Weakonomi¢s » personal finance

Six Things The Bachelorette Can Teach Us About Money

The Weakonomist — Tue, 15 May 2012 14:15:27 +0000

Being married to the fairer sex, one often finds themselves watching television shows that don’t normally show up on their radar in order to spend quality time with said partner. Funny, as when Star Wars comes on I find myself quickly alone in the room. Marriage is about sacrifices though and so last night I sat through 90 minutes of what I can only imagine the CIA refers to as water-boarding.

But that doesn’t mean I can’t exploit my discomfort to find some pop-culture references that can be tied into something for this blog. Usually, I prefer to do these lists with things I actually like (see below), but I can make an exception.

So what can a reality show that by its very nature defies the statistics behind matchmaking teach us about money? Just see:

If something is profitable, make more: And it doesn’t have to be good, it just has to make money. This is really what The Bachelor and The Bachelorette have always been about. Television and movie producers will happily take concept and run it into the ground. Not only have the original shows had many seasons, but offshoots of the concept like Joe Schmo, Joe Millionaire, and Flavor of Love and more have also had varying degrees of success. It doesn’t have to be good, it doesn’t even have to be a success based on the fake premise of one person finding love among dozens of members of the opposite sex. It just needs to be entertaining. This model isn’t limited to TV. We see this in toys, video games, and just about any form of entertainment because product and content executives really have no idea what will work until it’s in front of the people.

Nothing is safe, there are no guarantees: On The Bachelorette one beautiful woman is given 25 guys that will try to court her. Through a long and drawn out process of elimination she will get the group down to just one and then that one must choose to be with her or not. Many times the show ends with the two engaged or at least caught up in a fairy-tale style romance. The reality is that the couples don’t normally last. This is easily evidenced by the fact the current bachelorette won on the last bachelor and then they broke up. The same thing of course applies to our finances. No investment is perfectly safe. Any investment, even the cash in your bank account could go away. Most people assume their money is always safe because that’s how it’s pitched by bankers and investment advisors. Investments and cash are much safer than a relationship formed on a reality show, but by its very nature money is never safe. Even under your mattress.

There’s always enough idiots to fall for a scam: The financial crisis exposed Bernie Madoff’s ponzi scheme and since then government agencies have cracked down on dozens of other investment scams. But there will always be enough morons to fall for the next one. Just like there will always be enough potato-brained viewers to buy into the premise of The Bachelorette. Keep in mind, the premise is that 25 guys would all magically like the same girl and compete for her love. The only place that’s reality is China. But like an investment scam, to get viewers the show sells the idea that something that is too good to be true is actually true.

Stick with the boring options: Advisors and bankers commonly convince their clients to put their money in products they don’t understand. But they look interesting and have all the bells and whistles. On the show the best person for the man or woman is likely the most boring contestant. The one that doesn’t cause trouble and stays out of the way of the other suitors. The one that doesn’t do cheesy things to get attention of viewers or the opposite sex they’re courting. But those people aren’t entertaining, and don’t last long on the show. It was clear in the premier who the producers of the show like, and they will somehow last much longer than the view would expect because they’re fun to watch. Stick with boring investments that are easy to understand, they’re the only ones that will still be around when you’re old and grey.

Past performance is not an indication of future returns: We see this all the time on the documentation you receive about mutual funds. They must disclose this in the marketing materials because those materials contain nothing but carefully framed charts showing their past performance. It’s good they must disclose this. On The Bachelor this is not disclosed, but it is implied in the premise. The show’s track record for successful relationships is actually terrible. The simple fact that they bring back someone that was matched in a prior season is enough. This year the beauty has a kid too. I’m sure that kind of baggage will certainly get the guy to stick around after he wins.

People will do what their incentives tell them to do: On the show, every person has an incentive to win. Winning gets you celebrity status for at least a short time. If you can “win” you can parlay that into a career in Hollywood regardless of your relationship status. The winning couple can make quite a bit of money in endorsements and other celebrity related goodies. So is this really about love? Love of money perhaps. Pretending to love a pretty girl long enough to get there is a small price to pay. This is exactly the same problem we have everywhere in the world: politics, business, school, sports. People have various incentives and they may not be perfectly aligned with the intent of their position. This is why we are constantly disappointed but really shouldn’t be surprised when these people do something bad that lines their pockets.

