Retire earlier by cutting corners

Posted on July 11, 2006 by Mark

You’ve probably heard the old adage “a penny saved is a penny earned” right? How about this modern twist – “A penny saved is $200 (if invested wisely and compounded over 20 years)” Well, I’m not exactly sure how much compounding it takes to turn a penny into $200 but I’m very sure that saving money leads to wealth. There’s absolutely no doubt about that! The Motley Fool just published a great article about how cutting corners on things like eating out and expensive coffee drinks can help you retire much sooner.

Are you fretting about your lack of savings and the amount you’re putting away for retirement? Well, me too. I always do. Today I want to tell you the best way I’ve found to accumulate money beyond setting aside part of your paycheck each month. It’s fairly easy and fairly painless, and it could add up to hundreds of thousands of dollars by the time you retire. – Rex Moore via The Motley Fool

How To Retire Faster via the Motley Fool

Here’s another quick and easy idea! The Orange Savings Account. Earn 4.35%. Great rates, no fees, no minimums

Technorati Tags: Budgeting, Finance, Investing, Retirement

A cheaper home in Texas

Posted on June 30, 2006 by Mark

With the news of rising interest rates, an increased amount of homes sitting on the market, and a reduction in recorded sales prices many people are beginning to feel that there is no where to go for affordable homes or good real estate investments. I’m here to tell you that there’s hope! There are parts of the country not beset with over inflated housing prices. Places where land – the thing that ultimately drives up the cost of homes – is still very affordable. And I’m not talking about small towns either. How about Austin, San Antonio and Lubbock? (Wait a second. Aren’t all these towns in Texas?) These communities have thriving universities – Lubbock has 50,000 full-time students – vibrant arts scenes, fantastic medical care, temperate climates and good transportation infrastructure.
I was recently in Lubbock and was shocked to see what kind of home you could purchase for $350,000. Let me just say this

In Phoenix, AZ you would pay more than twice that amount for the same home. In California potentially as much as four times!

So what are you all waiting for? Are the coastal regions that great? I suspect that as families with adjustable rate mortgages start to get into the adjustable parts of their mortgages cities such as these are going to start to look extremely attractive!

New subdivision selling 1-acre lots in Lubbock for $45,000

Technorati Tags: Finance, Finance Tools, Investing, Mortgages, Real Estate

From poor to rich in 5 years

Posted on June 9, 2006 by Mark

Here’s a book that was written by a former poor river guide who was interested in investing in stocks but found the process inpenetrable and frustrating and wasn’t willing to make it his full time job. He then studied some of the investor greats such as Warren Buffett, invested his first $1,000 and five years later turned that into $1 million. What did he learn that allowed him to do this on a part time basis? Order this best selling book (it’s been at or near the top of the New York Times best seller list for some time now.) and find out how you can unravel the mystery of investing in stocks and create fantastic wealth with your savings.

Technorati Tags: Finance, Finance Tools, Investing, Retirement

It’s time to refinance your mortgage

Posted on June 5, 2006 by Mark

In case you didn’t notice mortgage rates have been on an upward trend. The obvious implication is that anyone who doesn’t have some sort of a fixed rate mortgage will soon see – if they haven’t already – an increase in their monthly payments. Some may even see their monthly payments double! I personally know of at least four families who have 2/28 arms. These are loans that are at a fixed rate for two years and then begin to adjust every year after. I believe these loans can adjust by as much as 2% per year based on whether or not rates are rising. Because people tend to buy as much home as they possibly can afford based on the introductory interest rate they are most likely in trouble unless they refinance soon at an affordable fixed rate loan. Another very common scenario is the one in which a buyer will purchase a home with a low rate interest only ARM. Most of these loans are fixed for a three to five year period and then begin to adjust. When I’ve asked people what they plan to do with these loans once they begin to adjust they commonly say things like, “Oh. I plan to sell the home before that happens.” or “I’ll just refinance!” The problem is that in a soft resale market – much like Phoenix is right now – it may not be that easy to unload your home in the event you can’t debt service the newly adjusting mortgage. The other option, doing a mortgage refinance, can be tricky as well for some people. Especially if they (and their pocketbooks) have grown accustomed to that low monthly payment. So what’s the solution?

