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Living for today - Planning for Tomorrow

August 29th, 2008

Real Estate Takes A Nasty Turn In Our Neighborhood

It’s a crazy, crazy world these days.  Last night my daughter had her kindergarten orientation at the elementary school near our house.  Yes, it was a milestone that came way too fast for us.  It’s hard to believe it’s been 5 years since we were blessed with our wonderful daughter.

Anyway, I was walking down the hall of the school when I recognized some neighbors that live a couple blocks from our house.  They live directly across the street from a house I posted about previously.  The people that bought that house paid $614K for it about a year ago.  Apparently they got over their head and then decided to sell.  Unfortunately the market fell out from underneath them during the short time that they were there.  They tried selling at $599K, and then lowered it all the way down to $539K.  The house didn’t sell and they moved out almost two months ago.  The "for sale" sign sat out front listing the home for sale but nothing seemed to happen.  The sign is gone now.

So, like I was saying, I saw the neighbors across the street from this house and happened to overhear them as I walked by.  They were explaining to another neighbor that the people had moved out and took all the fixtures, sinks, trim etc from the house.  Apparently they took pretty much anything that was or wasn’t nailed down.  I had read about this but had never actually seen it happen.  In other areas, I have read that banks would offer a couple thousand dollars if foreclosed homeowners left the home in good condition.  Apparently these folks didn’t get that offer.

I completely disagree with these people’s actions.  Because they overpaid for a house that they couldn’t afford, they decided to punish the lender that gave them the money to move in.  Maybe the lender shouldn’t have loaned them the money, but ultimately these people made the decision to sign up for terms that they couldn’t afford.  It’s just morally wrong to screw the mortgage company like that.  Geez, I don’t even like mortgage companies very much and I still think it’s wrong!  Bottom line is that the bank is going to take a huge loss on this house and the neighborhood is going to have to watch the house deteriorate until someone buys it and fixes it up.  The crazy thing is that it was a beautiful house that needed nothing.  Now it’s a house that needs PLENTY.

August 29th, 2008

Resources for Medical Bills You Can’t Afford

CNN has an article that talks about some of your options when you are hit with medical bills that you can’t afford.  It’s definitely worth reading.  Just because you have insurance doesn’t mean you won’t find yourself in a difficult situation.  If you don’t have insurance, it’s even more important to read this article.  It’s amazing what you can get when you simply ask!

 

Here are the key mistakes people can make:

1) You ignore your bills

2) You don’t look for errors in your bills

3) You don’t negotiate the price down

4) You’re embarassed to ask for financial assistance

5) You don’t work out a payment plan

 

Anyway, go check out the article.  It’s worth the few minutes it will take to read.

August 14th, 2008

Do We Need a Depression???

The sky is falling.  Okay, well maybe not yet but I sure have been reading a lot of articles about gloom and doom.  Our budget deficit is around $9.5T (yeah, that’s trillion), real estate is declining rapidly, consumer prices are rising rapidly, loans are harder to come by, our national spending is increasing and is causing billions of dollars in increases to our national debt, consumer credit is out of control, layoffs are imminent at many companies, local and state governments are not hiring and I could go on and on.

What I can’t tell from all this is when the crisis starts.  Is it time to panic yet?  I’ve been practicing running around the yard yelling, "We’re all gonna die!!!!" so that I’m ready when the time is right.

Seriously though.  How do we work our way out of this tough spot?  Does it just take time for the magic to happen?  Do we just hold on and keep doing what we’re doing?  My gut tells me NO.  The only solution that I can see is for a drastic change in behavior at the consumer level and at the governmental level.  We need a drastic change in strategies here.  The longer we wait to face our reality, the worse it’s going to be.

I read an article yesterday that talked about how a depression might actually be good for our country.  After the initial shock that someone might think that, I read on.  The author’s point is that we need a shock to our system.  We need people to experience the pain of not having everything in order to alter their behavior.  It’s hard to argue that something isn’t needed to change people’s approach to money management.  While I don’t want to see our country go in to a depression, part of me wonders if we are headed there no matter what.  If you only read one article that I’ve linked to here today, I’d make it the link in this paragraph.

August 10th, 2008

I.O.U.S.A

I just discovered the next movie I want to see.  It’s called IOUSA and is a documentary about the massive debt we have in our country and what the long term implications are.  It isn’t being released on a large scale but I was able to find some theatres near me that will be showing it.

Here is the link to the official movie site:

http://www.iousathemovie.com

Here is a link to a review about it:

http://seattletimes.nwsource.com/html/businesstechnology/2008103033_pfdebtfilm10.html

Since I haven’t seen the movie yet I can’t say much about it but I will post a review once I’m able to see it.  Is there a way out of this huge overbearing debt?  Is Rome falling?

