Wednesday, May 28, 2008

Rent vs. Own How Much Can You Save?

Rent vs. Own How Much Can you save?
I found a pretty cool interactive tool that allows you to take a look at which is financially better renting or owning.  With today's declining home prices in a lot of areas it really is a tough call.  You have to play around with some assumptions however, I thought it was a pretty cool tool.  Calculate savings of renting vs. owning.  Another big factor that I always talk about is if you are on a 15 yr or 30 yr mortgage.  That makes a huge difference.

Wednesday, April 30, 2008

Save Money On Your Phone Bill


Save Money On Your Phone Bill


Do you have huge phone bills? Between home phone, long distance, cell phones, family plans, text messaging, it all gets overwhelming and expensive. Below are my tips on reducing your phone bills.
  1. Drop the land line: The first tip to save money on the phone bill is to drop the land line. Some times this can be challenging especially if you have kids that don't have cell phones however most do. So if you can drop the land line, and just rely on the cell phones, do so and you can save a minimum of $35 per month or more.
  2. Drop the features: If you can't part with the land line the next best way to save money on your phone bill is to start dropping features from the land line. If you can get down to the bare bones you will save the most money. For example drop the long distance service, save $2.50, use a calling card instead, drop call waiting, save $4 per month, I hate call waiting, there is nothing more iratating than when you call someone and they say hang on just a minute I have another call. They put you on hold to find out it was only some sales call. It really shows you how you rank in their world.
  3. Calling cards: We have been buying calling cards from Sam's Club forever. These are great for making long distances calls. It is like $.04 per minute which is a pretty good deal. We usually buy the 1000 minutes at a time for $40. Consider using these for kids in college as well.
  4. Cell Phone Family plans: I haven't gone down this path yet because I am still too cheap however, a lot of people get the family plans for their cell phones. Some programs allow you to get 4 or 5 phones and you can share your minutes and texting. I think it is a good idea however the programs start at around $70 per month. It is still a little to rich for me.
  5. Free Texting: Did you know that if you have a Yahoo account that you can text on yahoo for free. This works out great for teenagers because they can text their friends for free. You just goto Yahoo mail and click on the new button and then click SMS. Pretty cool, you don't have to pay $.15 per message to either send or recieve.
  6. Buy a texting package: As most of us know that have teenages, kids don't talk to each other anymore. No sense in picking up the land line and talking to each other when you can get on AIM or text message someone on your cell phone. Anyway my kids wanted to text more so they bought a monthly package at ATT which gives them 1000 texts for $10 per month. Its is a good deal and get the cost of texting down to $.01 per messages.
  7. Bundling: Make sure you investigate bundling your service providers. Determine which one is better for you the cable company or the phone company. Both offer TV, internet, calling etc. Make sure you find our what the fixed prices is including taxes. Don't be fooled by just taking the introductory offer of 12 months at $100. It could go up a lot after the introduction is over.
  8. Pay as you go cellular: If you are not doing the family plan on your cell phone. Consider switching to a pay as you go phone. We buy the $100 ATT card which last for a year. We end up using it up in 6 months, however $200 per year is a great deal for a cell phone. The only down side is if you want one of the coolest latest phones then you are going to have to shell out some initial investment for the actual phone. Like $200 to $300. However, if you consider the minimum cost for a cell phone contract is $40 per month which is $480 per year the payback is pretty quick.
  9. Skype or other VOIP: If you do a lot of long distance consider using Skpe or another VOIP provider. You can make long distance calls for $.02 per minute to places like Japan and Europe. Pretty amazing. If you buy the package you can get almost unlimited calling for around $25 per month. Skype especially works well when you are traveling overseas and you want to call home and chat for an hour. You can even install Skype on your cell phone.

Saving Money Reducing Expenses In A Recession

Saving Money Reducing Expenses In A Recession

I saw a great article called Recession Diet Just One Way to Tighten Belt in the New York Times. There a ton of ways to save money and reduce your expenses.  Even though our government officially does not state that we are in a recession, most people think we are already in one. Therefore, most people are think of ways to save money.  Here are some ideas from the article along with my own ideas.

  1. Set a budget:  First of all, do you have a budget?  If not get one, especially for descreationary items like dining out, gifts, and entertainment.
  2. Cut back: If you are already spending a lot of money on home entertainment, such as cable, Netflix, XM radio, and so on and still going to the movies or clubs, you might want to think about cutting something out?  Skip the movie theater and watch the DVD instead.
  3. Brown bag it:  If you have a habit of going out to lunch with your buddies make a change and start brown bagging it.  Going out to lunch can cost as little at $3.50 for Subway to $15 if you get a salad, sandwich, and a cola at Friday's.  You don't have to completely stop going out however, just dropping 2 lunches a month could save as much as $30 per week or $120 per month.
  4. Order Pizza: Dining out can be a big expense, especially with a family.  Skip the Friday night out and buy the two $5 pizza specials and eat at home.
  5. Skip the drinks:  When you eat out drinks such as cola or adult drinks are expensive.  If you are a family of 4 then you could spend $8 extra on the meal just ordering pop and ice tea.  Alcohol is even worse.   A beer at home is $.50 to $1 depending on what you are drinking.   Eating out you can pay $2.50 to $10 or more per drink.  Skip it.  Buy it at the store and have the drink when you get home.  For example, like gin and tonics.  I bought Seagrams Gin with Lime for around $10 per fifth.  I think I can get at least 10 to 12 drinks out of it.  
  6. What's on special: When you are food shopping make sure you grab the specials paper when you enter the store.  All of the stores run specials.  Don't be afraid of the $2 per pound chicken.
  7. Do more work:  I was just in the grocery store today, boneless skinless lean chicken breasts are $5 per pound, chicken legs and thighs were $1.19 per pound?  You can remove the skin yourself?  It saves almost $4 per pound.  Wow!
  8. House brands:  House brands can save you a lot of money.  When you are buying cereal or shampoo make sure you check out the house brand.  Compare the ingredients.  Most of the time they are the same.  Besides who do you think is making the house brand.  Most likely it is the same company that makes the brand name.
  9. Buy in bulk:  Buying in bulk can save you money.  You need to know you cost per item and you have to watch the quantities.  It takes some work but it can save you money.
  10. Skip the value meal: Ever notice how the fast food place always wants to sell you the value meal?  Thats because it is more expensive.  Skip the value meal and just order off the value menu.

