’s possible to save too much, FMF offers data suggesting that 60% are not saving enough and those who are ahead of plans can choose to retire early if they wish.
Why You’re Wrong If You Think Gold at $2000/oz Is Unlikely… or Worse, Just a Bubble by Money Energy makes the case for a continued rise in the price of gold. John Maynard Keynes referred to gold as a barbarous relic, and over the longer term, I tend to agree. In the short run, anything is possibe, I suppose.