Free Money Finance

Taking the Day Off

Like many of you readers, I'm sure, I'm taking the day off today and enjoying it with my family. I hope you all have a GREAT holiday weekend!!!

Star Money Articles and Carnivals for the Week of June 29

For weekday updates of what I find to be some of the most interesting personal finance articles on the web, follow me on Twitter. For now, here are some pieces I found especially worthwhile and some of the carnivals Free Money Finance was in this week and my posts that were included:

• This week's Best of Money Carnival was won by the post Identify & Overcome Money Anxiety & Stress in Relationships.

• EDITOR'S CHOICE! Money Hacks Carnival - Buy High, Sell Low: The Basic Instinct Driven Error of Investing

• EDITOR'S CHOICE! Carnival of Top PF Posts - The Best Way to Maximize Your Investment Return

• Financial Highway gives some honeymoon planning tips.

• Steadfast Finances talks about the pros and cons of investing in ETFs.

• Debt Free Adventure says to follow through on financial goals.

• The Quicken Blog tells how to quit your job and travel the world. 

• Free from Broke asks if you keep money secrets from your spouse.

• Festival of Frugality - Do You Fly or Drive on Summer Vacation?

• Carnival of Debt Reduction - Managing Student Loans: 5 Ways to Make Repayment Less Painful

• Carnival of Money Stories - Another Good Experience

• Carnival of Pecuniary Delights - Interview Lessons from a Video Contest

Enjoy!

P.S. Carnival Hosts -- If my post is in your carnival in a given week, please send me the URL to the carnival and I will include it in my weekly roundup.

Safeguard 8: Avoid an Advisor with a Lavish Lifestyle

The following is a guest post from Marotta Wealth Management. After reading this, you may want to check out my thoughts on how to pick a financial planner.

There will always be swindlers masquerading as investment advisors. You can learn to recognize such people by their over-the-top lifestyle. Avoid them at all costs.

The differences between the manager of a Ponzi scheme and a model citizen are almost imperceptible, which is not surprising. Those who would perpetrate a Ponzi scheme are usually not the demons everyone makes them out to be. And they are obsessed with appearing successful.

This fixation on appearances, however, is the red flag. If you are the millionaire next door, you know that frugality is one of the marks of an effective financial advisor.

But you may have to train your eye to recognize an immoderate lifestyle. If someone in business is worth $300 an hour, some apparent extravagances may in reality be productivity gains.

For example, if you hire a chauffeur to drive you to and from work each day so you can be productive, society gains. If you hire a gardener so you can continue contributing in your area of expertise, society gains. And if you hire a butler or a chef, so long as you employ someone else for less than $300 an hour, society gains.

Productivity gains are not synonymous with a lavish lifestyle, and with some careful observation you can learn to discern the difference. Productivity gains are all about function, and if you discover them you will find out accidentally. In contrast, the whole purpose of an extravagant lifestyle is to be noticed.

Consider Bernie Madoff. He and his wife lived in a $7M penthouse apartment in New York City and a house worth $3 million in the Hamptons. They also owned a $9.3 million Palm Beach mansion. Plus they maintained a $1M million chalet and two boats on the French Riviera.

They spent an average of $100,000 monthly on the corporate credit card on chartered jets, limousines, top hotels, fine wines, world travel and shopping. When they drove themselves, they rode in style in a BMW and or one of two Mercedes. Madoff bought a vintage Aston-Martin for his brother as a company car. The couple owned a Steinway concert grand piano worth $39,000. Madoff purchased tickets at the Mets Citi Field at $40,000 a season.

Madoff was also a prominent philanthropist, but his interests were anything but altruistic. He started the Madoff Family Foundation and gave to charities, which in turn invited him to serve on their boards. Madoff then invited them to invest their endowments.

He and his wife also gave more than $200,000 to the Democratic Party. He gained high-level connections to those in Congress who write the laws and are supposed to provide regulatory oversight. Madoff was one of the first to exploit kickbacks for brokerage order flows. He argued they should remain legal and not alter the price that customers received. His connections prevailed.

The Madoffs themselves owned $62 million in securities and $45 million in municipal bonds. They loaned their sons $22 million and $9 million, respectively. Oddly enough, having siphoned billions, the couple only has a net worth of about $823 million.

Wealth is what you save, not what you spend. That's why an ostentatious and excessive lifestyle is a red flag for an investment advisor. The middle class buys liabilities like boats and cars. The rich buy investments. If Bernie Madoff had bought businesses and investments, he would be able to make restitution of those initial investments. He might even be able to pay a fraction of the gains he claimed to have.

We all wonder what happened to the $65 billion. Much of it was phantom gains, and a lot of it was simply spent a million here and a million there. Excessive spending is a warning sign that your advisor doesn't understand wealth building personally.

In April this year, the Securities and Exchange Commission (SEC) charged Shawn Merriman of Aurora, Colorado, of collecting $20 million in a Ponzi scheme "to support his lavish lifestyle." He lied to investors, reporting "impressive and consistent annual returns" as high as 20%.

Merriman was known for showcasing his high-end art collection. U.S. marshals seized hundreds of works of art including some by Rembrandt and Picasso from his sprawling three-story home. Also seized were a silver Aston Martin, 1932 and 1936 Auburns and a 1932 Ford Highboy.

This spring the SEC also filed charges against Pennsylvania advisor Tony Young for allegedly stealing $23 million from investors to "support a lavish lifestyle for his family, including payments for expenses related to horse ownership and racing, construction, boats, limousines, chartered aircraft and other luxuries." That lifestyle included an opulent vacation home in Palm Beach, Florida, near the Madoffs' vacation home. Young also lied to accountants who prepared statements and claimed his losses in 2008 were only 5.8%.

Ponzi schemes are often discovered after market downturns when investors make the mistake of fleeing to safety. They want to take their stellar returns and put the money someplace safe while the storm blows over, only to find that no money is really there.

Additionally, the news cycle runs in themes. After the Madoff scandal, every Ponzi scheme became national news. The theme, played over and over, is that all financial services, from Fannie Mae to AIG, are rife with corruption and mismanagement and need more government regulation.

But more control won't protect you from dishonesty. More law can't protect you from an unethical person. Fannie Mae and Freddie Mac had direct congressional oversight. Madoff was good friends with the regulators. Regulation is more likely to be used politically than responsibly.

Your best defense is to engage an advisor whose daily practices reflect ways to safeguard the money under his or her fiduciary care. As part of identifying such an advisor, make sure there is a mutual understanding that an ostentatious lifestyle is not a valid financial goal.

