Sometimes, recognizing that you have a problem is the first step in solving it. That’s definitely true when it comes to spending and saving habits that can lead to increased debt and decreased financial stability.
One of the first signs of financial trouble includes chronic trouble making the minimum payments on credit cards, personal loans, mortgages and other obligations. If you’re unable to make even the minimum payments on your obligations, you need to understand immediately where your money is going. It’s not unusual for people with relatively high incomes to end up with little or no money at the end of the month. Try tracking all of your expenditures for a month. Keep a close tally of late fees, over-limit fees, overdraft fees, and ATM fees. Also keep track of how much you spend on “incidentals” and “minor purchases.” At the end of the month, you may be surprised to find out how much you’re spending in these areas.
Another sign of financial trouble is falling behind on monthly payments. If your mortgage or rent payments are chronically late, or if you skipped one or more payments, you should consider yourself in financial trouble. Providing a living space is a very basic need, and if you’re having trouble paying the mortgage or rent, you probably need immediate assistance with your to finances and debts. Developing a budget may help you see how you’re coming up short.
If you’re using a credit card to pay for necessities each month, you’re either in financial trouble or soon will be. Like housing, providing food, medicine, and utility service for your home is a basic expense that should be covered by your monthly income. If you’ve lost your job or your income has been reduced suddenly, you may need to make drastic changes to your lifestyle to accommodate your new, lower income level. Look at your expenses to see if you can shift you’re spending on necessities to a cash-only basis. Then look to see if you can eliminate some of your credit card spending.
If you’re using credit cards to pay off other credit cards, you may have mounting debt problems. This strategy may resolve an immediate problem, but isn’t sustainable in the long term. If you pay your credit card bills with another credit card, you’re probably living beyond your means and racking up some very expensive interest charges in the process. You need to work on more successful debt relief strategies that resolve your debt problems rather than shifting them from place to place each month.
With all that’s happening in the current market and so many conflicting opinions in the news everyday, how do you recommend people approach investing today?
The most important thing is to NOT invest emotionally, but rather objectively. The average investor is panicking now and piling into low yielding investments like CDs, savings and money market accounts – the equivalent of socking cash under the mattress. For some wealthy individuals, late in retirement, this may be prudent. However, for most investors, significant future damage may be occurring from this seemingly comfortable, short-term, benign strategy. The problem is that life expectancies are stretching; boomers/retirees are more active, and inflation (i.e. healthcare, food, vacation, etc.) will eat away at these so-called safe investments. The fact of the matter is there are a lot of opportunities now – especially as fear levels have risen so dramatically. And the opportunities do not only lie in the stock market. There are a lot of excellent investment prospects in the fixed income market as well.
Is it true that people haven’t actually lost their money if they don’t sell their stocks for a lower price?
Stocks in some respect are no different than other asset classes. You can think about stocks in the same way you think about the value of your house. If you are in the process of selling your home and the house price craters, you will experience a loss in home value. The prospective buyer will encounter a simultaneous gain, in the form of a lower price (the buyer gets to keep more money in his/her pocket). It is true that lower stock prices on unsold positions are only “paper losses,” and if prices rebound above the prices purchased then there will be “paper gains.” True gains or losses will not occur until the stock positions are sold.
The media buzz is that this is a great time for people to make a lot of money; can you explain that?
The old adage of “buy low, sell high” rings true during volatile periods like now. Most domestic equity indexes corrected by more than -40% from the peak levels experienced in late 2007. Historically these terrifying periods have been the best times to buy. For example, take the 1974 bear market, which experienced a price correction of about 50%. During that period we were in a deep recession with 9% unemployment, we had just come out of the Vietnam War, and President Nixon resigned after impeachment hearings. At the time, the S&P 500 index bottomed out at a level of approximately 61. Last Friday (2/6/09), the same index closed around 868, a 1,300%+ increase over that period (excluding dividends). Not too shabby.
