Saturday, February 24, 2007

Prepaying your mortgage to do or not to do

Interesting article over at called Prepaying mortgage not a no-brainer here is what they said along with my comments. morgage motrgage

Dear Dr. Don, I have heard so many debates on paying off the mortgage versus not paying off the mortgage, but to me it's a no-brainer. I want to pay off my mortgage! Here's my plan: I have $40,900 as a principal balance and about 20 years left on my mortgage. The total principal and interest each month is $323.38. I think you should also consider how close you are to retirement. A general rule before you retire is to be debt free. If you are 50 and still have 20 years left on your mortgage you should think about getting rid of your debt before retirement. In this case prepaying your mortgage probably makes sense. morgage motrgage

According to the amortization schedule I printed out, the total interest I would pay if I continue to pay on this mortgage would be $35,038. Adding that to my principal, I would pay a total of $75,938.76 over the next 20 years if I continue my loan. It is really impressive that she is financially savy enough to do the amortization schedule and calculate the total payments over the 20 years. Most people don't know what an amortization schedule is or how they are calculated. If you need help on this please review my posts on top financial calculators.

If I pay off the loan now, I would be saving that $35,000 of interest, plus I could contribute an additional $323/month to my 401(k) at work ... which would also grow over the years, giving me, as far as I can see, a huge savings that I would not have had if I hadn't paid off the mortgage. I realize there's a tax write-off for mortgage payments, but it can't add up to the amount I'd have saved at the end of those 20 years if I pay off my mortgage! Do you agree? I'm no financial expert, but as I said, it seems to be a no-brainer to me! The key point here is that she will contribute the additional funds to her 401K. In some cases it may make more sense for a person to max out the 401K contributions first prior to paying down the mortgage. Especially if you have a low interest, like below 7%. You have to remember that if you contribute $323 to your 401K the entire amount comes off of your taxable income. Meanwhile, if you pay and extra $323/month on the mortgage you don't get any additional tax benefit. It is a difficult balance in trying to figure out what you should do.

Dear Deborah,What makes it a "no-brainer" in your case is that you're going to prepay the mortgage and then use the money you would have spent on the mortgage payment to make additional contributions to your 401(k) plan. The tax advantages of that strategy make it easier to justify prepaying your mortgage.

What's missing from your analysis is consideration of how the $40,900 used to pay off your mortgage is invested. You only look at how it generates interest savings and the ability to invest the mortgage payment. The $40,900 needed to pay off your mortgage, invested over 20 years at an after-tax rate of return of 6 percent, will grow to $135,387. The lost tax deductibility of the mortgage interest does have a cost, assuming you can use it in calculating your income taxes. I assumed that you could use it in calculating your income taxes and estimate the value of investing that tax savings over the 20-year period at 6 percent after-tax as about $20,000. So combined, the value of not paying off the mortgage early and keeping the $40,900 invested and taking the tax deduction has a future value 20 years from now of $155,387.

Since 401(k) contributions are made with pretax dollars, an after-tax sum of $323 per month can buy more than $323 per month in contributions to the 401(k) plan. I'm going to assume that $323 per month buys you $430 per month in 401(k) contributions at an 8 percent pretax rate of return. That contribution stream is worth $253,279 (pretax) 20 years from now or $189,959 after taxes at 25 percent. If your contributions are matched by your employer, the forecasted results are even higher.

Without the extra $107 per month in contributions to the 401(k) and the advantage of deferring taxes on the additional 401(k) investment, the comparison would be a lot tighter and not the "no-brainer" that you suggest.

Salary envy, making more money and managing your career

I found and interesting article on salary envy by Reben Navarrette of the San Diego Union Tribune. Here is what they said along with my comments. moeny salery

