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The offbeat personal finance blog for responsible people.

Black Coffee: A Little Fun with My Dog and Some Peanut Butter

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It's time to sit back, relax and enjoy a little joe Welcome to another rousing edition of Black Coffee, your off-beat weekly round-up of whats been going on in the world of money and personal finance. Heres what caught my attention over the past week Next time you parents with kids need an idea for a clever birthday party game that kids under age eight - or guys like me - will surely get a kick out of, try this: ask everyone to predict how many times the dog will lick its chops after you give him a big glob of peanut butter. My daughter Nina and I like to do this for fun every once in awhile. I don't know why, but I think watching a dog eat peanut butter is one of the funniest things on earth. The only rule is that you officially stop counting once the dog has gone at least 10 seconds without licking. Today, our Rhodesian Ridgeback, Major, licked his chops 84 times. Meanwhile, Nina and I were laughing for at least 2 minutes. I know. I need help. Blogs I've Been Following This Week Free From Broke - Financial Krav Maga: Personal Finance Self-Defense for the Modern Era. I know what you're thinking. WTF is Krav Maga? Until I read this very clever article I thought Krav Maga was one of Godzilla's over-sized insect foes. Silly me. Control Your Cash - Lower Fees Through Prevarication. Ten bonus points for those of you who don't have to look up the word "prevarication." I didn't! Okay, yes I did. Watson Inc. - Is Extreme Frugality for You? Well, if you ask a Freegan who read Shawn's article, he'd say "extreme" is definitely in the eye of the beholder. Crushed possum roadkill can be mighty tasty when seasoned with condiments raided from the local greedy corporate fast food joint, and accompanied with a little stale bread and out-of-date lima beans (from dented cans, of course) fished out of a grocery store dumpster. It also has to be skillfully prepared, outside an abandoned parking lot lean-to, over a trash can fire started by rubbing together two sticks from a dead chestnut tree, and cooked in a rusty old paint can for a pot. Mmm. When do we eat? I know, right after the lecture on how capitalism makes life unbearably rotten for humans everywhere. Kiplinger - 10 Surprising Ways Your State May Tax You Next. Still not on the list: taxing toilet flushes. Yet. Money Beagle - 5 Ways to Save at the Beach. Aside: I once had a secretary who owned a beagle named Bagel. Debt Consolidation Care - (An interview with some goofy guy named Len Penzo.) Thanks, Sarah! Debt Vigilante - 8 Ways I Cut Costs Down to Have More Fun. Those lovable Freegans might have a problem with this list because the Vigilante didn't mention dumpster diving and eating roadkill for dinner. ...And Here's Some Other Posts You Might Enjoy: Hope to Prosper - Trillion Dollar Public Pension Shortfall. Personal Finance By the Book - New Laws Rock the Debt Settlement World. Budgets Are Sexy - 5 Things to Always Keep In Your Car. Eventual Millionaire - I Must Do the Thing I Think I Cannot Do. Wealth Informatics - Borrowing from 401k for First Time Home Down Payment. Personal Finance Firewall - Have You Experienced What Financial Freedom Tastes Like? Oblivious Investor - Dealing With Investment Confusion. Green Panda Tree House - The Ultimate Way to Manage Your E-Mail. Barbara Friedberg Personal Finance - Need Extra Money? Do Not Do This! Sweating the Big Stuff - 5 Main Money Gobblers. Beating Broke - Balanced Billing: Budget Helper. The Way-Back Machine: Past Posts Of Mine You May Have Missed From August 2009: Personal Finance Decisions: The Good, The Bad, and The Ugly - If the world of personal finance was a spaghetti western, this is what it would look like. Credits and Debits Debit: Approximately one half-million people filed new applications for unemployment benefits last week. That represents a nine-month high for initial claims, and suggests the so-called "summer of recovery" is anything but. Debit: The reason employers aren't hiring is simple - there is just too much economic uncertainty brought about by President Obama's anti-business policies that, some say, is our economic Katrina. Debit: With all this uncertainty, I'm not the only one who expects this country to flounder - or worse - until we reverse the economically destructive liberal policies that this Congress and President Obama are foisting on the United States. But there are some who say "bah!" to that because, they say, the only thing we're really uncertain about is, well, uncertainty. At best, that's a glass-half-full opinion, if you ask me. Credit: I'm normally a