Ten Pricey Cities that Pay Off

I've gone on record saying that one great money-saving tip is to consider moving to a less expensive city (and I've documented that the reduction in costs more than outweighs the usual loss in salary). Most people hate this advice, but that doesn't stop me since I'm a glutton for punishment. ;-)

But today we're covering the other side of the issue and listing the ten cities, though they are expensive, that are "worth it" (at least according to this US News piece) because they offer "amenity value." The details:

Economists look at every asset as having an "amenity value," which measures the amount of satisfaction the asset brings to its owner. For example, your home has an asset value that is worth much more than the roof it puts over your head. The land where you live brings with it a certain quality of life: How nice is the weather where you live? How close are you to the coast? How many cultural and recreational opportunities are nearby? These quality-of-life factors contribute heavily to the amenity value of a city, and they help explain why housing costs are so high in some places.

Another big component of a city's amenity value—trade productivity—is essentially, how many goods does the city produce that other people value? The San Francisco area has Silicon Valley. New York has Wall Street. But productivity boosters can come in other forms, such as universities that produce an educated workforce, easy access to water or other transportation, or proximity to natural resources. How do these factors create amenities? Residents of highly trade-productive cities tend to enjoy higher wages. What's more, businesses flock to these cities to enjoy the advantages. As incomes and employment go up, so do housing costs.

Given this, here are the top ten pricey but worth the price cities from US News (in alphabetical order -- they didn't rank them):

• Boston
• Honolulu
• Los Angeles
• Naples, Fla.
• New York
• Salinas, Calif.
• San Diego
• San Francisco
• San Luis Obispo, Calif.
• Santa Barbara, Calif.

A few comments from me on this info:

1. For those of you advocating living in an expensive city, this piece does a good job of detailing what many of you have already said.

2. Good weather seems to count for a lot in this analysis.

3. They often cite "higher incomes", but we've already shown that the costs of living in these cities is much more than the income increase versus other alternatives, so on purely economic terms there isn't a rationale for more expensive cities. What they're saying here is this equation makes these places worth the price: Higher incomes + amenity value > cost of living.  

4. To me, amenity value as they define it isn't worth much. As long as I have either access to the things a big city brings or something that's "good enough", I'm fine with it. We have Chicago three hours away and Detroit two hours away, plus we have decent enough museums, botanical gardens, etc. No, they're not the Met, but they are good enough for what we want. As such, the equation for me now shifts to this: Higher incomes < cost of living. Now you get a sense of why my point-of-view is what it is. That, and I'm cheap.

5. Different people value different things. For instance, I prefer wide open spaces such as green fields, gardens, etc. over concrete and metal, places where your neighbors aren't on top of you, areas where your kids can run the neighborhood without the fear that they'll get lost or kidnapped, spots where the pace of life is slower, etc. This moves my equation even more away from larger cities.

6. Just because you live in a less expensive city doesn't meant you HAVE to earn a lower salary. I'm sure I couldn't make much (if any) more than I make now even if I lived in New York City, San Francisco, or any other costly place. And I've done pretty well despite living in less expensive cities all my life.

7. One thing the analysis doesn't take into account is the value of having family nearby. This is one of the most-cited reasons for living in an expensive city by the commenters here. Having family around not only contributes to the quality of life, but can save you money as well (by providing daycare, for instance.)

8. Of course you can spend your money however you like, so don't take these thoughts as condemning anyone for their lifestyle decisions. I'm simply pointing out an alternative way of thinking about decisions we make that impact our finances in a big way.

How to Save $200 on Your Car Insurance

Family Handyman magazine suggests in their July/August issue that drivers 55 and over can save $200 a year on car insurance by completing a "senior driver training course." The details:

Most insurance companies offer a discount for each driver 55 and older who takes an authorized driver safety education program (some states mandate this discount.) The initial course is eight hours, and some companies (and states) allow you to take a four-hour online version ($20 per driver.) Classroom rates vary. You'll be a safer driver and can pocket the savings every year. For more information, contact your insurance agent, AARP, AAA or your local adult education center, or search the Internet for "senior driver education."

FYI, in the heading, they claim this tip will save you $200. Just want to mention that's where I got the number used above.

I did Google the words and surfed a bit, but lost interest soon since I'm not even close to getting this discount. I know most of you reading this aren't yet 55 (and are farther away from it than I am), but someone out there might know something about this. Maybe you have a parent or friend that's taken this class. If so, please give the rest of us your insights into the process and let us know if the savings are as good as they say.

The Price You Pay for Pride and Prejudice

The following is a guest post from Neal Frankle, CFP from Wealth Pilgrim.

A couple weeks ago, I had a post linked to from a popular website and many new readers visited Free Money Finance. Unfortunately, one of them made a comment that was either on the line or over it (depending on your point of view) from a decency standpoint. I debated back and forth what to do with the comment, but ultimately decided to leave it up since my on-going policy has been to leave all but the very worst up as I hate censorship (don't believe me, then see what I leave up on many of my Sunday posts.) Anyway, since the comment was about Jews, I asked Neal for his take on it before I made my final decision. He's Jewish and I thought would have a better perspective on the comment. He said it was certainly offensive, but he thought my response/comments on the post were good. In addition, he volunteered to write this guest post about the costs of prejudice.

Your preconceived notions about other people are costing you a fortune so stop it right now – for your own good.

I learned this lesson at the wee age of 12 when my father took me to meet a client of his – Mr. Williams.  The client happened to be African American and lived in a run-down part of Los Angeles.  Once the meeting was over I asked my father how that man could possibly have been an important client.  I told my father that Mr. Williams probably didn’t have any money anyway.  I based my statements on the man’s color and where he lived.

Turns out Mr. Williams was my father’s most important client.

My dad was ashamed of what I said and he spared no effort in “explaining” how stupid my racist comment was.  The fact that I meant no harm really wasn’t relevant he explained.  He told me that racism hurts people and he was right.

It was painful at the time but I’m glad he said what he did.

I’m not proud of that incident but I am happy I got to learn that lesson when I was young.

I was reminded of the importance of this lesson a couple weeks ago when I stumbled on a comment made by somebody at Free Money Finance.  The commenter suggested that if you wanted to bargain with a vendor, it was best to “act like a Jew”.

This stupid remark elicited some very angry responses as you might expect. At the end of the day, both the person who made the remark and the people who responded in anger paid a heavy price.

1. Their focus shifted from the lesson they could have learned from the post to the anger they were feeling for each other.

