Don't Quit Your Day Job…

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.

“Good morning class. Today we’ll discuss some things that anyone who has passed 6th grade already knows (sorry for those of you that didn’t). Darwinism: Survival of the Fittest (ironically laughing to myself now at those who didn’t). This concept is believed to be what drove life from tiny micro-organisms which emerged spontaneously eons ago to the amazing diversity of life that Earth possesses today. This process appears to be what designed us, what makes us humans the cream that rose to the top. The ironic twist that we run into after the millions of years that it took for us to evolve is the concept of ‘Morality’.”

Sorry to pick on the Art Majors, but all of this discussion about President Obama’s Executive Order on student loans has pointed the country down an interesting path. Perform this thought experiment with me… The vast majority of student loans in the United States are federally backed. There are also $1,000,000,000,000 in student loans outstanding. This means that, in the event student loans aren’t paid, the debt will be borne by the general fund of the United States (read: taxpayers paying private and public colleges). Should taxpayers demand lower paying majors pay higher student loan rates?

“In this world nothing can be said to be certain, except death and taxes.” – Benjamin Franklin

What is less certain is what those taxes will be called – the tax code continues to get more and more complex every year. The IRS puts out a data report annually about their fiscal year which includes tax collections by the type of tax (Table 6). These numbers are not the final numbers – those numbers are arrived at once all credits and refunds are complete. However, the chart that results is instructive, and it allows us to visualize how the tax code has change over the years to collect revenue from the country in different ways.

In the chart that follows, you can turn off individual categories so you can see how individual categories stack up. Note the relative size of the estate and gift taxes. For the amount of interest they receive, they are an insignificant portion of total tax collections.

When it comes to guaranteed returns, there is a list of investments perhaps as numerous as your fingers.  The most famous example is the 401(k) with an employer match.  In order to charm you into investing some of your money in the company’s 401(k) account, most employers tend to put up a bit of their own money as an incentive.  The return is immediate, guaranteed, and something that should be captured.  The bottom line is – in almost all instances you should make sacrifices elsewhere in order to receive the full employer match.

Interesting posts, updates, and carnivals and featured links for the week!

Oh no! The Social Security Administration recently released it’s Wage Statistics for 2010 to little (official) fanfare. To read a little financial press, it’s the end of the American Dream (buy guns and gold!), however. Here’s a little secret: the problem isn’t that employers are colluding to ratchet down the income of the United States. The true reason for the reduction in median income is the shifting demographics of employed workers. You can break it down in many ways, but I’ll break it down into age brackets… and you should be convinced that while unemployment is a problem, the falling wage is just a symptom of everything else, and not something you should spend too much time worrying about (let DQYDJ do it for you!).

I recently came across Jodi Beggs’s awesome (and tongue in cheek, and that’s a compliment from a site called DQYDJ!) economics site, “Economists Do It With Models“. Perusing her recent history, I came across an article entitled “Adventures in Fact-Checking, GOP Debate Edition” where Jodi fact checked some statements made by Mitt Romney and Newt Gingrich and found them, on the surface, to be false. Fair enough – the candidates both made statements to the effect that Ben Bernanke is the most inflationary Fed Chair ever. Playing fast and loose with the facts is wrong, but I don’t entirely like how Ms. Beggs ranked the Chairmen – by annualized inflation during their term. To explain why I’ll turn to an unlikely (yet, strangely appropriate) place- baseball.

Tying to an article earlier that my colleague PKamp3 wrote, personal finance seems to have taken a dive in popularity in more recent years. As a writer for a confessedly self-aware personal finance crowd, this assertion may seem irrelevant, surprising, or, at worst, alarming. As a young college graduate, many of my fellow coworkers (as well as I) have student loans as one of their more significant financial obligations on top of car loans and (soon) mortgages. Some plan on paying down their student loans as fast as possible to deleverage themselves and then start saving for a home. I am of a different and not necessarily correct opinion: to hold onto the student loans for as long as possible due to their incredibly low interest rate and tax-deductibility for incomes up to $60,000 (partial deductions up to $75,000).

Last week, we gave you an interesting chart on political donations from Wall Street firms by election cycle, dating back to 2004. This week, we’ll follow it up with an equally interesting chart on the amount of investments in Wall Street firms (again, ‘Securities & Investments‘ from Open Secrets) by Democrats and Republicans. Read on to find how much the two parties invest in Wall Street!