I just heard about Chelsea Clinton’s upcoming wedding.

You: It was announced some time ago.

Well, somehow I missed getting an invitation.

You: Yeah, me too. Are you surprised?

Not at first, since I don’t know Chelsea Clinton. Or Bill. Or Hillary.

You: You don’t know who they are?

I know who they are – but I don’t know them personally.

You: Me too.  So why did you come to believe you’d be invited to a wedding you only just learned about?

I thought everyone was going to be invited.

You: That’s ridiculous.

I know that now. So I had to do some research. Turns out that the expected $3 to $5 million cost is only going to cover about 500 invited guests.

You: That’s like $1,000 a plate!

No, on the high end, it’s actually about $10,000 a plate.

You: Oh my.

If that had been the cost per person at my wedding, I’d still be single.

You: C’mon Michael, we know you love your family.

No doubt, but we didn’t spend anywhere near $20,000 on our wedding. As such, either my wife or I couldn’t have attended, let alone any of our guests. Of course I would have selected my wife to attend rather than myself, but I am not sure how well the first dance would have gone over.

#    #     #

I realize I didn’t need any security at my wedding, but $600,000 for air conditioning? I got married in July in Florida, yet still “negotiated” no separate AC charge.

If you wanted your child to learn how to play baseball, who would be the ideal teacher?

You: Dustin Pedroia.

Okay, I love how the guy plays the game, but let’s just say his current professional career makes him unavailable to teach your kid for the next 20 years.

You: Darn.

Realistically, who would you want to teach your child how to play baseball?

You: A good local baseball coach.

Me too. I’d hope for the best baseball coach around. Ideally, he’d be someone who’d have played in high school, maybe college. He’s a natural teacher – maybe that’s his day job.  He’s really good with kids and knows all about the fundamentals.

You: Makes sense.

Now let me ask you a different question. Who would you want to teach your child about money?

You: About money?

Yes.

You: For my son’s contract negotiations?

Ah – no. He’s got to learn how to hit off the tee first.

You: The kid’s got loads of potential.

As did Drew Henson.  So, who would you want your kid to learn about money from?

You: Not sure.

For my children, it would be someone with the same characteristics as the baseball coach, with an obvious shift in the area of experience. Said another way, I’d want someone who was really good with money to teach my children. Someone who was a proven excellent saver, understood how to use credit effectively, and had a great work ethic. Obviously, someone  patient with a knack for connecting with others would be an ideal candidate.

You: Makes sense.

Unfortunately, the federal government disagrees.

You: Huh?

The government has a different suggestion for advancing financial literacy.

You: What’s that?

Themselves.

You: How so?

Through their own web site.

You: Why is that a bad idea?

It’s kind of like learning baseball from Bloat.

You: Who’s Bloat?

Bloat – you know the kid. He was the 8-year old who really hated sports, especially team sports.  His parents made  him play, but his attitude was horrendous.   So the coach batted him 9th and put him into right field, where the ball never came. Still, he managed to get in the way of his teammates’ efforts, once getting his chewing gum all over the baseball bats.  If you ran into Bloat years later – he’s still looking for that first real job at age 38 – would you ask him to teach your kid everything he knows about baseball?

You: Of course not – he’s the last guy I’d ask.

Precisely. So why would the federal government, an institution run by a group of multi-millionaires, many via the old-fashioned work ethic or marrying money or inheriting money, who collectively spend billions more of other people’s money than they have, be the ones to teach us and our children about money and saving?

You: I wouldn’t choose them.

Doesn’t matter.

You: Why not?

Bbecause they’re the federal government – they decide and they’re confident. It’s like Bloat saying look man, I didn’t care back then, but now I am really into baseball and I am going to turn your son, and both his and your future around. And you’re thinking -

You: Yeah, right.

My exact reaction when I read Is There a Cure for Financial Illiteracy?

Your thoughts?  Who’s going to teach you and your children about money basics?

You: You mean there’s a choice?

Not really.  While it’s possible to structure some of your financial affairs to lessen your tax burden, most high-income earners will still pay a lot in taxes while those at the lower end will pay far less.

You: So then why ask what the right amount of taxes to pay is?

I’m thinking on more of a macro basis.

You: What?

As a society, how much tax is appropriate?  I just finished reading “Do Americans Pay Too Much in Taxes?” at Kiplinger.  Like many of the commenters, I believe he underestimates the current tax burden in his discussion, but I’m not as angry about it as they are.

