I’m a huge champion of penny-pinching, but there are times when being miserly can be penny wise and pound foolish –as in stupid and destructive.
I can’t help but point out that it was vulgar frugality that led to the revelations about the Secret Service scandal now imploding the agency charged with protecting the president.
As no doubt you have heard, the U.S. Secret Service is investigating allegations that some of its agents brought prostitutes to their hotel rooms in Cartagena, Colombia, ahead of President Obama’s arrival for an economic summit. Prostitution is legal in Colombia, but soliciting women for paid sexual favors is against Secret Service policy. The Washington Post reported that on Wednesday, the Secret Service announced the departure of three employees connected to the scandal. Earlier this week, the agency revoked the top-secret security clearances of all 11 men under investigation and placed them on administrative leave. Ten military personnel are also alleged to have been involved in the embarrassing incident.
Although there hasn’t been an official report of what happened, according to The Post’s account, the whole ugly mess came to light when one of the prostitutes wasn’t paid what she wanted, agency sources said.
“One person with close ties to the Secret Service, who spoke on the condition of anonymity to speak freely about an ongoing investigation, said he was told by agents that the woman involved in the dispute ‘freaked out’ after she was not paid and banged on walls and doors in the hotel hallways,” reported The Post’s David Nakamura and Ed O’Keefe.
The Colombian prostitute allegedly got angry when the agent wouldn’t pay her the $800 he had agreed to but instead offered the woman 50,000 pesos, the equivalent of about $30, according to an interview the woman gave to The New York Times.
So, really, it comes down to this: The agents’ misdeeds got them into deep trouble. And one man’s alleged penny-pinching ensured that the whole world would know about it.
So my question to readers: Do you remember a time when pinching pennies led to far more trouble than the saving was worth? Send your comments to firstname.lastname@example.org. Be sure to include your full name, city and state and put “Secret Service” in the subject line.
Controlling College Cost
Would you give up a percentage of your future earnings to avoid taking out student loans to pay for your college education?
The Post’s Brad Plumer wrote an interesting piece recently about a proposal by some students in California. The students suggest that rather than charging tuition, public universities in California should take 5 percent of the graduates’ salary for the first 20 years after graduation (for incomes between $30,000 and $200,000). Essentially, rather than taking on debt, students would prefer to sell equity in their future earnings.
One reader agrees with the idea. “What I like most about it is it changes the priorities 180 degrees,” reader “paulyheins” wrote in the Wonkblog article’s comments section. “Under this plan, colleges would have an incentive to graduate the student and graduate them with the best education and job finding skills possible. That way the student would pay back more. As it stands right now colleges are like healthcare - the longer you stay in the more you pay. Colleges currently have a vested interest in keeping the student for as long as possible and hold no responsibility for finding the student a job or career.”
Of course, there are potential hitches, Plumer says. “For one, students who want to major in the most lucrative fields — like computer science or engineering — might flee to other universities, preferring to take their chances with traditional loans.”
I’m don’t like either strategy for paying off college debt –incurring decades of debt to attend school or pledging your future salary to pay for college now. What do you think? Send your responses to email@example.com. Be sure to include your full name, city and state and put “Controlling College Cost” in the subject line.
Tax Time Cheaters
It’s over. Tax day is gone.
But what if you cheated on your taxes? Wondering when your offense will be so old that the Internal Revenue Service won’t come after you?
“As is often true with taxes, the answer is complex and full of traps,” writes Wall Street Journal columnist Laura Saunders.
For garden-variety civil tax issues, such as overstating an entertainment-expense deduction, the statute of limitations is typically three years, Saunders says. But there are many exceptions that give Uncle Sam wide latitude. For example, if the tax issue involved income greater than 25 percent of the gross income on the return, the statute of limitations rises to six years.
And when it comes to civil fraud, there is no cut-off date.
Financial Literacy Month
As we hit the middle of financial literacy month, Mint.com contributor Cyrus Sanati has been tackling personal finance topics. This week it’s mutual funds.
“The mutual fund is the quintessential collective investing scheme,” says Sanati. “It is basically a variety of securities (stocks, bonds, etc), which are owned collectively by a large number of investors. The securities make up a single fund, and shares are sold to investors based on their collective value. It is managed by a group of financial professionals who make all the investment decisions on the fund’s behalf. If the securities in the fund increase in value, then the value of your shares also rises, equating to a positive return on your initial investment.”
Sanati answers some of the most frequently asked questions about mutual funds.
Responses to “Breakaway Wealth”
In an award-winning series, Washington Post writers Steven Mufson, Jia Lynn Yang and Peter Whoriskey reported on the nation’s growing wealth gap.
For last week’s Color of Money question, I asked: “How do you feel about the growing disparity between the super wealthy and everyone else?”
“In light of the huge disparity between top executive pay and the new working ‘no longer middle class’ poor, like me, I think the poverty level income figures should be revised,” said AJ of Waldorf, Md. “I am a grossly underpaid educator who is committed to my career choice, but am usually delving into ideas to produce additional streams of income.
Michael Ripple of Somerville, Mass., wrote, “The energy is mostly going to the top 1 percent. The middle class and working poor are losing their energy.”
On Saturday, April 21, at 11 a.m., I’ll be speaking at Columbus Metropolitan Library in Columbus, Ohio. The library is sponsoring “Money Smarts for You: A Day of Free Financial Help.” The address is 96 S. Grant Ave., Columbus, Ohio 43215. There will be free parking and child care for children 3 to 9 years old. To learn more, call 614-645-2275, or click this link.
Tia Lewis contributed to this report.
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