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Fine-Tuned Finances

Make Your Wallet Run Like New Again

Stranger buys woman’s house – and saves her from homelessness

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Would you buy a house for a complete stranger if you didn’t even know what it looked like? Well that’s exactly what Marilyn Mock did in 2008, when she saved Tracy Orr’s family home from being auctioned off by the banks….

 It’s a situation nobody ever wants to be in. But in 2008, Tracy Orr was facing the prospect of losing her family home in Pottsboro, Texas after she was laid off from her job and was no longer able to keep up with her mortgage repayments. While she sat crying and waiting for her house to be auctioned off at a mortgagee auction, something happened – and it was nothing short of a miracle. Along came Marilyn Mock, a local resident who’d come to the auctions to help her son buy a home. She struck up a conversation with Tracy, who told her that her home was one of the houses being auctioned. Marilyn didn’t have a big wallet by any means – just a big heart. When she saw Tracy crying, she saw a soon-to-be homeless woman and decided on a whim to do something about it.

Marilyn bought Tracy’s home in the auction. Not so that she could live in it herself, not so she could sell it and make a profit – but simply so that Tracy and her family could continue living in their own house while making lower, more affordable repayments.

A new charity organisation is born

Within a short time, Marilyn’s good deed had attracted the attention of the media all over America, and even Oprah caught wind of Marilyn’s work and featured her on her world-famous talk show. It was the good-Samaritan act which spawned a whole charity organisation dedicated to helping people like Tracy who are facing the devastating prospect of losing their home to foreclosure (the American equivalent of a mortgagee auction). Today, Marilyn’s organisation The Foreclosure Angel Foundation is dedicated to helping Americans in similar situations, and has inspired a number of spin-off organisations, such as the Housing Angels.

Getting help with your mortgage

It’s the feel-good story which touched the hearts of thousands around America, and while not everyone who finds themselves in financial hardship is lucky enough to know someone like Marilyn Mock, there are options available for people who are having trouble paying off their mortgages.

More and more Australians are taking out home loans every year. According to a December 2010 report by the Australian Bureau of Statistics, the number of home owners with mortgages increased by around 5% between 1998 and 2008, while a recent drop in housing prices means that the average Australian mortgage was around $384,042 in June (1.1 percent lower than in May this year).

Changing housing prices

However, with the Australian Government’s new Carbon Tax, set to come into force in 2012, experts are predicting the cost of housing to increase, putting pressure on some people with mortgages. Housing Industry Association executive director John Dastlik recently told the Sydney Morning Herald that “the cost of a house on an average house and land package would go up by about $5000-6000 when factoring in the new carbon tax.”

While many of us take out home loans to make our dream of owning our own home a reality, financial strains are common for many Australians. 22% of people who work full time are working over 50 hours per week*, and many of these people presumably work such long hours in order to cover off various financial responsibilities.

Taking control of your finances

Financial circumstances can change at a moment’s notice, and are often completely out of a person’s control. Changes can be due to external factors and shifts in the economy, one of the major issues being interest rate rises.

So what’s the best way to safeguard your mortgage and finances if the unexpected were to ever happen?

Refinancing and debt consolidation services can help people choose the best course of action to save their home. Refinancing simply means trading in an old mortgage for a new one by moving a home loan to a different lender. This can allow people to find a cheaper monthly repayment rate, a loan with better terms and conditions, or to help consolidate other costs.

There are also plenty of articles and tips to help you avoid defaulting on payments by utlising better planning and budgeting practices and conducting “home loan health checks” regularly to ensure your mortgage is manageable, even if your financial situation changes.

Tips for the Unemployed

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The unemployment rate is higher than it’s been in more than 26 years. If you’re not already laid off, you may be concerned that your job isn’t as stable as you’d like. Most of the time, you can’t prevent being laid off, but there are some things you can do after you get laid off to help you until you find a new job:

Don’t Burn Bridges

You’re probably going to be angry or upset if you lose your job. The stress can sometimes cause people to freak out and maybe even fight or yell with their boss. Don’t burn bridges with your employer – they will be giving you references when you apply for new jobs and you want them to remain on your side. There’s always a possibility circumstances will change and your employer could bring you back to work, too, but you can be sure that won’t happen if you cause a scene when you’re laid off.

File for Unemployment Benefits

Even if you think you won’t be unemployed for long, make sure you file for unemployment benefits. Usually you can do this online or by phone. File as soon as you are laid off, since receiving benefits can take several weeks. If you happen to land a new job before then, even better.

Prepare Your Resume

Make sure your resume is updated to include the skills and experience you’ve gained from your most recent employer. Update the entire resume as it is the key to getting interviews with potential new employers. Make sure it’s a reflection of who you are as a person and your abilities as an employee.

Apply for New Work

Don’t just sit back and collect unemployment, hoping someone will come to you with a job offer. The increased number of people unemployed means higher competition for every job opening. Start applying. Use job search sites like careerbuilder.com, and your local newspaper. Apply to anything you are qualified to do. If there are particular companies you would like to work for, check their website to see if they have any job openings advertised on it. Many times, they will list job openings on their website long before they advertise them on job search sites or the newspaper, so you increase your chances of being hired if you apply to them early.
Reduce Living Expenses

Even with unemployment pay, you’ll want to make every effort to reduce your living expenses until you are employed again. Turn off or reduce your cable television package, avoid eating in restaurants or getting take out, avoid using credit cards or taking on new debt. The more you do to live within your means, the better you’ll be once you’re employed again.

All That Glitters- Buying and Selling Gold

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We have all seen the advertisements talking about gold, either the buying or selling of this precious metal. For manystacks of gold bars consumers looking to make quick cash or invest in something tangible, the rising price of gold makes this option attractive in a recovering economy.

