Hard Truth Week in Review – Cynics Edition

April 25, 2010 by  
Filed under Fools of Finance

I’m a generally cynical person about personal finance. No surprise there. I’m not saying that’s a good thing. I’m just owning up to my flaws as a human being. Here’s an explanation of why you may be a cynic too.

Here are a few more cynical readings in the world of money.

CNNMoney asks whether the unemployed should receive a third year of benefits. I asked a similar question last year and again last week. The CNNMoney article provides the usual anecdotal evidence of personal hardship, proving once again that hard cases make bad economic policy, particularly in an election year.

If you think that being a landlord is a pathway to wealth, think harder. The Four Pillars blog reports his real returns on investment (6.8%) and equity (4.6%) from his single rental property. These meager returns are not worth the risk, particularly considering the lack of liquidity in the investment. Also, the typical small-time landlord actively manages his own properties with no compensation other than net income from rents. That time spent is an opportunity cost that should be considered as well.

I was going to write something about this week’s bogus celebrations of GM “repaying” its government bailout money. The cynical Money Musings blog beat me to it. ¬†Michael did a fine job of explaining why the report of the so-called GM loan pay-off is complete B.S. If you pay taxes, it’s definitely worth your time.

Don’t forget to visit this week’s Carnival of Personal Finance at Punch Debt in the Face.

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4 Responses to “Hard Truth Week in Review – Cynics Edition”
  1. MasterPo says:

    By Obama’s own words a great many of the jobs lost just are NOT going to come back!

    Ex: How many of the *65,000* auto works that HE and the UAW layed off when the gov took over GM have been hired back? Or at least at similar jobs (for similar pay)? Very few!! So now what? Waiting around for the great American auto industry revival that just isn’t going to happen even if Obama can walk on water?

    From personal experience (I was one of the thousands of NYC IT employees that lost my job soon after 9/11) knowing my unemp was soon to run out forced me to make some very tough decisions that had to be made and not just kicked down the road.

    Then again, if gov can kick it’s problems down the road indefinately, why can’t Joe Mainstreet?

  2. MasterPo says:


    Not racist.
    Not violent.
    Just not silent any more.

  3. kitty says:

    “Also, the typical small-time landlord actively manages his own properties with no compensation other than net income from rents”

    As a former landlord – there are other advantages to renting especially in a bad real estate market or in a real estate market that just starts to go up after a downturn. For example, renting out may be a valid alternative to selling at a loss; if you plan to move to a different home in a close by location. Renting out my old condo was ultimately the best decision I’ve ever made as the property I could’ve sold for under $114K (not even sure about that), I ended up selling for 215K. The amount I cleared after the sale allowed me to pay off the mortgage on my current home with one check. Not bad for 4.5 years of renting out. Now, you may say it was the bubble, except for I sold a bit too early – in 2004. Had I waited, I could’ve sold for 300K.

    He is also an unusual case in that he cannot take advantage of tax breaks that come with rental because he is a student with very little income. For me it worked out great because I was in a higher tax bracket than 25%. So the money I saved in taxes from claiming depreciation were actually higher than what I paid for recaptured depreciation when I sold. But for him it’s bad – he’ll have to pay taxes from recaptured depreciation when he sells even though he didn’t derive any benefit from it (my parents were in this situation this year when limited partnership they invested 12K in 20 years ago sold the property and dissolved – had to pay taxes on money they’ve never saved). Maybe he’ll get some job soon that would pay him enough to take advantage from tax breaks you get when renting out. So the moral of the story – consider your tax situation before you rent out.

  4. Michael says:

    Yeah, I’m about as cynical as they come. As a guy who just tries to do things right, each days’ news just brings another slap in the face. :)

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