This week’s picks for the best in personal finance from around the web.

Who routinely trounces the market (NY Times). This is why we believe in “fund infidelity,” only staying with funds as long as they’re winning.

SEC ends $1 a share for some money funds (USA TODAY). So far, this only impacts institutional money market funds. So far.

Greenspan says bubbles can’t be stopped without ‘crunch’ (MarketWatch). The former Fed Chairman on stock market bubbles and human nature.

IRA contributions: the perils of procrastination (Reuters). When you make your contributions matters more than you may realize.

How brands make the man, and the woman—literally (PBS). How large a role do brands play in your life? Are you sure?

And from the blogosphere…

Three portfolio risks you may be overestimating (Morningstar). The danger of inadvertently taking on more risk in some areas of your portfolio while trying to lower risk in others.

Your mind, your investment returns (Barry Ritholtz – Bloomberg View). When facts collide with beliefs, unfortunately, beliefs usually win.

The bulls just got the inflation news they were hoping for (Business Insider). You may be paying a lot at the pump and the grocery store, but from an investor’s perspective, the inflation numbers that matter most look good.

What you think about inflation is wrong (Bloomberg View). Don’t worry; the government’s view of inflation does take energy and food costs into account when making Social Security cost-of-living adjustments.

An eye to the past can help guide the future (Sketch Guy – a NY Times blog). Knowledge and the circle of wisdom.

We’d love to hear your responses to any of the above. To weigh in, just meet us in the comments section.

Matt Bell

By Matt Bell

Matt Bell is Sound Mind Investing’s Associate Editor. He is the author of three personal finance books published by NavPress, leads workshops at churches and universities throughout the country, and has been quoted in USA TODAY, U.S. News & World Report, and many other media outlets.

For many years, popular personal finance teaching, especially in churches, has steered people away from credit cards and toward debit cards. But recent credit and debit card data breaches, such as the massive one experienced by Target shoppers, shows why credit cards may be the better way to pay with plastic.

The Argument For Debit Cards

Debit card proponents come from a “save yourself from yourself” perspective. They point out that you can’t get too reckless with a debit card since its pulling real money from your checking account. With credit cards in your wallet, they worry that you may head to the store for milk and eggs only to come home with a new bass boat!

With a credit limit far exceeding the balance most people keep in their checking account, they argue that carrying a credit card is like walking around with a stick of dynamite in your wallet. There’s no telling when that thing might go off, blowing up your financial life and probably taking your marriage with it.

The Argument for Credit Cards

The Target mess, and similar ones at other retailers, made a lot of people rethink their use of plastic. Hopefully, it reminded people of one very important difference between debit and credit cards.

If someone buys something fraudulently with your debit card, that money has been pulled from your checking account. Now, your recovery efforts are all about getting your bank to put the money back. While many debit card issuers have zero-liability policies (as long as you sign for your purchases instead of using your PIN), banks have up to 10 days to investigate fraudulent debit card use. In the meantime, your lower account balance may leave you bouncing checks.

By contrast, if someone buys something fraudulently with your credit card, that money has not been pulled from your checking account. Instead, it shows up on your bill, giving you time to contact your card issuer and make sure you don’t have to pay for that item.

Credit Card Rules of the Road

To be sure, there are some people who would be better off not using credit cards. The temptation to overspend really is too much. However, I believe many people (and most SMI readers) are capable of using credit cards responsibly. Here are four “rules” that help.

First, use a credit card only for pre-planned purchases. If your cash flow plan (a.k.a. your “budget”) says you can spend $100 on clothing each month, you are free to use a credit card to buy $100 of clothing each month. Of course, this assumes you have a cash flow plan. I would go so far as saying if you don’t use a cash flow plan, don’t use credit cards.

Second, record your credit card spending right away. If you’re using an electronic cash flow tracking system, such as, it’ll do this for you. If you’re using a paper & pencil tracking system or some other manual process, record your spending on the day you make each credit card purchase, even though the bill won’t show up for several weeks. Today’s credit card purchase counts against this month’s budget.

This is one of the most important ways to avoid overspending with a credit card. Too many people wait until the bill arrives, which often prompts them to think the credit card company made a mistake (“I couldn’t possibly have spent that much!”), only to find out they really did make all those purchases.

Third, pay your bill in full each month.

And last, if you can’t follow rules one through three, don’t use credit cards.

Heretical Teaching?

In our household, we only use a debit card when depositing checks or getting cash. For all other plastic-related transactions, we use credit cards.