August 8th, 2008

While Banks Hemorrhage, My Credit Union Keeps Humming Along

If you’ve been reading ELYM for any length of time you’ll know I’m a big fan of credit unions.  I use one for all of my banking needs and have always been 110% happy with it.  As I’ve been reading about all the drama with many commercial banks and lending institutions I started to wonder how my credit union was doing.  All I needed to do was wander on over to their website to see a letter from the vice president of the credit union.  Here is an excerpt from the letter:

Many financial institutions are experiencing very high credit losses from making subprime or "exotic" mortgages (often referred to as "negative amortization" or "Alt A" mortgages). We have never offered those products, which we believe aren’t the right solutions for our members and have contributed to high losses at other institutions. Additionally, we, like all credit unions, are significantly restricted to the types of investments that can be purchased and the financial transactions we can enter. We know it is our members’ money we are investing—and we proceed with the utmost caution in every case.

Over 90% of the deposits that are held here are dispersed as loans to members—the true purpose of a credit union. Our responsible and sound lending guidelines allow us to remain in a healthy position and continue to offer highly competitive deposit and loan rates.

I guess my conservative financial perspective is a good fit for a credit union like mine.  I can’t say enough good things about credit unions.  Given the choice, why would you want to put your money in an institution who’s main goal is to generate profit for it’s shareholders?  I’d much rather put my money somewhere that is solely in existence to create value for it’s members.  I’m getting top rates for my deposits and have access to some of the most competitive loan rates if I need a loan.  On top of that, the fees that my credit union charge me (I’ve actually never been charged a fee from them) are much lower than commercial banks.  For my family, a credit union is the right choice.  With more recent laws, pretty much anyone can join a credit union.  If you have one in your area, it might be worth a look.

July 30th, 2008

Frugal Zeitgeist Paid Off Her Mortgage

Congratulations to Frugal Zeitgeist for paying off her NY apartment.  She managed to do it in 6 years, 7 months and 3 days with no huge financial windfalls.  She took the route of sacrificing a few things along the way and applying everything she could towards the mortgage.   I noticed that she refinanced a couple years in to a 15 year 5.125% mortgage which also helped.  As I read through her posts it was obvious to me that she has learned the art of living below her means and sticking to her personal commitments.

CONGRATULATIONS!!

I also hope to pay off our mortgage but I’m doing it a little bit differently.  I chose to buy a second property and built a house on it.  By paying a good price up front, doing a lot of the work myself, and paying cash as we went, I have built up a sizeable amount of equity in it.  If all goes well, within 5 years I should be able to sell it and use the cash to pay off our primary mortgage.  That would mean we will have paid this mortgage off in 10 years, which isn’t quite as impressive as the Frugal Zeitgeist, but since this isn’t a competition, I guess it really doesn’t matter.  :)

Do you want to pay off your mortgage early?

(Thanks to MadameX for pointing me to the blog)

July 21st, 2008

And The Debt Just Keeps On Coming

This weekend I was driving down the road when I noticed a reader board outside a small town bank.  The message on the board said, "Increase your summer fun with a home equity loan".  Really?  In 2008?  The sad thing about this is that I’m sure someone will take that message and borrow money to make their summer more fun.  I was hoping that people were starting to wake up to the fact that they should keep their spending in check and spend less than they earn.  I suppose the reality is that the message hasn’t gotten to everyone.  While millions of people struggle to make ends meet due to their mounting credit card debt, institutions all around the country are fighting to give them more debt.  It sure seems unfortunate.

Along those same lines, I saw an article in the New York Times today that profiles a woman in Philadelphia (Diane Mcleod).  She’s pretty much at the end of her debt run and is about to lose her house.  Even after all of her defaulting, she still receives credit card offers.  The last one she received could easily be called a predatory offer.  It’s for a $300 limit credit card and $150 of that goes to the bank each year in fees.

Check out the article

June 20th, 2008

Top 5 Things I’m Doing To Save Gas

Gas prices suck.  For many people, who have built their lives around long distance travel and large vehicles, gas prices really suck.  I’ve been reading lots of articles about people who travel 120+ miles round trip to their jobs every day.  Ouch.  Most of those people aren’t driving hybrids either.  I’m sure just about everyone has made their way to the Internet looking for ways to improve their situations.  I know that I’ve been reading various posts about how to save gas.  So, what am I doing?  Here are the top 5 things that our family is doing to minimize our gas expenses:

1) Reduce the number of trips we make

This has been the number one easiest way to reduce our gasoline purchases.  Once you start paying attention, it’s really quite amazing how many driving trips you make that aren’t really necessary.  If you put a tiny bit of effort towards it, you can drastically reduce your gasoline consumption.  Here is an example:  Instead of zipping to the store for one or two items, we have made it a practice to only visit the grocery store when we are already taking another trip.  No more quick trips to the store for that impulse dessert.  The side effect of this is that we are saving gas and being forced to be more creative by whipping something up from the cupboard or refrigerator.