You: Why not?

What’s the point of getting angry at a columnist? If you want to make a difference, talk to someone in a position to make a policy difference. (I generally do neither.) Regardless, it raises the question of how much tax is appropriate.  A typical middle income taxpayer might face:

• 25% income taxes on his wages (at least for a sizable portion of his income)
• 7.65% payroll taxes (Social Security and Medicare) that he sees withheld from his paycheck
• 7.65% payroll taxes (Social Security and Medicare) that he doesn’t see withheld from his paycheck
• 8-11% income taxes, in a number of states, in state income tax
• up to 10% (like in Chicago) sales tax
• thousands of dollars in annual property taxes (paid directly as a homeowner or as part of your rent as a renter)

Add all of these taxes together and they’re often a far higher percentage of your earnings than you might first sense.  Furthermore, there are other, comparably more minor, fees and taxes the typical person pays.

I live in New Hampshire, a state with no income or sales taxes.  People from out of state sometimes ask me how my state’s services are.  When I ask them to describe their state’s services, we realize no one is happy there.  Still, I don’t have all the answers, do you?

Do you pay too much, too little, or just the right amount of taxes?

Some quick thoughts:

Nope, we didn’t purchase a house before Friday - but not for lack of trying.  We made what we thought was a good offer on  a nice property. Nonetheless, our offer was not good enough in the eyes of the sellers, who elected to keep the property on the market while hoping for a stronger bid from someone else.  Truthfully, it’s amazing how much easier it gets to move along, psychologically, the more times you get rejected (we’ve bid on homes before without success).  Kind of reminds me of my high school dating life.  Just like there, eventually it works out and it is so worth the wait.  Anyway, I’ll keep you posted.

The household savings rate is back down under 3%, it’s lowest level since September, 2008 when the recent economic malaise began. For those who thought we were a permanently changed culture, one where people were going to save more aggressively than before, I say to you a humble, “I told you so.”  Those who were savers before are probably even bigger savers now, but the vast majority of us went back to our old ways as soon as weren’t embarrassed or terrified to do so.

Continental and United will merge. I’m not excited about this. First, because I’ve had great experiences on one airline and pretty much refuse to fly the other. Also, because less capacity means higher profits (and I don’t directly own any airline stock, but am a consumer who will probably paying more). That said, sooner or later the airlines have to make a profit. Personally, I’m not into cross-country bus rides.

Thoughts on any of this?

My brother sent me a link to On a tight budget? Odds are you’ll spend more. Since the article’s title suggests that trying to micro-manage expenses was a failing strategy, I was intrigued. After all, and as long-time readers know, I like the rule “Major on the major, minor on the minor” Therefore, I figured the article would support my theory.

You: Did it?

No.

You: A-ha!

Not really.  The article reports on a study down in Atlanta that supposedly proves that people who shop in a poorer area of town do a much worse job at estimating the amount of money in their grocery carts than do those who live in the affluent part of town. While both groups of people underestimated the cost of the goods they had in the cart, the poorer folks were off by three times as much.

The study then concluded that it is the complexity of the precise math that the poorer people try to do (as opposed to the simple estimating techniques used by the more affluent) that results in this problem for the poorer population.

The journalist writes:

Oh ironies. We already know that people with less money end up paying more interest on everything from credit cards to home loans. Now, it seems that penny counters  actually spend more than intended in the checkout aisle, too.

Allow me to throw out a question:

Isn’t it possible it’s the other way around?  Perhaps it’s that those who understand how to calculate the true cost of things wind up spending less and are therefore more affluent. Why rush to judgment that it is the “penny counting” attitude that makes people financially poorer?  Surely you have met plenty of people who watch every penny and yet are quite affluent. It’s not even rare.  While it’s not necessarily the path I recommend, it surely is a viable strategy.

If you’re spending more than  you can afford at the store, don’t let the media blame your math skills – bring a freaking calculator.

Thoughts?

Yesterday, I read an interesting article in the Boston Globe highlighting the experiences of the many 18-29 year olds still depending on Mom and Dad.

You: Because they’re still living at home?

Actually, the examples in this case aren’t boomerangs. Instead, the article profiles people living in the big city who are still getting checks every month (or are having certain bills paid by) their parents.

You: Oh.