Saying that feels like revealing a deep, dark secret. The teaching against credit cards and in favor of debit cards, especially in church circles, has become so visible and impassioned that it’s easy to assume it must come straight from the pages of Scripture. But it doesn’t. God’s Word teaches us to be wise. In today’s environment of frequent data thefts, if you’re going to use plastic, I believe using credit cards is wiser than using debit cards.

What about you? Which form of plastic do you prefer and why?

Matt Bell

By Matt Bell

Matt Bell is Sound Mind Investing’s Associate Editor. He is the author of three personal finance books published by NavPress, leads workshops at churches and universities throughout the country, and has been quoted in USA TODAY, U.S. News & World Report, and many other media outlets.

The Fed’s policy of buying government bonds by the billions-of-barrels full (controversial in some quarters because it’s essentially printing money and debasing the U.S. dollar) is coming to an end this fall. Here’s a brief history review from the Washington Post:

For the past year and a half, the Fed has been buying tens of billions of dollars in government bonds and securities each month in an attempt to tamp down long-term interest rates and boost the recovery. It was the third and largest bond-buying program the central bank has launched since the 2008 financial crisis. But officials have been slowly scaling back the effort this year, and documents released Wednesday show that the Fed’s policy-setting committee is nearly ready to call it quits….

The bond-buying programs, also known as quantitative easing, have been credited with pushing mortgage rates to historic lows, breathing life into the moribund housing market and fueling a boom in refinancing…. The bond purchases have also helped send stock markets to record highs, with the Dow Jones industrial average crossing 17,000 last week. The index has hit a new high 14 times this year. But skeptics worry that the Fed could be setting the stage for another financial bubble…

The QE programs have kept short-term interest rates near zero since 2008, and the big question now is when might the Fed begin, at long last, to raise them. According to Sy Harding’s reporting, it might be sooner than expected:

The Fed now says it will use a range of economic data to decide when to begin raising rates, with its emphasis on inflation. It indicated the first rate hike will probably not be until late next year. However, with some signs that inflation is beginning to rise faster than the Fed expected, pressure is building for the Fed to consider raising interest rates sooner.

Even some Fed officials are in that camp. Charles Plosser, president of the Philadelphia Fed, said this week that, “We should not keep rates at zero until we meet all our economic objectives.” He warned waiting too long could be disruptive, that rates would have to rise faster and higher if the Fed gets behind the curve. Kansas City Fed President Esther George said this week that some of the indicators the Fed looks at are pointing to a possible rate hike as early as this year (emphasis added).

That is not the consensus of Fed officials, but raises the possibility of more dialog in that direction.

This “when will they raise rates?” discussion brings to mind occasional posts that Mark has put up over the past two years that point to rising rates as a possible indicator that the bull market may be ending. For instance:

I’ve written a number of times that I don’t think this bull market will end until that monetary policy begins to tighten. And while the winding down of the Quantitative Easing programs could be interpreted as the beginning stages of that tightening, even after that stimulus ends, we’ll still have interest rates at nearly zero. So I think we have a ways to go yet before this bull is finished.

But as we’ve frequently pointed out, bear markets always follow bull markets and your long-term plan must take this into account—by setting your stock exposure commensurate with your season of life and investing temperament.

As Mark concluded this past May:

The next 18-24 months may or may not unfold the way I’ve described here. Our investment success isn’t reliant on making good predictions, and yours shouldn’t be either. That’s a horrible way to invest. But if you’re following SMI’s strategies and have an appropriate risk mix based on your season of life, you don’t need to worry about predictions. We think that offering an educated guess of what the future may hold can be helpful if it helps you stick with your plan during periods of market uncertainty and fear. But it’s no substitute for following the personal plan that we encourage all readers to create when they start investing according to SMI principles.

Austin Pryor

By Austin Pryor

Austin Pryor has three decades of experience advising investors, and is the founder of the Sound Mind Investing newsletter and website. Austin lives in Louisville, Kentucky, with Susie, his wife of 46 years. Two of his sons, Andrew and Matthew, work with him at Sound Mind Investing. A third son, Tre, is a RealtorŪ in the area.

This week’s picks for the best in personal finance from around the web.

10 steps to take if you hope to retire soon (MarketWatch). I don’t agree with starting a new 30-year mortgage just before retiring, but there are some helpful steps on this list.

Is it time to prepare for inflation? (Advisor Perspectives). Spoiler: No, not yet.

Target date funds try timing the market (Reuters) Sold as a simple solution for 401(k) plan investors, these funds are getting more complex.

How did MY account do? (Dalbar). What system do you use to answer that question and what would make it easier?