Remember when it used to be considered impolite in America to talk about how much someone earned? Its a scary thing when you start to get into salary comparisons. Hopefully you are not stuck in a minimum wage job. Now there are times when it seems that's all Americans talk about. The bottom line is that you need to look at the average salary for your particular job along with years of service. The guy with more years in most cases should be making more but not always. One thing that has tongues wagging lately is executive compensation. Apparently, a lot of Americans are concerned about what Fortune 500 companies and Wall Street firms pay top executives to perform or – in the case of lavish severance packages – go away. You know the bottom line here is when you do talk about salaries with others it still causes problems. Most people do not make the same wage in an office environment. I have found lots of cases where one person was new to the company and the other guy was there for 10 years. Guess who was making more? The new guy. Now how does the dedicated employee feel. You really have to watch who you discuss salaries with. Instead of talking with your friends about wages and salary you should discuss it with a knowledgeable recruiter or consult for a free salary calculator the will provide you with and estimate of what people in your region make for a particular type of job. Below is an example of what you will find this one is for a program manager job. It really doesn't matter what type of job you have you can find everything from a teacher salary to a nurse salary you will be able to find a comparison of your salary here.moeny salery

Some of the sudden interest in what executives are making might be tied to a new populism. Television talker Lou Dobbs insists there is a War on the Middle Class which is the title of his recent book. Democratic presidential candidate John Edwards, a millionaire trial lawyer, recently blasted “big insurance companies” and “big pharmaceutical companies” as well as “big oil.” And Sen. James Webb, D-Va., in his response to President Bush's State of the Union address, warned that “the middle class of this country, our historic backbone and our best hope for a strong society in the future, is losing its place at the table.” I agree in someways that it is very tough on the poor and the middle class. However, before we go trying to thro out our economic system take a look at the GDP per capita for the US. We are still have one of the highest GDP per capita in the world. Why do you think so many people want to live in the U.S.

Whatever the reason, the media were awash in stories this past December about record year-end holiday bonuses on Wall Street. Goldman Sachs CEO Lloyd Blankfein pocketed $53.4 million. In all, last year's bonuses for Wall Street executives totaled $23.9 billion. Then came the story about former Home Depot CEO Bob Nardelli and his severance package, which weighed in at a gargantuan $210 million despite the fact that shareholders had long complained about the sluggish performance of the company's stock. Some of these pay packages don't make any sense to me. Just like athletes and actor/actress movie and TV salaries don't make sense. It never ever makes sense to me why we have to pay a CEO 100s of millions of dollars to go away. It he screws up he should get the typical severance package that the company gives it workers. If thats 2 weeks or 6 months pay that's what he should get. I am still waiting for someone to ask me to go away for $210 million dollars. Sign me up baby!

Recently, President Bush – the first MBA president – took on executive pay. During a visit to Wall Street, Bush called upon business leaders to “pay attention to the executive compensation packages that you approve . . . and show the world that American businesses are a model of transparency and good corporate governance.” In the same speech, Bush invoked the phrase “income inequality.” He was making the case for reauthorizing the education reform law, No Child Left Behind. The president acknowledged that many Americans are worried that the economy is leaving behind working-class folks and suggested that the fear might be somewhat justified. Bush said the reason was “an economy that increasingly rewards education, and skills because of that education.” And that, Bush insisted, makes education reform all the more important. I guess I agree with this in some ways. But I would like to take another spin or direction on this topic. I have 2 college degrees and engineering degree and an MBA. However, in my neighborhood I have lot of families who's Dad's have different jobs or own business who most likely do not have a college degree. One guy is an auto mechanic, another guy owns two pizza places, and another guy owns a landscaping company. My point is the guy the installs and fixes my furnace make significantly more money than I do. He doesn't have a college degree but he owns the business, he and his wife run it and he might have 6 employees. Another friend of mine owns his own business and he has like 4 months of college and again he lives in a bigger house than me and makes more money. I am not saying I have envy of these people there are just different ways to slice the apple. You need the following to get ahead in life but you don't need all of them, 1. a good education, 2. a skill or trade, 3. own your own business. As the book The World Is Flat points out you can't offshore or outsource your plumber or mechanics job to India or China. The mechanics job keeps getting more complicated and most people now days can not fix their own cars. You need a skill, you need to be able to add value.

