Wednesday, October 10, 2012

Digging Into the Details

"If it's too good to be true, then it probably is." ~ adage

A good skill in Personal Finance is to be able look past the financial claim and evaluate the basis for the claim in the details.  When I evaluate investment results, I like to understand how they were achieved, e.g. one or two good stocks like Apple, or a generally rising market like the tech bubble.  Sometimes, I find that past results may not be a good indicator of future performance.  When I look at guaranteed returns from insurance companies, I like to understand what flexibility I am giving up to get the guarantees, which typically require extended contracts and no inflation protection.

Applying this principle of looking deeper into the data can be applied to financial campaign claims also.  For example, President Obama has claimed to cut taxes 18 times for small businesses and Governor Romney claims he will be better at reducing the deficit.

Revisiting President Obama's Small Business Tax Cut Claim reports that the 18 tax cuts were either extensions/improvements of existing tax cuts or tax incentives, which require spending additional money, designed to get small business to take certain actions.  In most cases, the tax cuts were temporary and have already expired, begging the question if President Obama has raised taxes 18 times on small business :-)

Analysis: Candidates Deficit Reduction Plans Don't Add Up  reveals that Governor Romney's plan is too bold and would require significant cuts that would likely not make it passed Congress.  President Obama's plan is too timid and uses creative accounting to develop spending cuts.

Both of these were balanced articles that dug deeper in the specifics and provided a more clear picture of the financial claims, which appear to better than reality.

For more on The Practice of Personal Finance, check back every Wednesday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2012 Achievement Catalyst, LLC

No comments: