Last updated 12/31/2011
PAGE INDEX:
*Reverse Mortage Trap
*Best Mortgage Rate Traps
*Social Networking Can Affect Your Credit Score!
*Credit Life After Bankruptcy
*HOW TO OBTAIN YOUR FICO CREDIT SCORE
*Bank Accounts are Frozen Upon Death
*Homeowners Insurance Changes Create Huge Coverage Gap.
*CREDIT CARDS & YOUR CREDIT SCORE - New information!
*NEW CREDIT CARD GOTCHA FEES
*LIFE SETTLEMENTS (Selling Cash Value Life Insurance)
*HOW MUCH IS YOUR GOLD JEWLERY WORHT??
*Is Your Estate Plan Up To Date?
*US Treasury Savings Bond Wizard
*How Safe Is My Savings Account? Updated info!
*Do You Have A Spending Plan?
*Downloadable Budgeting Forms
Age Based Retirement Rules,
Here are just a few age based general rules for retirement accounts :
*At age 50 you can start making ‘Catch-up’ contributions.
Permanently disabled widows or widowers can begin Social Security survivor benefits early withdrawals at a reduced rate.
*At age 59 ½ everyone can start Social Security early withdrawals at a reduced rate.
*At age 60 all widows or widowers can begin Social Security survivor benefits early withdrawals at a reduced rate.
*Beginning at age 62 (depending on your year of birth) everyone can start Social Security early withdrawals at a reduced rate. The amount of monthly payment will increase 7 to 8% for each year you delay starting withdrawals till age 70.
*At age 65 you get to enroll in Medicare.
*Starting at age 65 ½ everyone is eligible to start Social Security withdrawals depending on your birth date.
*At Age 70 everyone should start receiving Social Security withdrawals as you have reached the maximum benefit levels.
*At age 70 ½ mandatory minimum distributions start.
Always check for the latest and most complete rules at Social Security.gov
Return to top of page.Don’t Let Your Heirs Loose Your Money
Your bank safety-deposit box may not be the best place to store important financial information for your heirs. After your death the bank may delay them from gaining access until certain legal things are settled. You might do better if you make a list of financial stuff and give it to a trusted heir. Keep a copy in the safety-deposit box too. Here is a sample list of things to include. Be sure to include account name & numbers, where the statements are stored, passwords, all contact info, and what company & who to contact.
1. All of your investment accounts like IRA,s pension, stocks & bonds, real estate, insurance policies, and broker accounts.
2. All of your bank accounts like checking, savings, CDs, money market, credit/debit cards, and reward accounts.
3. All of your loan accounts like mortgage, car, recreation vehicles, or personal loans.
4. All of your financial professionals like accountant, tax preparer, insurance agent, attorney, and financial planner.
5. A copy of your budget with a list of reoccurring annual and semi-annual bills like car insurance, dues & subscriptions, and automatic withdrawals. Also list any payments you are receiving from settlements, IRA & retirement accounts, annuities, etc. This will help your heirs take care of business
until your estate can be settled without late fees and cancelations due to non-payment or closed accounts. Don’t forget to include web & email address and passwords for any online bill paying accounts.
6. Personal computer information – where it is, how to log on, log in password, and in what files the financial info is stored, & where those file is stored.
7. The location of all important documents like your will, estate plan, titles to real estate & other personal property, vital records, family history, safety-deposit boxes & where the key is kept, and home safes / fire boxes and where key / combinations are kept.
Reverse Mortage Trap
Be sure to name both spouses on a reverse mortgage so it will continue if the primary named spouse dies. If not named, the surviving spouse may have to sell the house to pay off the loan at a 'fire sale' low price.
Return to top of page.Here is a good personal financial calculator - CalcMoolator.com
Return to top of page.Best Mortgage Rate Traps
With home prices and mortgage rates way down now is a great time to buy a home. But how do you get that fantastically low mortgage rate???
