Author Archive
How’s Your 401K or IRA Going?
Posted by admin | Filed under Retirement Planning
Chances are that your IRA or 401k has taken a hit just like everyone else’s. In a report put out by Institutional Retirement Income Solutions: A Call to Action, available through the organization’s website, www.irirc.com over 2 trillion has been lost in retirement accounts over the last 12 months alone.
Since almost 90% of employees have some type of defined contribution plan, they are projected to be the primary source of retirement income for all future retirees, and now it falls on the individual rather than the company to save for and generate a guaranteed retirement income.
It behooves everyone to learn as much as possible to enhance their retirement fund performance. A simple book that I recommend is David Bach’s “Start Late, Finish Rich”. If you’re not were you want to be or are worried about having enough then read this book, there are a lot of great ideas and information on how to put money aside for your retirement.
Is it Time to Buy Stocks?
Posted by admin | Filed under Investing
A lot of people who are in the sidelines are ready to throw in the towel. If you’ve stopped contributing to your plan at work and have the wherewithalto start, you are in good company. Warren Buffett, considered by most the greatest investor of all times is now buying stocks, you should be too.
One of the reasons that it right NOW to buy stocks is that the current P/E ratio’s is below the 50 year average (17.57).
Warren Buffett said “If prices keep looking attractive, my non-Berkshire net worth will soon be 100% in US equities.”
Enough said.
Asset Allocation Works
Posted by admin | Filed under Investing
Just read a great article about how to allocate your funds. Steve Pavlina is a well known figure on the internet, and he recently took a financial planning course. He comments about the mistakes of keeping his money invested in savings while the stock market was roaring and invested his money in stocks, and promptly losing 80%. I can relate.
However, he also has a little chart that demonstrates why we all need to know more about different types of investment vehicles and allocate wisely. Have a Read, enjoy!
Pratical Advice on Making Ends Meet
Posted by admin | Filed under Budget, Credit Cards, Found Money, Reduce Debt
Half of all Americans live on less than $48,000 a year. That total, which is the median income level, is derived form U.S. Census figures from 2006. There is a lot of advice out there on cutting back on spending. But if you fall into this category, which simple math tells me 1 of 2 who read this will, chances are that cutting back on “going out to dinner” advice will not do. Unless of course they mean McDonald’s or Subway.
If your situation is that have more money going out on a montly basis than coming in, what do you do?
There two things you could! Three if you count doing nothing.
Make More Money or Spend Less.
Make More Money
First figure out what your shortfall is each month. Let’s say you need an extra $500 a month to loosen the collar. Some obvious ideas are are overtime at work, a side job, a simple side business, sell what you no longer need on Ebay, etc.
Spend Less Money
It’s very hard cutting back on certain luxuries we have grown accustomed, but sometime it’s necessary if only temporarily. Look closely at what goes out a make hard decisions. Do you need a $40 monthly gym membership or maybe you can exercise outside for free. Now this may be sacrilegious to some but if you’re in deep, what about your cable bill? Do you really need it? How much are you paying in credit card interest rates, moving debt to lower interest cards will lower your monthly payments, if onyl temporarily.
These are just a few ideas to kick start your brainstorming session. Why don’t you shut off the computer and take a yellow pad, with your favorite writing pen ( Very important, this makes a differnce in coming up with ideas), go to a quite place that’s comfotable and think of different wayss ot make some extra money or spend less money. Write everytihng you can down. Don’t worry about how stupid it may seem or that this will take along time to implement. You just want to write at this stage.
Here are some questions to hep you start your personal brainstorming session.
- What are you passionate about?
- What skills do you possess? Think hard, everyone has skills that are needed by someone, just think!
- What needs are out there, where you live, that aren’t being filled?
- Who do you know that you can barter a service? ( Bartering services can be sold)
- Who do you know that can help you locate a part or full time job, or business? (A client of mine started his business by being available to helping out a customer he was caddying. Now he provides a unique service for clients driving there.)
You can probably save or make a few hundred extra each month without too much pain, you just have to think about it objectively, which isn’t always the easiest thing to do.