1. Don’t buy more than you can afford on a 15 or 30 year mortgage.
2. Don’t try to predict where mortgage rates are headed. Your financial future is not worth the gamble.
3. If you have a crummy loan contact a mortgage broker immediately and ask about a mortgage refinance to a fixed rate loan.
4. Tell you friends and family who have crummy loans to do the same.

Technorati Tags: Budgeting, Debt, Finance, Finance Tools, Mortgages, Real Estate

Get a new credit history…legally

Posted on May 19, 2006 by Mark

One of the most innovative things to roll out of the world of credit recently is the Payment Reporting Builds Credit organization. (PRBC) In a nutshell the PRBC company is an alternative to the big three credit reporting bureaus: Equifax, Experian, and Transunion. Yeah boy! Stick it to the man!
What makes PRBC so innovative is their approach to gauging credit worthiness by tracking your recurring payments to your utilities such as phone, water, gas and other non-traditional credit you may carry such as loans from family. (via CircleLending.com) You can even report your on time rent to them! So in short, even if you FICO score is so low your credit report isn’t good enough for lining your kitty’s litter box, you can have a stellar “credit” rating via PRBC if you pay all your other recurring bills on time.
The beautiful thing is that many nationwide lenders including Fannie Mae loans will accept (or are required to) your PRBC report. Good news for those who had credit travails in their past.

How can PRBC help me?
1. It helps you to build your credit. Your traditional credit reports and scores do not include on-time commonly recurring bill payments, such as rent, insurance, cable, phone, remittances, day care, child support, and utilities. PRBC is the only credit bureau that enables you to build your credit by having your positive bill payment history reported on your behalf.

2. It helps you to save money. Building a positive PRBC bill payment history and Bill Payment Score demonstrates your creditworthiness and fiscal responsibility. Having a positive PRBC bill payment history can save you thousands of dollars on a mortgage, hundreds of dollars on an auto loan, insurance, and other major purchases.

3. It helps you because enrollment and basic PRBC services are free.
PRBC does not charge you a fee to self-enroll, accept account and payment information from approved PRBC Data Providers, view your PRBC data, or resolve disputes about information reported about your accounts by PRBC Data Providers. If you wish to build a bill payment history by providing historical payments to PRBC, there may be a nominal fee to verify those historical accounts and payments. Visit www.prbc.com/consumers to learn more.
Full downloadable PDF article

So if you keep getting turned down for favorable mortgage refinancing or you want to maximize your mortgage position in some other way it may be well worth your time to start accumulating a history with PRBC.

PRBC.com

Technorati Tags: Credit, Credit Score, Debt, Finance, Finance Tools, Mortgages

Invest $100,000 without losing a dime

Posted on May 11, 2006 by Mark

A fantastic way to learn about the process of investing in individual stocks is to play Investopedia’s online stock simulator. About a year ago on a whim I decided to give it a shot and picked a handful of stocks from companies that appealed to me for one inane reason or another. Microsoft, Apple, Texaco, etc.
Over the year’s time I’m up approximately 19% percent in my “ahem” portfolio. Making me wish I had invested real money. However it’s been an interesting education in the ups and downs of a particular stock. For instance I picked up 100 shares of Dell reasoning that such a solid company should be a strong buy in any market. Well, as of today I’m down approximately 14%. I could search the internet in hopes of divining why the stock isn’t succeeding right now but it serves to illuminate a reality in doing this kind of investing: THIS IS SOMETHING THAT REQUIRES DETAILED ATTENTION.

I have no doubt that I will be purchasing individual stocks in the near future but for now I’m going to keep on keeping on with my fake portfolio and chalk it up to a great learning experience. I encourage you to experiment in the same way.

Investopedia’s Online Stock Simulator

Technorati Tags: Finance, Finance Tools, Investing, Retirement

Identity theft ruins credit

Posted on May 11, 2006 by Mark

We would be remiss if we didn’t take a least one chance to warn you about identity theft. Here are some recent
statistics courtesty of The Identity Theft Resource Center:

According to 2 studies done in July 2003 (Gartner Research and Harris Interactive), approximately 7 million people became victims of identity theft in the prior 12 months. That equals 19,178 per day, 799 per hour, 13.3 per minute.