I’ve also reduced my driving in to work.  I am fortunate to be able to work from home on most days.  One of the ways I do this is through attending meetings virtually.  Once I’ve established a relationship with coworkers or customers, everyone is quite happy to do business virtually, at least part of the time.  I have only driven in to the office once in the last two weeks.  It’s worth talking to your boss if you have the type of job that could be done from more than one place.  Another option is to try to switch to a 4 day per week work schedule by working longer hours.  With gas prices so high many employers are being much more flexible about how their employees do their work.  It’s worth asking.

2) Carpool when going to events

In the old paradigm I never, ever carpooled.  I liked having the freedom of arriving and leaving on my terms.  Well, it’s a new world now.  Carpooling is now sexy.  I’ve actually heard people brag about saving gas by riding together.  That never happened before gas prices spiked.  Originally we had planned to drive ourselves to Montana in July.  The plan was to caravan with my mother and aunt, and also my sister’s family.  The main reason for not carpooling with my mother and aunt is that my mother has a large dog and all the dog hair that comes with having a large dog.  I’m allergic to animals, as well as just about everything else on the planet (My friends call me Bubble Boy) so being in her minivan for 13-14 hours would not work for me because of all the residual hair in the van.  I’d be in pretty bad shape by the time we reached our destination.  We can’t take our car because it is too small to hold everyone.  In the end we decided the smartest thing to do would be to rent a minivan and split it three ways.  Total cost of the rental is $300.  We’ll save far more than that on fuel so it just made sense.  Had gas prices not gone up so much, I’m not sure we would have come up with this optimum solution.  With gas prices so high, the first question we now ask is, "Do we need to take the trip and the second is, should we carpool?"

3) The driver that drives farthest takes the most fuel efficient car

My wife doesn’t have the luxury of working from home.  Because of this, she drives much more than I do.  It just so happens that her car is the most fuel efficient getting 25 miles per gallon.  It’s not great but it beats the 20 mpg that my Toyota Tacoma gets.  As a general rule we always use the Honda Accord unless we have a need to haul something.  This didn’t use to be the case.  We never really put much thought in to the gas mileage variation of the cars.  The reality is that if we get 5 extra miles per gallon in the Honda we can get an extra 70 miles per fill up.  That’s almost $12 per fill up that we are saving by simply choosing one car over the other.

4) Practice a few Hypermiling Techniques

I’m not about to scream around corners at 45 miles per hour to try to keep speed up and avoid brake usage but I am interested in doing all I can to adjust my driving to save a few bucks.  The number one thing I’m doing in this area is to minimize my foot on the gas pedal.  Don’t get me wrong, I don’t want to get run over by a 90 year old woman in her 1973 Dodge Dart, but I also don’t want to burn the rubber off my tires by tearing off the starting line.  When the light turns green these days I take it nice and easy.  I slowly apply gas and shift when the rpm’s hit a little over 2000 rpms.  The focus here is not to wind up the engine and cram fuel in to the engine like I just robbed a convenience store and the cops are hot on my tail.  I’m also trying to drive in the highest gear that keeps my speed constant with the lowest RPM’s.  When I hit hills, I put it in neutral and coast as far as I can with the engine at idle.  This seems like a safer approach than turning the engine off and still minimizes fuel usage.

5) Use a rewards card for fuel purchases

I posted about this earlier.  We have finally hopped on the rewards card bandwagon.  We chose an American Express card through Costco.  We went for the business card because the fuel rewards were much higher.  There doesn’t appear to be any criteria to go with a business card over a consumer card but we do have a long term Costco business membership that might have been used as the key criteria but I don’t know for sure.  The business card pays 5% back for fuel purchases at Costco or other regular gas stations.  We try to buy all of our fuel at Costco where it’s cheapest and then the 5% back on top of that really takes the price down.  We are getting almost $2.75 per fill up back.  This is clearly saving us a significant amount of money and it took the least amount of work.