The economic environment wasn’t pretty either if we fast forward to the 1990-91 period when we were knee-deep in the first Iraqi war, going through a recession (8% unemployment), and digging our way out of the S&L Crisis (Savings & Loan). Yet again, this was a great opportunity to invest as the markets have about tripled over that period, excluding the benefit of dividends (S&P 500 bottomed at around 295 in late 1990).
After the 2008 mark downturn, many people are afraid to invest. What do you suggest for them?
Unfortunately, there is no silver bullet. Everybody’s situation is different. My suggestion for a 29 year old in the wealth accumulation phase of his career would be dramatically different from a 79 year old retiree that is in the distribution phase of her investing cycle.
The best thing people can do is to educate themselves about investments. There are a lot of aggressive sharks out in the investment waters and to survive in the long run investors need to equip themselves with relevant questions to ask financial advisors and institutions in order to protect their investments. There are some great low cost tax efficient products (e.g. index funds and exchange traded funds) and strategies that I discuss in more detail in my book.
In light of current events, how can investors improve investment performance over the long run?
The low hanging fruit for investors is to drive down excessive fees and transaction costs charged by brokers and financial institutions. John Bogle, the very successful founder of The Vanguard Group, did an eighteen year study (1984-2002) showing that individual investors underperformed the “do-nothing” index strategy by more than 10%…PER YEAR. The cause, a standard fee structure of approximately 2.5% (1% load, 1% management fee, .5% transaction costs) that many investors pay, which doesn’t even account for additional tax expenses. The annual -10% underperformance is not only due to fat fees, but also from poor emotional decisions tied to the “herd” trading mentality. A sensible, unemotional approach to investing should also incorporate a “dollar-cost-averaging” strategy that purchases additional shares for each dollar invested as prices decline.
What should people do that have stocks that took a nose dive?
It really depends on the particular investment. Each stock should be thoroughly reviewed on a case by case basis. If fundamental investing is the driving force behind your investments, then I believe individuals need a systematic strategy to buy securities and sell securities. As part of this disciplined approach, I urge investors to have a thesis (basis) for ownership and if that thesis changes you can use that dynamic as a foundation for your sell signal. There will be winners and losers as we work our way through this financial crisis and recession, but with each recession and bear market there is a renewal of leadership that builds for the ensuing bull market. Tax loss considerations can play a role in the sale decision of underperforming stocks, but should not be the key determinant.
Lastly, do you have any tips for someone who may be considering investing for the first time in the current economic climate?
Now is a great time to start investing relative to a year ago. Don’t get discouraged by the market volatility. First time investors have extremely long investment horizons, therefore heightened volatility can be viewed in a beneficial light. Diversification through fund investing is another important principle that new investors should embrace. As experience levels expand for newbie investors, expanding exposure to individual stocks can become a larger priority. Until then, my advice to first-timers is to take a more conservative stance.
NOTE:
Wade is also offering a free ebook which shares excerpts from his book, for a limited time. Be sure to stop by his website to get a copy www.Sidoxia.com. This is your chance to take a look inside the book and to learn additional information about Wade Slome and his business.
For more information about Wade Slome and his virtual tour, check the schedule at http://virtualblogtour.blogspot.com/2008/12/how-i-managed-20000000000-by-age-32-by.html
When it comes to online transactions, it pays to be vigilant about your personal information. Once you’ve made a purchase over the internet, it’s hard to control where your information ends up – and who exactly has access to it. If you’re uncomfortable when it comes to using your credit card or debit card for making those online transactions but don’t want to totally avoid internet shopping, we’ve collected five reasons why you should use a prepaid Visa debit card for online purchases:
1. It’s More Secure.
Using your credit or debit card to fund your next internet purchase or pay online bills can be dangerous, as your billing information could fall into the hands of internet hackers and thieves. So if you want to keep your financial information protected – and prevent your life from being turned upside down due to identity theft – use a prepaid Visa debit card for all of your online purchases.
With a prepaid debit card, you are not exposing your main accounts on the internet as you would if you used your regular credit or debit card. Additionally, if there are any unauthorized purchases on your card, Visa offers zero liability protection against any fraudulent charges!