glass-half-full guy myself. Unfortunately, that view becomes delusional when the glass is clearly three-quarters empty. Debit: My friends at Political Calculations recently did a couple of very enlightening studies that shed light on President Obama's tax future and spending future based upon his budget plans, where they concluded: "What we find is that even after adjusting for inflation, President Obama intends to permanently increase the federal government's spending by an average of $576.4 billion during the years from 2010 through 2013. We also see that he doesn't plan to stop there, as he would plan to spend even more money in 2014 and 2015, the last year for which he projects spending in his Fiscal Year 2011 budget." Debit: Even worse, and as Political Calculations showed, although the tax burden will rise significantly for everyone, starting in 2011 and beyond, the deficits will just continue to get even bigger. There is no way you can spin that by saying the glass is half-full. Debit: Two big issues contributing to our deficit problems are the absurd pay and benefits enjoyed by public sector employees, which prompted the Freeman's George Leef to observe, "Karl Marx was right - sort of. He was right in saying that society is driven by class warfare, but he got the classes wrong. Its not the case that capitalists exploit workers, but rather that tax consumers exploit taxpayers." Credit: If this country is going to survive in its present form, we must drastically reduce the size of the federal government and its spending. Don't make the mistake of thinking that's Tea Party hyperbole either. We need to elect true fiscal conservatives this November, regardless of their party affiliation. Otherwise, I fear our country will soon be destroyed from within. Credit: Meanwhile, in a bit of positive news, MSNBC reports that some architects and real estate websites have declared that the era of the McMansion is all but over. If true, it's good to see that most people have finally woken up and realized that a 3000 square foot house for a family of four - or less - is not only excessive, but also a potentially unnecessary strain on their pocket book. Debit: Then again, after gasoline jumped to $5 per gallon a couple years ago, I thought the era of the over-sized SUV and monster truck was over too. Oops.   Debit: In other news, the World Health Organization (WHO) called on Friday for the monitoring of a new superbug that is resistant to nearly all antibiotics. This is the same organization that warned us all in 2007 about an H5N1 bird flu pandemic that never came, resulting in millions of wasted dollars for hastily-created vaccines that were never needed. Through 2009, there were only 263 deaths from 447 total cases worldwide. Well, they were close. Credit: This just in: the World Health Organization just sent out another press release today predicting that, in 2011, the Washington Generals will wrest the NBA title from the Los Angeles Lakers and Billy Bob Thornton will be voted People Magazine's Sexiest Man Alive! By the Numbers Some fun statistics, courtesy of Wikipedia, on the Washington Generals and their Achilles' heel, the world famous Harlem Globetrotters. 5 The number of alternate team names for the Generals. To give the appearance that the Globetrotters play more than one team, the Generals have also donned uniforms representing the Boston Shamrocks, the New Jersey Reds, the Baltimore Rockets, the New York Nationals, and the Atlantic City Sea Gulls. 6 Between 1953 and 1995, the number of times the Generals have beaten the Harlem Globetrotters. 13,000+ The number of times the Globetrotters have beaten the Generals. 2,499 The Globetrotters' longest winning streak. The streak came to an end on January 5, 1971 when the Generals (playing as the New Jersey Reds) won in overtime 100-99. It was the Globetrotters' only loss between 1962 and 1995. According to Wikipedia, Generals' team owner Louis "Red" Klotz said that after the game the fans, "Looked at us like we killed Santa Claus."       Other Useless News Here are the Top 5 Referring sites so far during the month of August (excluding search engines and aggregators). 1. MSN: Smart Spending 2. Time Magazine: It's Your Money 3. Wisebread 4. Cheap Healthy Good 5. Mint Thanks to everyone who has linked to me over the past month! I truly appreciate it. I'll be highlighting the Top 25 referring sites at the end of the month. Oh yes, and here's another friendly reminder for ya: if you happen to enjoy what you're reading - or not - please make sure you follow me on Twitter. And, if you'll be so kind, don't forget to subscribe to my RSS feed too! :-) Carnival News This week I had articles featured at the following carnivals: The Carnival of Personal Finance @ Live Real Now ...

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Should Low-Income Drivers Receive Subsidies to Use Toll Express Lanes?

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Every day on my way home from work I zip by tens of thousands of people behind the wheels of cars stuck in hopelessly gridlocked traffic because they didn't want to pay the toll (usually between $2 and $10, depending on the direction and time of day) for the open express lanes. For me, the money spent every day for the right to avoid 10 miles of traffic hell is money well-spent. I currently spend about $1000 each year for the privilege of driving unimpeded and, truth be told, I would gladly spend double that if I had to. Those express toll lanes are a beautiful thing - without them I would not be able to endure my daily 38 mile commute and I would most likely be forced to leave my employer of many years to take a much lower paying job closer to home. Not everybody thinks they are a good deal. In fact, a lot of people argue that paid toll lanes are inherently unfair to low-income drivers. They wonder why those who make less money should have to endure a hellish commute while others who can afford to pay for it get to whiz by in relative comfort. A joint study conducted in 2008 by UCLA and USC actually seems to disprove that line of thought. According to the study, pay-as-you-go transportation options like toll express lanes are actually fairer to all income levels than paying for road improvements such as additional express lanes through sales taxes alone. While the study found that toll express lanes are disproportionately used by middle- and upper-middle-income households, it also found that those same drivers would have ended up paying less each year if the lanes would have been funded via their sales taxes. What troubles me is the study authors' suggestion that policymakers worried about low-income peak-period commuters could provide discounted subsidy pricing based on income levels, or provide travel credits to lower-income commuters. Of course, such a suggestion poses another problem. Since the only way to keep the express lanes flowing smoothly is to raise the prices during times of peak use, the implementation of subsidies would result in other drivers being priced out of the lanes in favor of the subsidized lower-income drivers. How fair is that? As usual, when it comes to subsidies and hand-outs there is no free lunch. Somebody is always going to have to pay. ...

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The (Dead)Beat Generation

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Should you walk away from your mortgage just because your home depreciated? So you refinanced. Or bought too much house. You divided the mortgage payments by your income, and decided you could swing something a few percentage points higher than the recommended 2533 because the market was rising and your house would make you rich just by existing. You relied on speculation as an investment strategy (not even your own speculation, but other peoples.) But your house got cheaper, maybe cheaper than what you bought it for. Thats called losing money on an investment, which happens all the time, but people think it oughtnt when your bedroom and kitchen are inside the investment. The market might bounce back. If youre 7 years in, lots can happen in the remaining 23 on a 30-year mortgage. When you lose money on a stock, your (invisible) bank account gets wiped out. Owe more than your vehicle is worth, and it might get repoed. But stop making payments on a house, and theres a letter from the constable on the door, maybe some yellow tape involved hard to keep that quiet from the neighbors. Also, people getting forcibly removed from their house (its yours and not the banks only after you pay the entire mortgage) make for striking photo and political opportunities. After all, bankers are evil. Meanwhile, its the working stiffs just trying to make ends meet who get raked over the coals. (Wow, a sentence composed entirely of idioms. Mike Lupica approves.) Some people who make enough to cover the mortgage dump the house anyway the strategic default. They assume investment values only move in one direction. According to Experian, that includes 20% of defaulters. This is hiding behind the law. Stop making payments, and its not like youll be evicted that week. It takes months, even years. The idea here is to take the mortgage payments and put them toward, say, your credit card balance, figuring the lender will gladly renegotiate a contract you signed in order to get some sort of return on its investment. Some borrowers think this is fine because if the lender kicks you out, itll be tough for them to sell the house to someone else in a down market anyway. The lender at least wants the house to stay lived in. This is nonsense. Strategic defaults hurt everyone. A strategic default does to your credit score what O.J. did to Nicole. Youll never be able to borrow either a) again, or b) until Congress and the White House decide that so many people need to improve their credit score that it just wouldnt be nice to let something as insidious as that have such power over their lives. Whats the solution? Well, no politician of either party wants the other accusing them of standing by while old ladies and cripples are being kicked out of their houses. The government would then essentially renegotiate mortgage contracts, setting caps on future ones and insisting the lenders take less. Under this type of forced renegotiation, the borrowers dont even have to sack up and face the lenders themselves. Besides, neighbors, professors, and the blonde lady on TV say defaulting is fine. And for PR reasons, lenders are hunting down deficient borrowers about as aggressively as the federal government goes after illegal immigrants. Say you walk away from your mortgage, mail your keys to your lender (this is how its done), then rent somewhere. Your (old) neighbor follows, then a third. No matter how swank a neighborhood you deserted, the lawns turn brown and the pools green because no ones living in the houses. Which reduces the value of the remaining houses. Now the people who stayed behind and havent (yet) defaulted watch their homes values decline. Which means theyll likely owe more than their houses are worth, making it more likely that those folks will default. Continue like this, and you end up withDetroit. When you declare bankruptcy, you can renegotiate to protect yourself from creditors. But strategically defaulting is the opposite you keep all your assets except the house and mortgage. So what to do? Four choices: 1. Man up, economize and make your payments. Youre obligated to the lender, yourself (to preserve your credit), any kids of yours (unless you dont think you need to set an example) and society. If you steal from your lender, it doesnt directly affect the rest of us, but it makes civilization incrementally more difficult to live inthe broken window theory. You dont like that answer? Its a house, for crying out loud. You need somewhere to live. No matter how much value it loses, its still better than renting and never building a dime of equity. Stop assuming that because your $100,000 house lost 10% of its value last year, itll lose a similar amount next year and by 2021 will be worth -$10,000. 2. Short sale. If you know you cant make your payments, and youve exhausted every possible way of earning or otherwise securing money, call the lender and come clean AS SOON AS POSSIBLE. Theyll sell the house at a loss, just to get you out of there and collect their money. Youll still be on the hook until the bank resells the house, but that wont last forever and at least you can stop throwing good money after bad. 3. Ask for a loan modification. Its begging, but your pride already left a while ago. 4. The Deed in Lieu of Foreclosure. Tell the lender, Look, I cant make the payments. Lets not short sell, Ill just give you the damn thing to get out of this debt. This hurts your credit rating the least, and tells the lender not to worry about you being one of those evictees who pours concrete in the toilets and makes off with the copper wire. And next time, get a vanilla 30-year fixed-rate mortgage. About the Author Greg McFarlane lives in Las Vegas, winters in Maui, travels the globe and hates working for other people. He recently wrote Control Your Cash: Making Money Make Sense, a financial primer for people in their 20s and 30s who know nothing about money. You can buy the book here and reach Greg at greg@ControlYourCash.com. ...

