If you’ve done much reading in the personal finance sphere, you have likely encountered some bad advice. Not overly broad generalizations, nor excessively optimistic or pessimistic scenarios designed to support the writer’s point, nor even serious debates on the best course of action (as with many of the great financial debates), but simply bad advice. The kind that, if followed, will leave you poorer and in worse financial shape than you would be otherwise.
Enter Frank Curmudgeon. The writer of the Bad Money Advice blog focuses on identifying and correcting bad advice from other personal finance commentators, ranging from published authors like Suze Orman and Dave Ramsey down to other personal finance bloggers. And he’s well qualified to do it: an unemployed hedge fund manager, he’s had more financial education than ten average PF bloggers combined. And he’s not afraid to tear their arguments apart, either. (With any luck, I’ll be able to avoid being on the wrong end of his analyzes in the future…)
Some of the interesting posts he’s written in the last few weeks:
The Bad Money Advice Financial Literacy Quiz – I have to say, I do love financial knowledge quizzes. Frank has a good one here, covering everything from FDIC insurance to credit card fraud liability. I’m not terribly happy about my score (13 out of 20), but I’m glad to learn some new things (and I am reminded that I need to do plenty of research before I post anything in my blog).
How to Create your own Target Date Fund – A guest post over on Get Rich Slowly which discusses the cons of target date funds and how you can go about creating your own. He raises some good points, some of which I noted earlier today (amazing how these things sync up), about how target date funds tend to be one-size-fits-all and not necessarily appropriate for your particular situation. I think he overstates the possible dishonesty in the funds, though; given the level of disclosure required by the companies, the opportunity for shenanigans is rather low.
Secured and Unsecured Debt – Frank notes the problems with the common wisdom of not taking out a Home Equity Line Of Credit (HELOC) to pay off unsecured debt like credit cards. Doing so means that you can lose your home if you can’t pay back the debt (at least in theory), but Frank shows how this is much less likely than popularly believed. Basically, you are trading higher priority to claim your money if you end up insolvent, in exchange for a lower interest rate; in many cases, such a trade ends up benefiting the debtor.
Are 401(k)s a Bad Idea? – Frank notes the complaints that 60 minutes levels against 401(k)s. The main argument against the plans by 60 Minutes is the recent losses in the stock market show that these plans are not good replacements for defined benefit plans. However, Frank notes that widespread use of 401(k)s isn’t the source of our current problems, and that the older style, defined benefit pension plans had problems of their own (including not being that widely available).
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David Stillwagon
on May 6 2009
The advice about the 401k is particularly good considering the way the market has been moving. As for company pensions a lot of companies simply don’t have them anymore.
Roger
on May 6 2009
David,
Welcome to the blog, and thanks for the comment. You’re quite right, most companies simply aren’t offering pensions anymore. And while 401(k)s do have their pluses, they are definitely at the mercy of the market, for better or for worse.