2. You Can Control Your Spending.
We’ve all had those times when we’ve lost track of exactly how much we’ve spent. Perhaps it was during a fun vacation, or a night out with old friends – the same can happen with online purchases! Prepaid debit cards prevent you from exceeding your balance, as you can only spend your predetermined limit.
3. No Interest or Overdraft Fees.
No one likes having to fork over their hard-earned money to pay outrageous overdraft fees or interest high rates – which is why prepaid Visa debit cards are so great! You’ll never have to pay overdraft fees, as your card won’t work when you try to spend more than your balance. Additionally, there are no interest rates, so you won’t ever have to pay those larger-than-life fees!
4. It’s Accepted Everywhere.
You’ll never have to worry about whether your favorite website will accept your payment again, as prepaid Visa debit cards are accepted wherever Visa debit cards are!
5. You Can Build Up Your Credit History.
Now you can use your web bill payments to enhance your credit score, as some prepaid Visa debit cards can lift your credit rating. By paying for your bills using online billpay, your automatic payments could count towards building your credit!
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Should registered users be the only ones allowed to comment ? Listen, if your going to spam us, please say something intelligent. Only use search engine optimized keywords if you say something really smart. If in doute, don’t even dare leave a keyword with your website because I’ll eventually ban you.
Notice, I didn’t say you can’t spam, I’m saying stop making it obvious. Don’t let me detect it.
Why would someone say stupid one liners like “I Agree, blah blah.”. “Very helpful, blah blah” and expect me to leave their keyword optimized links ?
Stop pooping in my yard, and saying thank you.
More examples of spam:
“Thank you for this insightful post. Yes, i think older ones and people working in hazardous environment should be given more attention.”
“Very helpful, thanks so much”
What is considered spam around here ?
1. Keyword obtimized links with no intelligent comments ( Use those keyword carefully !!! Or I’ll ban you and everyone from your ISP)
2. Poor grammar
3. Poor spelling
4. One liner with links to financial websites
5. Comments with links and open invitations to visit your “awesome” website
6. Anything stupid that includes a link or keyword spam.
By the way, I’ll be soon offering an intelligent blog commenting service at Blog Comments For Sale. Our comments won’t look, smell or feel like spam.
Recent comment spammers include
1. Women Boots
2. My PayDay in the UK
3. Talking Home Loans
4. Same Day Loans
Jon Waraas mentioned Provident-Direct.com, in a recent blog post. What’s special about them is that they probably offer the highest APY on a savings account.
Jon said “Signing up with them isn’t hard at all. You just have to fill out a few pages of personal info and then give them your current banking info so they can deposit a few small deposits into your account. Once you see them in your account you then confirm the deposits and then your ready to go. It total it took me 3 days to sign up.
High Yield Online Savings Accounts (Again, I am not making any money if you sign up with one of these banks)
Providentdirect = 3.25%
ING Direct = 2.50%
E-Trade (affiliate link) = 3.01% (I know a few happy people using e-trade) “
No minimum Balance and No Monthly fees !!
What are you waiting on ? If you’re looking for other competitive online bank rates, you should take a look at these savings account rates. Rates aren’t as high as they once were, which is all the more reason to find a good rate. You can also take a look at the best CD rates to lock in a rate if you find a worthwhile rate.
by Mike Larson
I don’t know about you, but I had a great time watching my little girls open their presents on Christmas morning. You should have seen the smiles on their faces! I sincerely hope that you and your family are relaxing and enjoying this holiday season as much as I am.
But soon, thoughts are going to turn from relaxation to reality. Investors are going to focus once again on the wounded real estate market. And millions of homeowners and commercial property owners are going to ask that all-important question:
Will 2009 be “it” – the year when things finally start turning around?
I wish I could say I was optimistic.
But the evidence I’m weighing points to another disappointing year. Indeed, I expect 2009 to be marked by lackluster sales and falling prices in the residential arena, and a deepening crisis on the commercial side of the ledger.
Housing Bottom?
