Sunday, June 15, 2008
Now, depending on how old you are, think back to the 1970s or 1980s and ask yourself whether the above items were a necessity or even available. That is the idea behind a flashback budget.
In the 1970s people generally lived in smaller homes, drove smaller cars (and generally only had one per household) and ate more meals at home. There was also likely no cable bill, no cell phone bill, no internet bill, etc.
If you have been working a budget or spending plan for more than a few years, take a few minutes to review your budget categories and numbers from the past. You may be surprised that even 5 years ago you lived a very good life without a few of today's "necessities."
Saturday, June 14, 2008
iLearn courses are free, practical, led by expert instructors, and available around the clock to work with your schedule.
Each on-line class includes a lesson, quizzes to test understanding and homework projects. A brief description of the lessons of the on-line course I took are below.
- Lesson 1: Financial Planning Is a Family Affair
No matter who the primary breadwinner or chief bill payer is, everyone in the family can play a role in mapping out your financial future. We'll take a look at family dynamics and show couples how to share roles and responsibilities in a way that works for them.
- Lesson 2: Setting Your Financial Goals
Financial planning starts with a fun exercise: deciding what you want in life. In this lesson you examine some typical family goals and discuss ways to approach goal-setting that combine wishful thinking with financial reality.
- Lesson 3: Career Decisions That Affect Everyone
Career decisions affect everyone in the family, regardless of who's earning the actual wages. This lesson discusses some of the key decisions many families face about working and retirement, and how to go about resolving them.
- Lesson 4: Embarking on a Savings Plan
You can spend it now or spend it later. Or, to put it a better way, you can spend a little now, or you can save and invest it and have a lot more to spend later on the things you really want. This lesson talks about popular savings vehicles.
- Lesson 5: Managing Your Cash Flow
This lesson shows you how to examine where your money goes in a way that enlightens but doesn't blame. It also features smart shopping tips and ideas for instilling spending discipline in children (and anyone else in the family who needs it).
- Lesson 6: Investing for the Future
In some families, one person makes all the investment decisions; in others it's a joint project. To make sure all parties are up to speed on the basics of investing, this lesson covers the foundation and provides enough information to get you started.
- Lesson 7: Protecting What You Have
Insurance is one of those things you hope you never need. But it's essential for any family that has assets to protect. This lesson discusses the major types of insurance, how to determine how much you need, and how to choose your policies wisely.
- Lesson 8: Thinking the Unthinkable
One of the kindest things any family can do is to anticipate the deaths of family members and make arrangements ahead of time -- while everyone is rational and thinking this could never happen. This lesson covers estate-planning basics.
Although I found this iLearn course pretty basic, I would suggest it to friends or readers who are just starting to focus on personal finance.
Wednesday, June 11, 2008
Plug in your current address or, better yet, the address of a property you are looking to buy and Walk Score:
Helps homebuyers, renters, and real estate agents find houses and apartments in great neighborhoods. Walk Score shows you a map of what's nearby and calculates a Walk Score for any property. Buying a house in a walkable neighborhood is good for your health and good for the environment.
Walk Score gave my home a score of 83/100 which makes sense as we live in a very walkable small city. My only criticism, I wouldn't count 7-11 as a grocery store.
Tuesday, June 10, 2008
As The New York Times reports, banks are reducing or eliminating exisiting lines of credit due to dropping home values. A representative of WaMu explains:
“We will increase, decrease or suspend lines based on a number of factors, including a customer’s entire relationship with WaMu, their payment status and history, changes to their creditworthiness, and changes in the value of their property,” said Sara Gaugl, a Washington Mutual spokeswoman. “We believe this is part of being a responsible lender.” Home values are a particularly large component of the lender’s decision, Ms. Gaugl said, and since the real estate market remains moribund, more credit lines could be cut. “We will continue to evaluate individual home equity lines of credit in relationship to the amount of equity a customer has in their home,” she said, “and if appropriate, we’ll lower the line amount.”
