Wednesday Links — March 3, 2010

I feel very far behind in my readings of the Economist this week, but I kept up with the blog world a little better than usual. Let’s do some links:

• Couldn’t agree more with Miranda on physical gold.  The slippage on entering and leaving physical gold is immense.
• Great article by our friend Fred on green savings strategies, for those rare occasions when your pocketbook and your conscience might align.
• Let’s give Poorer Than You a round of applause for netting four dollars and a Plutus Award!
• Online Investing AI discusses finance apps.   Relevant to me as I’m desperately trying to figure out what phone to get.
• Trend technician discusses the black swan in Greece and why I’d be far too scared to chase it.

How to Save When You’re in Debt

This is a guest post from Fred from Credit Card Finder. Fred helps people to compare and choose the best credit card online.

If you’re in debt with credit cards, or personal loans and a mortgage you may be feeling a little nervous when you think about your lack of savings – but does it make sense to direct funds towards a savings account when the interest earned there will be overshadowed by the interest you are paying on your debt. There are ways to save when you are in debt, and there are financial products which can help specifically with this situation. So here are five years you can save, even if you have debt.

1 Consolidate credit cards to one balance transfer card

Try and avoid using equity or a line of credit on your home loan to pay off your credit card debt because you are in fact just stretching out your credit card debt for another 30 years, when you can target it now and get it out of the way for good. Instead, find a balance transfer card with a low interest rate which will allow you to transfer all of your credit cards to be charged one low rate. In this way you have your debt under control, you have a manageable monthly repayment and you have a payment plan which will help you get rid of your credit card debt.

2 In debt to 9%

Many financial planners and advisors will use the 9% rule – if you have debt which is charging you interest of more than 9%, you should direct as much of your income as you can towards paying down that debt. (more…)

Long Term Joblessness

The unemployment statistics in America are confusing.  Sometimes you will see unemployment go down without jobs being created.  How can this be?  As it turns out there are many different definitions of unemployment and the number you see is only one of them.  In fact, if you don’t have a job for a certain amount of time, you’re considered to be “out of the workforce,” and no longer counted in the common measure.  As it turns out, long-term joblessness is a danger to societies and this has implications for many of us in our personal life.

Measures of Unemployment

In understanding the impact of long term joblessness, it’s good to understand how unemployment rates are calculated.  In America there are six different unemployment numbers, U1 through U6:

• U1: Percentage of labor force unemployed 15 weeks or longer.
• U2: Percentage of labor force who lost jobs or completed temporary work.
• U3: Official unemployment rate per ILO definition.
• U4: U3 + “discouraged workers”, or those who have stopped looking for work because current economic conditions make them believe that no work is available for them.
• U5: U4 + other “marginally attached workers”, or “loosely attached workers”, or those who “would like” and are able to work, but have not looked for work recently.
• U6: U5 + Part time workers who want to work full time, but cannot due to economic reasons.1

So as you can see, sometimes a job seeker simply “gives up.”  They’re no longer counted in unemployment statistics, but they certainly don’t have a job.  As it turns out, this is actually the worst kind of unemployment, even though we don’t see it measured very often.

Long Term Havoc

A study by the Cologne Institute for the German Economy is one of many supporting the belief that the longer a person is out of a job, the less likely they are to return to the workforce.2 Their job skills atrophy and they lose hope.  They basically get locked into a self-reinforcing cycle of poverty.  You may know someone like this, who used to be in the workforce, but now seems unable to return. (more…)

1. Wikipedia — Unemployment [↩]
2. German Think Tank Says Joblessness Behind Poverty [↩]

Wednesday Links – February 24, 2010

While I haven’t been doing a good job of writing lately, I’ve been doing tons of reading.  Thus I thought it might be time to start doing a weekly links post, so here’s the inaugural post:

• Miranda Marquit writes about FDIC coverage.  Interesting questions about what isn’t covered, which might surprise you.
• FreeFromBroke discusses the CARD act.   This of course would have been a much better piece of legislation if the companies in question weren’t given a 9 month window to undermine all the changes.
• A great article about couponing in Canadian Finance Blog.  I have tried so many times to become a “couponer.”  I feel like I”m leaving a ton of money on the table.  That $1 coupon is worth more than a dollar of cash!
• I thought I’d go ahead and mention an article I did on bank accounts and credit scores.  I actually didn’t know a lot of this information before I did the research.  Summary:  Bank accounts don’t affect credit scores, but lenders have access to other scores that bank accounts do affect.
• Weakonomics discusses inflation and the stock market.  While I wouldn’t go so far as to say I’m not worried about inflation, I do agree that the stock market is a good hedge against inflation.

Web 2.0 Personal Finance

Today’s post is by Nick Barber who works for UK discounting site VoucherCodes.co.uk

Personal finance has moved on and people are now roughly separated into two groups; those that are savvy online and those that are not.  There is a myriad of tips of tricks beyond the usual blanket “buy online” advice that can slash your usual monthly spend painlessly by about 20%.  These personal finance tips however can be leveraged in the worlds of investing and of small business too so you offset the hefty start-up costs that are often incumbent on the budding entrepreneur.

Before you know where you are going to make savings however, you need to know exactly how your finances are shaping up. In recent years there has been a proliferation of online software packages that will help you keep your bookkeeping in order. Mint is a great example. Once you sign up and enter your details, it will automatically pull in your balances from different accounts, updating in real time, so you can always keep on top of how much you are laying out each month. This information can then be used in conjunction with their budgeting software and there is even functionality to check how your investments are doing.  What is more – it’s completely free!

The second tip for knowing where you stand financially is to check your credit report. Your credit report is, put simply, a record of all the debts you have taken out in the last 6 years, right down to cell phone contracts, as well as a record of how well you have managed to repay them. Experian offer a free credit report when you register with them. It is essential to check for mistakes – which happen more regularly than you think. Even the smallest error can reflect badly on you which is especially important with banks having access to your records. If it seems you have missed just a few payments, this can result in a much higher rate of interest on your mortgage and other borrowings. Correcting mistakes can result in savings of hundreds of dollars a month; as well as opening up more finance to you.

Now you know where you stand; it’s time to make savings. (more…)