Not That I Can See …
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| Despite government intervention and despite cutbacks in new construction, the fact remains that supply far exceeds demand. |
The Treasury Department and the Federal Reserve are doing all they can to lower mortgage rates and stem foreclosures. There’s just one problem: All the government money and manipulation in the world can’t repeal the law of supply and demand.
The overall housing market remains dramatically oversupplied, despite very sharp cutbacks in new home construction. Moreover, demand remains weak due to slumping consumer confidence, tighter lending standards, and rising unemployment. That means anyone looking to Washington for a quick fix to this downturn is going to be disappointed.
Just consider the latest numbers …
New home sales dropped 2.9% in November to a seasonally adjusted annual rate of 407,000. That was the worst sales rate since January 1991, and down more than 35% from a year earlier. Existing home sales plunged 8.6% for the month, with single family sales hitting the lowest level in more than 11 years.
While dramatic cutbacks in housing starts have led to a decline in the raw number of new homes on the market, sales have dropped so much that we’re seeing little net progress overall. Case in point: There were 11.5 months worth of new homes on the market based on the November sales pace. That was only slightly below October’s 11.8 months, which itself was the worst reading ever (Census data goes back to 1963).
On the existing side, we have more than 4.2 million homes on the market – far above the 2 million to 2.5 million considered normal. That’s good for 11.2 months of supply, tying April’s record high.
As far as pricing is concerned, you won’t find any solace in the latest figures. New home prices were down 11.5% from a year earlier, the second-biggest decline ever. Existing home prices dropped 13.2%, the most on record. The median price of a used home is now hovering around $181,300, meaning we have wiped out every penny of gains generated since February 2004.
Don’t be surprised to see the government get even more aggressive next year. We could get tax credits designed to stimulate home buying on top of the direct manipulation of the mortgage backed securities market we’re already seeing.
But until fundamental equilibrium is restored in the housing market – until we work through the vast inventory overhang of houses – home prices aren’t going to stop falling. In fact, I’m expecting further declines throughout 2009.
Commercial R.E. Joining Residential
In the Penalty Box …
The residential real estate business started slowing in 2006, and then really fell out of bed in 2007. But commercial real estate continued chugging along for a while. That’s all changing – and 2009 will likely be even worse for landlords and investors in warehouse, office, or retail property and related securities.
Just consider …
- Construction activity is starting to tank as commercial mortgage credit dries up and the economy slumps. An American Institute of Architects (AIA) index, which serves as a great leading indicator for commercial construction since you need to design a building before you build it, just plunged to a record low of 34.7.
- With credit tighter, commercial real estate sales and prices are now following home prices lower. The final numbers haven’t been added up yet. But it appears that commercial sales plunged by about 70% between 2007 and 2008.
- Meanwhile, the Moody’s/REAL Commercial Property Price Index dropped 2.4% in October, the tenth month out of the last 14 where it declined. Prices are now down more than 11% from their late 2007 peak.
- Finally, sublease space is flooding the office market as companies fire workers. And mall vacancies are surging as retailers like Circuit City and Linens ‘N Things go broke. Even the perennially optimistic National Association of Realtors just forecast that office vacancy rates will rise to 16.4% by late 2009, from 12.5% in 2007, while retail rents will drop by 7.3%.
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| Commercial real estate representatives are heading to Washington in search of a handout. |
If you own commercial property, you’re probably already feeling the heat from the slumping economy. Expect further increases in vacancy rates in 2009, and additional pressure on rents when leases come up for negotiation. Lenders are also a lot stingier with credit that they’ve been in the past, meaning it should be tougher to refinance your loans.
Of course, commercial real estate representatives aren’t just sitting idly by. They’re doing what all their other … er … capitalist brethren are doing. They’re going to Washington begging for spare change!
As The Wall Street Journal recently recounted in a story called “Developers ask U.S. for Bailout as Massive Debt Looms”:
“With a record amount of commercial real-estate debt coming due, some of the country’s biggest property developers have become the latest to go hat-in-hand to the government for assistance.