Thursday, March 20, 2008

How to calculate net worth, how do you compare to others

How to calculate net worth, how do you compare to others

I ran across a cool little tool to calculate where you stand relative to you peers in regards to net worth?  Do you ever wonder if you are saving enough or if you are on the right track.  This net worth tool will compare your income, total net worth vs. other people in your age bracket.  Pretty cool little net worth tool.

Check out this video on how to increase your net worth by changes in your credit card interest rates.

Tuesday, March 04, 2008

20 Ways to Save More Money

20 Ways to Save More Money

I found and excellent ariticle over at Kiplingers magazine on 20 ways to save. Below is the article along with my comments.

You've heard of the saving crisis in America. You've probably even thought, 'yeah, I should probably save more.' But eking out an existence is tough on a starting salary and sometimes comfort takes precedence over cutting corners. Besides, if you can only save $50 or $100 a month, is it really worth it? The answer: absolutely.

I use to think that however almost 15 years ago I started saving $50 per month for my kids education. Each year when I could I would increase the amount of the monthly withdrawl. Overtime it has really added up and of course this is due to the miracle of compounding and the advantages of starting early.

By starting to save now, you're giving your money -- however little it is -- time to grow on its own. The magic of compound interest means that you can contribute less money for fewer years if you start when you're young and still end up with more cash than someone who waits.
For example, if Natasha starts saving or investing when she's 25 and saves $100 a month for ten years then lets the money sit, her stash will grow to $174,928 by the time she turns 65 (assuming an 8% annual return). If Anna waits to until age 35 to start saving, and socks away the same $100 a month for the next 30 years, she'll have only $135,940 by 65. Anna will have contributed three times as much as Natasha, but will end up with nearly $39,000 less.

It always amazes me when I meet young people who are not saving for their retirements. Start early and you will benefit greatly. Additionally, as you move along in your life you will find that even as you make more money you will spend more money. So get use to saving right away. Check out this book The Retired Millionaire Exposes Everything! Click Here! .



This week is America Saves Week, and it makes as good a time as any to get started. Think you don't have enough money to save? We've compiled a list of our best tips to find extra money in your budget to sock away. These strategies won't require you to take a vow of poverty -- we know money's tight already. Rather, they're small and simple cost-cutters that'll help you get started saving as soon as possible.

1. Give yourself a raise and bank it. Boost your take-home pay by adjusting your tax-withholding and have the difference in pay automatically transferred to an online savings account. Kiplinger's tax-withholding calculator can help you revise your W-4.

I have never been good at figuring out my with holding. So if you can do it great. What I do instead is use a special savings account which automatically pulls money out of the checking account and pops it into an account at is used for special items. For example, I use my special savings account for a Christmas fund, paying property taxes, paying for kids annual tuition bills. How many of us are still paying off our Christmas debt. If you had a special savings account your bill would be paid off or at least alot less.

2. Enroll in a 401(k). If your employer offers a 50-cent match for every dollar you contribute, even adding $60 a month will net you over a grand a year. Plus, you defer paying taxes on your contributions, giving you a bigger paycheck now.

Enrolling in a 401K is a triple whammy and that is a good thing. First of all most of the 401K have a matching plan so if you save 6% they match like 3%. Second the money you save in a 401K is tax free dollars meaning that you earned the money, banked it in the 401K without and taxes being taken out. It is the number 1 and in most cases the only tax deduction most of us have left. And finally, the third items is the money in your 401K grows tax free. Sweet!

3. Raise your car insurance deductible. Upping your out-of-pocket outlay from $250 to $1,000 can save you 15% or more off your premium.

I totally agree with the high deductible. However, I would add the following, first of all you can only raise your deductible once. I recommend that at least every 2 years you shop your car insurance around. My house insurance was $900 a year. I went to a new broker and they lowered my house insurance to $600. Then of course every year it went up, like $100 a year. So after 2 years of that I called the current broker and asked why it was going up so high and what they could do about it. The broker is an independant and they shopped it around for me. They were able to get the payment down to $575. That was even lower then where I started out 2 years ago. Pretty cool!

4. Pay off your credit card. Carrying a $1,000 balance at 18% blows $180 every year on interest that you could put to better use elsewhere.

I have wrote about paying off you debts in this blog extensively, you have to learn how to stop using credit cards and payoff your debts. First of all, don't borrow money from a credit card company. Borrow money from a bank, you will find much cheaper loans at a bank. Second don't incurr debt on something that doesn't last like a dinner out or a vacation. Who wants to be paying for last years vacation this year and you are already thing about this years vacation and the bills.