2. They lost the opportunity to bond closer with each other – one of the great benefits of getting involved with blogs.

3. They lost the opportunity to be open and share with each other.  Remarks like these and the corresponding responses tend to get everyone to shut down rather than open up. This refers to everyone who was leaving comments - not just the people involved in the altercation.

4. They caused a ripple effect.  Racism fosters racism.  That brings more and more people into this hurtful cycle. More and more distance.  Less and less opportunity. Just plain dumb.

I wish that I could say that I haven’t uttered a racist remark since the day my father pointed out how hurtful such remarks are.  Sadly, I haven’t done as good a job on this as I would like.  I’ve made mistakes.  Writing this post is one small effort to make amends for those errors.

I do know however that racist remarks add nothing positive.  Quite the opposite – my slips in this area hurt me and everyone around me.  It prevents me from forging relationships that could be meaningful, educational and profitable.  It releases negative energy that is hurtful to everyone caught in its wake.

You or I might make an off-color joke. We might restate something hurtful that we’ve heard others say.   But let’s just stop.  We’ve got enough pain. Let’s work together to stop this needless exchange that keeps us apart. 

I’m going to try my best to be mindful in this area.  How about you?

My Jobs, Pre-College

I've talked a lot about managing your career, so I thought it would be interesting (maybe, maybe not, you decide) for me to detail the jobs I've held in my lifetime, what I gained from each of them, what I learned, how I grew my income, etc. I'll be doing this over a series of posts that will last a couple weeks or so. We'll see how it goes.

Today I want to detail the jobs I held before I started college -- basically the jobs I held while in high school. As I've noted previously, students simply need to get work experience, ANY work experience, during these years, and that's just what I did.

My first official job was as a grocery store carry-out boy. I worked at the local grocery store in our small town for several years. It started as a summer job, then I worked 15 hours or so during the next school year. In the summers following it bumped up to 30 to 40 hours a week (the regular guys took vacation) and in my senior year of high school, when my class load was lighter, I worked about 30 hours a week. I stocked shelves, sorted cans (no machines back then, so beer and pop bottles and cans returned for deposit were sorted by hand -- it was a huge, ugly mess) and, of course, bagged and carried out groceries.

I learned several things from this job including:

• How to get along with co-workers and bosses. It was my first "real-world" job and I learned the basics of work here.

• How to be on time, do the job that was required, and so on. Again, more basics.

• How hard work (and time) could lead to advancement. I started out as the low man on the totem pole. This meant I was the first to answer the call when a checker said "carry-out please" over the intercom (no one liked this job because it was hot outside in the summer and freezing in the winter.) I was also the primary bottle/can sorter -- the job everyone hated. But over time, I did well, others left or were fired, and I advanced. When I left, I was the highest-ranking carry-out boy in the store and my main job was the "plum" position of stocking shelves.

• That I didn't want to do this as a career. I saw that several people (the "management") were earning a barely livable wage and weren't doing tasks that much different than what I was doing. I KNEW I was going to college and DID NOT want to do any job like this in the future.

• That hard work and pay don't always correlate. This was one of the physically hardest jobs I ever had and was also one of the lowest-paying ($3.35 per hour -- which was minimum wage back then.) Again, another reason to go to college and become qualified to do something else.  Then, after I had worked so hard for such a small amount and had saved much of it, the bank I had it in failed. Ugh.

• The good feeling from a job well-done. I had one of the assistant mangers tell me a few times that I was the best worker in the store and he always wanted to work with me as a result. Of course this made me feel good about myself and my work, though I didn't particularly like the guy (he was lazy) and was dismayed thinking that I was always going to be working with him (it didn't turn out that way, though I did work with him a lot.)

My second pre-college job was for one (very long) summer that I did in addition to working at the store. I "walked beans." For those of you who are unfamiliar with this horror of a job, here's what it entails:

• Get up very early (while it's still dark), so you can arrive at the field just as the sun comes up.

• Get a long pole with a sharp hook at the end.

• Walk acres and acres of beans growing, cutting down the weeds by wrapping the hook around them and pulling up.

• No bathrooms, no water (or much) that was close, and blistering hot days (we usually knocked off by 1 pm or so).

• $2 per hour.

Don't ask me how I got roped into this job, but let's say I was naive and didn't get the full details before I agreed to do it. This was the biggest lesson I learned in this position. Thank goodness I only did it for a month or so.

In the next post in this series, I'll detail the jobs I held while in college.

I Stand Corrected

Found this piece this morning that says Michael Jackson's net worth in 2007 was $236 million. So he either died wealthy or spent a TON of money in two years (who knows, maybe he had stock losses too). That said, it seems unlikely that he ended up $400 million in debt, though the piece says he had little cash on hand and was known to go on lavish spending sprees, certainly not the picture of financial restraint.

Just wanted to set the record straight...

Do You Work on the Weekends?

One way to get ahead of the pack and advance your career is to work longer than the average person. This can mean getting in early, staying late, taking work home, or working weekends. Today I'd like to talk about the last option in this list, working weekends.

A recent piece from US News brought the topic to mind. They say that you shouldn't work weekends for the following reasons:

1) You'll come back refreshed.

2) Time heals all (work) wounds.

3) You won't bore your family and friends with tired tales about people they don't know.

4) It limits obsessive thoughts and thinking for others.

5) You'll better enjoy home and work. Or, at the very least, if one stinks, it won't as quickly leak into the other.

In past years/jobs, I worked lots of weekends. All through school, my strategy was to outwork the competition (I wasn't smarter than many others, so I gained an advantage by working harder) and that carried over into my work life. When I was just starting my career, I worked almost every weekend for several years. And those were the days before the Internet and easy mobile computing, so it meant I had to go into the office. But as time has passed, I've become more senior in my industry, my priorities (family) have gotten in line and, specifically, I've moved into my current position, I've worked very few weekends in the past five years. Maybe five at most, and then only for an hour or two here and there. Nothing major at all.

So may answer to "do you work on the weekends?" is "No, but I used to."

How about you? Do you work on the weekends? Why or why not?

Help a Reader: Parking Money

Here's an email I recently received from a reader:

My wife and I just sold our house and are walking away with about $26,000.  We are not yet ready to buy our next house for a variety of reasons, and are currently in an apartment.

I would like some input on the best place to park the money while we decide our next move.  I am extremely comfortable not having access to the money for 3 months and am relatively comfortable not having access to it for 6 months.  Anything beyond that I feel like the money needs to be liquid and accessible for a new home.

What are your thoughts for him?