Bush is half-right. He is absolutely correct that, to the degree that there is an income disparity in this country, much of it is tied to those who obtain a quality education and develop marketable skills (See the author makes the same point here, marketable skills), and those who don't. As Bush pointed out, one recent study of what men earn showed that someone with a college degree earns about 72 percent more than someone who has only a high school diploma. This isn't new. There has long been a gap in earnings between those who are college-educated and those who aren't. And yet, according to Bush, the gap is greater than it was in 1980.
Americans shouldn't feel bad about that. Much of it is tied to the decisions that individuals make about how much education they're going to pursue, and how hard they're going to pursue it. Most of the obstacles that people face are self-imposed, and self-designed. We can't say that enough, especially at a time when too many people in this country look to blame others for their troubles, failings and shortcomings. Again some people are not natural born students. Even if you attempt to get a skill now days it takes some technical ability. You need to know math and how to read and right. I have a good friend from high school that is an electrician. He wasn't a good student, he was average, he continued to study for and retake the journeyman's test and then eventually the masters electricians test until he passed it.

So the president's focus on education is valuable. But there is less value in what he had to say about executive compensation packages. That's an issue best left to the executives and the company's shareholders – and the government has no business interfering. Whether we're talking about movie stars or professional athletes or television and radio personalities, there is a simple formula for deciding what someone is worth: It's what someone else is willing to pay them. OK I won't argue with this but really $210 million to get someone to go away after you have screwed up the company. It still doesn't make sense to me.

I bet that makes sense to most people. But for others, there is an emotion that always seems to get in the way. It's class envy – the sense that it's simply not fair that there are those who earn in an hour what it takes others to earn in a month. It doesn't help that there are plenty of politicians, commentators and pundits who shamelessly try to cultivate that resentment and use it for their own purposes. My Dad told me along time ago, there is always someone making more and there is always someone making less. You really have to get over the comparing yourself to others. The only race on your career and income is the race against yourself. You need to set your own goals. If you are stuck in dead end job are you going to night school? Can you get enrolled in an apprentice program? Does your dead end job require any skill or could anyone do it? If so it is time to make a plan and get yourself out of that dead end job. As Robert T. Kiyosaki says in Rich Dad Poor Dad there are 4 ways or quadrants to make money, 1. as an employee, 2. self employed, 3. as a business owner, and 4. as an investor. If you are stuck in the quadrant one as an employee you need to figure out ways how to improve this quadrant so you can think about how you might eventually move into other quadrants.

They won't succeed if you don't play along. Being envious of the rich is a waste of time and energy. Better to direct those passions toward building a life for yourself that others will envy.

Final thought do me a favor. If you enjoyed this post or any of my other posts why not subscribe to my Strategies for Life Blog? Again it is free, free is good right? Just click here.

Thursday, February 22, 2007

Top 11 ways on how to get noticed at work

  1. Get in early and stay late. Even 30 minutes earlier and later than most people will get noticed. Generally bosses get in early and stay late. If you are pounding away on a special project and you boss walks by when he/she is leaving you will get noticed at work.
  2. Ask your boss if there are other projects that you can help out on. Ask for additional responsibility but don't expect a raise when you take on the additional work. This will come later. Bosses need people that they can count out. By taking on additional projects you become viewed as a person that can get things done. By helping out and reducing your bosses work load you will get noticed at work.
  3. Never ever say "not my job." I always find it amazing the generally the lowest person in the organization is the first one to say "not my job". I have never ever said that in my entire career. If your boss asked you to do it, it is your job and you need to figure out a way to get it done.
  4. Try to make your bosses life easier. Bosses usually have a million deadlines and if they can count on you, then they will generally take care of you when it comes time to handing out raises and promotions.
  5. Under promise and over deliver. A key aspect to making your life successful at work is to deliver on your promises. In order to successfully do this under promise and over deliver on a consistent basis.
  6. Meet your deadlines. Don't be late for any deadlines. If you boss has to remind you about deadlines you will come across as very unprofessional.
  7. Wave your own flag in a positive way. It is important to point out the things that you have accomplished. You have to be careful how you do this. You need to make sure that you are not boasting. However, there is nothing wrong with running through you ideas with your boss and other important managers in your company. Also remember that you can tell people something 7 times and at the end of one year they will swear that you have only told them once.
  8. Become and expert. When you become an expert you become invaluable to your organization. Learn more on a particular topic then anyone else. Be a problem solver.
  9. Volunteer. Sign up for special projects, committees and other assignments.
  10. Be part of a committee or task force.
  11. Represent your company at related industry associations.
Recommend reading:

Wednesday, February 21, 2007

Wisdom from my Dad and Father in Law

My Dad always had some phrases that he used to remind us of some fundamental rules of the universe. I don't know if he made them up or heard them somewhere else. I just know that they have helped me in my career and life. Some of the quotes are from my wife's Dad along with my comments.