If you don't already have an emergency fund, at least a mini-fund of $1000 - $3000, you need to start one.
- Add funding your emergency savings account to your list of monthly bills and allocate $10, $25, $50 or $100 a month to your emergency fund.
- Sell stuff at a garage sale on EBay or Craigslist. All proceeds go to your emergency fund.
- Put your stimulus check or IRS refund towards your emergency fund.
- If you did receive an IRS tax refund, talk to your HR department at work and adjust your withholdings so you take home more money in each paycheck. Put that extra money towards your emergency fund.
- Cut back on the 'little' expenses that add up (i.e. lunch out, lattes, bar tabs, cigarettes, etc.) and you will be surprised at the money you can save. Put that money in your emergency fund.
Sunday, June 8, 2008
I'm not a huge fan of loyalty programs, although I know many folks who use these programs to save big bucks. The only loyalty programs I use are frequent flyer programs with airlines.
If you are a SB regular, does it make sense to sign up for the loyalty program? What do you get?
You get: two hours of free wireless Internet service a day. The other freebies include syrup and soy milk additions to its drinks, refills of drip coffee and a tall beverage of any sort for people who buy a pound of whole bean coffee.
What does Starbucks get?
The point of a loyalty program is, first and foremost, to grab a bigger share of customers’ spending. Tracking customers through loyalty program account numbers offers companies an additional advantage.
While a couple of syrup pumps doesn't seem like much, according to the article it doesn't take much to get customers to take action in response to a freebie.
What he has found is that it doesn’t take a lot to get diners, for example, to do what restaurants want. One Chockstone gambit involves using the customer’s receipt to make an offer. Return within 10 days, perhaps, and you can get a free dessert, the slip says. “It’s amazing this stuff works so well,” Mr. Lipp said. “What we’ve found is that people can be bought for a cookie.”
What do you think? Can you be bought for a cookie?
Wednesday, June 4, 2008
People who believe in this logic say that growth-oriented chains like Starbucks and Home Depot do tons of economic and demographic research before moving into a new town, and that their decision to locate a store indicates a big vote of confidence in the area's economy.
I'm not a regular customer of Starbucks, and I was a little bummed when SB came to our small city's downtown a year ago. But, now I guess I should consider SB's arrival a good sign.
Tuesday, June 3, 2008
- FICO - Most applicants now need a score no lower than 660, and in some cases lenders are not willing to go below 720.
- Debt to income ratio - Debt (including housing costs, car loan, student loan, alimony, credit card debt) to income ratio is now at a maximum in the mid-40s. Available credit card limits count as debt even if rarely used - which might require some credit card cancellation.
- Documenting income - You now have to actually provide proof of income. No-doc loans, also known as liar loans, are generally not available any more.
- Cash-money - You need to have some liquid cash available, equal to 3 - 36 months of mortgage payments.
Even good customers, with high income and years of on-time mortgage payment history are finding it more difficult to move onto a bigger/more expensive home.
Val Kleyman, a self-employed lawyer from Staten Island, knows this firsthand. He bought a two-bedroom town house three years ago; his wife then had their first child and wanted to move on to a bigger place in the same borough. He had put down 20 percent on the town house and made payments on his adjustable-rate mortgage diligently on the first of each month. Mr. Kleyman would seem to be the perfect customer for another mortgage from his same lender. “I called the bank, saying I wanted a mortgage for a bigger house,” he said. “They said: ‘That’s very nice. You always pay on time, but we can’t give you a mortgage.’ ” Actually, the bank would give him a mortgage, but only with a 25 percent down payment. As he had with the town house, Mr. Kleyman wanted to give his lender a stated income — with no supporting documentation — rather than a verifiable income. He plans to hold onto his first house and rent it out, and that would count as debt against him. He is also self-employed.
Holding on to a prior property as investment rental is something we did when we bought our current house. Most mortgage companies/banks will consider rental income as part of your income after a year or so of established rental history. As a result, even if you plan to rent out a property to cover your monthly carrying costs, the bank won't count that rental income until its well established.