There is much to learn in the world of television. Look all around you and try to learn lessons from other peoples mistakes.

Other “Six Things Can Teach Us About Money” Posts:
Star Wars
The Ferengi
James Bond
World Cup
March Madness

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Does Being Rich Hurt Romney’s Ability To Be A Good President?

The Weakonomist — Tue, 24 Apr 2012 15:49:26 +0000

If Mitt Romney were to win the presidential election in November he would be one of the richest presidents in history. Unlike many of these presidents, Romney is mostly self-made. Sure he grew up in a well-to-do home and his dad had money, but by the time he inherited anything Mitt Romney was already loaded. He said he gave his inheritance away. Romney never had to worry about where his next meal was coming from. He’s never had to think about finding another job to pay the bills. His wife raised their children and didn’t have to work. So with such a privileged upbringing will Romney really be able to run the country? He doesn’t know what it’s like out there does he?

That’s bull$#!+ and any pundit that tries to throw Romney’s wealth around as a hindrance to his ability to serve the office is just playing games. No one judged John Kerry’s ability in this context. He’s a member of the Forbes family and was sent to the most elite schools as a child. He also married into wealth. Al Gore went to a high school so expensive it rivals many private universities which then led to Harvard. Hillary Clinton had a relatively comfortable upbringing too. And you can look at the first link above to see how rich some of our presidents were.

The only reason this is up for discussion is the state of our economy today. So can someone that washes his silver spoons with other silver spoons run a country struggling to afford plastic spoons? It’s hardly even a question. Of course he can.

Romney’s specialty is what some in the private sector would call general management. He’s very good at jumping into a situation, quickly getting his bearings straight, and making good decisions. He doesn’t have to be an expert on the economy, which even today is only a small part of the president’s job. But he can look at the facts and make good decisions from them. One can question his career from a political perspective, but Romney is clearly able to clean up messes, lead a team, negotiate, make decisions, and execute them. These are the unappreciated abilities a president must have. The media seems only concerned about whether or not the president, whoever it is, can influence from the bully pulpit and kiss babies. That has nothing to do with the day to day running of the country. The skills that get you elected are not the same ones that make you a good president.

Empathy and Sympathy
Is it critical for the president to be able to empathize with someone struggling economically? It’s commonly misstated that Republicans don’t have sympathy or empathy for the poor. This is not true. They have different visions for how to deal with it than Democrats. But is it fair to say a Kennedy is any more connected to the poor than a Romney? An oncologist has no better idea on how to treat cancer than someone with a PhD in cancer biology locked in a lab. But they may look at the problem differently.

The real question is whether or not being rich affects Romney’s ability to connect with voters enough to get elected. Obama can connect better but Romney only needs to connect enough. And none of this matters to whether or not he’ll be a good president. Question his politics, or his vision for the future. But being rich just really doesn’t matter.

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Don’t Buy In Bulk

The Weakonomist — Wed, 11 Apr 2012 14:41:05 +0000

It is not every day one is inspired by the milk they’re pouring into their homemade iced coffee, but when the idea strikes, it strikes.

As my tasty concoction came together I reached in the refrigerator for the final and most important ingredient. Not only does milk give coffee a creamy texture, it’s also fun to watch it mix in through a clear cup. But, there wasn’t much milk left. There wasn’t another jug either. The Sheconomist wouldn’t make it to the store for another 36 hours and that’s two breakfasts away. I could have had cereal for breakfast but due to the high dairy need of such a meal I passed and went for oatmeal with my coffee. Oatmeal uses a lot less milk than cereal because water is usually the primary moist ingredient. The result lead to my using considerably less milk than if there had been another gallon in the fridge.

Think of all the things you have to purchase regularly because you run out of it. For me it’s milk and other perishable foods. But there’s also toiletries, makeup (for some), and fuel for our cars. In every instance as we start to run low and without backup, we start conserving. We use considerable less when there’s no extra in site.

Perhaps the best example is toilet paper. We’ve all been there. You sit down on the toilet, let biology and physics do their thing, look around, and there’s not enough toilet paper to get the job done in normal circumstances. But somehow you make it work. Without doing a study it’s reasonable to guess we can easily get by with a third of the TP we’d use if there was another roll nearby.