  1. Show up, shut up, cash the check. This quote applies to work and careers. In general it means that no one really likes a whiner. I try to explain this to my kids how they whine and complain about something longer than it takes to accomplish what I asked them to do. Kind of amazing isn't it. Do you know people like this at work? They complain and say they can never get ahead. Yet when the boss is handing out extra assignments or looking for volunteers they are the first ones to say, "not my job". This saying also fits in with the quote, "a big part of success is just showing up". I have met lots of people that literally think that their sick days are vacation days and you are suppose to use them up every year. I tend to be on the other extreme and usually end up showing up at work when I really should have stayed home sick.
  2. You can pick your day not your weather Don't complain about the weather or timing of things. You need to be able to follow through when things go wrong or things like the weather or situations do not go your way.
  3. The harder you work the luckier you get This is a pretty common phrase that I use to hear and have heard frequently from other places. This is true in almost all situations. If you lean into a project, discuss the problem and issues with enough people, come up with alternatives and work hard, you will figure out some solutions.
  4. Show up, shut up and shell out This one was from my father in law and it applies to things like weddings and kids parties and so on. It is better in some situations not to argue or give your input on things. You just need to support your wife in these situations, show up, and shell out. Shell out meaning write the check for whatever she is asking for.
  5. When in doubt through it out Another one from my father in law and it applies to things in the fridge. Simple but true.
  6. If you don't like what's for dinner eat at another restaurant. This one applies to kids and being a guest at someones house.

Monday, February 19, 2007

Struggling with Career Burnout?

The Miami Herald had a great article call Don't let your occupation burn you out. Here is what they said.

Feeding the spirit to treat work burnout. Our culture encourages a healthy, balanced physical, emotional and mental life, but not many people consistently pay attention to their spirit. Your job is a drag, your co-workers are baboons and your favorite movie is Office Space. Ever considered that you might be the one with the problem? Does this sound familiar to you? How many people do you find that actually like their job? Does the saying TGIF really mean something to you?

Work burnout -- that persistent, nagging feeling that you loath the hours between 9 a.m. and 5 p.m. -- may not be a clinical disorder, but it is serious: About three-fourths of workers will experience it at one time or another, according to some studies, said Dr. Alan Shelton.
He should know. First of all sign me up for 9 to 5. With an hour lunch that sounds like a 7 hour day. I usually start work between 7 to 7:30 am, work through lunch and then stay until 5:30 pm. Probably one of my problems that results in me feeling burned out.

Shelton was doing everything he was supposed to: He had an active life, enjoyed great relationships, worked as the medical director for the Puyallup Tribal Health Authority and was a faculty member at Tacoma Family Medicine Residency program for doctors in training.
Then, gradually, he lost his energy and enthusiasm. ``I felt like it was a struggle to go to work. I was cranky, I didn't have compassion for my patients, and I was getting resentful.'' Unfortunately, our culture in the U.S. is too push it and over work the best workers. However, what happens is when you get things done you end up getting more to do. It is a vicious cycle. Our culture loves workaholics and doesn't mind burning them out, so like the old book says you have to be Looking Out for #1 which is an excellent old book that I highly recommend.

To sum it up: ''I wasn't . . . very nice to work with,'' he said, laughing riotously. So he did more of all the things he was supposed to: He tried taking a vacation, changed his hours, ramped up his social life. Nothing worked. His burnout got so bad that a co-worker scheduled him an appointment with an American Indian healer without telling him. He learned of the lunch-break appointment only minutes before. Not finding an excuse (and he did try), he went to the appointment. He was surprised that the ''healing'' consisted of one question, some stories and a chant. I am always amazed at how fast the calm and relaxed feelings from vacations wear off. Sometimes they even wear off the night before you go back to work. Do you wake up before your alarm the first day back to work after a nice vacation? Do you feel the pressure of all the things that you need to do so it wakes you up even before the alarm?