5. Go green. Control energy costs with a programmable thermostat. Prices start around $50, but you'll cut your heating-and-cooling bill by 10-20%.

Another idea, just turn down the thermostat and where a sweat shirt. Also another great way to save on energy costs is to drive slower. I use to run up and down the freeway way to fast. I back it down to 70, and you would be amazed what is does for your mileage. Also, if you don't have a garage, don't pre-start your car in the morning. This wastes a ton of gas.

6. Bundle up. Getting a package of phone, Internet and cable from one provider can save you about $50 a month.

This one really pisses me off. Our stupid cable bill is $120 a month, phone is $38 and that doesn't include cell phones. One tip I have on the cell phones, consider using a pay as you go phone with no contract. My wife has one and her cell phone bill is only $200 per year. That is only $16 a month. We buy her a $100 card when she needs more minutes and it last almost 6 months. Also, cut the long distance service on your land line. We use calling cards. It is only $.04 per minute.

7. Use your employer's FSA. Flexible spending accounts let you pay healthcare costs with pre-tax dollars. If your company offers them, take advantage and save 33% or more.

This is your second largest deduction that you can take right out of the pay check. These are tricky though, because if you don't use the money you loose the money. They also tend to be a lot of record keeping. But I still use mine.

8. Get a credit card with rewards. Spending $80 a week on gas and groceries? Putting it on a card with 5% cash rebates will earn you nearly $200 a year.

I am a huge fan of cash back cards. The caution here is don't sign up for a cash back card and then not be able to pay off your credit cards. Additionally, make sure your cash back cards don't have an annual fee. No sense in paying $100 to get $200 back.

9. Kick the habit. Smoking is hard on your health and the wallet. Three packs a week averages $50 a month. Learn more about how getting in shape can fatten your wallet.

My work is even offering cash incentives to get healthy and stop smoking.

10. Brown bag it. Instead of spending $8 on takeout every day at work, bring a bagged lunch for $5. You'll save $60 a month and $720 a year.

Eating lunch out is expensive. I disagree with the math here. I think you can bring your lunch for less than $5 and when you eat out it is usually a lot more than $8. Huge savings here when you start to cut back on the number of family dinners out. Another thing to consider is to cut back on the drinking in the bars. Have a beer at home they only cost $.50 at home and they are $3 to $4 in the bar!

11. Negotiate your rate. Instead of paying an APR of 18% on your credit card, call your issuer and ask for a lower rate. If you have good credit, your lender might consider it and if you can provide examples of offers you've gotten from other companies, it'll strengthen your case.

I recently wrote a post on negotiating with credit card companies.

12. Travel on the cheap. Bypass the old trifecta of travel search engines (Travelocity, Expedia and Orbitz) and head straight for Sidestep.com, which will search them all -- saving you money and time. For last minute deals, try Site59.com. And see our list of the 25 Best Travel Sites for more cost-cutting resources.

I recently wrote a post on finding cheaper flights. Vacations are expensive! Consider driving, not staying at a resort, you never spend time in the room anyway.

13. Insure yourself. Even if your company has a health plan, you may be able to do better for yourself. Pairing a high-deductible medical policy with a health savings account -- which lets you put away pre-tax dollars for out-of-pocket medical expenses -- can save money on premiums. Shop around at http://www.ehealthinsurance.com/.

14. Make media free. Dust off your library card and enjoy DVDs and books for free. If you'd normally rent a movie a week and buy a book a month, you can cut costs by $30.

15. Change your calling plan. The average wireless-phone user spends about $60 a month, including taxes and fees. If you talk for 200 or fewer minutes per month, switching to a prepaid plan where minutes cost 25 cents a minute could save you $10 a month. Compare plans at http://www.myrateplan.com/.

16. Park your car. Why pay $25 a week in gas when you could pay half that to use public transit? Or check out carpooling at http://www.erideshare.com/ and http://www.carpoolconnect.com/.

17. Ditch your gym. Forget the $40/month gym membership that'll cost you almost $500 a year and check out community centers in your area. Some may be free or charge a minimal fee such as $100 a year. Or buy a good pair of running shoes and work out the old-fashioned way.

18. Reshop your auto insurance. Using a comparison site like InsWeb can help you determine if you've got the best deal.

19. Learn to cook. Cooking at home saves on your food budget and it could even improve your dating prospects -- who isn't impressed by someone who can prepare a great meal? Check out Nine Ways to Get Ahead for more practical financial advice.

20. Keep track of your money. The best way to save is to know what you spend. It might not be pretty, but detail every expense for a month to get an idea of where you can cut back. Nearly everyone has some fat they can trim from their spending to put toward a savings goal.

Thanks for visiting and feel free to leave a comment or idea. By the way I am running a little survey to get my readers opinion on what items I should write more about so please take the survey, it is over on the left hand side of the page. Also for related articles check out the tags below. You might find something usefull. If you enjoyed this post please Subscribe to Strategies for Life.

Sunday, March 02, 2008

Reverse Mortgage Troubles and Caution and how to avoid them


Reverse Mortgage Troubles and Caution and how to avoid them


I found and interesting article in the New Your Times called Tapping Into Homes Can Be Pitfall for the Elderly here is what the article said along with my comments.