Buying in bulk is difficult in many areas of life. We don’t buy suits, cars, fuel, iPads, or vacations in bulk. But we do buy lots of things in bulk. We’re told it’s economical because we’re paying less per unit. There’s a three pound bag of dried apricots in my pantry that would agree with us.

But it’s only economical in the traditional economics sense. We would assume it’s much more efficient to buy in bulk, not only saving on cost per unit, but also on trips to make purchases. But that assumes we consume at the same rate regardless of what we have on hand, and that as soon as we run out, we would go out and purchase more.

This is not how we act when we run low on resources. We cut our consumption, especially if the resource is expensive to replace. We see this every time the price of gas goes up but we don’t equate it to other areas of life. No one thinks “hey, I’d cut my toilet paper costs by 30% if I tricked myself into always thinking I was running out”.

But we actually could save that much or more. Buying in bulk is one of those American things we’ve all become accustomed to but may not be the best for us.

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Ten Things Worth Spending Money On

The Weakonomist — Thu, 29 Mar 2012 14:41:40 +0000

One of the key tenants of business is putting down money today that will yield you even more value tomorrow. The best and brightest of business understand you have to spend money to make money. Cutting corners can at the least be a distraction, and at worst derail an entire investment. It’s easy to get lost in our day to day expenses and want to save money on everything we buy.

Cheap people like me end up reluctant to spend money on much of anything. This could seem smart today and really dumb tomorrow. There are many things in life worth paying extra money for. I made this list not just for the benefit of the reader, but for myself as well:

Food: This isn’t food at restaurants, which never represent actual value. But any fresh or healthy food is worth every dollar you put into it and more. It’s an investment in yourself and to carry the painful analogy forward it pays dividends. It costs more than unhealthy food and will likely be that way for the conceivable future, but it’s worth the cost.

Education at a public school: There’s a lot of talk out there about an education bubble. People are borrowing more for college than ever before and jobs are harder to come by than they used to. But it’s even harder to find someone who would say that college is still a bad idea. One just needs to be smart about it. Find a school that’s a good value, and know what you want to get out of it.

Footwear: This is especially important for larger folks or people with weird feet. Quality footwear isn’t just about comfort, but also durability. This costs money, but it’s money well spent. If you can get shoes that fit your feet perfectly they can do everything from giving you energy to making you happier. It took me a long time to learn I had wide feet, and even longer to learn I need to spend more than $60 on dress shoes.

Work clothes: If you’re settled into a career and know you’re going to be there for a while, quality clothes are worth the extra money. You don’t want anything trendy, just a few quality garments that can be re-worn and will last for years. A quality pair of pants costing $100 will last more than twice as long and look better than a pair costing $50. This doesn’t just apply to white collar work, the key in every work outfit is finding what quality really means in your world.

Home improvement: Sweat equity is not dead, but really what we’re talking about it peace of mind. When you’re doing work on your house, nothing is more valuable than having it done right the first time. There’s something to be said about experimenting and learning to do stuff yourself, that’s what the back room and guest bathroom are for. Where it matters, get it done right the first time. Spend the extra money so you don’t have to keep thinking about the project.

Vehicle maintenance: Just like home improvements, car maintenance is worth the cost. One of the most common maintenance items drivers put off are replacing brake pads. If you wait too long the brakes will damage the rotors. A $200 stop becomes a $1200 one. Car maintenance really pays for itself when the owner is informed. You don’t need to know how to change your oil, but you need to know what’s going on, why something needs to be done, and have a general idea of how much it costs. What you’re paying for most here is peace of mind. Here’s a picture explaining brakes if you need it.

Insurance: Speaking of peace of mind, insurance is synonymous with it. The advice here is always buy as much insurance as you can afford. With the insurances requiring deductibles, go high and just keep tons of cash to keep the premiums down.

Family: It’s hard to explain exactly what anyone would mean by saying family is worth the money, but they are. It means something different to everyone, but it’s also true for everyone.

Networking: Go out with your co-workers. Invite people out for coffee. A few bucks a week on drinks will do a lot more for your long term economic prosperity than paying off debt a month earlier than you thought. That doesn’t mean you shouldn’t rush to pay off debt, but make room in the budget for networking expenses.