Personal Debt Relief Will Be Harder to Get Soon
Posted by admin | Filed under Budget, Credit Cards, Reduce Debt
Unless you have been hiding under a rock, you’ve heard about the Banking Crisis, “The Banking Bailout” or the “700 Billion Gambit”. What most people do not seem to realize, is that because banks are tightening up on their money, and their lending guidelines, whether it be home loans, auto loans, home equity loans, or yes, unsecured loans such as credit cards.
This is a huge problem to every American, whether or not you think you are directly affected or not. We can all probably put off selling or buying a house, selling or buying a car, but what if we already have credit card debt. The average American with at least 1 credit card owes more than $8000 in credit card debt.
Here are two scenarios that could get people in trouble.
- If you are credit card surfer, those that shift debt to low or no interest: those offers may dry up, causing minimum payments to go up.
- If you carry high debt to credit limit: debt limits lowered, means high debt ratio > lower FICO > higher interest rate.
In scenario number 1, you want to make sure you have a back-up plan. Do you have other banks offering you low interest rates now! Now might be a good time to shift, because they may not be available. What is your debt to credit limit per card? Ideally you want to have no more than 80% of your credit limit per card and the lower the better overall.
In scenario 2, it may pay (no pun intended) to get more credit now, so that if it your limits get cut back, then you are still below the magical 80% ratio of debt to credit limit.
With the Credit Crisis, you won’t find Credit Card companies with 0% interest and zero fees any more but here is one that is worth checking out.
Discover More offers 0% interest for 12 months, with a maximum Balance Transfer fee of $75.
Banks Balking at Consumer Credit Protection Changes
Posted by admin | Filed under Credit Cards, Reduce Debt
Read a great article in The LA Times about the proposed new bill, HR 5244. The banks even though they’re thrilled to being bailed out of the mess there in to the tune of 700 BILLION dollars, are against the very same taxpayers getting any relief in the form fairer laws. Currently credit card bills must be received with at least fourteen days left before the due date. The proposed legislation would extend that to 25 days.
The Universal Default Limit, where if you’re late on one bill other credit card companies can raise their fees is also being challenged. Banks would now also be required to give you a 45 day notice before raising interest rates. Of course the banks are against that as well.
The Bill has passed in the House of Representatives handily but it appears it may have trouble in the Senate. The Bush administration is opposed to the legislation.
Airlines Raising Miles Required for Free Tickets
Posted by admin | Filed under Budget, Features, Frequent Flier Miles, Travel
I, like most people own a couple of credit cards with frequent flier miles. Lately, in an effort to combat fuels costs, many of the airlines have stopped offering bonuses and making you pay more (in miles) for free tickets. The question is, does it make sense to pay annual fees and sometimes higher airfare prices just for miles. Personally, I have American Airlines Frequent Flier card, but just flew Delta to Cancun, Mexico, because I refused to pay for the luggage fee. I did use the AA miles card though 
Currently I have enough for a round trip domestic trip but just heard they started charging an online booking fee. Another question is, how easy is it to get a free ticket? Many people give up trying to get a free ticket, when they realize their eight choice in flights or destination isn’t available.
To give you an idea on how some airlines overbook flights, leaving little if any empty seats for frequent flier programs, I recently had to make an emergency trip to Ecuador. A friend who works for American Airlines out of Dallas, was kind enough to let me use a buddy pass for my wife and myself since a last minute ticket was a ridiculous price. We traveled down with no problems, but on the way back, I traveled sans wife on Sunday Martin Luther King weekend with a stopover in Miami before continuing to John F. Kennedy airport in New York City, my home airport. BTW, living in the the NYC area affords you the luxury of choosing from four different airports to choose from, if you can’t get a ticket to your favorite. Besides, JFK, there’s Laguardia, Newark, and MacArthur Airport in Islip, Long Island. Bear with me, I’m going somewhere with this.
So, I get to Guayaquil after a four hour ride over fog covered mountains hoping that maybe, just maybe, there’s one extra seat for me. Remember I’m flying with a “buddy pass” (class 3), that means “standby” after all American Airline employees (class 1) and there families (class 2) . Yes, I get on, and First Class to boot, YES!!