Last-Minute Tax Savings for College Expenses

The following is a guest post from Marotta Wealth Management. It's a bit tailored for Virginia residents, but still offers some useful thoughts for the rest of us as well.

My youngest will be a first-year student at the University of Virginia this fall. My coauthor Matthew's oldest child is almost two years old. So he is just beginning to think about college funding and I'm about to start withdrawing from my final 529 plan.

With a well-designed 529 college savings plan, you can fund a college education at a deep discount. But even if you haven't saved much for college beforehand, simply passing college expenses through a 529 plan can save you $200 to $2,000.

A 529 college savings plan offers three types of tax savings. Virginia residents receive a state tax deduction in 2009 on contributions up to $4,000 per account. Students are permitted to attend a college out of state. If you don't live in Virginia, you can research your own state's tax benefits. In every state you receive both federal and state tax-deferred growth and tax-free distribution when you are ready to use the money. These latter two tax benefits are the most significant. But you must invest early.

The Virginia state tax deduction, in contrast, is available merely for putting money into a 529 plan. You are allowed to make a withdrawal immediately to pay for college expenses. This worthwhile tax deduction can help trim expenses. Consider it Virginia's way of promoting higher education.

Make sure you understand what counts as an educational expense before you begin this process. The withdrawal must be for tuition, fees, books, supplies and equipment required for enrollment or attendance at an eligible educational institution. In a recent change, a personal computer now also qualifies.

If you are paying tuition and fees, have a check sent directly from your 529 account to the college. This direct deposit will simplify bookkeeping and make filing your taxes easy. If your fees are spent elsewhere, keep receipts of all the qualifying expenses.

Consider Paul and Ali Hewson, whose oldest child Jordan will begin college in the fall. The Hewsons haven't saved much, but Paul's career is really taking off. So they now have the money to pay for Jordan's college expenses. As Virginia residents, they are entitled to a $4,000 state tax deduction if they put at least this amount into one of the state's approved 529 plans. At the 5.75% state tax rate, they will net a $230 savings for 2009 after they file taxes in 2010.

Jordan has decided to bypass Virginia's fine in-state institutions and attend a more expensive private college. Consequently, the Paul and Ali now have $40,000 of upcoming qualified educational expenses they can pass through a 529 plan to build a decade worth of carry-forward state deductions. Virginia 529 plans allow for an unlimited carry-forward deduction until the amount of contributions has been deducted. Assuming the tax laws and rates remain the same, the Hewsons will take a $4,000 deduction each year for the next decade. They will accrue a total savings of $2,300 savings over this 10-year period.

Paul and Ali can use any of the three different 529 plans in Virginia to accomplish this savings. We estimate it should take no more than an hour to set up the accounts and an hour to make the disbursements.

The CollegeAmerica program, the state-sponsored plan run by American Funds, must be accessed through a financial advisor. Unless you have a relationship with a fee-only advisor, you will pay a hefty commission to use this plan. If you can access the American Funds without paying a commission, invest your pass-through money in the Money Market Fund, the most liquid and stable investment in the plan. This fund requires a $1,000 minimum deposit for the initial setup. With the American Funds, expect to pay a $10 account setup fee and a $10 annual maintenance fee that kicks in if you hold the account through the end of the year.

Investors can access the state-run Virginia Education Savings Trust (VEST) program directly at www.va529.com to begin online enrollment. The plan charges a $25 annual fee in November and no other setup costs. It also has a money market fund available as part of its nonevolving portfolio investment options. Both the VEST and CollegeAmerica programs have received the highest scores from a recent Wall Street Journal report and other rating groups.

Virginia also has a program administered by the Union Bank & Trust called CollegeWealth. You can open a money market account at a Union Bank branch to receive the state tax deduction. If you are comfortable completing this task online, you may find working with a local bank difficult only because you must go there to complete all your paperwork.

Better than waiting until the last moment to start funding a 529 plan, consider investing now. With a depressed stock market, your funds can expect a healthy return for the next several years until your child is ready for college. If you have grandchildren you can get the same tax deductions by opening accounts for them. If you do not have a lump sum available to invest, start a monthly contribution from your paycheck directly into a college savings account. Although you may have to wait until your children bless you with grandchildren, they will ultimately thank you for it.

How to Spend More than You Earn When You Make Millions

Here's a story a reader sent me about past NFL quarterback Bernie Kosar and how he's fallen on tough times. Despite the fact that he's made a boatload of money, he recently declared bankruptcy. Yes, you can spend it all.

The article doesn't say how much he made during his career, but it leaves hints that show it was a good amount. For instance:

Kosar was one of the smart ones. He graduated from the University of Miami in 2 ½ years. Smart enough to help build several businesses after football, with a 6 percent interest in a customer-service outsourcing company that sold for more than $500 million.

How much has he lent teammates over the years without being repaid? ''Eight figures,'' he says.

Friends and family? ''Eight figures,'' he says.

Charities, while putting nearly 100 kids through school on scholarships? ``Well over eight figures.''

Ok, so he made enough to hand it out without much problem. But in addition to being generous, he was quite a spend-thrift. This sentence summarizes the situation:

And even the live-in maids had assistants.

Plus, he's surrounded himself with people with people that seem less than honest:

He says financial advisors he loved and trusted mismanaged his funds, doing things like losing $15 million in one quick burst. There's a $4.2 million judgment against him from one bank. A failed real-estate project in Tampa involving multi-family properties. A steakhouse collapsing with a lawsuit. Tax trouble.

And despite the fact that he's a smart guy, it seems he didn't really know or care much about handling his own money:

His finances have never been something he controlled. Dad would handle the bills; the son had to handle the Bills.

And now, to top it off, there's an expensive divorce:

He says the divorce has cost him between $4 and $5 million already.

''That's just fees,'' he says. ``And they keep coming. Attorneys charge $600 an hour just to screw things up more.''

So, despite the fact that he made tens of millions and had some good business dealings that brought him even more, he managed to go through all of it. You certainly can spend more than you earn, no matter how much you earn. This story is simply another one to add to my ever-growing list illustrating this fact.

But at least Kosar still has a good attitude and he had a fun ride while it lasted:

''Let me tell you something, bro,'' he says. ``It was all worth it.''

For Those of You Looking for a Tasty July 4th...

...here's a little reminder. :-)

Wealth Without Wall Street

The following is a guest post from The Insider's Guides.

“Wall Street's world turned upside down”

These were the headlines in 2009.