Lobbying: Not everyone can afford to lobby, but let’s be honest it’s one of the best things you can spend your money on. The return on investment for lobbying is huge.

Clearly not everything is worth spending extra money on. Some easy ones are cars, watches, and financial advice. They’re all filled with extras and don’t pay for themselves. When you’re considering what to spend a little extra on, it should be on things that give you peace of mind and can be reasonably certain offer a good return.

Image (peaches): North Charleston

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Weak Links: Less Roads, Less Traffic?

weakonom — Fri, 23 Mar 2012 14:21:09 +0000

Why I gave up my six-figure salary and quit Bay Street: Bay Street is in Toronto and is Canada’s version of Wall Street. You can’t expect much a difference between the two countries, but this author provides a well written explanation of his time in finance and why he, and others, left.

Remove the highways, fix the traffic problem: One of the most interesting reads in 2012 so far. John Norquist championed the destruction of some highways in Milwaukee while the mayor and actually saw an improvement in traffic. New Urbanism is the name of the idea and it calls for better city planning that reduces congestion. The best way to sum it up is that by proper planning of roads, people won’t have an incentive to live far out of town and commute in for things they need. If you work in the city, live in the city. We are likely to see this in some form or another in increasingly greater amounts all over the country as the cost of commuting continues to rise. Most traffic issues are “solved” by adding supply to support the increased demand. What would happy to demand if supply was taken away? I’d like to see how they would do DC though.

Castro might have known Kennedy was going to get shot: Conspiracy theorists rejoice. A great conspiracy about Fidel Castro knowing JFK was going to get shot. The only downside is if this story is true, most of the cover-up conspiracies likely wouldn’t be.

Generally speaking, everything makes you fat: Extensive article showing that calories alone can’t account for the reason everyone is so fat. It’s the quality of what is put into our body. The whole article reads like an endorsement for organic food, and it will give the overweight among us an excuse for not jogging tomorrow. Mommy’s eating when she was pregnant made me fat.

Men, just thinking about talking to women makes you dumber: This would explain while I fumble through my words every time I need to talk to my wife about something. Points scored for The Weakonomist (if The Sheconomist is reading)!

Number cruncher’s life in charts: I didn’t build this, but I feel a good connection to the charts. Especially aligning the supposed same data from different sources.

Are you a ginger? You can take the pain: Red heads feel less pain than everyone else. Are they more genetically advanced? Will they rule the world? Thank a ginger today.

Divorce: the downside to living longer: Til death do us part used to mean 60 years. Now 90 isn’t crazy. The rate of divorce of people over 50 has doubled over the last 20 years. When the kids are gone, it usually meant you were about to die. Now it means you have to decide if you want to spend another 50 years with the other parent. Many are thinking, not. Via @pkedrosky

More People Interested in Part-Time Retirement: Count me as one of them. Weakonomics started because at the time I was bored working just 40 hours a week. I work more now, but I can’t imagine full blown retirement. Not yet at least.

Tricks retailers use to carve out extra profits: Candy bars have been shrinking, but the prices for them haven’t. That’s good for bellies, and retailers. This is just one of a number of ways retailers are playing games with price tags these days.

Once again, I entered a post into the Carnival of Personal Finance. Once again, I was editor’s choice. Click through to see what it was.

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How Timeshare Companies Make Money

The Weakonomist — Mon, 19 Mar 2012 13:15:20 +0000

Either online, in the mail, or direct phone call, almost everyone has at some point seen an ad for timeshares. They usually look like great deals on free or very cheap vacations. The fine print specifies one must attend a sales session. Most of us are aware of timeshares but have heard bits and nuggets from the news or friends of friends about how bad they are. But even if you’re staying away from the business you should still know how it works.

What is a Timeshare?
Timeshares are fractional ownership of property. They’re common in most vacation destinations and Florida is likely the king. Buyers of timeshare literally own part of a property and the percentage they purchase gives them the right to that property for x% of the year. So if you buy 1/26 of a condo timeshare you get 2 weeks a year. Owners can choose to use those weeks or rent them out just like any vacation property. There are two basic types of timeshares, deeded and right to use. Deeded timeshares give you actual fractional ownership of the property (including the taxes). Right to use timeshares give you access to the property but are technically long term leases and the contract will expire at some point.