Erika Baker was 67 years old, divorced and worried about her job when a saleswoman showed up at her door in late 2006. A reverse mortgage, the saleswoman explained, would give Ms. Baker instant access to hundreds of thousands of dollars tied up in the value of her home. Such a loan, typically available only to homeowners in their 60s and older, would not have to be repaid until Ms. Baker moved out, the saleswoman said. And if she never moved, the loan would be settled by selling her house after she died. “Your Home Pays You Cash!” read a brochure the saleswoman left behind.

I guess the first red flag is don't believe any sales person that shows up at your door. Also another caution is if this is your first offer as in any transaction such as a purchase or and investment you should get at least 2 and hopefully 3 offers.




Ms. Baker, who lives just outside San Diego, jumped at the offer, borrowing a little more than $200,000 through a company called Senior American Funding. Then the problems began. The saleswoman pressured her to put the proceeds of the loan into complex investments that put her money out of reach, Ms. Baker said. She received only about $33,000 in cash, far less than she needed for her final years. “I thought this was a safe way to make sure I’d never run out of money,” Ms. Baker said. “Then everything became so confusing. No matter where I turned for help, it seemed like things got worse.”

At this point the second red flag should have been waving frantically. She needed money not new investments. This started to smell like a scam very quickly.

As the United States has become an older nation, reverse mortgages have grown into a $20-billion-a-year industry, with elderly homeowners taking out more than 132,000 such loans in 2007, an increase of more than 270 percent from two years earlier. In surveys, many borrowers say reverse mortgages have improved their lives and provided money they needed for retirement.

For most people their home is their largest asset. I don't like to call it and investment because if you sell it you need to find somewhere else to live. However, it is worth something. However, most of us, especially with the recent ups and downs in the real estate business will not be able to depend on our home for a significant portion of our retirement.

But hundreds of people who have sought reverse mortgages — in lawsuits, surveys and conversations with elder-care advocates — have complained about high-pressure or unethical sales tactics they say steered them toward loans with very high fees. Some say they were tricked into putting proceeds of their loans into unprofitable investments, while sales agents pocketed rich commissions.

I feel sorry for people in these situations. You would think they would have an adult child or a friend that could review the contract with them to help them determine what they were getting it. In this case they should have consulted a real estate attorney to review the contract. I have trouble understanding terms and conditions and I would have hired and attorney for a few hundred dollars to review the contract and tell me what I am getting into.

“Every scam artist is getting into this business,” said Prescott Cole, an elder-care advocate who has worked with numerous reverse mortgage borrowers. “Because reverse mortgages are so complicated and give you money up front, years can pass before a senior realizes they’ve lost everything.”

Again focus on the term So complicated. That sounds like you so need a lawyer. Getting a lawyer involved first would have prevented the need for one later when you have to sue the company that offered you the reverse mortgage.

Reverse mortgage lenders and brokers dispute those accusations, noting that the loans are heavily regulated and have helped hundreds of thousands of people. “For a lot of elderly people, their only real asset is their house,” said Peter Bell, president of the National Reverse Mortgage Lenders Association, a trade group. “A reverse mortgage is one of the few ways someone can access wealth that’s otherwise out of reach, while still living in their house for as long as they want.”

They could also sell their house to an investor and rent it back from him. They could outright sell the house and move into an nice senior community. Lots of options you would hope. Again where is the family to help out with these decisions?

However, some borrowers find their wealth is still out of grasp, even after they have sought a reverse mortgage. For example, Senior American Funding, the company that sold Ms. Baker her loan, has been sued three times in the last 13 months by clients who said they were misled. (Two of those cases were settled out of court for undisclosed sums. The third, filed by Ms. Baker in California state court last month, is pending.) The company, which is licensed in 16 states, has originated mortgages worth more than $100 million since 2004. “We never pressure clients,” said one of the company’s founders, Matthew Copley. “We just try to make sure they know about their options.”

I don't know if I believe this, "we have never pressured clients".

However, a former sales agent, Hani Shenoda, and an agent who still works at the company who spoke on the condition of anonymity because of fear of retribution, said in interviews that managers at Senior American Funding encouraged them to pressure older homeowners into unwise loans and investments. The company disputes that assertion. On Tuesday, after being contacted by a reporter, Senior American Funding announced it would no longer sell combinations of loans and investments like the one Ms. Baker had bought. “When we make mistakes, we address them as responsibly as we can,” Mr. Copley added. Ms. Baker owned a home worth about $600,000 but was living paycheck to paycheck, teaching child-rearing skills to low-income mothers for about $400 a week, when she was told in 2006 that her job was ending.

We you see here is a problem right off the bat, a $600,000 home. Holy moly! The taxes alone on the house has to be more that she is bringing home with her $400 a week job. She should have sold the house long ago. What ever time in her life when she was able to afford that house is gone.

Months earlier, she had received a mailing from Senior American Funding, one of the hundreds of reverse mortgage companies that have emerged in the last several years. She scheduled an appointment with a saleswoman named Laurie Spencer. (Ms. Spencer no longer works at Senior American Funding, according to the company, and could not be located.) “This saleswoman was so friendly and personable,” Ms. Baker said. “It was like God had sent me a friend to tell me how to survive.” In the kitchen of the home, where Ms. Baker displays watercolors of dolphins and flowers she has painted, the saleswoman recommended a loan of $218,900, with a variable interest rate initially set at 6.57 percent.

Again what was the house worth? $600K and they were recommending $218K. I don't like the math.