Wall Street financial management has proven itself worthless. Bill Gross was right. “Professional money management is a gigantic rip-off.” Only 2 advisors provided their clients with the correct advice about the total collapse of the market in 2008-9. In one year, most money management clients have seen their accounts plunge 40%, 50% even 70%. No advisor has fired him/herself. No advisor has returned their advisory fees and commissions. In fact, most advisors hid from their clients during the worst of the storm, as acknowledged by Fidelity executives in May 2009.

The naked truth—YOU must build wealth without Wall Street.

What to do?

Look at Wall Street “turned upside down.”

• First, when money managers buy and sell securities in their mutual and hedge funds, they are trying to predict the future of the market. There is no proof this can be done over time. Yesterday’s winners are usually tomorrow’s losers. The AVERAGE market return has been 12%, so a few managers will beat the average by luck—Just not the same ones every year.

• Second, you must pay the costs of the manager, her/his marketing group and operations, whether or not s/he makes you a dime. It is always better to pay as little as possible for the same performance over the long term. Costs can take up to 33% of your returns, over time. Investors averaged only 2.57% annually from 1984 through 2002 despite buying the ‘winners’ at the top.

• Third, managers are paid for increasing “ASSETS under management,” not for making you rich. Bringing in more assets is a full-time job. It is expensive to market the funds given that there are now thousands available. It is inevitable that popular funds will grow until they produce average returns with high expenses. Managers want to be rich, not right.  It takes luck to pick successful stocks. You do not benefit from economies of scale. As assets grow, fees do NOT shrink.

• Fourth, there is much less chance of you being treated poorly by fund management if the structure and governance are customer-oriented like Vanguard’s and TIAA-CREF’s are.

• Fifth, many professional managers and Wall Street “insiders” place their core assets in index funds. As bond guru, Bill Gross, said, “professional money management is a gigantic rip-off.”

• Sixth, since no manager can consistently beat the market, a mutual fund or hedge fund for that matter, must be evaluated as a commodity. Commodities are usually judged on price. As Benjamin Graham, legendary value investor, said, “Investors should purchase stocks like they purchase groceries—not like they purchase perfume.” Actually, all financial services should be purchased this way—insurance, mortgage, credit, banking.

• Seventh, due to changes in access and technology, some manufacturers of financial services and products have decided to enhance their direct to customer channel. Even though Vanguard funds have not been sold by personal selling, it has grown to rival most fund complexes. Discount brokers are now considered to have better customer service than brokerage firm services, according to Consumer Reports. Even though Progressive Insurance is sold by agents, their success in the direct channel has been impressive. 

• Eighth, Wall Street cannot reduce the risk of investing. Most individual investors have lost 30% to 50% of their life savings in the last Wall Street bubble. Many investors now realize that Wall Street is selling snake oil. Even the promise of diversification has left many realizing that “experts” can’t control risk.

• Ninth, Wall Street used to control price—raising the price of investing to grow revenue directly lowers investor returns. The advisor or fund with the highest price does NOT guarantee success: only expenses to investors. 

Investors can now control the price. We can use low-cost mutual funds and brokers. Since Wall Street cannot predict the markets and we don’t know if stocks will outperform all other assets over time, we must take the Pascal wager:

Pascal’s wager: The consequences of not being in the markets are worse than being in it for the long haul. Buying the market returns at the lowest price is the best solution for long-term wealth-building. You are better off without “professional” advice.

Example: Member Ron Delaney of New York will gain $400,000 because he asked about his 401k plan. Mutual fund fees are the largest source of overcharges—$400,000—over time. Ron did not believe pension costs were as high as we said. He asked his HR person about the costs of his 401K plan. He received a packet of materials. Finally, he calculated that his annual expenses were 2.1% and his annual fee was $50. His plan offered index funds for just 0.70%. He picked which funds he needed and saved $2,800 ($4200-$1400) every year. By the time Ron retires, he may have added an extra $400,000 to his 401k.

Your choice is clear—avoid Wall Street. Their “advice” is just marketing hype. Their research exists to sell their products. Take the advice of unbiased advisors like master investor Warren Buffett,

By periodically investing in an index fund, for example, the know-nothing investor can actually out-perform most investment professionals.  Paradoxically, when "dumb" money acknowledges its limitations, it ceases to be dumb.

The Psychology of Why People (Used to) Hate Annuities, Part 2

The following is an excerpt from Snap Judgment: When to Trust Your Instincts, When to Ignore Them, and How to Avoid Making Big Mistakes with Your Money by David E. Adler. This is a fascinating book about the psychology of money and how our instincts and emotions often harm us when we make investing decisions. The excerpt below is part two of a two-part series (part one was posted earlier today.)

Annuities

There are rational reasons to buy an annuity when you retire. The foremost is you don't have to worry about outliving your money. With a guaranteed check coming in each month, you need never live your final years in poverty. On top of this, annuities also have the potential for higher returns than from traditional investments because of their inbuilt insurance features—if you survive that is. For people who make it into their 90s, the income from an investment in traditional assets would only be 40% compared to the income from the same amount of money spent on an annuity. The fact that people aren't necessarily good at handling their money once they have retired makes the arguments in favor of annuities even more compelling. This is why the wildly enthusiastic consensus among most economists, to say nothing of the insurance industry, is that annuities are a great thing.

But the consensus among the public is that annuities aren't so hot: Only a tiny fraction of people buy them. Many people hate annuities, which puzzles academics. Hence, economist Franco Modigliani, in his Nobel Prize acceptance speech, said, "It is a well-known fact that (individual) annuity contracts...are extremely rare. Why this should be so is a subject of considerable current interest. It is still ill understood."

It is no longer so "ill understood." The answer has to do with human psychology. Annuities, until recently, were a bad match for what most people, as opposed to most economists, worried about. One rational reason not to buy annuities is they tend to be very expensive, with the pricing opaque and hard to figure out. Also, they make the most sense if you plan to live a long time, and therefore attract people who are unusually good at doing this. Insurance companies have noticed, and priced annuities accordingly, meaning they are costly. They aren't actuarially fair, and the pricing favors the long lived instead of the general population. And they have some risks: Because they are contracts with individual corporations, if the insurer goes bust, there goes your annuity. Finally, annuities are complex and hard to understand, and people don't like complexity. The complexity starts with the name, with many things called an "annuity" that aren't annuitized. For instance, insurance companies offer products with annuity in their name that really resemble mutual funds: You don't have to surrender your principal and they don't guarantee lifetime income. The annuities I am referring to are "life annuities"—irrevocable insurance products that in exchange for a payment offer a minimum level of guaranteed income that lasts a lifetime.