While there are exceptions to every rule, for the most part I found such behavior detrimental to one’s reaching financial maturity.

You: What’s financial maturity?

When you’re able to truly support yourself and your family. It means you can pay your bills and save for the future.

You: Sounds nice.

It is nice, but my experience shows me that it can only be achieved via earning it.

You: The old fashioned way?

Indeed. I loved that commercial.

No single person making $50,000 a year truly needs financial assistance.  Yet this article shows how Megan Brown has grown to depend on her folks to make ends meet.  Of course, given her lifestyle, it’s easy to see how she needs additional funds:

• She lives in the most expensive part of Boston.
• She has a parking spot – not cheap in Boston.
• She has a health club membership – probably not at the Y

Candidly, we know very little about her spending habits, but the fact that a single individual earning $50,000 can’t take of her own bills tells me that she’s spending too much somewhere.  Not sure who she’s dining with in the picture, but if you’re ordering Pellegrino, you pretty much lose any rationale for monetary assistance.

Yet, I have sympathy for her plight.

You: You do?

Yes.

You: Why is that?

Because most people would take the money if it were offered to them.  At 23 years old I probably would have to.  But for me, it was never an option – and not because my parents couldn’t have helped had I genuinely needed it.

It was clear to me, as part of my upbringing, that when I was done with college my folks were done supporting me financially.

So, I didn’t live in the best part of the big city right away – I commuted 45 miles each way.  I didn’t live alone – I shared an apartment.  I didn’t drive a nice car, I drove a freakin’ Neon. I could go on but I’m tiring of it and I had a great life so I don’t want to sound like I’m complaining. I’m not. I’m contrasting.

Still, I  have sympathy for Megan because it isn’t Megan’s fault.  It is her parents who are causing, via their enabling behaviors, Megan’s lack of financial maturity.  Yet it will be Megan who, long term, will pay the price.

A person with low income and high student loans who is making wise financial decisions but struggling despite them has my sympathy.  But not the people profiled in this article.

What do you think?  Is this a problem and, if so, who’s to blame?

Twice in the last two winters, we’ve lost power for about 36 hours.

You: You should just pay the damn electric bill.  I know you like to negotiate everything, but you’ve got two little kids –

Massive ice storm last year.  Massive windstorm last weekend.  My write-up of the December 2008 event:

Visiting Boston during an ice storm – Like most New Hampshire residents, we lost power for at least two days earlier this month due to an ice storm.  No way we were going to ride it out at home when the inside temperatures were expected to (and did) reach the thirties – we have an infant!  So we planned on heading to a hotel 20 minutes away.  Then my wife and I chatted: Why not make lemonade out of lemons?  If we’re forced to use all these hotel points (I travel a lot for work), why not go somewhere fun?  So off to Boston we went.  Now we have family memories of being tourists in Boston (riding the subway, going to the Aquarium, pressing buttons to go up and down on the elevator) with two little kids instead of hanging out in the confines of a breakfast nook in Dover, NH waiting for the lights to come back on.

The 2010 Version

When we awoke Friday morning without power and heard it might be a while before it returned, we contemplated doing the same thing – going to Boston on hotel points.  (After all, my four-year old daughter immediately suggested it.  My wife and I have learned that she now associates any reasonably lengthy power outage with an automatic trip to Boston.)

But this time my office, three miles away, had power.  No showers or beds, mind you, but it had the most important luxury:  heat.  So we decided to bank those hotel points for a future “real” vacation and hunkered down at night with the girls in an office building.  It worked, although arriving here this morning felt a little weird as things were just a bit “off.”

You: Forgot to throw away the dirty diaper?

Ugh – fortunately that didn’t happen.

Truth be told, we had fun and kept the costs to a relative minimum.  Of course, we went out to lunch and dinner (keeping the refrigerator and freezer closed at home saved a bunch of groceries from going bad) but went to fun, inexpensive restaurants.  For breakfast the next morning, I went to a grocery store and picked up some oatmeal packets (we have a hot water cooler at the office), yogurt, and some juice.  Lunch was deli meat and some wraps. All in all, we kept it fun, kept it inexpensive, and kept our sanity.

At 3PM, the power was on.  We were just about to cook dinner when friends invited us over. Together, we celebrated the little things. What else really matters?

A close relative of mine just sent me this email:

Gotta love my bank . . .

