Credit cards get a bad rap – one that is not entirely deserved. I’ve got this working theory that it has to do with their name – the term ‘credit’ may mean ‘ability to obtain resources based on a future payoff’, but the card is named entirely wrong: If the only purpose of your credit cards is to purchase things on credit you are doing things completely wrong. The true beauty of credit cards is that they are a liquidity tool; credit cards allow you constant access to funding… whenever you need it. So, let’s look at the perfect strategy for turning your credit cards into liquidity cards!
We here at DQYDJ are constantly scouring the internet for gems which will help you with the financial aspect of your life. This post is no different and we even extend the courtesy to your family as well…
A very interesting study out of Texas Tech University asks the question: How is Financial Literacy Affected By Age? The results are very interesting. Even though the paper reports that households with ages over 60 years possess more than half of the wealth in the United States, a decidedly younger crowd, the 45-49 year olds, possess the most financial knowledge. The implications: while we know that there is a decline in physical and cognitive capabilities which comes with aging, we should also note that with those cognitive changes may come curious financial decisions as well.
What, am I crazy? Peyton Manning of the Indianapolis Colts is probably a doubtful start for the rest of the 2011 season, and perhaps has made his last start of his Colts career (The Colts would owe Manning $28 million if they exercised his contract for another year at the end of 2011 – crazy to think about). He is also due to make at a minimum $23.4 million this year – $20 million as a signing bonus for his new contract and $3.4 million in guaranteed salary. Luckily I left myself an out – the problem with painting every sports contract with the “overpaid” brush is there is an army of athletes who will never touch the salaries which make us do a double take. As Frédéric Bastiat wrote in his essay What is Seen and What is Not Seen, “Let us accustom ourselves, then, not to judge things solely by what is seen, but rather by what is not seen.”This article requires a special shout-out to Nelson Smith at Financial Uproar who planted the seed – sorry I waited until the third week of NCAA football to write this!
Substitution and Income Effect: These two terms are very familiar to anybody who has taken an intermediate course in macroeconomics. With the recent articles regarding volunteerism and labor statistics, I thought that it was very timely to write on these two very important concepts.
Let’s start with a thought experiment: if you were to receive a 10% increase in your hourly wage, would you increase, decrease, or maintain your hours worked? Believe it or not, any answer is correct, despite many assumptions regarding the positive slope of labor supply curves. The reason that any answer is correct lies in an understanding of substitution and income effects.
Dollar Cost Averaging (DCA) is touted by some financial planners as the solution to all of investing’s problems. By continuing to invest money at a regular interval, you buy more shares when prices are low and more shares when prices are high. Additionally, dollar cost averaging fits the general schedule of how people normally get paid – every two weeks you get your paycheck, and you also automatically invest in your 401(k), for example.
That’s great… for predictable streams of income. This article will *not* try to convince you to stop your normal recurring investments. However, dollar cost averaging meets its match when introduced to a windfall. When you have extra funds, you shouldn’t tiptoe into the market, you should dive right in with a lump sum investment. Don’t believe me? Let me convince you…