The central problem is framing: Consumers view annuities as risky gambles rather than insurance. If we die early, we lose; if we live a long time, we win. Economists, and insurance companies, view annuities as insurance: not against dying but against the risk of outliving your wealth. They call this longevity risk—the risk that you live longer than you expected and have budgeted for. Anyone else would consider living to a ripe old age a good thing. Not economists who fret about all the financial dangers involved, which can be mostly taken care of by annuities.

This brings us back to Jeffrey Brown's framing experiment. Says Brown, "If I think about how much money I have in a bank, then an annuity looks horrible. I am giving up a lump of wealth and whether I get it back or not depends on how long I live; so it seems risky. But if I think about how much I am going to be able to spend every day, then an annuity looks great."

Insurance companies are well aware of our psychological problems with annuities, and current behavioral economics research into this area. Their psychological insights are allowing them to engineer products that meet consumer's psychological as well as financial needs. This includes "reframing" our perception of annuities by highlighting their insurance features. Some annuities are now explicitly offered as longevity "insurance"—these are usually ones designed to kick in very late in life, at 85 plus. Or another idea is to link an annuity to long-term care insurance, a sort of two-for-one product, addressing two big concerns of the elderly: cash flow and healthcare. Variable annuities try to emphasize growth and income, appealing to our desire for both. The biggest changes are in "guaranteed death benefits." Insurance companies are trying to take the "gambling with your life" feature out of annuities, through guaranteed death benefits. The idea is you, or rather your estate and beneficiaries, get the money back if you die before the annuity has kicked in. In fact, the development of annuity products is so rapid and extensive, much of it based on applications of behavioral economics, that insurance companies, once seen as plodding and dull, are at the center of financial innovation. It looks like they will succeed in making annuities popular.

But I still see challenges ahead because there is one remaining big psychological—and real—problem with annuities, and that is control. If you buy an annuity, you give up control of your money. Maybe the insurer will let you buy the annuity back, but such a rider is extremely expensive. And a true annuity is irrevocable. "Irrevocable" is not an easy concept or word to swallow. Once you buy an annuity, the money is no longer yours. Before you had, say $1,000,000. After the purchase, it now is the insurance company's. You get a check every month, but you no longer have the $1,000,000 to play with.

Even though an annuity reduces the risk you won't outlive your money, there are other risks to worry about, like the risk you won't have enough money exactly when you need it, if you get really sick, for instance, or have a sick grandchild. It doesn't have to be so morbid: You might prefer the flexibility of playing with your money. For all I know, you might have the desire to buy a $15,000 bottle of champagne and spray it around a nightclub, or go on a mega shopping trip to Dubai and end up broke afterward. These might be your desires. But it would be hard to live your dream on your carefully doled out "oldster" allowance in the form of an annuity from your insurance company.

So the question comes down to this: Do you want all your consumption needs insured in the form of annuity, or just some or maybe none of them? I don't think this is about being rational versus irrational; it's just a matter of your tastes, how you want to invest your money, and how you want to spend it.

The Psychology of Why People (Used to) Hate Annuities, Part 1

The following is an excerpt from Snap Judgment: When to Trust Your Instincts, When to Ignore Them, and How to Avoid Making Big Mistakes with Your Money by David E. Adler. This is a fascinating book about the psychology of money and how our instincts and emotions often harm us when we make investing decisions. The excerpt below is part one of a two-part series. The second part will run later today.

Take the following retirement quiz about two people who have made permanent decisions on how to spend a portion of their money in retirement. Which sounds like a better deal to you?

Quiz #1

Each person has some savings and can spend $1,000 each month from Social Security in addition to the portion of income mentioned in each question. They have already set aside money to leave for their children when they die. The choices are intended to be financially equivalent and based on personal preferences for spending in retirement.

Mr. Red: Mr. Red can spend $650 each month for as long as he lives in addition to Social Security. When he dies, there will be no more payments.

Mr. Gray: Mr. Gray can choose an amount to spend each month in addition to Social Security. How long his money lasts depends on how much he spends. If he spends only $400 per month, he has money for as long as he lives. When he dies, he may leave the remainder to charity. If he spends $650 per month, he has money only until age 85. He can spend down faster or slower than each of these options.

Results: How did you answer? It is likely that you felt Mr. Red had a better deal than Mr. Gray. His consumption was guaranteed for life whereas Mr. Gray risked running out of money after age 85.

This financial quiz (actually a psychological experiment) was developed by the economists Jeffrey Brown, Jeffrey Kling, Sendhil Mullainathan, and Marian V. Wrobel, who wanted to understand what factors went into people's retirement decisions. They found the majority of participants when presented with this exact choice preferred Mr. Red's situation to Mr. Gray's.

Then the economists varied the experiment slightly. They rewrote the setup paragraph using new language and new descriptions, which conveyed a slightly different message. They tested it on a new group of participants.

Here is their new quiz. Try taking it. You might not change your answer because you have already seen the original version. Nonetheless, try reading the introductory paragraphs slowly and carefully, letting it put you in a new frame of mind before making your decision.

Quiz #2

Two people have made permanent decisions on how to spend a portion of their money in retirement. Which sounds like a better deal to you?

Each person has some savings and receives $1,000 each month in social security, in addition to the portion of savings mentioned in each question. Each person has chosen a different way to invest this portion ($100,000) of their savings. They have already set aside money to leave for their children when they die. The choices are intended to be financially equivalent and based on personal preferences for investing in retirement.

Mr. Red: Mr. Red invests $100,000 in an account which earns $650 each month for as long as he lives. He can only withdraw the earnings he receives, not the invested money. When he dies, the earnings will stop and his investment will be worth nothing.

Mr. Gray: Mr. Gray invests $100,000 in an account which earns a 4% interest rate. He can withdraw some or all of the invested money at any time. When he dies, he may leave any remaining money to charity.

Results: The majority of people who took this quiz said Mr. Gray had a better deal.

Quiz #1 and Quiz #2 are, of course, exactly the same in financial terms. But in psychological terms they couldn't be more different, because of the differences in language and descriptions. In the first quiz, everything is presented in terms of consumption: Mr. Red and Mr. Gray spend the money. When taking the quiz, you are confronted with the consumption consequences of financial decision. The second quiz emphasizes investments. It uses words such as invest and earnings. It mentions the account balance. When taking this quiz, you think about the return on the investment.

Psychologically, these differences in perspectives are known as frames. The underlying information is the same, but we filter it and make our decisions depending on how the choices are couched. When the financial decision is framed as a consumption decision, Mr. Red's guaranteed spending money looks the good deal. When the financial decision is framed as an investment decision, Mr. Gray's opportunity to invest his money looks like a better deal. In another words, context can be as important as content when it comes to financial decisions, even very important financial decisions.

I spoke to Mr. Brown (this is beginning to sound like a Quentin Tarantino gangster movie where each character is named after a different color, but here I am referring to the eminent economist Jeffrey Brown of the University of Illinois who cocreated this experiment). He said this of his results: "Traditionally, economists have had the underlying view that people are hyper-rational and are trying to maximize their happiness (what economists call utility). If you believe that, then how you package the information shouldn't impact their decisions. But you have huge swings in how people behave depending on how the information is packaged."

The larger point of the experiment is not just that framing has an impact; it is specifically about how retirement planning is "framed" in the U.S. and how we are conditioned to think about it. Should our financial focus be on building wealth for retirement, or on what we can consume after we retire? Is the right measure of financial success how much wealth we have when we retire? Or how much we can spend each month after we retire? Like the quiz, these are different ways of looking at essentially the same problem.

It is Jeffrey Brown's contention that we have been conditioned to think about retirement as mostly an investment decision, similar to quiz #2. Whereas he feels thinking about retirement as largely a consumption decision, similar to quiz #1, is more appropriate. Says Brown, "The messages that individuals receive when encouraged to save are all about how much you have in your account and your rates of return. But really you should think about how much can you eat each month, how much can you consume." This subtle conditioning or "framing" has a real result when we retire. Most people see themselves as Mr. Gray and choose the investment solution. However, most economists feel we should be in a consumption frame of mind, and follow Mr. Red's choice.

If it is not already clear, Mr. Red has bought an annuity: $650 a month. The experiment is an attempt to explain why annuities are so unpopular, despite their many economic advantages.

--------------------------------------------

Part two of this piece will post at 7:15 pm today Eastern time. Update: Here's part 2.

Interview Lessons from a Video Contest

Remember the competition for the best job in the world? Well, here's a knock off -- it's a really Goode job (a pun because the company's name is Murphy-Goode, a winemaker in California.) They're offering $10k per month for six months for someone to come out and drink wine (oh yeah, there are a few other responsibilities.) But that's the key part of the job. ;-)

As I watched a few of the application videos, it was pretty clear what was working and what wasn't working in these 60-second interviews. For instance, this video isn't working (FYI, the video is going in and out on my site, so if you can't see it here, grab a look here):

Why isn't it working? Let me name the ways:

• Poor quality. Is this really the person you wanting to represent your company on the web? The video and sound quality is terrible. Poor first impression.

• "Recently unemployed." Following up the poor first impression is an even worse second impression. Talk about leading with a negative. "I'm recently unemployed" screams "you're not worth me firing." Why even bring it up?

• I, me, my. Too much about her and what she wants. Should be about the potential employer, what they want, and how she can help.

• "I love the Internet." Is this a qualification? Really? Ugh.

• No quantifiable accomplishments. How about telling us how many visitors your blog gets? Or maybe how you did something great online (that's what the job is about after all.) This video is lacking any sort of accomplishment that's verifiable and impressive.

One positive note: at least she's cute. It's something I would expect a wine company to want -- a good-looking representative.

Overall, this video demonstrated several of the ways you can kill an interview.

Now, here's one I thought was a winner (here's the link if the video does not display):

Why did I like this one? For the following reasons:

• Good quality. Nice video, scenery, music, background, etc. Starts me off with a good impression.

• Quantifiable accomplishments. This guy can deliver! He's connected! I would have preferred that he lead with the stats (and put his personal info behind it) as well as translate the numbers into "and this is how I can use these various outlets to help you," but overall I got the impression that he has made big things happen in the past and can do so for any employer.

• Nice guy. He looks friendly -- like someone I'd like to work with.

• Good presentation. He looks comfortable and presents himself well. I know this can be edited to look this way, but at least he made it look that way. The first woman simply looked uncomfortable and like she needed a haircut (she keeps flipping her hair back.)

He didn't nail it 100%, but this interview was pretty good IMO.

So what are the takeaways here? How can we apply the learnings in these two videos to make our real-life interviews better? Here's what I'd say:

1. Make sure you highlight quantifiable accomplishments. Practice interview responses in advance and be sure they are full of success stories.

2. Have a good attitude -- be pleasant. If you can deliver results and are someone people like, you're going to win way more than you lose.

3. It's about the employer and what you can do for them. It's not about you and what you want to do with your life. (At least in how you represent yourself in the interview. Obviously, you have to consider your wants and needs. But presumably you've done this prior to even interviewing for a job.)

4. The little things matter. The little things say a lot about you -- the type of person you are, whether or not you'd fit in, and so on. And remember, you're always "on" -- from the time you hit the parking lot to the time you leave it, ANYTHING you say or do can influence the hiring decision. So be warned, and act accordingly.

Best of Money This Week

Just wanted to let you all know that this week's Best of Money Carnival is up at Gather Little by Little. Congrats to all participants and especially the winning post, Identify & Overcome Money Anxiety & Stress in Relationships!

Next week's carnival will be held at Bible Money Matters. Click here to submit a post.

How to Make the Most of a College Degree

I've written a lot about the value of a college degree including the following:

• College is Expensive, but Well Worth It Financially (Or: Give Four Years and $40,000 and Get an Extra $1 Million)

• This Year's Graduate's Destined to Earn Millions in Their Lifetimes; Average Graduate Can Earn $25 Million if Career is Managed Correctly

• How I Made Millions Off a $5,000 Investment

• Why Education is So Important to Your Financial Future -- And How You Can Pay for College

• The College Degree is Not Dead

• College Degree Worth an Extra $23,000 per Year

But here's a piece from MSN Money that says a college degree isn't a good deal. To prove their point, they take two friends, Bill and Ernie, and make these assumptions:

• Ernie and Bill are the same age and each saves exactly $16,594 for college.

• Ernie doesn't get accepted to a school he likes. Instead, he starts work at 18 and invests his college savings in a mutual fund that tracks the broad stock market.

• Ernie makes average yearly pay for a high school graduate with no college, starting at $15,901 after taxes and peaking at $32,538. Each month, he adds to his stock fund 5% of his after-tax income, close to the nation's current savings rate. It returns 8% a year, typical for stock investors.

• Bill gets into a public college and after two years transfers to a private one. He spends $49,286 on tuition and required fees, the average for such a track. I'm not counting room and board, since Bill must pay for his keep whether he goes to college or not. Bill gets average-size grants, adjusted for average probabilities of receiving them, and so pays $34,044 for college.