Those lowest rates are dependent upon 3 major things :
1. Your down payment must be 20 to 25%.
2. Your credit score must be above 780.
3. Your overall debt to income ratio, including the mortgage, must be less than 45%.
Social Networking Can Affect Your Credit Score!
More and more banks and financial institutes are using Facebook, Twitter, etc to gather personal information on your habits and attitudes before granting credit or setting interest & insurance rates for you. It seems they just go online and read all your juice
posts about your opinions and check to see what type of friends you have. Remember the saying, 'birds of a feather flock together'? They truly believe Deadbeats have deadbeat friends, those with radical ideas hangout together, and we who pay bills on time
congregate together. So beware of what you post on the web. Beware of who you 'friend' too. Big brother and business IS watching you. Take the necessary security steps to restrict who can see your profile and posts. Also remember :
If you don't want everyone to know how you feel about something, DO NOT post it on the web!
Credit Life After Bankruptcy
Bankruptcy leaves a huge black mark on your credit report that stays there for 7 years. Nothing you can due will erase it. But there are some things that will minimize the damage and others that will help restore your credit score. First off, if you are considering bankruptcy be aware that the laws have changed quite a bit. Get competent unbiased legal advice. Be sure to do all you can to avoid filing for bankruptcy like negotiate the voluntary return of assets to their creditor; negotiating reductions in payments and/or reduced interest rates; negotiating longer payback/amortization schedules; or negotiate and 'offer and compromise'. Whatever you do, be sure to get EVERYTHING in writing in a signed and dated document detailing when, where, and how everything will be done BEFORE you execute the deal. Then review your credit report for errors in reporting the deal - like reporting payments as late after the agreed upon date when the loan was properly discharged according to the agreement. Be sure to insist that the creditor adhere to the agreement. You may even want to send a copy of the agreement to the credit bureaus.
After bankruptcy let anything you negotiated a settlement for and anything the court discharged be. Treat it as if it never happened, it is legally dead. If you open a settled or discharges closed item it becomes active again. Each time you open one it will dog you for another 7 years. Once closed DO NOT touch! Be sure to have several copies of the settlement deal and/or court discharge papers to send anyone who inquires about a closed debt. Once closed DO NOT touch no matter what they threaten to do. It is legally dead!
Re-establishing credit. Create a budget and stick to it. Then call around to local banks and credit unions. Policies vary so it may take a while to find one who's rules you can live with. Find one that will not require a co-signer even if you have to get a secured credit card (where you have to put say $500 in a special savings account to get a $500 credit limit). Credit rebuilding takes a while and steady on time payments. In 6 to 12 months check your credit report to be sure the credit card company is reporting on time payments. You should see a small improvement in your credit score. Keep going, this will take a while. Avoid 'rent to own' and finance companies like the plague. While I love debit cards, they have no effect what-so-ever on your credit report.
Return to top of page.HOW TO OBTAIN YOUR FICO CREDIT SCORE
Now days lenders and insurance companies are more interested in you FICO credit score than the gory details of why. There are several ways to get an estimated FICO score for free, but only 3 was to get your true FICO score. None of the 3 are free. However you can obtain a free FICO score IF you are rejected for a loan, credit card, apartment or insurance based upon your FICO score.
Where to get an estimated FICO score:
Bankrate.com
Locate the "Credit Card Calculators" section and select "FICO Score Estimator"
Credit.com
Click on "Credit Score Estimator"
Beware of ‘Free Credit Report/Score’ offers. Most require you to join a credit monitoring service for a monthly fee. ALWAYS, ALWAYS, ALWAYS read the fine print!
The BIG 3:
Fair Isaac
This is the company that compiles all the FICO credit scores. 1-800-319-4433 Cost is $15.95.
Equifax
1-866-493-9788 Cost is $15.95.
Find "View All Products", select "Reports Only", then "Equifax Credit Report + Score".
TransUnion Consumer Solutions
1-800-888-4213 Cost is $14.95.
Click on "Single Credit Report + FICO Score" and then click on "Order Now".
