On Ethics

Yesterday two interesting things occurred to prompt the writing of this post, though the catalyst the matter has been on my mind for some time now.  The matter of Ethics.

Yesterday I wrote a piece on how to fund an IRA with a Credit Card, which garnered mixed reviews, and also I became, for the first time in my life ethically bound to uphold certain practices by an external organisation.  It is my belief that a lot of the concern over funding an IRA with a Credit Card is that if a person could not afford an IRA they should not use debt to do so.

The facts of the matter are that if a person who could not otherwise afford an IRA used a card in the way I mentioned they could reduce the cost of owning a $1,000 to $233 with a combination of applying the cards signup bonus and the tax break that they otherwise could not have claimed by borrowing for 12 months on no interest.  In no uncertain terms that individual would be better off financially to do this.

Here are some of the concerns that I heard from many readers, either in the comments, via email or on twitter:

“if a person was in debt they shouldn’t be using credit cards for points and miles, they should be paying down their debt”

– my take is that this is rubbish, points and miles from credit cards are free money from the issuing banks, it is the ability to manage the card, and the decision on where they opt to spend the free money that matters.  It is spending and saving habits that matter, and excluding credit cards from this is a naive and simplistic approach, that does offer certain protections to the individual, but at a cost that outweighs the benefits.

“a person not as smart as you might mess this up, it is dangerous!”

– again true, but who are we to judge, the truth of the matter is that this plan works, it can be helpful to people, it can allow people to get on the retirement ladder when otherwise they cannot.  Yes, there are risks associated with messing it up, but there are risks everywhere in life.

This blog, is all about finding the best route through financial decisions, at some levels it is more of an exploration of concepts that people will never undertake, but is intended to open your mind to different ideas.  I can totally see the value in keeping things simple and more actionable.  There are a myriad of problems that can be answered with “it’s hard to say” or “it depends on the person” but I enjoy getting stuck into tough questions and finding interesting loopholes or routes through these decisions.

I also have my own standard of Ethics.  I do not go out there to trick the reader, or suggest things that are illegal.  I do share the potential results of following an elaborate plan for inspiration.  An example of me executing my own ethical boundaries yesterday was the exclusion of bankruptcy protection for IRAs.  The first $1M of IRA assets are protected in the event of a bankruptcy, the first $1M of Credit Card debt is not.  Therefore, following that logic you could attempt to load up your IRAs and then declare bankruptcy and take your chances in court- of course your mileage may vary and you and I might both end up in prison.  So I would not advocate this strategy, it is both immoral and whilst it might fit into a grey area of the law it is my belief that exploiting the law like this is wrong, and you would deserve your jail time for fraud.  Please don’t do this, we are both too young and beautiful and I would testify against you saying you should know this is wrong.

So, I have my limits, but my limits do not include an Orwellian decision that certain strata of the social system should be excluded from using tools to save themselves from evils of debt.  I have wrestled with this concept and will continue to do so, however for now I think that if your current financial situation is inadequate then you should not be using credit card points for lifestyle inflated habits such as luxury travel, but you certainly should use them to earn extra income and help get on the right path again.  And for me that means I should not censor or dumb down my solutions or posts to protect the “less competent” we should all help each other.

It is your approach to earning more money, spending less money, and saving the balance in the most effective way that I want to focus on,  not whether you ‘deserve it’ or not.  It it not our place to judge, it is our place to help share our ideas and thoughts on this exciting journey we call life.

What do you think, should we restrict the amount of information and ideas shared in order to protect people from themselves, or should we share our thoughts and ideas?