Through small changes like this we are hoping to reduce the impact of high gas prices.  What’s interesting is that none of these changes really took any effort.  Through easy, simple changes to our routine we actually reduced our expenses and our carbon footprint.  Next on our list is to explore easy ways to lower our home utility bills.  I can tell you my current strategy is to cut usage of the central air conditioning by 50% this year.  It’s already working.  I’ve been making a much more concerted effort to open windows and create cross drafts before I consider turning on the A/C.  We used to keep the thermostat on "auto" so that it just did what was needed to maintain one temperature in the house.  By turning that off and tolerating a bit of temperature fluctuation, we are already seeing the reduction in our utility bill.

June 12th, 2008

Getting Discounts We Can Use

Lately I’ve been looking at all the various gimmicks out there to get me to spend money in specific stores.  Frankly, it would be pretty easy to sign up for saver cards and gift cards in lots of stores but I choose to only sign up for things like this in stores I already frequent.  Here are a couple of the cards we are using, and getting:

-Starbucks card cpnsbw2725

I’m going to keep a Starbucks card in my wallet with a few bucks on it.  Why?  Because I’d like to get free wifi access when I’m out and about.  I keep my Ipod Touch with me and use it to check email, or look things up when I’m out and about.  I got a free year of Tmobile Hotpots when we bought my daughter an XO laptop last year, but this just makes it even easier.  Now I can park in front of a Starbucks and check email etc whenever I want.  Oh, and I’ll definitely take advantage of any discounts they offer on the cheap "drip" coffee they serve.  I’m way too cheap to buy anything else there.

-Kroger Stores Gift Card krogercard

I’ve never bought a gift card from them before but we do all of our grocery shopping at Fred Meyer (a Kroger brand) and recently they started offering a promotion that they would add an extra 10% to the value of the gift card if you put a minimum of $300 on the card.  I’m sure they are doing this to try to get more people to spend their economic stimulus checks there but since we do all of our grocery shopping there, it makes sense for us to buy the gift cards even though we haven’t even received a stimulus check yet.  We have almost used the first $300 and plan to go buy another card for $300.  I’m always happy to get free money.

-Costco American Express Card trueearnings-card-from-american-express

We have decided to finally break down and get an American Express card sponsored by Costco.  Why?  It’s pretty simple.  They offer 5% cash back for fuel purchases (and we almost always buy our gas at Costco) for business card users.  They also offer 1% back for everything else, 2% for travel related expenses and 3% for something else, I just can’t remember what.  I have been walking by their booth in Costco for a long time.  I have always been content to walk by because I just didn’t want to complicate our simple approach to credit.  We have always just had one credit card through our credit union.  I trust them and their interest rate is low (although we’ve never paid any interest).  The biggest mistake I made with the strategy of using that credit union card was that I missed out on all the cash back that I could have gotten when building our lake house.  Lesson learned.

-Using employee discounts empl_discount_sm

My company has a huge employee discount program.  They negotiate huge discounts with some of our preferred vendors (just think of many large name brand companies).  I have saved a fortune on cellular costs, computer costs etc.  They also actively seek out promotional discounts from many local businesses.  Just last week we took our daughter to the Pacific Science Center.  Prior to leaving the house I checked for discounts and found that they did have a standard discount for employees of my company.  When I got there and asked for the discount we saved over $20.  I just love discounts!!!  Add that on top of the free parking spot we found on the street and our day was a lot cheaper than I thought it was going to be.

November 21st, 2007

Lowered our HELOC Rate

From the If you don’t ask, you won’t get department:

When we bought the lake house property and structure we used some money from a home equity line of credit that we’d set up months before.  We didn’t borrow a ton of money but at the time we locked in the interest rate.  I’ve read too many horror stories about payments adjusting up as the bank raised the interest rate.  The rate was good at the time but since then the credit union has lowered their interest rate for new HELOC’s.  For the past couple months it has eaten at me a bit so I decided to make a call to my credit union to ask them to lower the rate.

When I made the call I greeted the customer service rep and told her that I was considering borrowing from another institution to pay this loan off for the sole purpose of obtaining a lower interest rate.  I expressed that I really liked doing business with my credit union and was hoping that they’d be able to lower my rate.  The customer service rep said that there wasn’t a direct way to lower the rate on the existing loan but she said she had a creative way of doing it.  She used the existing available line of credit to pay off the loan that I had and said that by doing that, it was creating a new loan which would have a rate that was .5% less than my existing loan.

She worked her magic and I actually watched it all play out via my online banking.  Now I’ve got a rate that is .5% less than I had at the beginning of the day so that more of my payment will go towards the priniciple and less will go toward interest.

I seriously doubt a commercial “for profit” bank would have done this for me…………

Happy Thanksgiving!!!

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