Bank Accounts are Frozen Upon Death
unless they are held in a Living Trust or by Joint Tenants with right of survivorship. Living Trusts usualy avoids lenthy Probate proceedings and cost.
Return to top of page.Homeowners Insurance Changes Create Huge Coverage Gap.
A lot of coverage that used to be standard is now optional premium coverage for extra $$. Be sure to review your coverage with you agent to see what has changed. Here are a few things to ask about:
Off-premises theft.
Personal property stolen from somewhere other than your home may not be covered. Things like cell phones, computers, and luggage on a vacation may not be covered. Many car insurance policies no longer automatically cover your personal property either.
You may have to buy a rider to obtain coverage.
Theft of jewelry, watches and firs.
This coverage seems to be disappearing or have extremely low and limited coverage. Again you may have to purchase a rider.
Code-dictated home repair upgrades.
When your home is damaged on a covered repair, the insurance may not cover building code upgrades which are mandated by local law. This can leave you on the hook for thousands of dollars to finish the repairs. You may have to purchase a ‘Code Upgrade” rider.
Sewer/sump pump overflow.
If you live in an area where this tends to occur, it is not covered under a standard homeowners policy. It is especially necessary if you have a finished furnished basement. Yup, another rider.
Flood insurance.
ONLY the U.S. government issues flood insurance. And it usually does not cover basement furnishings. See above.
Mold and Aquariums.
Yes, you guessed it – not covered. Yet another rider to purchase.
CREDIT CARDS & YOUR CREDIT SCORE
Want to lower your credit score in a hurry? Cancel a credit card you have had a long time with a good payment history. Or ask to lower your credit limit.
When you cancel a long term Credit card with a good history it affects your overall credit history score which is a part of your overall credit score. It also affects your debt to credit available ratio which will also lower your overall credit score. Even when the credit card company lowers your credit limit without your asking,
it affects your debt to credit available ratio which will also lower your overall credit score. Creditors like to see a little less than 10% usage of your available credit. Remember - Debit cards have no effect whatsoever on your credit scoreIf you want to cancel some of your cards think carefully about it.
1. Be sure it has been paid off and unused for several billing cycles.
2. Consider canceling cards you have had the least amount of time.
3. If all else is equal, cancel the ones with the highest fees or interest rate.
Another part of your credit rating is the variety of types of credit you have. They like to see several different types of loans, student, car, home mortgage, consumer goods, store credit, general credit cards, HEL, etc. So it might be wise to take out a 90 day car loan from your credit union to buy a car instead of putting it on your credit card. AND believe it or not, you get a lower score if you always pay off your credit cards on time each month. I hate to say it, but it might be a wise idea to pay the minimum one time a year and then go back to paying it off every month.
Remember, I strongly recommend a local or regional bank or credit union over a national one. They are usually far more forgiving than national ones, and far less likely to frequently change the rules and fee structures.
Return to top of page.NEW CREDIT CARD GOTCHA FEES!
As the Federal Government tightens the rules on how fast and how high credit card issuers can raise fees, they are dreaming up new ways to part you from your money. Fifth Third Bank has instituted an inactivity fee. If you do not use your card in 12 months they will bill you $19 or so. Not to be out done, Citybank is starting to charge annual fees on cards that customers charge less than about $2,400 a year. Look for most other nationwide or regional card issuers to follow suite.
PLEASE REMEMBER TO READ ALL CORRISPONDANCE FROM YOUR CREDIT CARD ISSUER! ! I found this out the hard way. Now I do read the legal junk.
One web site to compare credit card fees is CardRatings.com. Or just join your local Credit Union. They are usually much more reasonable. Some local or West Michigan banks are still somewhat reasonable. I like to be able to go right to the corporate office if there is a problem the branch can not solve. You just can't do that with a national bank out of N.Y.