Because reverse mortgages do not require borrowers to make immediate repayments, the interest charges are added to the debt every day, and the total amount owed grows over time. The saleswoman did not explain that within 10 years, Ms. Baker’s $218,900 loan could grow to as much as $400,000, Ms. Baker said. That debt would be paid by selling the house when she moved out or died.

The saleswoman also did not emphasize the high fees, Ms. Baker said. The loan’s fees cost her $17,100 — almost 8 percent of the total loan — which was paid out of the proceeds as soon as the loan closed.

To ensure that borrowers know such details, the federal government requires them to speak to an independent adviser before closing a reverse mortgage. “We make potential borrowers talk to a counselor to make sure they understand what they are doing,” said RenĂ©e Shadel, an investigator with the Washington state attorney general’s office. “These can be great loans for some people, but only if they understand them.”

But critics say these counseling sessions are often brief and unhelpful. Some elderly borrowers, for instance, said their sessions lasted only 10 minutes, rather than the 60 to 90 minutes most counselors say they need to explain the loans. Critics say some sessions are so brief because reverse mortgage companies are paying for the advice. One of the largest reverse mortgage counseling companies, Money Management International, often asks lenders to pay for providing advice to the lender’s clients, according to a company spokeswoman. Money Management International, which is a nonprofit company, received $900,000 from reverse lenders last year. By regulation, counselors may not charge clients, though they are allowed to seek support from lenders.

“Anytime anyone gives a counselor a donation, they expect a quid pro quo,” said Buz Zeman, a reverse mortgage counselor with Housing Options Provided for the Elderly, a nonprofit group financed by government grants. “The point of counseling is to make people consider other options. That’s difficult if you feel like your next paycheck relies on convincing someone to get the loan.”

A spokeswoman for Money Management International says it seeks payments from lenders because government grants do not cover costs. The group’s counselors educate clients only about how loans work and do not recommend whether to proceed, she said, adding that the average time a counselor spends with a client is 58 minutes.

“There is no quid pro quo relationship with lenders,” a Money Management International spokeswoman, Catherine Williams, said in an e-mail message, adding that clients receive the same advice whether a lender pays for the session or not. “Funding is not tied to the outcome of any case.”

Even when lenders do not pay for counseling, it can still prove unhelpful. Ms. Baker’s counseling session, which was provided by an agency that does not accept money from lenders, lasted only about a half hour, and she walked away from the conversation still confused, she said.
Then the saleswoman persuaded her to sign the loan forms.

After the reverse mortgage closed, Ms. Baker used the proceeds to pay off a $68,000 traditional mortgage on her home, and she put about $33,000 into various savings accounts.
The remaining $100,000 was used to purchase, at the saleswoman’s urging, two deferred annuities — complex contracts that offer monthly income in exchange for a large lump-sum payment. Those annuities prohibited Ms. Baker from gaining access to most of her funds for seven years unless she paid a stiff penalty.

Moreover, the annuities were likely to cost her money rather than pay her. Annuities are so complex that it is impossible to forecast precisely how much Ms. Baker will receive from them. However, based on recent payout data for similar products, she will probably earn about $520 a month from her annuities for the rest of her life. Ms. Baker’s mortgage debt is increasing by about $600 a month as the interest compounds on the money she used to purchase those annuities.

If Ms. Baker collected monthly income from her annuities for 10 years, she could receive $62,400. However, the debt she would owe over that period would likely increase by $79,000 to $300,000, depending on how her loan’s interest rate changed.

“Buying an annuity with the proceeds of a reverse mortgage is incredibly dangerous,” said Mr. Cole, a critic of reverse mortgages. Indeed, the practice is so troublesome that many annuity companies and states either tightly regulate or forbid it. The salespeople at Senior American Funding were richly rewarded for their sales: the company received about $8,750 in commissions from Ms. Baker’s annuities, and $7,200 for processing her reverse mortgage.

Last month, Ms. Baker sued Senior American Funding, accusing it of fraud and elder abuse.
Mr. Copley, the Senior American Funding co-founder, defended the company’s actions and said Ms. Baker consented to every transaction. However, Mr. Copley conceded that Ms. Baker was given documents with inaccurate numbers and that sales agents, including him, at the time did not fully understand the products they were selling her. “If we made mistakes, I’m sorry,” he said.

Other lenders have also been accused of pushing older homeowners into unwise deals.
A survey released last year by AARP, formerly known as the American Association of Retired Persons, of more than 1,500 reverse mortgage borrowers found that almost one in 10 were urged to buy other financial products, like annuities.


Lawsuits against reverse mortgage companies, including the nation’s largest, Financial Freedom Senior Funding, contend that those firms helped pressure older Americans into bad investments. In court filings, companies have denied those claims. “Financial Freedom is not involved in selling annuities, does not recommend annuities, and won’t even allow borrowers to use reverse mortgage proceeds to buy an annuity at closing,” said Joel Schiffman, the company’s general counsel. “We only pursue a reverse mortgage when it is in a senior’s best interest.”
Some regulators and lawmakers, however, have said that more safeguards are needed, including giving borrowers more information about alternatives to reverse mortgages, disclosing fees more clearly and providing more government money to counselors, so that they do not seek payments from lenders.

New laws governing reverse mortgages are under consideration in Congress, though lobbyists for some lenders are mounting strong opposition, Congressional staff members say.
For Ms. Baker, now 68, such safeguards would come too late. She says she wakes up in the night, terrified there will not be enough money for food, gas or anything else. To cut her grocery bill, she stopped buying meat and fresh vegetables. “Before, at least I knew my house was safe, and that no one would take that away from me,” she said. “Now, I don’t know if there is anything I can count on.”