He was even more surprised when, despite his healthy level of doubt, Shelton returned to work that day feeling like he was finally ``back.'' ''I was how I used to be when I was a good doctor,'' he said. But, as you'd expect, it wasn't so easy: About a month after his session, he had slowly faded back to his burned-out state. I find that when I am stressing out or feeling down I start to search for some type of relief or a distraction and I usually find it in some type of article or book. The tough part is that it wears off too fast.

That time, he'd had it. Convinced he needed to make a change, he took a leave of absence so he could study his problem and learn how to deal with it. Work burnout can have many causes: stress, long hours, lack of a life outside work, the accumulation of general negativity or even underlying health problems. One of the biggest stress relievers that I find helps me is to exercise. Sometimes I even try to get 2 work outs in one day. Unfortunately, I don't think I can take a leave of absence so I need to figure out how to cope and deal with the stress other ways. Shelton also writes that it's often experienced by people who feel a lack of control, those who have to suppress emotion at work (caregivers, for example) and workaholic types who strive for perfection.

The three main burnout symptoms, Shelton writes in his book, Transforming Burnout, are exhaustion, withdrawal and lack of job satisfaction. When health problems are ruled out, it's important to assess if you're doing everything you can to avoid or cut off burnout. ''It often comes from actually being out of balance: Too much of one thing, not enough of the other good things in your life,'' said Phillip Prudhomme, a Tacoma mental health counselor. ``That's why we have vacations or we take up hobbies. It's something to shift that focus.'' One thing to watch is how often we shut things off. Do you end up bringing work home. You need time to relax and focus on your family, friends and hobbies. Bringing things home and not shut off the work just continues to amplify the problem. I find if I do emails to late at night that it screws up my sleeping and makes me more stressful. I find that I need some couch time every night. Just some time to relax and not do anything constructive. Doing this helps me unwind and sleep a lot better.

Prudhomme said it's also important not to compare yourself to others -- whether at work or in your personal life -- but to establish reasonable goals for yourself. But Shelton was doing all those things. When he started to study the problem, something the healer had said stuck with Shelton. The healer had told him he needed to do something to tend to his spirit. One of my favorite motivational speakers is Deepak Chopra and he focuses on tending to your spirit through meditation.

At the time, Shelton thought he was doing just fine. But later, he considered it: He kept his body fit, his mind sharp and his relationships healthy but wasn't doing anything consistently to take care of his spiritual side. He compared being spiritually connected with maintaining physical fitness. ''You can't go work out once a month; it needs to be something daily,'' he said. During his time off, he found that meditation was a good way to nurture his spirit. He was also surprised to find how much damage he was doing every day. ''Those kind of things, over time, erode the spirit,'' he said.

So he reversed his thinking. When the alarm went off, he reminded himself it was the start of a new day. When it rained, he tried to appreciate that it takes rain to live in the lush, forested Pacific Northwest. Armed with optimism, he returned to work and presented his findings to a group of physician residents. To his surprise, they were fascinated. What he found out was simple: Our culture encourages a healthy, balanced physical, emotional and mental life, but not many people consistently pay attention to their spirit. To make matters worse, with his academic background, he had learned to be an unfailingly critical thinker. ''When you extend that into all areas of life, you end up being negative a lot,'' he said, laughing.

Things like complaining, resentment, carrying grudges and worrying all chip away at the spirit, which is possibly why, Shelton said, there are more people in this country unhappy with their jobs than there are people happy with them.

• Do you wake up feeling tired in the morning?
• Have you lost feelings of satisfaction, accomplishment and enjoyment in your job?
• Are you more irritable and impatient than usual?
• Do your co-workers frequently ask you, ``Are you all right?''
• Does taking a vacation give you only a temporary sense of relief?
• Do you take longer lunches and breaks than you used to?
• Does life seem like ``all work and no play''?
• Do you often feel overwhelmed and too tired to do your work?
• Do you procrastinate, and welcome interruptions?
• Do you spend time doing nonwork activities?
• When you're doing your work, is it accompanied by a feeling of inescapable fatigue?
• Do you daydream about ''running away'' and quitting your job?