The incidence of victimization increased 11-20% between 2001-2002 and 80% between 2002 -2003 (Harris Interactive). This same study found that 91% of respondents do not see an “end to the tunnel” and expect a heavy increase in victimization. 49% also stated that they do not feel they know how to adequately protect themselves from this crime.

Victims now spend an average of 600 hours recovering from this crime, often over a period of years. Three years ago the average was 175 hours of time*, representing an increase of about 2470%.

The average arrest rate (according to law enforcement) is under 5% of all reported cases by victims.

Approximately 85% of victims found out about the crime due to an adverse situation – denied credit or employment, notification by police or collection agencies, receipt of credit cards or bills never ordered, etc. Only 15% found out through a positive action taken by a business group that verified a submitted application or a reported change of address.

What’s even more shocking is how easy it is to be targeted by by an identity thief. Guardian Unlimited published an article on May 3rd about what your boarding pass could mean to an identity fraudster.

We logged on to the BA website, bought a ticket in Broer’s name and then, using the frequent flyer number on his boarding pass stub, without typing in a password, were given full access to all his personal details – including his passport number, the date it expired, his nationality (he is Dutch, living in the UK) and his date of birth. The system even allowed us to change the information.

Full article here

Technorati Tags: Credit Score, Finance, Identity Theft

Risky mortgages – Plain scary!

Posted on April 17, 2006 by Mark

Almost every person reading this probably has a personal experience with someone (or themselves) who have financed or re-financed their home with an interest only adjustable rate mortgage. What is an interest only ARM? Basically it’s a loan where you pay only the interest on a loan that will start to adjust after a certain amount of time. Typically 3-5 years after the loan is originated. What’s so risky with these loans? Well, if you don’t know by now you haven’t been reading the news. (Not that the news is always right mind you.)
But just for the uninformed let me give you a worst case scenario: Bob desperately wants that beautiful new rambler on the corner lot. Problem is he can’t afford it on his salary with a fixed rate 30-year loan even though 30-year rates are some of the lowest in history. What to do? Well Hello there Bob! Why not take out a 2.7% interest only 5 year ARM? Surely you’ll be able to refinance after your salary goes up or you’ll sell if it looks like you’ll have trouble making the payment. Right? Well, perhaps not. By the time Bob gets towards the end of his fixed rate period that he has enjoyed for almost five years the real estate market has cooled and no-one is really interested in purchasing his home. What’s more, his income hasn’t gone up enough to cover what will amount to almost a doubling of his monthly payment! All of the speculators have moved on and it’s a buyer’s market. So what does he do? He goes into foreclosure that’s what! (Keep in mind this is a worst-case scenario but still highly likely and beginning to happen in some local markets.)
For more information take some time to read the Business Week story on this issue:

Why is the surge in interest-only mortgages so frightening? Because many people are using them to buy houses that they couldn’t otherwise afford. The monthly payment on an interest-only loan is lower because there’s no amortization of principal. So people can qualify for bigger loans and buy bigger houses. The availability of such loans has probably contributed to the upward spiral in home prices, as shoppers armed with cheap financing try to outbid each other for choice properties.

A Growing Tide of Risky Mortgages

Here’s a suggestion: Go to RateState.com to get a free comparison quote for a 15-40 year fixed rate mortgage if you find yourself in Bob’s position.

Technorati Tags: Debt, Finance Tools, Mortgages

Learn how to invest and retire rich

Posted on April 11, 2006 by Mark

Who want’s to live in a refrigerator box? Who’d like to rely on food stamps and minimum wage labor when your bones are brittle and you get winded walking up three steps? If you’re not excited about the prospect of asking your kids for loans one day here’s some required reading for the Motley Fool for you:

Fool.com: What Does It Take To Invest Like a Fool? [The 13 Steps to Investing Foolishly]

Technorati Tags: Finance, Retirement, Finance Tools, Investing

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