50 smartest things? Maybe, maybe not …
June 18th, 2005 | by mbhunter |Recently Money posted and published the 50 Smartest Things to do with your Money. Some are indeed smart. Others probably aren’t that smart because of some heavy assumptions or just plain sleight of hand. They’re definitely worth a look overall, but not worthy of gospel.
Real Estate. The tip about “Fixing your ARMs” is smart — interest rates are probably on the way up. But getting a HELOC if you don’t need one? Why tempt yourself? Also, if you use it to consolidate credit card debt, you’re also probably signing yourself up to pay interest for a few years. A lot of HELOCs have prepayment penalties. Also, regarding the self-adjusting thermostat, check to see whether or not it’s more energy efficient to keep your central air/heat at constant temperature. With ours it actually takes more energy to fiddle with the temperature than not.
Money Management. Good ideas all except for part of the first one, but it’s a doozie:
“Call your mutual fund or broker to have monthly investments routed from your bank.”
This is a very dangerous habit to get into. It gives you the opportunity to not think carefully about your investment strategy, or to forget about it altogether. You don’t want to forget about where your money is being invested. Tides turn, and funds make money regardless of whether you have a gain or a loss. Donald Trump wrote in one of his books that he likes to write as many checks from his business as he can, for the purpose of seeing where the money goes. If you’re not physically writing the checks each time, it’s too easy to forget about it.
Great Ways to Save. These are good.
Smart Ways to Deal with Taxes. Just watch out about tax consequences when you sell your house after you’ve deducted part of it for a business. You have recapture of the deductions.
Intelligent Investing. These don’t seem to be bad advice, but there’s a big, BIG assumption in most of the tips in this section. There’s a strong bias toward mutual funds. No one investment vehicle is the best for everyone all the time, and this is especially true of mutual funds. You should consider the timing of your investment as well as what you invest in. What about precious metals? Cash? Foreign currency? Commodities? Tax lien certificates? CDs? Municipal bonds? A business? These are totally absent in the “Intelligent Investing” section. Further, it’s really hard to have good gains when you’re doing the same thing as everyone else.
It’s probably not surprising that there’s a heavy bias toward mutual funds — particularly Fidelity, T. Rowe Price, and Vanguard funds. Just leafing through the big ads I saw three full-page ads for T. Rowe
Price, two for Vanguard, and one for Fidelity. No doubt that these companies pay big bucks for these ads. Maybe it drives the magazine to defer to mutual funds as the investment vehicle of choice? Or, more strongly, that Money has heard from these companies that it expects endorsements peppered in the financial articles lest they pull out? I don’t know.
Savvy Consumer Moves. These are on the whole excellent. Especially the part about buying used if it makes sense. This is the advice that I recommend to people as often as I can.
Great Ways to Better Yourself. Again these are really good for the most part. I question spending a lot before your child applies to college just so that they can get aid. Why expose yourself to financial disaster if you don’t need to?
Anyway, Money probably does more good than harm with this top-50 list, but it’s always advisable to read in light of where the magazine gets its money from. Mutual funds are but one option.