Retirement: from theory to practice (Investment News). A retirement writer sees her topic from a whole new perspective.

And from the blogosphere…

Stock corrections after long winning streaks (A Wealth of Common Sense). For all who think this bull market is getting a little long in the tooth, there are four that lasted longer.

When bubbles become manias: the psychology of runaway markets (Trader Feed). Trying to separate the math from the mind games.

Bet on green (The Irrelevant Investor). As this year has shown so far, strong years for the market aren’t always followed by weak years.

A new Ponzi scheme every week (The Retirement Café). How a little commonsense can keep you away from all the Bernie Madoff wannabes.

Wanna pay a 50% penalty on your retirement account? (The Retirement Café). If you’re nearing 70, be PDQ about checking your RMDs.

We’d love to hear your responses to any of the above. To weigh in, just meet us in the comments section.

Matt Bell

By Matt Bell

Matt Bell is Sound Mind Investing’s Associate Editor. He is the author of three personal finance books published by NavPress, leads workshops at churches and universities throughout the country, and has been quoted in USA TODAY, U.S. News & World Report, and many other media outlets.

You probably saw the headlines, maybe even read the articles. During her recent book tour, Hillary Clinton made a couple of comments that did not go over well. When she and President Clinton left the White House in 2000, she said they were “dead broke” and had difficulty coming up with money for their “mortgages“—yes, plural—and Chelsea’s Stanford University tuition bills.

Within days of making those comments, she did it again, telling one interviewer her family should not be compared to the “truly well off,” despite her husband making millions from books and speeches and herself now making as much as $200,000 per talk.

Many called her out of touch, and I found myself singing along with the chorus of critics, if only softly to myself.

But then an old lesson about logs and specks came to mind, reinforced by a moving article I read on Christianity Today’s web site called “My Bright Sadness.”

The article appeared on my radar screen at a bad time. I was in a hurry, scanning lots of articles as I tried to finish off another Friday Roundup. It slowed me down, drew me in, brought tears to my eyes, conviction to my heart.

It made me wonder how out of touch I may have become.

An Other-Centered, In-Touch Life

The author, Pastor Doug Banister, coaches an inner city swim team. It’s an experience that breaks his heart, sometimes steers his melancholy nature toward depression, and propels him forward.

After a meet, he drove one of the young swimmers home where a group of adults was partying on the porch. No one paid attention when Pastor Banister told them how well the boy had done at the meet. Instead, one of the women swore at the kid, ordering him inside.

Another team member doesn’t get enough to eat. At least one kid’s father is in prison.

“For the first time,” he writes, “I am truly in relationship with the most vulnerable members of my community.”

Pastor Banister once planted a church that grew to 2,000 people over the course of 15 years. Today he claims to have “a gift for going backwards.”

Last winter we launched a tutoring and dinner program after practice. We began with eight kids. We ended with two. Did we fail? It depends on how you keep score. This summer I’m betting God gives points for just showing up and not going away. This summer I’m redefining fruitful as faithful.

Paying Attention

My daily experience is not filled with the types of encounters Pastor Banister describes. That alone left me feeling very out of touch when I read the article.

I was drawn to the work of writing and speaking about biblical money management out of a sense of calling. After all, it was a financial crash and burn that God used to get my attention. Ever since, I’ve had a passion to use the topic of money as a way to share the Gospel, to help believers walk more closely with Christ, to help restore marriages, and more.

Is God calling me to seek out opportunities to help meet other needs? I don’t know. But I’m willing to ask.

In the meantime, Pastor Banister’s article reminded me that whether ministering to inner city poor kids or simply living in the suburbs, my life is filled with encounters, each one an opportunity to be Christlike or not.

This point was brought home exceptionally well in a speech the late writer David Foster Wallace gave at a college commencement ceremony a few years back. More recently, his speech was turned into a powerful nine-minute video that you’ll find well worth your time to watch.

For many of us, wealth can be like water to a fish. It doesn’t take very long to acclimate to it, to not notice it anymore—to even deny that we’re swimming in it—all the while becoming more and more out of touch with those who have so much less.

Is Hillary Clinton out of touch? Maybe. But what is that to me? The huge log in my eye should remind me more often than it does what hypocrisy it is to pay more attention to the speck in someone else’s eye.

What have you found helpful in making sure wealth does not make you out of touch?

Matt Bell

By Matt Bell

Matt Bell is Sound Mind Investing’s Associate Editor. He is the author of three personal finance books published by NavPress, leads workshops at churches and universities throughout the country, and has been quoted in USA TODAY, U.S. News & World Report, and many other media outlets.