Return to top of page.LIFE SETTLEMENTS (Selling Cash Value Life Insurance)
This is somewhat new. You're elderly or sick and in need a large sum of cash. And sitting there is that large life insurance policy. Why not sell it to an investor/broker? That might make sense in a few circumstances, BUT beware! The buyout amount (not the surrender value from the issuer) is only 1 to 15% of the face value.
Be sure to shop around and get ALL quotes less all fees. What you want to see is a statement that says:
Buyout amount = $xxxx.xx
Less this fee of $xx.xx
Less that fee of $xx.xx
Gives me a check for $XXXX.XX
Shop 3 or 4 investor/brokers and compare their offers to the surrender value from the issuer. HEY, the insurance company might even make you a better offer as most insurance companies HATE investor/brokers buying your policy. Be sure to explore all the alternative options before you cash out. Maybe the insurance company will help out. Maybe the beneficiaries (kids) could help out to protect their inheritance. Think outside of the box and seek advice from several sources.
WARNING:
This could turn out to be the next big stock market bubble. It seams that Wall Street is turning pools of brokered insurance policies into tradable securities just like it did to subprime mortgages! Be sure to get that check free and clear. Might be worth letting a lawyer checkout the contract.
HOW MUCH IS YOUR GOLD JEWLERY WORHT?
Thinking of selling your unused gold but not sure what it is worth? Here is an easy formula to get you a ballpark price.
1. Weigh your gold on a kitchen/postal scale.
2. Multiply that figure by the current price of gold. Here is one web page to check - CNNMoney.com. You might try to Google a few more to get an average price.
3. Divide by one of these types - 10K is 74.8; 14K is 53.2; 18K is 41.5; and 24K is 31.1.
4. Now multiply that number first by 0.50, and then by 0.80. This will give you a low to high price range for your gold.
Of course you could just keep it for use after the apocalypse when paper money and credit will be worthless. GBG!
Return to top of page.IS YOUR ESTATE PLAN UP TO DATE?
If you haven’t updated your beneficiaries on your will, IRA, 401K, insurance policies, etc., you are not done! Any financial document where you name beneficiaries should be reviewed periodically for changes in who gets what. Why? Because the courts are obligated to disperse the money according to your last written instructions. Regardless of how out of date those instructions are.
For instance divorce, remarriage, births, and deaths will change who gets what. Do you really want all of your 401K to go to your ex-wife even though you remarried 10 years ago and have 3 kids?
And while you are at it, declare a secondary, and if possible, a third or fourth beneficiary. This way you are covered in the case you were slow to update beneficiaries or there is a multiple tragedy. This happened to a friend of mine who died with her husband in a car crash. She was his primary beneficiary, and he was her primary beneficiary. Luckily they had named their kids as secondary and third beneficiaries.
And read the fine print about retirement accounts. There may be certain benefits to naming a spouse over your kids. If your eyes glaze over at fine print, seek the advice of your account manager on the best way to name beneficiaries.
Naming minors usually means an express trip to probate. Talk to a professional about weather you need a trust or guardian.
Changing beneficiaries can usually be done on-line or call your account manager to get the forms. Its easy, it is smart, and it may save your family some real grief.
Return to top of page.Savings Bond Wizard
This is a great way to manage your government I, E, EE, H, HH, I, and Savings Note savings bonds from the US Treasury Savings Bond Wizard
Return to top of page.HOW SAFE IS MY SAVINGS ACCOUNT?
UNDERSTANDING FDIC, NCUA, AND SPIC INSURANCE
Recent bank failures have many people asking how safe are their bank accounts and retirement funds. Well the short answer is quite safe, unless you have more than $250,000 in funds. Especially when only 17 US banks have failed in 2008, and only 100 in 2009, and 156 in 2010 out of about 8,500 total US banks. Most of the banks failing in 2010 were smaller local or statewide banks heavily invested in bad real estate loans unlike in 2008 when huge nationwide banks failed.
