Each week I run into a few articles that I feel are especially valuable. Every Monday I would like to share some of the best with you, my readers. I hope you find them helpful.
This week’s favorites include refinancing at a lower rate doesn’t always save you money, how does your net worth stack up the averages, ways you accidentally commit tax fraud, you can’t out earn bad spending habits, and the damage from state-specific CME licensing requirements.
When interest rates drop, a vast crowd flocks to the bank to refinance their loans. Just like lemmings running towards a cliff, the journey may not end as well as predicted. I remember a time when I could call the bank and ask what their current commercial loan rate was. Last summer when I contacted the bank to ask the current rate for a construction loan for my new home, I was told it would be a 6 week wait to get an appointment to talk to the loan officer on the phone about rates. The bank was so swamped with people refinancing, that they could not field the call. MSN Money published a piece from The Motley Fool on Why Refinancing Your Debt to a Lower Rate Doesn’t Always Save You Money. They are right, some of us are refinancing our way right off the cliff. Sometimes a lower interest rate refinance is more expensive than continuing with your current loan.
Often we wonder how we are doing financially compared to our friends, colleagues and neighbors. Here is a chance for a glimpse. CNBC published an article that spells out the household net worth broken down by age groups. This data is from the 2019 Survey of Consumer Finances. Even if you find you are “better than average,” don’t let it make you complacent. In this setting, average isn’t good enough. The average family is not doing well financially, so don’t make average the target you shoot for. But it is fun to see where you stand.
Have you ever been scammed? It doesn’t feel so good. The government doesn’t like to be scammed any more than you do, but they have teeth to do something about it if you scam them. If you commit tax fraud, even if it was accidental, the IRS will not be happy, and they can make you very unhappy as well. Go Banking Rates recently published an article on the Seven Ways You’re Accidentally Committing Tax Fraud. I think that #6 is the most common issue and I have had many people ask me to help them intentionally commit this fraud. Don’t let yourself get into trouble with the IRS, they are not an enemy you want to face.
How much of one’s financial difficulty in life is due to lack of income and how much is due to poor spending habits? Physician on FIRE published a guest post from Jori Hamilton on The Danger of Assuming You Can Out-Earn Your Bad Spending Habits. I have noticed that bad spending habits magnify as your income increases. If you tend to overspend when buying cars, you will overspend even more on those cars as your income goes up. Good discipline in spending goes a long way to create wealth. I am thankful to my wife for pulling in my spending tendencies. She is my best financial asset.
If you have a medical license in more than one state, you know about the ridiculous requirements some states make for CME and licensure. It comes from state lawmakers with silly demands that get tacked onto their pet bills. For instance, when assisted suicide was enacted in Oregon, they tacked onto the bill the requirement for every physician to undergo specific CME for pain management in terminally ill patients. It was as if we don’t already know about pain management. I don’t know how they thought a one time, one hour course was going to counteract the bad effects of their assisted suicide bill. But ever since then, every physician applying for an Oregon License has had to take the one hour course. It was a useless and undue burden placed on physicians and the same burden, but on a different pet peeve topic, is present in many other states as well. This alone would be a good reason to have a national license to practice medicine, instead of having to get another license every time you change states. Look for Zebras gives us a good summary of this problem in their article State Specific CME requirements and how they are hurting physicians.
I hope you enjoy these articles as much as I did. I look forward to updating you again next week with a few more articles I find especially interesting. If you read an especially good article, send me the link so I can share it with others.