This Week in Your Wallet: Breaking Down the Bitcoin
Before I get to the news of the week, let me just say that my heart goes out to the people of Boston, anyone personally affected by this tragedy, and runners everywhere. Economist Justin Wolfers wrote the words I wish I had when he tweeted as @justinwolfers, “If you’re a runner, you know the beautiful feelings of community and solidarity that race day usually invokes. Let’s never lose that.” Amen.
A quick reminder, tonight is the Money School Budgeting Bootcamp. There are still a few slots left, so if you haven’t signed up and want to, you can do it here. Response to the Jumpstart Your Finances course a few weeks ago was overwhelming. One participant managed to save $3,000 a year just by revisiting his spending!
And with that…Onward. The markets were roiled yesterday. Biggest down day in quite some time. Part of it was China, part the news of the explosion. Let me just take this as an opportunity to remind you that these sorts of ups and downs can happen at any time. This is why money you need in the next three-to-five years does not belong in stocks. This is particularly important for retirees or soon-to-be-retirees. But it also applies to the college fund for your 16-year-old and the stash you’re building to buy a house. Stocks For The Long Run, Wharton’s Jeremy Siegel penned. He was — and is — correct.
If you were following the financial news last week, you might have seen a lot of talk about something that sounds like an arcade prize, or part of a video game: the Bitcoin. And while it is something digital, it’s not made-up — and it saw a very real drop in valuation last week.
I’d be lying if I said I was an expert on Bitcoin (though one of my favorite television shows, The Good Wife, offered this explanation in an episode that aired over a year ago and mentioned it again this weekend) but this great Daily Finance article breaks it down nicely: Bitcoin is an online digital currency that is traded from peer to peer, through a computer’s cryptography rather than through a central bank. To add to the sense of science fiction, the creator of Bitcoin is still anonymous and goes only by a pseudonym. Unlike commodities that are traded for value but can be purchased for consumption — think coffee, cotton, gold — Bitcoin has no physical form. It’s made of digital data.
Bitcoin made headlines last week because of wild fluctuations in value. At the start of this year, TIME reports, one Bitcoin was worth $13.51. Early last week, its value was estimated to be a whopping $266 — but by Thursday, had dropped to less than $100.
So what does all this mean for you? Allow me to quote from the Daily Finance piece:
“Bitcoins are fascinating, for mathematicians, economists, traders, investors, politicians, regulators, and anarchists. And while watching the currency develop is entertaining, the experimental currency is no place for serious investing given the risk versus reward. Attempting to trade in established currencies is difficult enough.”
Personal finance articles often involve a lot of “how-to” advice: how to negotiate your cable bill, how to retire, how to budget. The latest issue of Bloomberg Businessweek is devoted to providing the best “how-to” advice, and features tips from 50 experts on everything from juggling to how to structure yoursleep for maximum efficiency. Some tips, like the juggling, don’t have much practical use. However, here are some that I thought you would find particularly helpful:
How to secure your online identity: BW advises outsourcing password management to services like LastPass or 1Password, both of which will generate unique passwords for every site you need to log into. (And of course, the more passwords you have, the safer you’ll be.) Then, remove Java from yourcomputer — it apparently has too many security flaws, and you won’t even notice that it’s gone.
How to ask difficult questions: Be direct and clear, says Senator Carl Levin. Furthermore, don’t be domineering or arrogant; if you’re not getting the answer you need, try focusing on being firm — just don’t go overboard.
How to get on a board: Fish where the fish are, Maggie Wilderotter told BW. In other words, start yourquest for a seat at the table by getting to know CEOs and other board members. She’s been on 23 public-company boards in the last 28 years, so if anyone knows how to get that seat, it’s her.
Tax Season Is Over!
… Unless you filed an extension, which means you’ll still have some paperwork to fill out. But for the rest of you who successfully turned in your tax return yesterday (or, hopefully, well before yesterday), congratulations! You won’t have to think about your taxes for another ten months. To celebrate, I give you this Dilbert comic that was making the rounds on Twitter yesterday morning. Given how complicated the tax code is, I couldn’t help but laugh!
Have a great week!
Jean