• Bill leaves school with an average-size student loan and a good interest rate: $17,450 at 5%. The $16,594 he has saved for college, you see, is precisely enough to pay what his loans don't cover.

• Bill will have higher pay than Ernie his whole life, starting at $23,505 after taxes and peaking at $56,808. Like Ernie, he sets aside 5%. At that rate, it will take him 12 years to pay off his loan. Debt-free at 34, he starts adding to the same index fund as Ernie, making bigger monthly contributions with his higher pay.

They then detail the results:

But when the two reunite at 65 for a retirement party, Ernie will have grown his savings to nearly $1.3 million. Bill will have less than a third of that.

Why is this? The summary:

College degrees bring higher income, but at today's cost they can't make up the savings they consume and the debt they add early in the life of a typical student. While Ernie was busy earning, Bill got stuck under his bill.

In other words, saving early beats earning more.

This isn't a new concept here. I talked about the same thing awhile ago (though it was about investing) in The Best Way to Maximize Your Investment Return.

The author admits that there are flaws that could be poked in his analysis and that the standard of living of the two men will likely will be different, but the point is made. A college degree isn't the slam dunk financially it once was. Especially when you assume today's "averages" for college students. (He goes on to argue about an alternative system of higher education, but that's beyond the scope of what I'm covering today.)

But who's striving to be average? Yikes! Is that the standard we're holding ourselves up to? I know it's not, and it's not what the author intended. And yet, that's what his numbers are based on. So what can/should potential graduates do to make the most of their college degree financially? I'd recommend the following:

1. Make the cost of college as low as possible. Why pay what the "average" person pays? Why not take steps to get your education for as little as possible? For instance, instead of going to a public and private college (as assumed in this example), what about going to a junior college and transferring to a public on after two years? This alone will save a TON of money. For more ways to cut the costs of college, see Five Ways to Reduce College Costs,  10 Ways to Reduce College Costs, and How to Get the Most Financially Out of College.

2. You can also work during college. Assuming your income is zero during this time may be what average people do, but you don't have to follow suit. And not only will working in school help you out financially, but it will also kick-start your career.

3. Only borrow money that makes sense to borrow. What does this mean? It means that you match the cost of college with your potential post-college earnings. A teacher with $100,000 in debt doesn't work out financially while a medical doctor with $100,000 in debt is fine in many cases. See what I mean?

4. Do everything you can to grow your career once you get out of college. Develop a system to regularly over-perform in your job and you'll end up getting promotions and pay increases that the Average Joe doesn't get.

Believe this can't be done? Think again. It's what I did. If you want details, see How I Made Millions Off a $5,000 Investment.

Is the Welfare State the Fault of Christians?

For those of you new to Free Money Finance, I post on The Bible and Money every Sunday. Here's why.

That title will get some attention, huh? ;-)

Anyway, let me state up front that this isn't meant to be a Christian-bashing post (why would I want to bash myself, anyway)? But it is meant to ask an honest question, namely "would the U.S. need all the government spending and programs we have if Christians simply followed the giving principles detailed in the Bible?"

This piece asks this question and has some good thoughts on it. It starts with a bit of a history lesson -- how the church used to help people:

The Church — the Body of Christ — continues its laxity in assisting the poor, the homeless, the diseased and the mentally ill in the United States. In the days before Franklin Delano Roosevelt's New Deal and Lyndon Baines Johnson's Great Society, it was the Christian church that provided food, clothing and shelter for the poor and destitute members of society.

For example, During The Great Depression and thereafter, the majority of "soup kitchens" and "shelters" were run by local churches. The homeless were provided a warm meal, a place to rest and a chance to hear the Good News of salvation through Jesus Christ. Christians in those days understood that in order to address the needs of the soul, it's best to first address the needs of the body.

But today, it appears that Christian leaders and church members have passed on the role of charity givers to the government — a government that prohibits even the mention of Jesus Christ within the public realm.

To put it succinctly, Christian men and women have changed from a people who literally give the shirts off their backs to cheapskates. And we have more than merely anecdotal evidence to back up that claim.

The article then goes on to detail a few studies showing that giving among Christians is way down over the past decade or so. It then gives these thoughts:

With such a shabby record of giving by churchgoers, it is difficult for churches — an important institution for community stabilization — to perform their Christian duties to feed, clothe, and shelter the poor, disabled, mentally ill and others in American society who depend on the charity of others.

With this lack of charity comes the unintended consequences of government programs that are intrusive and ineffective. For instance, public assistance, or welfare, has done more to destabilize the nuclear family than any other program in history. One of the stipulations for qualifying for public assistance is that a mother be alone in raising her children. So, in order to qualify, millions of women forgo marriage and create a single-parent home for their children. Another drawback is welfare payments being based on the number of children in the home. This further increases the number of children who grow up without a father.

Honest sociologists long ago realized the destructive nature of government-run "charity." Yet, conservatives — especially Christian conservatives — may find it difficult to condemn the welfare system without performing their Christian duty to be charitable.

Ok, so here's my take on the issue:

• If all Christians would tithe (or give generously, if you prefer) 10% of their income, think of the people that could be fed and housed, diseases that could be eliminated, lives that could be saved, and so on. Unfortunately, studies show that Christians give only 2-3% of their incomes, the same as non-Christians. For a group where a major part of the teaching is on giving to help others, this is surprising and disturbing.

• I'm not so sure many churches today would spend the money wisely even if they had it. Many seem more interested in building big buildings and keeping the flock comfortable and entertained than they are in helping the poor. Not that there's anything wrong with going to a service that's done in a nice place and with excellence, but so many have taken it to an extreme.

• I hang around Christians quite often and I can verify that most of them are against "big government." And yet their giving (as a group) could make the government much smaller. But they're (as a group) not willing to make the personal sacrifices required to give as they should. Kind of ironic, isn't it.

• All this said, Christians do give a ton of money, just look at giving dollars in the absolute. You'll see that "religious" giving is always at or near the top. All I'm saying is that if it was three or four times greater (the amount, on average, that it would be if every Christian tithed) and spent to help people, then government programs would be a lot smaller.

• This post isn't meant to be a debate on tithing, I've just used that amount to set a standard. I've written enough about tithing in other posts, so check those out and comment there if you have a beef with the concept.

Just because many Christians don't give as they should doesn't mean that all are cheapskates, of course. I'm not saying that, so don't accuse me of it (I know someone was thinking of it.) All I'm saying is that Christians have a mandate to help the poor and IMO we've fallen way short of the standard. As a result, government has had to step in to fill the void. Agree or disagree?