A Penny Saved

This is part 2 of 2 of 20 real answers to the 20 dumbest finance questions. The questions come from a post called the 20 dumbest personal finance questions at Punny Money. I covered the first 10 questions in the first post and we’ll tie up the last 10 in this one.

• Q: How much is my house worth?
  • A: The short answer is I don’t know. The long answer is that only an assessment can really tell. That or selling the house. Since I’ll assume you don’t want to sell right now, try visiting Zillow.com and see if it has any info for your neighborhood. If not, you’ll most likely have to order an assessment if you want to know the real value of the house. Expect to pay anywhere from $200 to $500 for an assessment.
• Q: Why can’t I get a loan when I don’t have a job?
  • A: One of the key factors in your lendability (think of it as lending risk) is your ability to repay the loan. If you don’t have a job, and can’t show some other form of income, you in effect are not showing any ability to repay. Nobody will loan money to what appears to be a automatic default.
• Q: Extended Warranty. How can I lose?
  • A: Let me share a story with you. My first car would have stayed in my possession about 2 years longer had I gotten an extended warranty. The transmission went and had I bought the extended warranty, it could have been fixed. As it was, I didn’t have the warranty and I had to trade it off because I couldn’t afford to pay the money for a transmission up front. The car I got on the trade, I purchased the Extended warranty. I paid nearly $2000 for the warranty. I used it once for repairs that would have cost me about $600. The car cost me an extra $1400 because of the warranty. The truth is that the extended warranty is a crap shoot. The odds are against it paying off and as a general rule, they really should be avoided. Use the money you would have spent on the warranty to build an emergency savings to pay for those repairs instead.
• Q: How much money should I spend on ____?
  • A: A concrete amount is impossible without an actual item, but the best way to find a fair price for an item is to comparison shop. Look the item up on eBay, Shopper.com,and a few other sites like Amazon or niche sites where it would appear. Doing so should net you an average price for the item. Be prepared to pay a little more if you’re buying the item from a physical location as you’ll pay for the convenience.
• Q: Can I avoid paying taxes on interest by stashing my money in a foreign bank account?
  • A: No. Most foreign countries have agreements with the U.S. to report those things. Even if they don’t, if you get caught (you will) you can be charged with tax evasion. It’s a pretty serious charge and can bring some pretty serious fines about.
• Q: If I don’t pay this bill, will anything bad happen to me?
  • A: If you’re asking if Bruno the bat boy will show up at your door, the answer is no. However, not paying a bill can have serious effects on your credit rating and your future. The delinquency can be turned over to a collection agent and your rating will plummet. You’ll have a hard time getting a loan and find yourself trying to use 25%+ credit cards for the smallest things. It’s a downward spiral. If you truly can’t pay a bill, contact the debtor, and ask if there is anything that can be done so that you’ll stay current.
• Q: Are there any jobs where I can work from home and make over $100,000?
  • A: There are. They are very few and very far between but they do exist. In most cases, you won’t be working from home so much as from a hotel as they usually have travel ratios of around 80%. They also usually require oodles of experience in a very specific field. (think “husbandry habits of the northeastern mole.” yes, that specific)
• Q: I read the economy is heading towards recession/depression/annihilation. Is that true?
  • A: The odds are that it isn’t. There are many safeties that are in place to try and prevent that from happening. I didn’t say it was impossible, just not likely.
• Q: How much money do I need before I can start investing?
  • A: Very little. Places like Sharebuilder.com let you invest in as little as $20 increments. The real question is when should I start investing. The answer to that is: when you have little to no debt.
• Q: Why do hookers cost so much?
  • A: Surprisingly, it does have a little to do with supply and demand. It also has something to do with the fact that the customers are people who don’t realize that they can walk down to the bar and get it for free. I’d charge those customers a lot too.

And there are the real answers to the other 10 dumbest personal finance questions. This was a pretty fun series to write and I hope it was slightly educational. If you find yourself asking any of the questions, remember that there are plenty of sources online that will give you the truth in somewhat easy to understand ways. Just know that you might have to put a little time in to do research and learn.

Technorati Tags: dumbest finance questions, saving, debt, loan, credit rating, fico