Timeshare developers tend to build large resorts in vacation destinations and instead of operating as a hotel or selling the condos to individual purchasers, they sell fractional ownership to lots of buyers. This is a much larger market with people that have lower incomes.

So timeshare companies are real estate developers and they make money selling property? Got it.

Not quite.

How are you going to pay for your two weeks a year?
The typical buyer of a timeshare isn’t going to have the cash to buy a share outright. The few financial institutions that would lend you the money aren’t going to treat it like a lower risk mortgage since they don’t want to repossess a week of vacation that’s difficult to sell. Timeshare company Westgate provides in house financing (how convenient!) and charges interest rates more commonly seen on credit cards. They provide the financing by actually borrowing from banks at rates more commonly seen on mortgages. The spread between the rate they pay and the rate they charge customers accounts for more than half of that timeshare company’s income.

Timeshare developers will also serve as the property managers. And a beach front condo facing an oncoming hurricane is going to have some maintenance fees. The developer will set those fees and you have to pay them. So timeshare companies make money in three ways: the actual sale of property (or contract), spreads on the mortgage to pay for the property, and maintenance fees.

Not a great deal then?
Pretty much. Timeshares are usually sold as impulse buys. The company will woo customers with free trips to visit a resort in exchange for a tour and sales pitch. Buyers will likely leave with their paperwork signed.

Getting rid of timeshares can be difficult as well. There is a secondary market for them but like buying a new car you aren’t going to get your money back. Wikipedia has an uncited number saying 50% of the original price is just marketing costs and other fees. This does mean that buyers on the secondary market are more likely to get a good deal than buying straight from the developer. However this is likely a lesson most timeshare buyers have to learn the hard way. Timeshares can even sell for $1 so people can get out of paying for the maintenance fees and taxes (the loss may also be a write-off), but the buyer should be wary of how much those fees and taxes are.

Summing it up
A family that makes $75,000 is by no means struggling, but they aren’t really the types to be considering a lot of luxury purchases. Like most luxuries, timeshares aren’t an investment. They don’t really go up in value. But the targeted timeshare buyer is unlikely to be a sophisticated shopper considering the interest rates they end up paying and impulse purchase nature of the business.

Surely though, there are people that enjoy their timeshares and find good value in them. If you’re the type of person considering a timeshare, do your homework and meet with more than one company to look at options. The advice of this author is to stay clear but if you must have one make sure you pay cash and be confident you are getting a good deal by comparing prices with competitors. You can read more about the business and a guy who has risen and fallen in the industry check out the Businessweek article below.

Read: Versailles, the Would-Be Biggest House in America

Image: GGtimeshares

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Less Carnivorous Than Before

The Weakonomist — Fri, 09 Mar 2012 15:56:34 +0000

Americans love their meat. Along with countries like Australia and Spain we consume the most meat per person in the world. Before the recession hit we were eating almost 190 pounds of meat per person. That’s more than half a pound of meat per day. Today is Friday and the last time I had meat was Sunday. That was about 1/4 pound of chicken. Sooooo someone is picking up my slack.

We’re a big meat eating culture for a number of reasons. For one, meat tastes really good. But meat is also expensive compared to other foods and Americans are still the richest in the world; meaning we can afford it. We also grow most of our meat in the US leaving no need to import. And the government has long subsidized (directly and indirectly) the meat industry.

But then the recession hit. Not only do we have less money than before, but the price of meat has gone up. The result is a drop in meat consumption per capita of about 12%. There’s never been such a precipitous drop before. The expectation is that our meat consumption will not pick up again for some time. And that’s coming from a convergence of a number of factors.

For one, Americans are choosing to eat less meat for health reasons. Not just because we’re as fat as the pigs we’re eating. But awareness about growth hormones and humane treatment has made shoppers more sensitive to the meats they choose. Some are buying less meat, but of a higher quality. Some are even starting to learn about how harmful livestock growth can be on the environment compared to other food sources.

Another reason is price. Meat prices have increased and they aren’t likely to come down. The cost to produce meat has gone up. The feed needed is more expensive to grow, and the land these animals need takes up a lot of space. With a growing world population, farmers are shifting their focus to producing the most food per acre. That growing world population is also coming out of the poverty line. And they want meat too. Global demand for meat is likely to increase for a while.