Lets start at the beginning. Most banks are FDIC insured. That stands for Federal Deposit Insurance Corporation. AKA the US Government. If you don't see this prominently displayed, ask. If they are not a member go to another bank. Most credit unions are NCUA insured. That stands for National Credit Union Share Insurance Fund. AKA the US Government. If you don't see this prominently displayed, ask. If they are not a member go to another credit union.
FDIC & NCUA insures only cash type accounts and investments like:
Checking and savings accounts;
Money market savings funds;
Certificates of Deposits*;
Christmas club funds and like accounts.
$100,000 per person, per banking institution.
$200,000 per joint accounts per banking institution.
$250,000 in qualifying retirement funds per person, per banking institution. FDIC & NCUA does not insure:
Stocks and bonds;
Mutual fund shares
Annuities and other equity type investments.
So if you have $123,456 in checking & savings accounts in your name at Mega Bank Corp, you are insured for only $100,000. If you put some in MBC's downtown branch and some in MBC's boondocks branch, you are still covered for only $100,000. The same goes for qualifying retirement funds with a $250,000 limit. You MUST split your money between banks or credit unions owned buy different companies. You must find out who the parent company is because many small banks with different names are owned by the same parent bank corporation.
Or you can open joint accounts at the same bank or credit union. So to insure your million dollar lotto winnings you open 1 account for $100,000, your spouse opens 1 account for $100,000, you both open 1 joint account for $200,000, then you open 1 qualifying retirement account for $250,000, your spouse opens 1 qualifying retirement account for $250,000, then you open 1 trust for $100,000 naming the other as beneficiary, and they open 1 trust for $100,000 naming the other as beneficiary. Total insured funds equal $1,100,000 in 7 different accounts at the same bank**. Depending on how brave you are you can open as many joint accounts with different people as you wish. As for me, I will just go to as many different banks and credit unions as needed to get all my cash type investments insured.
If your FDIC or NCUA financial institution should fail, you will have limited access to your funds the next day, and full access to your funds within 3 or 4 days. If you are not insured by the FDIC or NCUA, or over their limit, you will eventually receive about 50 to 70% of your funds not covered by FDIC or NCUA insurance after everything is settled by the FDIC or NCUA.
Most Retirement and Investment accounts are insured by SPIC. That stands for Securities Investors Protection Corporation. Weather at a bank, credit union, or brokerage house if you don't see this prominently displayed, ask. If they are not a member go to another financial institution. SPIC only covers brokerage firms and bank brokerage firm failures.
SPIC insures:Stocks and bonds;
Mutual fund shares
Annuities and other equity type investments. SPIC does not insure:
Price fluctuations;
Regular losses due to market fluctuation. For more info:
FDIC LINK
887-ask-fdic NCUA LINK SPIC LINK
202-371-8300
* Some CDs may be brokered. Always ask where the CD will be placed to avoid having it placed at a financial institution where you are at the maximum dollar limit.
** Beware of putting in the maximum amount of money in one account. If you have a $100,000 limit and you earn interest on it, the interest will put you over the limit and not be insured.
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Did you know
that your insurance rates are also based upon your credit score? Bad credit means higher insurance rates!
Just another reason to keep your credit score up.
Return to top of page.
DO YOU HAVE A SPENDING PLAN?
Quite basically,
you must have a plan to succeed. Otherwise by default you are planning to fail. And whose default is it? Yours for not planning! At this point most people scream: “I don’t need a budget!” To which I reply: “So just how did you get in this mess?” Well if only I got paid more; If only I didn’t have such a big student loan…or such a big credit card bill…or…or…or…Well guess what? The chances of getting a raise big enough to make any meaningful difference are just short of zero percent. And the chance of you getting those big bills paid off with out a spending plan of action isn’t any better.
So what can you do? Develop a spending plan of action, or budget. You must take control of your money, or it will control you. Now I don’t want to, nor can I teach you how to develop your individual spending plan of action on this web site. But as a certified budget councilor with Crown Financial Ministries I recommend the teaching materials and methods of Larry Burkett. A very close second would be Dave Ramsey. Larry teaches the why behind the budget better, and Dave teaches how to get out of debt better. I usually combine them in my counseling. I would be glad to answer simple questions by email. Just use the 'CONTACT US' button near the end of this page. If you are in the Grand Rapids Metro area I offer free basic budget counseling.