Related reading:

  1. Reverse mortgages pros and cons
  2. How do reverse mortgages work

Thanks for visiting and feel free to leave a comment or idea. By the way I am running a little survey to get my readers opinion on what items I should write more about so please take the survey, it is over on the left hand side of the page. Also for related articles check out the tags below. You might find something usefull. If you enjoyed this post please Subscribe to Strategies for Life.

Saturday, February 16, 2008

Racking up credit card debt in college

Racking up credit card debt in college


Did you rack up a big credit card debt in college? You have to remember that it takes a long time to Remove Negative Items from your Credit Report! One of my roommates had $5000 in credit card debt. Of course he also wore polo shirts and designer jeans. I think he also had a car payment. My car cost $700 and lasted me for like 3 years. This video is has some good lessons in it about credit card debt. I like the saying "if you live like a professional in college you will live like a college student after you get out of college." What happens is you have fun paying for things like spring break, dinners out, and material items. You rack up a huge debt and you end up pay for it for a long time. One of my spring break trips consisted of a buddy of mine and I driving to Daytona and Fort Lauderdale and sleeping in the back of our truck. It was great we didn't know any better and we were on SPRING BREAK. The trip was cheap.

Did you know if you have $7000 in credit card debt at 25% interest rate you end up having an interest charge of $1750 per year! That $145 per month just in interest that doesn't even count the principle payments.

A few guidelines to remember and these don't just apply to college students.

  1. Don't pay for things that don't last more than a few years with a credit card if you are unable to payoff the card each month. For example, if you don't have the money for the dinner out. Don't put in on the card.
  2. Don't borrow money long term from a credit card company. Borrow money from a bank not a credit card. The rates are much, much lower.
  3. If you cannot get credit borrow money from your parents or relatives. When I say borrow I really mean it. You have to keep track of what you owe them and have a written agreement on how you are going to pay them back.


Related articles:

  1. Finding Cheaper Loans
  2. How to stop using credit crds and getting out of debt

Thanks for visiting and feel free to leave a comment or idea. By the way I am running a little survey to get my readers opinion on what items I should write more about so please take the survey, it is over on the left hand side of the page. Also for related articles check out the tags below. You might find something usefull. If you enjoyed this post please Subscribe to Strategies for Life.

Monday, February 11, 2008

How to Negotiate with Your Credit Card Company

How to Negotiate With Your Credit Card Company
Are you afraid to call your credit card company and ask for a lower rate? Are you tempted to call one of those debt consolidation outfits on the internet and ask for help? Why not try it yourself first. You see if you run a balance on your credit card the credit card company is making boat loads of money off of you. They don't want you to leave. Why not give them a call and ask for a lower rate. Check out this example below on how to ask for a lower rate.

For additional reading check out the following book, Talk Your Way Out of Credit Card Debt!: Phone Calls to Banks That Saved More Than $43,000 in Interest Charges and Fees



Related articles:

  1. Finding Cheaper Loans
  2. How to stop using credit crds and getting out of debt

Thanks for visiting and feel free to leave a comment or idea. By the way I am running a little survey to get my readers opinion on what items I should write more about so please take the survey, it is over on the left hand side of the page. Also for related articles check out the tags below. You might find something usefull. If you enjoyed this post please Subscribe to Strategies for Life.

Avoiding Foreclosure - Don't Lose Your Home

Avoiding Foreclosure - Don't Lose Your Home
If you are unable to make your mortgage payment here are some tips to help you avoid foreclosue.

1. Don't ignore the problem. The further behind you become, the harder it will be to reinstate your loan and the more likely that you will lose your house. Remember, banks and mortgage companies do not want to be in the real estate business. They are in the loan business. Most banks now days have special departments setup to help you work through a payment program.

2. Contact your lender as soon as you realize that you have a problem. Again lenders do not want your house. They have options to help borrowers through difficult financial times. Have a list of question ready for your call. Make sure you understand what amount you can and cannot pay at this time.

3. Open and respond to all mail from your lender. The first notices you receive will offer good information about foreclosure prevention options that can help you weather financial problems. Later mail may include important notice of pending legal action. Your failure to open the mail will not be an excuse in foreclosure court. Even if you only owe $5000 on your $200,000 home they bank still owns it and can foreclose on you. Be responsible and address the problem.



4. Know your mortgage rights. Find your loan documents and read them so you know what your lender may do if you can't make your payments. Learn about the foreclosure laws and timeframes in your state (as every state is different) by contacting the State Government Housing Office. The state of Michigan is even running special seminars on avoiding foreclosure.

5. Understand foreclosure prevention options.Valuable information about foreclosure prevention (also called loss mitigation) options can be found on the internet at www.fha.gov/foreclosure/index.cfm.

6. Contact a HUD-approved housing counselor. The U.S. Department of Housing and Urban Development (HUD) funds free or very low cost housing counseling nationwide. Housing counselors can help you understand the law and your options, organize your finances and represent you in negotiations with your lender if you need this assistance. Find a HUD-approved housing counselor near you or call (800) 569-4287 or TTY (800) 877-8339.

7. Prioritize your spending. After healthcare, keeping your house should be your first priority. Review your finances and see where you can cut spending in order to make your mortgage payment. Look for optional expenses-cable TV, memberships, entertainment-that you can eliminate. Delay payments on credit cards and other "unsecured" debt until you have paid your mortgage.