This is all fine, as it’s unlikely many have noticed their decreased consumption. Years ago I gave up meat for Lent and had no trouble surviving. Since then my meat consumption has dropped considerably (especially meat from mammals). My diet is supplemented by dairy, whole grains, and legumes (peanuts, kidney beans, and black beans). And chocolate.

Will this trend help Americans get healthier? I have my doubts. It is unlikely everyone is switching from meat to tofu or humus. One of the problems in the US is healthier food costing considerably more than less healthy food. This is true in the grocery store and elementary school cafeteria.

Graph: Daily Livestock Report

Image: toolmantim

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Stuff Priced In Gold: Fun But Pointless

The Weakonomist — Tue, 06 Mar 2012 15:43:54 +0000

Since the government started printing money like Bounty does paper towels this country has had a renewed obsession with gold. I’ve tried to tackle the subject many times before but so far the price of gold just continues to find new highs. Proponents of gold have many arguments in support of their precious metal, and detractors have theirs as well. That is not the point of this post.

But one such argument for gold is its relative price stability when converted into other goods. For example, the cost of tuition at Yale has most certainly gone up since 1900. That is, in dollars. But in grams of gold the cost has been flat all this time. Coffee has gotten cheaper in the last few decades and so has gas. Fun charts pop up regularly that show various products priced in gold, but they always exclude or play down one thing: wages priced in gold. Wages priced in gold have gone down. In other words while the cost of tuition at Yale in gold is the same today, you would get paid less gold for an hour of work.

In 1970, an hour of work yielded you 3 grams of gold. Today, it would give you less than half. So sorry, tuition at Yale is still more expensive today, no matter how you price it.

The only way to really price something is to take all the money out of it. How much does an hour of work get you in various things? I don’t have the time to price labor into Yale tuition, but I did put together a few charts*:

The chart above shows how much of the S&P 500 index you could buy with an hour of work. As the value of the index increases, your work buys less and less of it. Or, if the value of your labor decreases, you can’t afford as much index.

Above now you’ll see how much house an hour of work gets you. Thanks to the popped housing bubble an hour of work buys a lot more house than it used to.

This chart is showing how much healthcare an hour of work gets you. We probably don’t need to say much more.

Finally, this last chart above probably provides the best view of something priced in wages. In the late 1990s an hour of work would buy you a full tank of gas in a small car. Today, an hour of work only buys about 6 gallons of gas.

I would argue that these charts are much more relevant. The only way the priced in gold chart work is if you owned the gold back then, implying you had money “back in the day”. Most people didn’t, but they had a strong back and a sharp mind. That’s why priced in labor is the only thing that matters.

*Note: the first three charts are priced against an index. Those are not percentages.

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Finally An Explanation For Trusts

The Weakonomist — Fri, 02 Mar 2012 16:06:35 +0000

Since I first started learning about personal finance there have been some areas where I’ve struggled to develop a full understanding. Most of them are centered around insurance and taxes. I’m still not very good with insurance, but I’m getting better with the tax stuff.

One area of taxing and wealth management that has always been confusing has been the matter of trusts. You’ve heard of trust funds and trust babies and that helps many people understand basically that trusts are types of accounts for wealthy people.

But the wealth management business is full of needlessly complicated banking, insurance, and investment products. So were trusts needlessly complicated accounts for rich people too?

The answer is yes, but also no. The current system of trusts is way too complicated, but I got some insight from someone in the business recently that made it clear. There are only two reasons for a trust:

Reason 1: You’ve got a lot of money and you want to be very specific about who gets what (and when). It’s not just money, but assets, ownership of private companies, real estate, you name it. And no one can manage it like you can so if you die you want very explicit instructions for how its handled. You put those assets in a trust.

The best example is between parents and kids. Say the parents are wealthy and worry they might die before the kids grow up. Splitting up the money into trusts not only allocates it ahead of time, but the trust can also stipulate when the children get the money. Maybe it’s a lump some at 18, or trickles out over time to support life stages. When you think of a trust fund baby, this is what it is. Another example might be a wealthy husband making a trust for his second wife independent of what his children get when he dies. And it’s set up to give her $10,000 a month until its depleted or she dies at which time the balance is perhaps donated to a charity.