I arrived in Miami at around 2:30pm with a connection at 5:30pm. I quickly realize that on the standby list, I’m currently number 36, with about 12 empty seats on the plane. What about going to Laguardia, I asked? Booked also. After waiting until 7:30pm, with just 2 more flights left that night, which were also over-booked, I decide to rent a car and head over to my brother in law’s house in Boca Raton, one hour away. I’m advised that the first flight leaves at 6:50 am for New York, yeah, right!
After staying up late watching the New York Giants win a nail biter over the Packers and washing clothes, my bags are already in New York, there’s no way. I’m going on 3 hours sleep again. I sleep in until about 6 am and head out for the airport. I get nervous when I realize I’m number 12 on standby for the 8:50 flight. I get really nervous when I meet three gentlemen who all work for American and commute weekly to New York, airplane mechanics. Why am I nervous? Because, I quickly find out they don’t have to be at work until 10:30 that night, and here it is at 8:00am and already they are looking for seats.
But as an AA employee they have on major advantage, they all have access to AA’s computer, and know exactly how many seats are empty on what flights. One of them has a plan, they have a feeling this was going to happen, it’s seems the Monday Miami to New York route is NOT a good one to be flying standby if you can help it. He has his passport in hand, and tells me that Miami to Toronto flight is “wide open”. And I just happen to have my passport with me:)
So, I spent to door to door about 36 hours by way of Miami and Toronto but finally got home around 5 pm. Thankfully I was able to breeze through Customs and Immigration in Toronto and just make the flight. The INS officer was a New Yorker and Giants fan, and my usual 30 minute wait through immigration, lasted all of 5 minutes, a new world record for me. That’s what I get for having the most common of Hispanic names, the John Smith of Hispanos.
But what does this have to do with frequent flier miles? If employess, have to spend an extra $65 (taxes for stepping foot on Canadian soil) just to get to where they have to go, how much of a better position are frequent fliers? Not much in my opinion, but what are your thoughts? Do tell!
General Strategies on Setting up a Family Budget.
Posted by admin | Filed under Budget, Features
How to budget? Some general strategies are helpful in assisting families to set up a budget or budget better.
- The first significant step is to change your thinking about money, shift your attitude toward spending, actually focus on saving money, planning ahead and driving for success
- Develop a greater awareness of how you earn, manage, save and spend money
- Awareness of how others would lure, entice and want you to spend your money (advertisers, retailers, and manufacturers)
- To stop participating and playing the “Keeping-up-with-the-Jones’s game,” living with a false sense of wealth and security, while over-extending your self and financial resources, beyond your means. Do not envy others and lust after things that they might have or even worse, get deeper into debt to compete or keep up appearances. It is counterproductive and can ruin lives!
- Delay purchases - learn and do, sometimes without having to buy!
- Set solid financial and budget goals for yourself and your family that you can work on individually and collectively to achieve together
- Set spending limits and stick to them
- Do not make ends meet utilizing credit cards, stay away from ATM machines, cash, cash advances, do not cheat on your budget
- Understand your income - know where the money is coming from and how it varies throughout a one-year cycle
- Understand your expenses - monthly and irregular, unexpected expenses
- Set a few realistic financial goals
- Know your own habits, spending, temptation, and where the areas of risk and exposure are.
- Set up savings and spending mechanisms that work, reserve and growth accounts and have the right number of credit cards
- Make an income plan - detail is important
- Plan your obligations and must pays - smooth out large size bills with reserve accounts
- Plan your necessities and look for ways to economize
- Set aside pocket money for daily incidentals
- Create a family allowance to cover entertainment
- Create a personal allowance
- Balance and consolidate, wise decisions and trade-offs - agree and stick to it
- Live happily on a budget
- Welcome to frugal living mode! Cutting back on living expenses - alternatives for simple living
- re-examine why you work and how you live
- stop tossing your hard-earned cash away
- shopping, overwork, stress and debt (some refer to this as an illness quipped: ‘Affluenza’!)