Sunday, February 11, 2007

Paying for College Tuition

So your thinking about college for your middle schooler and you are wondering how much you will need to save to fund their college education. I was trying to find a website that compares the tution cost for major Michigan colleges and universities. I was successful in finding a few, so I decided to put together a list of resources about paying for college. First of all before I get to the list I wanted to understand the cost of 2 of Michigan's largest university. Below are the in state annual costs for Michigan and Michigan State Universities, the costs below include tuition, room and board, fees and in some cases books. I know it looks expensive but not as expensive as I have heard. I though someone told me that the cost for University of Michigan tuition was like $40,000 per year. It is actually more like $22,000 per year so that good, I am getting it for half price compared to what I thought it would be.

University of Michigan $21,924
Michigan State University $14,937

Top 10 Resources on Pay for College Tuition: So here's the list everything from Websites that allow you to search for financial aid to tuition costs and so on. If you have a good resource and would like me to post it just leave a comment and I will check it out and add it.

  1. College tuition cost: Infoplease has a great site that allows you to compare college tuition costs by State. I thought it was a pretty good site and look faily up to date. It includes both public and private universities and colleges.

  2. College tuition saving calculator: USA Today always has a good set of financial calculators that are easy to undersand and use. Calculating the college tuition cost requires a little guess work on your part since you will have to understand and assume and inflation rate and a rate of return for your investments. However, it this calculator does give you a good idea of what you will need to save.

  3. Compare 529 Plans: The next site that I found allows you to compare 529 plans.

Saturday, February 10, 2007

How to wipe out holiday debt.

Kiplingers has a great article titled Wipe Out Holiday Debt. Here is what they said along with my comments.

Don't be lured into using a home-equity loan or line of credit to consolidate your bills. Consider these options instead. The holidays are past, and the credit-card bills have arrived. It's time to face the music, and it isn't necessarily jolly. Households with at least one credit card spent, on average, $1,534 this past Christmas, according to If you don't happen to have enough cash on hand to pay the entire balance, the Ghost of Christmas Past could haunt you for months or even years to come. For example, if you make just the minimum monthly payment -- $38 to start on a card with an interest rate of 16% -- you'll be paying off your balance until 2020, when you will have handed over $1,471 in total interest. First of all never make just the monthly payment, if you spend $1500 at Christmas and are only going to pay the minimum payment you spent way to much at Christmas. To get a quick view on how long it might take you to payoff your holiday debts start check out this article on financial calculators. You need to have a plan on how to pay off your credit card debt. Second, you need to establish a budget each year for your Holiday spending. I also recommend the you establish a special savings or Christmas club savings account now to help save for 2007 Christmas bills.

Consolidating bills via a home-equity loan or line of credit isn't a silver bullet.
Even if you lower the interest rate, you'll be tempted to simply stretch out the payments. And borrowing against your home has risks you may not anticipate. The best solution is to bite the bullet and pay down the extra debt quickly. You may be able to lower your interest rate simply by calling your credit card issuer, or by transferring the balance to another card. Think twice about home-equity borrowing. Transferring your credit-card balances to a less-expensive home-equity line of credit or loan is an option most financial planners discourage. "I hear all these ads touting how home-equity borrowing will let you 'eliminate debt,'" says Glenda Moelenpah, a financial planner in San Diego. "But they really just let you change it and take on greater risk, too, because you use your home as collateral." Translation: If you can't make the payments, you could lose your home in foreclosure. There is a saying that is in the personal finance world that says never use credit for something that looses value. For example, do you want to pay interest charges on all the dinners you ate out last year? Do you really want to still be paying on the dress that your daughter wore to the dance once? Transfering your bills to a home equity loan only stretches out the problem. Additionally, a lot of people will continue to use this year over year as a place to sweep up all they recent debts into and the problem will continue to grow.

Moelenpah says sales pitches often emphasize the tax deductibility of the interest that you pay. But she points out that the law lets you deduct only the interest on "acquisition indebtedness" -- what you paid for the house -- plus $100,000 of other home-equity borrowing. When you sell, you'll have to pay off any outstanding home-equity debt at closing. If you've borrowed more than the value of the home or if its market value has fallen, you could find yourself "upside down" -- owing the bank money at closing. That's not a happy place to be. Because of those risks, Moelenpah says she's reluctant to advise clients to consolidate debt with home-equity borrowing unless they take steps to avoid having the same problem again next year. My opinion is you need a place to live. I don't want to have to worry about being upside down on my mortgage or thinking about where I am going to live it I had to be foreclosed on. The problem with consolidating the loans and places you home equity on the line is, when you do get in trouble on the home equity side you will never ever remember where the debt came from. Was it the vacation to Florida, Christmas presents, the new flat screen TV, or just enjoying yourself.

