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November 2010

As I mentioned a few days ago, Consumerism Commentary is matching your charitable contributions. Please take this opportunity to give to your favorite charity. Here’s how to make your charity count twice.

The four-day weekend has seen consumers spend $45 billion, up from $41.2 billion last year. I contributed to this figure slightly, buying three long-sleeve shirts at good, but hardly impressive, discounts on Saturday. Cyber Monday is an extension of this weekend, having become a bit of a self-fulfilling prophesy as online retailers have grabbed the opportunity for another sales event.

Productivity around the country will likely have faltered today as shoppers take time away from working to surf the internet looking for deals from the office. A few years ago, Cyber Monday was a myth. That is no longer true; for those who are interested in spending, today is a good day to find deals online, whether for your Christmas gift ideas or for yourself.

One of my favorite places for deals today is the Gold Box. While I didn’t have time to keep checking the website, one friend brought my attention to a sale featuring BBC television series on DVD and Blu-Ray. I didn’t take advantage, but if I didn’t already have the latest Doctor Who episodes, I would have taken action.

Did you find any Cyber Monday deals today, or are you still looking? I can’t fault anyone for spending. The most financially secure advice tends to focus on not spending unless you can afford what you’re buying without debt and if the purchase doesn’t sacrifice your future. The occasional holiday gift usually won’t destroy someone’s finances, but I know many people who buy a number of toys for their children that end up piling up in the attic until the next office campaign to solicit new toys for underprivileged children.


On Thanksgiving, the New York Times published a story about a man who had a check for $14 million ten years ago — $10 million after taxes — and who now has little to his name (Nick Martin). It’s not the sort of uplifting, family-focused feature article you usually see around the holidays, but people do seem to enjoy reading about the misfortune (quite literally, in this case) of others.

During the holidays, I was able to forget about money for a little while, but returning to “real life” after a vacation means I have to get down to business. For me, that means doubling my writing efforts and managing Consumerism Commentary better and stronger. Back to the series of Nick Martin’s unfortunate events.

In 1998, Nick received a check for his portion of the proceeds from the sale of his family’s billboard company. The urge to spend took hold, resulting in cars, houses, and horses. To keep his new purchases in good condition, he needed cash flow, something that was significantly lacking, particularly as real estate investments and the stock market crashed.

It’s easy to be judgmental. The internet is a place where armchair quarterbacks feel comfortable. Very few people know what would happen if the same situation — an unexpected windfall — occurs to them. There’s enough blame to go around. Here is Mr. Martin’s perspective:

He is furious at the banks and the bankers, who he thinks gave him bad advice, and he still sounds angry at his brother and others who decided to sell the company and who he says gave him little voice. Some of them got more than $100 million each, he said, while he got $14 million, as did his father and his sister Ann, because they were all minority shareholders.

In any similar situation, we see bankers who give advice with their own financial gain in mind rather than fiduciary responsibilities, individuals who trust a limited number of professional opinions, and the temptation to spend. Placing blame isn’t really important.

We can play games of hypothetical situations, asking each other, “What would you do if you inherited $10 million?”. When we can separate ourselves from the situation, it’s easy to think rationally. Here is what one might consider if they took the opportunity to envision receiving such a lump sum ahead of time.

  • Invest conservatively to ensure a cash flow and live off the income.
  • Have a low-stress job to boost that income.
  • Invest a small portion in the stock market for a chance to grow wealth without risking too much of the balance.
  • Possibly start a foundation, passionately supporting a cause.

These are all rational choices. Unfortunately, rationality is often the first thing to go once that check is in hand. In general, financial decisions are rarely rational even when not involving windfalls because humans are generally irrational, favoring emotional decisions. It is quite unfortunate that a descent like Nick Martin’s can occur, but losing a great deal or having a windfall slip through your fingers can be a good reminder that these is more to life than your net worth.

New York Times


The 2009 economic stimulus came to the middle class in the form of the Making Work Pay credit, which provided a $400 credit for single taxpayers or a $800 credit for married taxpayers filing jointly across two years. The credit was embedded in W-2 paychecks, hardly noticeable to many.

The credit was also designed to last throughout 2009 and 2010, automatically expiring in 2011, when the economy was expected to be in better shape. Without a congressional action to renew the credit, taxpayers will notice a lower net income on each paycheck when the year beginnings — lower than it would be anyway with the other taxes that start at the beginning of the year but are fully paid in the middle of each year.

Most of the recent talk about taxes is on the possible repeal of lower tax rates for those with adjusted gross incomes over $250,000, a move that would result in a 3 percentage point increase in just the highest marginal rate. This change would effect a tiny portion of American taxpayers, but if the Making Work Pay credit isn’t renewed, all single taxpayers earning $75,000 or less or married-filing-jointly taxpayers earning $150,000 or less will pay more. In terms of numbers, this credit benefits 90% of all taxpayers or 110 million households.

The credit costs $60 billion. That’s certainly a lot of money, but it’s small when compared to the cost of extending the tax cuts for individuals earning over $200,000 or couples earning over $250,000. That move would cost $700 billion, but pales in comparison with the $3 trillion cost extending the tax cuts for everyone else, an expense that can most likely not be avoided.

The Making Work Pay tax credit, as it allowed most taxpayers to spend a little more, may have helped support the economy’s feeble recovery over the past year. With the economy not yet fully recovered even though we are no longer in a technical recession, should the tax credit be extended?


As I mentioned a few days ago, Consumerism Commentary is matching your charitable contributions. Please take this opportunity to give to your favorite charity. Here’s how to make your charity count twice.

In other news, I have returned from visiting my family in California for Thanksgiving. I spent some time with my brother and sister-in-law, hiking, trying yoga for the first time, seeing a play in Los Angeles, and participating in two great Thanksgiving meals. I’ve included a photograph from a nearby lake I explored on Thanksgiving day before arriving at dinner.

ThanksgivingLast week, in the midst of my travel, U.S. News published an appropriate new article of mine, The 3 Best Ways to Increase Travel Rewards. I expect to travel more in the future, so I’ve shifted most of my spending from cash back to travel rewards. Making the most of my miles has been on my mind lately.

The best time to start a health savings account is two years before you start having children, according to Money Reasons. I don’t use a health insurance plan that is eligible for health savings accounts (HSA), so I haven’t paid much attention to the rules.

Donna Freedman asks, Could Your Family Survive on One Salary? I have a family of one, so this question is most likely not directed at me. The answer to this question is unique to every circumstance. In a family where there are two salaries, perhaps one salary could support the family with minimal struggle while the other could not support the family without major adjustments. Some families will need both salaries to survive.

If you are interested in personal finance blogs, take a look at this collection of the 25 most influential finance bloggers from Redeeming Riches. I appreciate being included! [click to continue…]


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