- celebrate when you have money left over at the end of the month - indulge a little and reward yourself - rewarding patience and persistence! Not just the doing good and sticking with it
‘How to set up a Family budget’, is advocating a new code of fiscal honor for our families, so to speak. It proposes family budgets, that ask for wisdom (best choices and decisions), discipline (sticking to it), honesty (no cheating), persistence and celebration when we do it right!
THE RATIONALE AND PROCESS OF BUDGETING
Here are twelve good reasons to get you started:
1. Family budgets are used as a baseline, analysis-tool and roadmap. It is a useful tool and guide. It tells you whether you are headed in the direction you want to be headed in financially. It helps you to move from spending to saving and good fiscal balance, management and responsibility.
You may have goals and dreams, but if you do not set up guidelines for reaching them and you do not measure your progress, you may end up going so far in the wrong direction you can never make it back. Can you imagine the government or a major corporation operating without a budget? No, and neither should you.
2. It is often described and justified as an empowering enabler. A budget lets you control your money instead of your money controlling you.
3. A budget is a realistic estimate and true reflection of current circumstance and means, a type of financial situation-analysis that will tell you if you are living within your means. Before the widespread use of credit cards, you could tell if you were living within your means because you had money left over after paying all your bills.
There are lots of family budgeting tools available on line that make it a fun and enjoyable task and activity, to assess and analyze your family’s financial situation with minimum effort. (www.MoneyPants.com)
There is also lots of free financial software and most of it sets up easily and provides you with a detailed family budget online. It manages your finances, hassle-free and almost effortless.
Well, almost! It will require input and minimum effort through hands-on involvement in setting it up, populating, maintaining and editing it. Mvelopes.com is a good example of market offerings that are available at no cost to you, just waiting for the motivated family budgeter to embrace and try it out!
Some websites offer free financial newsletters by e-mail, with lots of money saving tips, budget advice, and other relevant personal and family-related financial information (www.planabudget.com).
The availability, accessibility, virtual marketplace, ease of use and more of credit cards has made the need for family budgets much less obvious. Many people do not even realize they are living far beyond their means until they are knee deep in debt, struggling to make ends meet and sinking fast into murky financial waters.
Budgeting is and can be a life and money saver, a reality check, BUT ALSO a remedy!
4. A budget can help you meet your savings goals. It includes a mechanism for setting aside money for savings and investments.
5. Following a realistic budget frees up spare cash so you can use your money on the things that really matter to you instead of frittering it away on things you do not even remember buying.
6. A budget helps your entire family focus on common goals. It is unifying families in mutual purpose and effort, working together towards a successful outcome and reward.
7. A budget helps you prepare for emergencies or large or unanticipated expenses that might otherwise knock you for a loop financially.
8. A budget can improve your marriage. A good budget is not just a spending plan; it is a communication tool. Done right, a budget can bring the two of you closer together as you identify and work towards common goals and reduce arguments about money.
9. A budget reveals areas where you are spending too much money, so you can refocus on your most important goals.
10. A budget can keep you out of debt or help you get out of debt.
11. A budget actually creates extra money for you to do use on things that matter to you.
12. A budget helps you sleep better at night because you do not lie awake worrying about how you are going to make ends meet.
Nevertheless, despite all these wonderful reasons quoted above, people are still hesitant to commit to family budgeting as standard practice in their households. We might again want to probe a little deeper still and ask why?
Missed Fortune 101: Required Reading
Posted by admin | Filed under Missed Fortune 101
It is subtitled “Dispel the Money Myth Conceptions- Isn’t it time you became wealthy?”
I’m going to call them missed conceptions, there are some of them.
Missed Conception #1: The best way to pay down a house is to prepay the mortgage.
I always believed that paying off your mortgage was the best way to pay off your house but Missed Fortune shoots holes through that. Douglas Andrew shows you at least three reasons why that IS NOT the way to go. One reason is simple, the only tax deduction still afforded the average guy is their mortgage interest deduction. Someone paying six percent interest is actually paying about 4.2% interest rate taking into account a 34% tax bracket.
His two books Missed Fortune and Missed Fortune 101 ” A Starter Kit to Becoming a Millionaire” go over this and the forthcoming strategies in greater detail.
| Missed Conception #2: The safety of your home.