“They’re warning policymakers that thousands of office complexes, hotels, shopping centers and other commercial buildings are headed into defaults, foreclosures and bankruptcies. The reason: according to research firm Foresight Analytics LCC, $530 billion of commercial mortgages will be coming due for refinancing in the next three years – with about $160 billion maturing in the next year. Credit, meanwhile, is practically nonexistent and cash flows from commercial property are siphoning off.”
Do I think THAT will make a difference? It might loosen credit a bit, sure. But the lesson from the residential industry is that all these bailouts merely ease the symptoms of this crisis somewhat, without curing the underlying disease.
In other words, I expect commercial real estate fundamentals to weaken in 2009, loan defaults and foreclosures to climb, and prices to fall no matter what Bernanke & Co. do in Washington.
The Good News?
I hate to leave you on such a gloomy note, what with New Year’s festivities right around the corner. So let me wrap up with this: Falling asset prices will eventually restore TRUE, intrinsic value to real estate.
This decline will get home prices back to levels that make sense when compared against incomes and rents.
It will make it so home buyers can purchase affordable homes at reasonable debt-to-income ratios, using traditional 30-year mortgages instead of all the junk loans that proliferated during the bubble.
It will make it so you can invest in rental property, or strip malls, or an office building and generate attractive returns again, without relying on pie-in-the-sky projections about future growth.
And most of all, I believe this painful decline will remind us all that we can’t build an economy based on flipping assets back and forth to each other at ever more inflated prices with ever increased leverage. Instead, we’ll save more. We’ll invest more in productive ventures. And the U.S. will once again be the great country it can be.
Have a happy and healthy New Year. I look forward to helping make 2009 your most profitable year ever.
Until next time,
Mike
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com .
Just for the fun of it. “Once upon a time a man appeared in a village and announced to the villagers that he would buy monkeys for $10 each.
The villagers, seeing that there were many monkeys around, went out to the forest and started catching them. The man bought thousands at $10 and, as supply started to diminish, the villagers stopped their effort. He next announced that he would now buy monkeys at $20 each. This renewed the efforts of the villagers and they started catching monkeys again. Soon the supply diminished even further and people started going back to their farms. The offer increased to $25 each and the supply of monkeys became so scarce it was an effort to even find a monkey, let alone catch it! The man now announce d that he would buy monkeys at $50 each! However, since he had to go to the city on some business, his assistant would buy on his behalf. In the absence of the man, the assistant told the villagers: ‘Look at all these monkeys in the big cage that the man has already collected. I will sell them to you at $35 and when the man returns from the city, you can sell them to him for $50 each.’ The villagers rounded up all their savings and bought all the monkeys for 700 billion dollars.
They never saw the man or his assistant again, only lots and lots of monkeys!
Now you have a better understanding of how the WALL STREET BAILOUT PLAN WILL WORK”
Well actually, the villagers in our situation will keep on buying and selling monkeys. Originally posted by Bacchus at GNN
![monkeys2[1].jpg](http://www.financialdominance.com/wp-content/uploads/2008/12/monkeys21.jpg)
Most people understand how to bargain for a lower insurance premium based on
the equipment present on their vehicles. Do you have an air bag ? You can get a discount. Same for anti-lock brakes and anti-theft devices, but there are some lesser known options that can also save you money if you know how to ask the right questions or supply the
right information to get cheap car insurance rates.
- Level of Education Some studies indicate lower risk profiles for given degree holders, in particular
those with degrees in engineering, science or math. Savings fall in the range of 10 to 30 percent when available.
- Current Occupation Did you know that teachers and farmers have the lowest risk-associated occupations?
Farmers might have to press the point, but it’s fairly simple for educators to score discounts of 10 to 30 percent.
- Military Service Many insurance providers, including GEICO, give discounts of 2 to 15 percent to
military personnel, both active and retired. An additional attractive option is decreased coverage levels during periods of
deployment when the insured vehicle is placed in storage.