8. Use your assets. Do you have assets-a second car, jewelry, a whole life insurance policy-that you can sell for cash to help reinstate your loan? Can anyone in your household get an extra job to bring in additional income? Even if these efforts don't significantly increase your available cash or your income, they demonstrate to your lender that you are willing to make sacrifices to keep your home.

9. Avoid foreclosure prevention companies. You don't need to pay fees for foreclosure prevention help-use that money to pay the mortgage instead. Many for-profit companies will contact you promising to negotiate with your lender. While these may be legitimate businesses, they will charge you a hefty fee (often two or three month's mortgage payment) for information and services your lender or a HUD approved housing counselor will provide free if you contact them.10. Don't lose your house to foreclosure recovery scams!If any firm claims they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home! Never sign a legal document without reading and understanding all the terms and getting professional advice from an attorney, a trusted real estate professional, or a HUD approved housing counselor.

Tuesday, January 29, 2008

Apple iPod and Starbucks Coffee catching on in Asia

Apple iPod and Starbucks Coffee catching on in Asia



It has been two years since I have been in Asia. Last year was a slow overseas travel year for me. I noticed two really important product or company differences this trip. The first one was the number of iPods people were using in Japan. Last time I visited I didn't see any of them. Now they seem to have really taken off. This of course is great for Apple's stock because Asia is just a huge market. Click here for product information on the ipod



The second thing that I noticed was a lot more Starbucks coffee shops. And just like their counter parts in the U.S. they were packed. I always like to joke that Starbucks needs watercooled cash registers because they never stop ringing the cash register. I say Starbucks in China, Tokyo, in the train stations, heck they even have one in the Nissan Tech Center lobby in Japan. Amazing!

Check out this video on Starbucks from Morningstar!




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The Smartest Guys In the Room: The Amazing Rise and Scandalous Fall of Enron

The Smartest Guys In the Room: The Amazing Rise and Scandalous Fall of Enron

I picked up the book The Smartest Guys in the Room which is about the Rise and Fall of Enron. It is a fasinating book. It is really sort of amazing to me how many crooks they had in the company and the overall level of disfunctionality inside the company. It is very easy to read and super interesting. I highly recommend it.

I didn't realize that there is also a movie made about the story. Below you will find the trailer for the movie. If you are a fan of business books you will really enjoy this book. I can recommend the movie yet until I see it.

By the way I just added a survey to my blog so I can get readers feedback on topics that I should be writing about. Please take a moment to complete the survey. I appreciate the comments and the feedback.

Tuesday, January 15, 2008

When to take Social Security Managing Your Retirement


When to Take Social Security - Managing Your Retirement

Interesting article in US News on understanding when to take Social Security along with my comments.  The first baby boomers are turning 62 this year, the magical age at which you can begin to lay claim to all those payroll taxes you shelled out paycheck after paycheck your entire working life. The nation's symbolic first baby boomer, Kathleen Casey-Kirschling, a retired Maryland teacher, who was born one second after midnight on Jan. 1, 1946, has already filed online for her Social Security retirement benefits.  It is really interesting how the baby boomers spread from 1946 all the way to 1965.  Of course most people born in the 40s or 50s or 60s really can't relate that much to the people born in a different decade.

Nearly 80 million Americans of the baby boom generation (born from 1946 through 1964) will follow her in becoming eligible for Social Security benefits over the next two decades, a phenomenon Social Security Commissioner Michael Astrue is fond of calling America's "silver tsunami."  Being that I am 42, I look forward to the retirement of the baby boomers.  I think for guys and gals like me having 80 million people leaving the work force will only make our skills and services in more demand.  Hopefully!

Almost a third of the 2.9 million boomers born in 1946 plan to apply for benefits this year, like Casey-Kirschling, according to a recent MetLife Mature Market Institute survey. But class of 1946 boomers who file this year will receive a reduced benefit for life, compared with those who hold out until what the Social Security Administration deems their full retirement age—in this case, 66.  Holding out until age 70 will bring in an even bigger monthly check.  I think the early baby boomers will get their checks for a long time.  However, I worry about the folks that were born in the 60s.  I think the system will run out of money.

So, for example, a boomer with a final salary of $75,000 might receive a $1,320 monthly Social Security check if he collects at age 62, according to a University of Pennsylvania Pension Research Council Working Paper by James Mahaney and Peter Carlson. If the same boomer were to delay until age 70, he would get $2,884 monthly, more than twice as much. Even after counting cost-of-living increases, the boomer who began to collect at age 62 would by age 70 probably receive only $1,637 a month.  It is a very sizeable difference if you wait until age 70.  The key is how long do you think you are going to live.  No one really knows.  The other factor is can you afford to wait, do you have other income, retirement savings, pensions, investments, etc.

"Waiting is a good deal if you have other means of getting by," says Laurence Kotlikoff, an economics professor at Boston University, unless you are certain you won't live a long life because of a health problem. "If you have a terminal heart condition, you want to take benefits immediately. Otherwise, in general—if you can—you want to wait as long as you possibly can to get benefits." Kotlikoff found that delaying taking the Social Security benefit can raise your standard of living in retirement by up to 10 percent. "That's like working an extra year or two," he says.