Will Rogers once said “I’m more concerned with the return of my money than the return on my money.” Many people feel similarly about the equity on their home, they feel that because their money is their home that that is the safest place for it. Real Estate booms (like the one that is concluding now) are all a result of supply and demand. Yes, it is an over simplification, but it is the reality. Real Estate professionals use the terms “buyer’s market” (too much supply, not enough demand) and “seller’s market” (too much demand, not enough supply) to describe the current situation The problems arise when the equity you have disappears. In 1985, I purchased my home, only to see values drop 30%, it would take 15 years to recoup that lost equity. Every situation is different, but I wasn’t the only one, thousands were in the same boat. Missed Fortune shows why having money tied up in your house is worse than having it buried in your backyard. Missed Conception #3: There is a return on equity. Let me use Doug R. Andrew’s illustration because after all, he did write the book. Assume you have a house valued at $100,000 that is free and clear of any mortgage. At the end of one year your house appreciates 5% and grow in value to $105,000. Got It? Good! Assume now that you separated the equity from the house and invested it earning 10%. At the end of the year your investment is now $110,000 PLUS your house has still appreciated another 5% for a $105,000 value. You have just tripled your return. Of course, there is now a mortgage to contend to and I’ll leave it up to you to peruse those books. |
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Fixed or Adjustable Mortgage
Posted by admin | Filed under Mortgages
*This article was originally written in October of 2006. Not withstanding, the information here is still relevant, with the exception of the ease of loans. The days of 1 percent down loans are over for now, but there are still programs out there, but they are few and far in between.*
Most people will never buy more than one or two houses in their lifetime. This puts the average consumer at a distinct disadvantage because real estate and mortgage professionals may deal with upwards of thirty to forty deals per year.
Gaining knowledge of the mortgage process can help even the deck. If you are trying to buy your first home (or tenth home), gaining more information on the single most expensive “product” you will ever buy will help you when dealing with real estate brokers and bankers.
Mortgage Companies are in it for the Money
Banks and Mortgage companies are businesses that are interested in turning a profit, like every other business. Oftentimes you’ll hear the term “products” being tossed around. Banks have many products they’ve developed over the years depending on current market conditions to market to YOU.
It is your job to not let yourself be hooked by the flavor of the day. Go for the steak not the sizzle.
| By the way, do you know where most of American homeowners keep their savings? Answer: In their home, it’s their nest egg. |
If this is your first time buying a home don’t let the process overwhelm you. You can get through it saving money in the process, so you too, can have a nest egg.
Following these few easy steps will get you started in the right direction.
- Step 1: Choosing the right “product” or loan for YOU
- Step 2: Reviewing your credit
- Step 3: Choosing a lender
- Step 4: Getting approved
Step 1: Choosing the right loan for you
The products that the Banks have run the gamut of teaser 1% loans to your typical plain vanilla 20% down 80% mortgage. ARM’s ( Adjustable Rate Mortgages) are tied to an index, LIBOR being one of the most common, although COFI ( Cost of Funds Index) is also available. Graduated Payment Mortgages are not al popular and Neg-Am ARM’s are once again gaining in popularity.
You must first ask yourself some questions. How long do you plan to stay in the house? How much risk (interest) are you willing to bear? The answer is different for everybody and why finding the best loan that takes into account your unique situation can save you thousands of dollars.
If you plan to be in your house for about 7 years (according to national statistics, the average mortgage is paid off through refinance or sale in 12 years), it makes no sense to take out a 30 year fixed rate mortgage. You are paying for the insurance that your rate remains the same for the next 30 years although you plan on moving on in seven. If you can get a 7 year adjustable (fixed for the first 7 years), you will probably save about 25 to 50 basis points which can translate to $6000 to $10,000 over those seven years.
The question of whether a fixed rate loan or an adjustable rate is better depends on what is happening in the interest rate environment.
At the present time October 2006, interest rates appear to have stabilized. If you feel that interest rates will be coming down than an ARM mortgage is the way to go. If you think rates are going up, then locking in these relative low rates may be the better alternative.