- Age In general, people who are retired can avail themselves of a considerable level of
discounts. Hartford, for instance, offers a AARP Auto Insurance Program with savings of as much as 45 percent. (Membership in AARP
can benefit drivers in a number of ways regardless of the insurance company involved. Members should investigate this angle fully
before negotiating their policies.)
- Continuing Driver’s Training Defensive driving courses and other driver’s safety programs can be used to lower
premiums with almost all insurers. Normally this is an option people look at after a traffic citation, but the classes can be taken
at any time for insurance purposes. (Note that these classes can now be taken online or via CD or DVD.
Drivers should also remember to investigate procedure-based discounts like
those awarded to multiple policy holders in a single family (husband, wife, and a teenage driver, for instance.) Family rates on
premiums can lower costs considerably. Also, don’t neglect new programs offered by some insurers for teenage drivers when monitoring
or GPS systems are placed on the car. Car leases may come with a substantially lower insurance premiums, but be aware that this option
has become much more rare as automakers have been forced to retreat from leasing due to the current economic climate.
Above all, insurance customers should conduct their own research and ask as
many questions as needed to be comfortable with the coverage offered. Always comparison shop. Never be uncomfortable about haggling.
Simply telling an agent that you’ve been offered a better rate by the competition can go a long way toward opening up the discounts
you need to get the most affordable coverage possible.
Just remember to shop around and request car insurance quotes from multiple providers…
This guest post is by ‘mortgagespecialist’,
a member of www.mortgagefit.com,
the world’s largest mortgage community.
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In the last week of October, 2008, the demand for mortgage application dropped to an eight-year low. According to a trade group, this has been propelled by an approximately 30% decline in demand for mortgage refinancing because the borrowing expenses have gone up.
The seasonally adjusted mortgage application index of The Mortgage Banker’s Association that comprises both home buying and home refinance loans, skidded 20.3% to 379.9 for the week ending 31st October, 2008. This has been labeled as the most pathetic showing since the month of December 2000.
From early September 2008, a drastic swing has been noticed in the application requests for home purchase and mortgage refinancing while global financial markets were facing turmoil.
A number of government interventions targeted at cutting down mortgage expenses still have not been able to control the situation.
Average 30-year fixed mortgage rates went up by 0.21% to 6.47% in the last week of October 2008 and this corresponded to the level of the week ending 10th October, 2008.
As per that trade group, the interest rate for fixed rate mortgage loans is inching closer to the highest rate of 6.59% of this year that was attained in the summer. Moreover, this is much higher than the 2008 low of 5.49% in the month of January, 2008.
According to the analysts’ opinion, there is no basis to anticipate that there would be a turnaround in the housing industry when 30-year fixed mortgage rates are on the upper limits for a period of six years, unemployment is at a 5-year high and still soaring, as well as an additional supply of houses that have not been sold is forcing prices to go down further.
Growing concerns about probable job cuts have lowered the confidence of the consumers and this has also stirred up a panic about an intensifying recession and led to reducing demand for home buys.
In October 2008, planned job cuts or retrenchments at U.S. based firms soared to an approximately 5-year high and this was an increase of 19% since September 2008. As per the report of Challenger, Gray & Christmas, an outplacement firm, this resulted from the problems stemming from banking and housing industries that impacted the wider economy.
Home prices in the U.S. have gone down higher than 20% off the ceiling that was fixed in the summer of 2006 on the basis of the Standard & Poor’s/Case-Shiller index. The prices are usually expected to lose another 10%.
The Mortgage Banker’s Association stated that its seasonally adjusted purchase index slumped 13.9% to 260.9 in the last week of October 2008, the minimum since the month of December 2000. At the same time, in the last week of October 2008, its refinancing applications index dipped 27.8% to 1,075.4.
In the summer of 2008, the number of mortgage refinancing applications had decreased because mortgage rates escalated during this period, resulting in the index to drop to a significant low till late August, 2008.
From CNN: “During his campaign for the presidency, Barack Obama explained where he stands on many of the economic issues that matter most to Americans.”