Your Social Security benefit increases by approximately 7 percent each year you delay taking it from age 62 to 66 and by 8 percent a year until age 70, Kotlikoff found. That could be a better return than retirees are getting on their investments. "You have to compare that with what your pension is giving you," says Hugo Benitez-Silva, an associate professor of economics at SUNY-Stony Brook. So, if your 401(k) or IRA is not giving you a higher return than that, you might want to start delaying Social Security and drawing down your other assets first, Benitez-Silva says.

Olivia Mitchell, a professor of insurance and risk management at the University of Pennsylvania's Wharton School, agrees. "Delaying is better if you can afford to wait," she says. "What you should do is save more of your money upfront and use that savings to finance your early retirement and then use the [Social Security] benefit later."

But most employees show little inclination to wait before collecting Social Security. The Employee Benefit Research Institute found that 65 percent of current workers plan to retire at age 65 or younger—before most will be eligible for full Social Security benefits. And only about 32 percent of boomers born in 1946 say they will wait until age 66 or beyond to receive full benefits, MetLife reports. Those who plan to collect as soon as possible cite feeling entitled to receive their benefit, preferring to have the cash in their pocket and not the government's, needing the money now, and having a pervasive fear that the Social Security system will collapse.

"There is a widespread belief among Americans that benefits in the future are going to be lower than they are today," Benitez-Silva says. "There are justifications that claiming early may be a very rational behavior." Other retirement experts say the fear is unfounded. "I think the government would sooner default on its debt than cut benefits for someone who is currently age 62," Kotlikoff says.

But it is not only your age that matters when deciding when to claim Social Security. Retirees should also consider whether or not they intend to work, which can temporarily reduce benefits and increase taxes if their earnings are too high, and review their spouse's plans before collecting their due.

Monday, January 14, 2008

Should you rent or own a home - buying your first house



Should you rent or own a home - buying your first house
Rent or buy, determining if you should own a home or live in an apartment. I read and interesting article in US News and World Report about determine if you should rent or buy a home. Here is what the article said along with my comments.


Real-estate agents have been pushing the virtues of homeownership since homes were invented. Or since real-estate agents were invented, anyway. Paying a mortgage, they insist, is a can't-miss investment (the tax breaks, the appreciation, the thrill of fixing your own roof!). Renting is for simpletons who don't like keeping their own money. Another thing to consider in buying a home is if you take our a 15 or 30 year loan that loan payment, providing that you take a fixed interest rate loan will stay the same forever. Your rent will not stay the same. Any good landlord should be raising your rent on a regular basis.

But does owning a home really trump renting? With the economy stumbling, house prices falling, and credit tightening, many housing experts are questioning the conventional wisdom. Remember some day you want to retire. Do you really want to be paying rent or a mortgage when you retire? "Over the last decade, it may have been true," says W. Van Harlow, an economist at the Fidelity Research Institute. "Clearly, there are periods where [the housing market] will dominate. But give this market correction another 18 months, and it may not be true anymore." A lot of people made a lot of money in real estate over the last 5 years. Of course the market was over bought and there was speculation. People that got in late got burn because they bought high and sold low. Sort of the story of my life of investing?


Not so hot. The housing boom produced endless stories of homeowners getting twice what they paid for their homes. But "prices don't always go up," says Jay Butler, director of realty studies at Arizona State University. Even a boomtown like Phoenix has seen median rates of appreciation climb only 4.6 percent a year since 1981. According to a Fidelity study published this year, the return on a dollar invested in real estate in 1963 barely beat that of a low-risk treasury bill.


When the housing market slumps—as it has every 10 or 15 years for the past several decades—homeownership becomes little more than renting, from a bank. Without appreciation, buying a $400,000 house—instead of renting the same property for, say, $2,000 a month—can turn into an expensive, potentially money-losing proposition. Part of the problem here is the $400,000 house issue. That is what got a lot of people in trouble. The $400,000 house was their first home and they could only make the payments if both the husband and the wife were working. Even worse some people borrowed money on adjustable rate mortgages that that have adjusted and now they are screwed because the payment is too high. Assuming home prices come out of their death spiral (prices fell 4.5 percent in the third quarter compared with last year), they would still have to appreciate at 4 percent every year for a decade—even if rents climbed well above the rate of inflation—before a family would save more owning than renting. An $80,000 down payment could be invested instead in a mutual fund earning 8 percent, and housing comes with myriad other expenses, from maintenance to insurance to taxes, none of which build equity. The article fails to mention the size of what you are living int the quality of life of living in a neighborhood, the fact that you have a yard for your kids to play in and so on.


Tax breaks do ease the pain. But with the average family staying in a house only six years, homeownership during a slump (especially in foreclosure pits like Las Vegas and Tampa, where prices have dropped more than 9 percent since last year) can look less and less like the American dream. Vegas, Florida, Arizona, and California where totaly over heated markets. They markets were full of speculators that were buying second homes just for investment purposes and then they go burned.


Renting, meanwhile, has its virtues. It's cheaper in the short term, it offers maximum flexibility, and it pushes the headaches of maintenance and taxes onto landlords. Remember, he can, will, and should raise the rents over the years. It can also be a sound long-term investment. According to Fidelity, if renters save even $300 a month—the difference, say, between their rent and a monthly mortgage payment—that money, invested in stocks growing at only 4 percent, could add up to $114,000 in 20 years. (And that's on top of earnings on a down payment that never had to be made.) "Over long horizons, if you reinvest the savings," Harlow says, "you're probably not going to find that much difference between renting and buying." Saving hasn't proved to be the national forte, of course. But with the bloom off the homeownership rose, it may have to be soon.