If you do go that route, a home-equity loan imposes more discipline than an home-equity line of credit. With a home-equity loan, you get a lump sum and pay closing costs. The loan will require a fully amortized payment of principal and interest every month -- typically over five or ten years. Plus, rates are running a half point lower, on average (currently 8.21%), than on home-equity lines of credit, according to

How to pay it down fast
Rather than take on the risks of borrowing against your home to consolidate your credit card bills, consider these tips for disposing of debt from Money Management International, a nonprofit credit-counseling agency affiliated with the National Foundation for Credit Counseling. Another thing to consider is to sell some stuff online. I think this works great. Every fall my wife and I get busy selling some of our kids old toys, clothes and electronics on eBay. It really helps when you go into Christmas with $500 in the Paypal account. Then we try to buy stuff used on eBay which works out great because it is like we are recycling money. We sold the Nitendo 64 and the money went toward the PS2. Wow what a concept.

Track the damage.
List all your creditors, how much you owe to each and the interest rates. Total it. Post it where you'll see it, and update it monthly. I saw a recent article on how to keep your New Years resolutions and it talked about posting your goals on the refigerator. I thought that was a good idea. I suggest the bathroom mirror as well. That way when you decide you are going to go out and party this weekend, you might remember to not put it on the credit card. Set a mini budget for the weekend of say $40 and then thats it. When it is gone you have to stop. Don't keep increasing the problem.

Create a budget and a 90-day repayment plan.
Figure out where you can cut and apply the extra funds toward your debt (see Build Your Budget for help). In the example above, you'd have to come up with $525 a month to pay off the debt in three months, and you'd pay $41 in interest. If the best you can do is $250, it will take you seven months and cost you $78 in interest. You know it is funny how you meet people that complain about being broke all the time and you find that they have a $60 per month cell phone bill, digital cable of $100, go to the movies all the time and wear only designer clothing. If you are paying off credit card debt it might be time to cut back and free up some cash. Switch to a pay as you go cell phone and don't use it much. Drop down to basic cable only and subscribe to Netflix for $9.99 per month. You really never watch all the stuff on digital cable anyway. Try buying a pair of shoes that is not a brand name and above all just plain cut back on the spending.

Hide your credit cards.
If you have to use credit, don't charge anything you can't repay in 90 days. Not only do you need to hide the credit cards, you need to stay out of the stores. It is always amazing to me how we will goto the store for bread and milk and we come out and the bill was $90. How does that happen. One thing you also need to do is when you are shopping work off a list and don't buy anything that is not on your list. It is a tough thing to do and you need discipline but it will help.

Pay strategically.
Make at least the minimum payment on all your cards to avoid late charges and any sudden increases in your interest rate. Dedicate extra funds to the cards with the highest interest rates. I really think if you are juggling multiple credit cards you need to consider some type of debt consolidation. I am not recommending a home equity loan but getting 5 or 6 different credit card bills per month can be very frustrating and hard to juggle.

Reduce your interest rate
The lower your interest rate, the more your monthly payment goes to pay down the principal you owe. This might be a good time, especially if you have a good credit record, to ask creditors to lower your interest rate. Scott Bilker, founder of, suggests letting the bank know that it will lose you as a customer if it doesn't. If they say no the first time, try again. You might score with a different customer service rep. Or you could transfer your balance to a card offering a 0% introductory rate -- but only if you'll repay your debt fully before the rate rises. Most people might be reluctant to do this type of negotiations. Consider finding a cheaper loan source like a credit union. Consolidate everything into one personal loan and the stop taking on more debt.

Get ahead of the game
To avoid the specter of holiday debt next year, credit counselors recommend that you start saving now. Hey, I already said this about setting up special savings or Christmas clubs. Here is how you do it. Divide what you spent this year by 11 (February through December), and stash the result each month in a savings account. A Christmas Club account at your bank or credit union won't pay much interest, but it will impose a penalty on any withdrawals before the holidays. If you're disciplined, you could open an account with HSBC Direct, which pays 5.1% interest, or ING Direct, which pays 4.5%. Remember this has to be done automatically, you will not have the discipline to save it manually, have your pay check deposited into your checking account and the special savings withdrawn directly from your checking account each month.