So there you have it:
Step #1.
Take control of your spending.This is the most important step to getting started. You must free up some cash to invest. Borrowing money to invest makes little sense at this stage. First of all you reduce your return on investment by the amount you pay in interest. Second you are a novice and more likely to make mistakes.
Step #2.
Your first investment – Your Emergency Fund.Your first investment should be something very simple like an automatic payroll deduction to a separate savings account preferably at a second bank or credit union. Yes it is hard getting started. Sometimes you just have to bite the bullet and say I will just make do with $10, or $20 per week less take home pay. Most people do not miss this small amount. Then work the amount up as high as you can. Set aside a portion of every raise, a portion of any overtime, etc until you are deducting a nice large chunk of money. If you do not have an emergency fund of 3 to 6 months expenses (see why you need a spending plan of action) this is a great way to get it built up. Now of course we don’t leave a pile of cash in a simple savings account. You want to invest your emergency fund in something very easy to get at. The simplest idea is to get 3 to 6 (or more) Certificate of Deposits for your emergency fund. I placed my CDs on deposit at my main bank and linked them to my checking account so that I get a f ree interest bearing checking account. This adds to the meager interest rate of CDs by saving me checking account fees, plus the interest I receive from my checking account. After you have an emergency fund built up high enough for your needs, this is a good way to save up for a car, house, vacation, etc.
Step #3.
Your second investment – Your retirement account.Here we use the payroll deduction method again. Now if you are under 30 you only need $10 or $20 to start because you have time on your side. If you are over 40, get going in a big way, $50 to $100 per week. If your employer offers any type of retirement account with any amount of matching funds I strongly suggest you take advantage of this free money. If your employer does not offer any form of retirement accounts, get yourself a ROTH IRA.
Here I recommend investing in mutual funds. Preferably no-load or low-load funds. Historically mutual funds have returned an overall average of about 12% over any 5-year period. Pick one that has done close to the overall average for the last 5 years. Just watch out for the management fees. Some funds say they are no-load funds and then sock it to you in fees. Stability of the fund stock make up and management is essential to continued growth. Funds that have a high buy/sell average incur lots of fees and taxes. Funds that can’t keep a manger for more than a few years are questionable. You can find this information in the funds annual report. You may want to look at 2 or 3 years of reports. Some funds have the report available on-line.
Remember to keep your fund diversified. Invest in several sectors of the economy and the world. For example I have a fund in the leisure sector, 1 in the financial sector, 1 in the small capital sector, 1 in the Asia/Pacific sector, and other sectors. If you are too heavily invested in one sector and it goes down, you go down with it. However if you are in 3 to 10 sectors, the other sectors will carry you thru the period that the one is down with only a mild drop in total return. If you are starting with a small amount from each check, say under $40, you may want to put it all in just 1 fund. Then next year when you add to the amount you invest divide it between 2 funds. The following year when you add to the amounts you invest divide it between 3 funds. If you are unable to add any additional money to the amount you invest per check, then I would pick a different fund to put it in every year or so until you get 3 or more funds going.
Investing in individual company stocks is a lot harder than investing in mutual funds. You need to do a lot more research on your own. You need to look at the quality and stability of the management, the product, the market, and the industry in addition to the earnings and stock prices. Remember to keep your retirement fund diversified. Invest in several sectors of the economy and the world. If your company gives you stock for your 401K that is nice, but remember to diversify your retirement account with your personal funds. Diversify, diversify, and diversify. ‘Many hands make the burden light’ and many different stocks make the retirement account safe from collapse.