Reason 2: Taxes. That’s it. Just taxes. Putting money and assets into trusts avoids the estate tax. Not every trust works this way, and it may not always work. But a trust banker worth even half their pay can take your $20 million and make sure the government doesn’t get $5.2 million of that when you die and it goes to your kids. The estate tax is much more generous to the wealthy today than it has ever been, giving the wealthy less need to put all their money in trusts. SmartMoney has a fun calculator to see how much they take. To keep things simple just use the cash and taxable investments box.

That’s really the only reason for a trust. Either you want to be explicit about what happens to your stuff when you die, or you want to keep the government from getting their hands on it. There are other reasons and an estate planner can share many, but they wouldn’t bother unless the benefits were traced back to one of these things.

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Weak Links: How Doctors Die

The Weakonomist — Mon, 27 Feb 2012 15:24:49 +0000

In the blogosphere there are tons of link roundups out there. But there’s only one that irregularly and is handpicked by me. Enjoy the best of the web from the last couple of months:

Doctors die differently: This was perhaps one of the most thought-provoking articles I’ve read in the last year. A significant portion of health care spending is geared towards prolonging life for someone on the decline. In many cases a patient’s quality of life suffers greatly as a result. Think of someone undergoing chemotherapy and still succumbing to cancer. It seems many doctors would elect to pass on the chemo if the survival rates are low. They don’t want to be resuscitated, put on ventilators, or suffer through huge expenses just to survive a couple of months longer in possibly great pain. In other words, they aren’t dying the same way many of us will. We don’t think about how we want to die and so loved ones usually default to life preservation at all costs. Is that the right way? To be honest I haven’t thought about it either, but I’m starting to.

How much student loan debt to people really have? NY Times Economix takes a look at who the 1% are with student loan debt. Most people aren’t suffering under a huge debt burden. But a vocal minority can be loudly heard. Still, debt or not, we’re still suffering from an imbalance of jobs to pay for the debts out there. For my thoughts on student loans and the suggested reforms so far see here.

Dylan Ratigan’s take on the mortgage settlement: Essentially, it’s not going to help the housing market. Only one thing will.

For the last three years, the policy has been to impose a political solution to a math problem. It hasn’t worked. America simply has too much mortgage debt to pay back. Serious economic thinkers across the spectrum, from Democrat Alan Blinder to Republican Martin Feldstein to New York Fed President William Dudley, believe that there is only one solution — writing down the enormous creaking mound of debt. This solution is currently off the table, because writing down these unsustainable debts could cost our fragile banks enormous sums of money and possibly lead to a restructuring of one or more of our major banks

Ratigan also notes that 50% of homeowners with mortgages are underwater. Thankfully that is an incorrect statistic and it’s less than 25%. Beyond that, a worthwhile read.

How good are football expert at predicting the playoffs? If they were good, this wouldn’t be an interesting article. There’s always next year guys.

When we’re losing we do better: If your team is down by 1 at half-time you should be in good spirits. They win 8% more often than the team with a 1 point lead. Eventually though this goes away, every two points of lead increases the odds of winning but about 7%. But what makes sports so interesting to many people is the thrill of a comeback and witnessing odds-defying performances.

Audits of rich people increasing: This was a widely reported story a month ago but it didn’t get that much traction beyond initial coverage. I’d like to see a chart showing audit trends of different income classes breaking out which party has the most power.

Why Your Meteorologist has a Shot at the Nobel in Economics: Nail, head.

“What I found then was another example of a very complex, interacting system. It [meteorology] had a big advantage over economics because the fundamental theory was very well understood.”

Why swearing helps with pain: Like any drug, just don’t use it too much or the effects might stop working.

Tornadoes only work on business days: Tornadoes are much more common during the week and research shows a connection with pollution.

Beeronomics: The study of all things beer and brewing. From price differences all over the world to how production is integral to a society. The argument for this emerging field is simple, they’ve already been doing it with wine and more people drink beer.

Carnival of Personal Finance #347, The Giants Edition: To better spread the good word of how great Weakonomics I’m participating in a Carnival of Personal Finance. Check it out for the best personal finance artciles in the blogosphere. Naturally of course, I was editor’s choice.

Image: The National Guard

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