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It’s Time Unemployed People Start Working For Free

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Okay, not all unemployed people, but definitely some of them. Let me explain. Last month the U.S. House of Representatives passed another 13-week extension of unemployment benefits on top of the current California maximum of 79 weeks. And just last week, Senate Majority Leader Harry Reid (D‐Nevada) introduced a proposal to extend unemployment insurance by up to 14 additional weeks for jobless workers in all 50 states. The proposal would also extend benefits for an extra 6 weeks in high unemployment states. Assuming these provisions survive and eventually get signed into law by President Obama, it means qualifying individuals in California will be eligible to receive unemployment benefits for up to 99 weeks. (UPDATE: In April 2010, President Obama signed the bill into law after the Democratic majority in Congress passed the legislation on what was essentially a party-line vote in both the House 289-112 and Senate 59-38.) The cost of this extension is estimated to be on the order of $70 billion. Of course, U.S. lawmakers have not figured out whether or how to pay for that, so they'll just cover it in a manner that requires the least amount of political courage. That is, they'll just print more money - damn the torpedoes and thank you very much. That being said, for now let's forget about the financial impacts and just focus on the magnitude of time, shall we? Ninety-nine weeks. If we're going to talk about the length of time that certain people should be getting paid unemployment benefits, I have to insist on raising a bit of a stink. Come on, that's almost two whole years. Hey, I have nothing against the number 99 per se. Ninety-nine is a terrific number if you're the greatest hockey player who ever lived. Or a secret agent. But 99 is a ridiculous number when it comes to the number of weeks the government allots some people to find a job while enjoying the luxury of a safety net. To be more specific, I have no doubt this is a big reason there are now a growing number of people who characterize themselves as being happily "funemployed." According to this expose by the Los Angeles Times, the funemployed are "usually single, in their 20s and 30s and find that life without work agrees with them." This story by CBS News asks, "If the economy is so dismal, why are victims of the recession smiling?" I'll tell you why: Because a lot of people are collecting $475 per week in California or $900 per week in Massachusetts for doing absolutely nothing! Most of those smiling people are single, under 35 and either have a low mortgage payment or are renting an apartment. One of my coworkers was telling me about a friend of his who fits that profile who absolutely refuses to look for a job until his jobless benefits run out. He's having a blast and the Unemployment Office isn't paying enough attention to notice that he isn't really looking for work anyway. And who can blame the guy? Why work for $10 bucks an hour stacking boxes when you earn $11.88 per hour sitting at the beach or skiing at Mammoth Mountain? If the government is going to continue to extend unemployment benefits, then the state unemployment offices need to do a better job policing those who are receiving them. I say that before anybody receives a single cent of extended unemployment benefits resulting from the Federal Emergency Unemployment Compensation program, they should have to prove they are making a good-faith effort at finding a job. After 52 weeks, and until they can show otherwise, people that have failed to meet such a modest requirement should be required to do community service for 20 hours per week in order to continue to receive further unemployment benefits. After 72 weeks, the community service requirement for failing to demonstrate a good-faith effort to find a job should increase to 40 hours per week. No community service, no check. If you want to stay "funemployed," be my guest, Skippy - just don't expect the taxpayers to subsidize you. Hey! If you liked this article, please be sure to subscribe to my RSS feed! ...

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Celebrating My 100th Post!

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You know, they say a milestone is anything that gives you a personal sense of accomplishment and helps you move forward. Amazingly enough, after just over six months I reached an important blogging milestone of my own today: post number 100! ...

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