You must also keep track of your funds and stocks. I use a simple homemade spreadsheet to track their quarterly performance. You can buy financial soft ware to do this if you wish. Occasionally you will have to ‘rebalance’ your retirement account. This is a fancy way of saying that you picked a poor fund/stock that has been loosing value for a year or two and it is time to sell it and pick another. That buggy whip company did real well in the early 1900’s, but kind of faded after the 1920’s. Some industries are dieing, some are up and coming. The same goes for individual mutual funds and stocks. I am not saying to panic at the least drop in value. You must have a ‘long term outlook’. If a fund/stock drops for a quarter or two, no big deal. Look at the general economy, that sector or industry, or the fund/stock itself. It may be a good fund/stock in a lousy environment. Or a lousy fund/stock in a good environment. If it continues to go down for more than a year, it may need to be replaced. It can be a hard call. Just don’t get sentimentally attached to any fund/stock. If it has lost money for more than a year in an otherwise good environment, dump it.
Step 4.
Your house and real estate:Your home can be an excellent source of retirement income. Be sure to buy a house that fits comfortably into your budget. And I do mean comfortably! Do not stretch your budget for a house. It is better to start out in a slightly smaller house than you want and trade up say in 5 or 10 years rather than strain your budget and risk loosing your investment. One other reason to fit the payment comfortably into your budget is so that you have a little extra cash to build up $$ to invest in say a rental property. Or to pay extra on the principal every month and save buckets of cash on interest payments. I paid $40 per month extra principal on my first mortgage. After 15 years of payments we only had 9 years left on a 30 year fixed mortgage. We saved 6 years of interest payments! We then rolled the principle over to our second house that was twice as big on a double lot and kept enough cash out to pay the closing costs and build a large second garage for my classic cars. When I retire I will sell th is paid for house and downsize while putting a large amount of cash in my retirement account.
Rental property can be a good investment. The secret is to buy low, find good renters, and sell high. It is much harder than it sounds. You must also treat the rental property just like you owned a business. BECAUSE YOU DO OWN A RENTAL PROPERTY BUSINESS !! If you can not do a majority of the maintenance your self I would urge you to skip rental property. My excursion into rental property came out mildly on the plus side. It was a good learning experience, but not very profitable. If you want to try it I suggest you find a friend who has made $$ at it and become their apprentice. Most of the self-help books paint too rosy of a picture.
A word about interest:
Yes a home mortgage is deductible. However it is $$$ you are paying someone else to enjoy your house or other item you purchased on credit. The debt can be recalled at any time (read the fine print!) and you can wind up loosing all you had already paid in plus the house/item you purchased on credit. Now I am not anti debt, just extremely cautious! A house takes 3 months or longer to loose, but is a much bigger hardship to overcome. A car can disappear in as little as 15 days after only 1 missed payment. If that is not enough to make you cautious about debt try this:
A $10,000 car with no down payment, $191 monthly payments @ 5.5% interest will cost you $11,461 with interest. If you bought a car you could pay cash for, and banked the $191 monthly payment in a money market or CDs @ 4.5% interest in 4 years you would have $10,006 and a paid for trade-in to buy that same car for cash.
Mortgage tax break? Let say you paid $1,000 last year in mortgage interest. The IRS gives you $150 (15% of $1,000) back. So you spent $1,000 less $150 or $850 EXTRA to live in your house. Lets also say you paid off your house last December and now you have to pay a 15% tax on that $1,000 you would have paid out in interest. $1,000 less $150 tax equals $850 in left over money you can spend any way you want.
Which do you really want; to pay $150 less in taxes, or to have $850 more to spend.
If you do pay off your mortgage, just be sure to set up a separate savings account to put one eleventh (1/11th) of last year’s property tax payments into the account each month just like you were paying with the mortgage so you always have the property tax money on time. I use 1/11th because property taxes usually go up every year.
I will post more later.
Brian
Peace be with you.
Return to top of page.Download Budget Forms
Interactive Axcel Spreadsheets
Crown Financial Ministries Forms in PDF Format
Dave Ramsey's Baby Steps to get you from poverty to Wealth!
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