Do you look forward to large annual income-tax refunds that you use to pay down your credit-card debt in a lump sum? Moelenpah says a better strategy is to adjust withholding downward and apply the extra monthly income to your credit-card debt. And Moelenpah offers this "radical" approach to gift giving if you're carrying credit-card debt: "Maybe next year you can't afford to buy any gifts," she says. "Of course, that doesn't mean you can't give them." A box of homemade cookies may be more meaningful than another cashmere sweater, and you won't be paying for it for the next 20 years. Another thing to think about on gift giving is to set a limit. It is incredibly hard to buy something for everyone that is under $20. However, maybe that is what you have to do this year. If you don't want to disappoint your kids really consider buying used stuff. You kids won't care if the get a used Sony PSP. They really just want a PSP. Good luck and pay it down fast.

Sunday, February 04, 2007

23 Free Places to Sell Your Stuff On Line

23 Free places to sell your stuff online.
Do you have stuff to sell? Are you looking to unload some junk or to raise some money for other stuff you would like to buy. Below are 23 free classified advertising sites that can help you sell your stuff online.

  1. I find the most effective way to sell things online is through eBay. However eBay is not a free place to sell things online. However, the rest sites below are free.  Did you see the recent news on the controversy between eBay and Craigslist, pretty interesting article in business week.  Update:  I have recently been getting back into eBay.  I think they are trying to change their ways.  It even looks like you may be able to do some free listings.
  2. CraigsList is a no nonsense, comprehensive, classified ads listing source it is a great spot to sell your stuff online. It is especially nice for the regional feature, you can pick your city or a city close to you.  Craigslist is not an auction site so most of the time you will be dealing with people looking at stuff in your driveway.  However, I have a lot of friends that have had great luck with Craigslist.  Update:  I have been using Craigslist for real estate ads including for sales by owner homes and homes and apartments for rent.  Craigslist has update some new features that make it easier for you to renew your post and update your post.  That have also gotten rid of the annoying captcha section which was always a royal pain and slowed down your web page updates.
  3. Google Base allows you to setup a webpage for free to advertise your business or stuff that you have to sell.  It also seems that when you sell stuff on Google base you also get better search engine results from Google.  I don't know why that is and I can't prove it however, it seems like it does.  Update: Google base has been replaced by Google Merchant Center.  It is still free and allows your items to be show on Google Shopping.  I am a newbie on this service, basically you can create a manual feed that links to your items and then you items will appear in the search results.
  4. Yahoo classifieds lets you run free ads for 7 days on a lot of items but not on everything. Things like cars and houses you have to pay a fee. They allow you to include a photo, manage your listing from My Classifieds page, and up to 200 characters to describe your item.
  5. Its kind of anything goes on Myspace classifieds, cars house what ever and the ads are free. They do have some restrictions on posting adult content.
  6. Windows live expo has a cool feature it indicates how far you are physically located from the listing. Therefore if you are trying to purchase something that you might actually go look at first or pickup this is a great way to figure out what is available.
The rest of the online sites I do not have any experience with.  If you have please leave a comment about them and I will add it to the article.
Related articles:
  1. 40 ways to make money online
  2. How to become a millionaire
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Friday, February 02, 2007

Top 6 How to Finance Articles

A few great articles on personal finance that I discovered at The first on from which is titled 102 Personal Finance Tips Your Professor Never Taught You is a great article covering everything from taxes to debt to eduction. Check it out. This article refers to what they didn't teach you in high school but I also think it refers to college as well check out 101 Financial Tips you Never Learned in High School (but should have) which is from Bankruptcy Reader. A very popular question that is usually asked by someone who doesn't have a job is how to get rich so make sure you stop by at 25 Rules to Grow Rich which is from CNN. The leasons from Mom. You know it is hard to replace good old Mom, I try to call her everyday so don't miss out on 46 Things I Wish My Mom Taught Me About Money. Everyone wants to know how to save money, so here are 88 Tips To Save Money. If your a student or a parent trying to pay for college you can go wrong by reviewing this article on 117 Creative Ways for Students to Pay for College.