I went online to check my bill and I see nothing there about me ever having a credit card…

As i’m looking around I notice I have an “email” from bank of America with a new credit card number…umm…WHAT!??!

So I call them…she said it has been “compromised or your card is lost or stolen.” I said umm I have it in my hand…it’s not stolen…she said, well sir mail has been sent to you regarding why this was done…I don’t have any info.”

i called back 5 min later and someone much more helpful said It’s not just me, its thousands of people. Apparently some store I shopped at (could have been a month ago or 4 years ago) got hacked and all their credit card numbers have been stolen. So they closed everyones accounts down and sent out new cards…my card that I have right now will still work till I get the new one.

This is all fine and dandy…but don’t you think they should have called?!?!?!

So no one knows anything till I get something in the mail.

#     #     #

Who can be the first person to correctly identify the bank?

Who else is in the same shoes?  Should they call or at least email? Thoughts?

As common as identity theft has become, I am amazed at the poor password practices of many people I interact with.

You: Because I use my significant other’s name as my password?

That’s one example.  But, at least according to this New York Times article, there are far more egregious examples.   When a hacker was able to get into a big web site and decided to post all the passwords, an analysis of the top passwords used featured obvious choices that could easily be guessed.

The number one most commonly used password?  See below:

• 123456

You: that seems like a pretty easy one to figure out.

I agree, but apparently people figured it was far safer than the second most commonly used password . . . wait for it:

• 12345

You: Not exactly a tough one.

No.

You: What else did people use?

Besides the incredibly sly password 123456789, the next most common password, and the first one to introduce the complexity that letters create was:

• password

You: Huh?

The most common password that uses letters was “password”.

You: Seriously?

Yes.  Also, Iloveyou.

You: Excuse me?

Iloveyou.

You: This is out of nowhere. I’m just reading your blog. . . I barely know who you are.  You’re making me uncomfortable.

Sorry, just reporting the news. The next most common password after password is “Iloveyou”.

You: Oh. I knew that.

I know.  It doesn’t get much prettier after that (although “princess” is a top 10 password too. My, how modest we all are.).

The analysis showed that 20% of all accounts could be opened by trying just 5,000 passwords. Those smart, yet evil, people with computers surely could figure out a way to try 5,000 passwords on your accounts in fairly short order.

The bottom line:

• “Password” ain’t no password.
• Don’t tell your bank that you love them (or at least not as a password).
• Your dog may be your best friend, but his name is a lousy password.

Also, don’t forget: nT09%9bUl2 is a damn good password.  But if it’s on a post-it note attached to your computer, it sucks.

Last week I discussed Why the drop in late credit card payments doesn’t excite me. Then, I covered The real unemployment rate just this past Monday.

To continue my little rant on misleading statistics today I discuss the phenomenon of lower credit card balances.  Analyzing TransUnion data, the AP reported the credit card delinquency decline here and a Fed G19 study further analyzed by Credit Cards.com here discussed the decrease in revolving balances.  So, there’s a good deal of excitement.  After all, lower credit card balances are a good thing.  Notwithstanding the government’s obsession that we “spend our way out of this,” I believe that people shouldn’t spend money they don’t have. (I also believe the same rules should apply to governments of either ruling party but that’s a whole ‘nother discussion.)

But why are credit card balances lower now than they were previously?

Best I can tell, there are three reasons for the credit card balance decline:

1. People are using their credit cards less. Call it the fear factor, but there’s nothing more influential in increasing your savings rate than seeing a friend or loved one lose their job.
2. People have had their credit limits cut. Some folks would probably continue to use their credit cards as they have in years past but now, quite simply, can’t.   The banks won’t let them.
3. Banks have issued massive write-downs. We’ve read about government bailouts of big financial institutions  because of their bad debts.  Guess who else has been issuing bailouts?  Yup, the banks for certain borrowers.  When you can’t pay and convince the bank you won’t, the bank eliminates the amount you owe.

All three of the aforementioned factors must affect our nation’s average current outstanding credit card balance.  I see a lot written about the impact of the first reason, a little about the second factor, and virtually none about the third component.

An article I was interviewed for earlier this week, Consumer credit card balances fall again in October, Fed says fairly summarizes my position.

What do you think?  Are people really changing their credit card utilization or is that only part of the cause of the balance drop, since many others are spending less on credit cards simply because the banks will no longer allow them spend like they used to?