There following are some factors you should consider prior to buying gold.

  • Do you have a safe place to store it?

  • Do you want to take possession of it in the first place?

  • Do you want to go into the commodities end of trading?

  • Can you afford the risk of a sudden drop over an extended time frame?

  • Where do you purchase gold?

  • Where do you sell it?

For most consumers; beyond a safe deposit box at our bank, there isn’t anywhere that we can reliably store something as valuable as gold. Is that going to be adequate if for some reason you would need the gold during non-banking hours?

Provided you opt to go to one of the myriad commodities or foreign exchange outfits and physically purchase and take physical possession of gold, do you have a way of transporting it?

Generally, the mindset of the novice investor in platinum, gold or silver is one of dire emergency and expectancy of terrible events in the future. This opens the door to further imaginings and scenarios of exactly how you will end up profiting or bartering for things you need. Incremental values of exchange have to be set up to accommodate the fact that one full ounce of gold is probably too valuable for anything you would want to barter for in the event of an emergency.

Thus, you find yourself in a situation of attempting to buy ½ ounce, ¼ ounce or even 1/10 ounce gold pieces – followed immediately by a realization that you probably should have some silver as well.  With each increment of precious metals comes a fee to purchase and a fee to sell, which can prove detrimental to your intended savings or profit building.

If you would happen to go into the commodities end and purchase quantity through leverage and possibly even consider risking margin investment as well, you will find yourself in a further quandary. A precipitous drop in market value overnight, since it is a 24/7 bid and ask process, could leave you devastated financially.

The final question you need to consider; what if things do in fact go “south”? What do I do with my precious metal investments? Where do I find someone that agrees with the value?

There is that impression of security, often a false impression which can evaporate in an instant. So, consider this avenue very carefully; before you react foolishly. Evaluate the true history of gold performance, adjusted for inflation, over the past 40 years. Consider the risks before investing your hard earned money.

Dealing With Unemployment In A Tough Economy

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Unless you are independently wealthy or anticipating a huge (guaranteed) payout in the future, no one can afford toEconomy Unemployment be unemployed. Even though the economy is showing small signs of recovery, there is still a long way to go before consumers will feel confident in receiving a paycheck. Unemployment as most of us know is at an all time high and even though there are fewer people losing their jobs each month, the number of individuals who have lost their income in the past year is higher than ever. For many of these consumers, unemployment benefits are running out and finding employment is not a guarantee. If you are facing this situation now or anytime in your life there are a few tips that will help you through these tough times.

  • Unemployment benefits are designed to help people until they find a new job. They are not intended to replace your income. Unfortunately if you have done everything in your power to find employment to no avail you will reach a point where your unemployment benefits are due to expire. In a recession the government is well aware of the lack of job opportunities and often extends unemployment benefits. If you are receiving unemployment and are nearing the end of your benefit period, find out if there are any extensions available to help you through until you find a new job.

  • Half of unemployed people will not find a job within six months of first becoming unemployed. In many cases you might have to consider jobs that you previously would not have looked at twice. When the economy takes a turn for the worse, any job is better than no job. It is often a hard pill to swallow to accept a position for which you feel you are overqualified, however it is important to remember every job is necessary in society. Remaining gainfully employed, even if not in your field is more important than finding your next career.

  • Do not be afraid to accept help during tough times. Individuals who are making every effort to fend for themselves often find that they still need help making ends meet. There is a difference between people who abuse the system and those who legitimately need help during down times. Do not allow your pride to stop you from accepting help from government or community programs which have been specifically designed to help people during tough times. If you are having trouble buying food, heating your home or providing medical care for your family- contact local government offices to see if you qualify for assistance.

Dealing with unemployment is difficult in the best of times. It becomes even more difficult when there are six other people vying for the same job you are interested in- for this reason it is important to have realistic expectations. When times are tough it becomes more important to not fall behind than to get ahead. Do not let this discourage you from your long term financial goals….in time the economy will right itself and as long as you have made every effort to stay afloat you will be able to get back on track soon.

Out of a Job – Time for a Career Change?

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career changeThose who have found themselves out of a job and in need of income often look for anything that they can find from a job standpoint to bring in money. That is not a bad thing to do when money is scarce and bills are going unpaid.

However, if you are in a position to be able to consider this, it might be a good time to make a career change. Many people who feel trapped in their current career positions, may never make the effort to try something that they would rather do. But, as long as your financial situation is stable, this could be the best time to try.

Prepare Financially

Before considering such a move, examine the financial implications. If you will be experiencing a drop in income because of your choice, then you should have enough money set aside to finance your venture for a period of time. This will help you be able to give it a go without having to worry about money for expenses. Avoid raiding your 401k or other retirement funds.

Eyes Wide Open

Be sure that you set realistic expectations for yourself in your new career. You cannot expect to be at the top earning level when you just start out so, watching for opportunities to advance as openings come up. Or, if you are not able to advance because of the type of career, then set expectations accordingly. If you are taking a severe cut in pay, you might have to take a part-time job to make up the short fall. And, a reduction in expenses can help, too.

Give Yourself Time

Set a realistic time-frame to make the new career work. Success does not happen overnight but you should not continue to drag out your attempt if there are clear signs that it isn’t going to work. Add to this the realization that economic forces sometimes have an influence on business success.

Obtain Advice

People who consider career changes are wise when they seek the advice and input from those who are already in the positions that they are seeking. If you can find a mentor or one who is willing to give you instruction on what to do and how to do it, then your chances for success will be greatly increased.

No Regrets

Whether you fail or whether you are a success, determine that you will have no regrets in your decision.

What Have We Learned From The Recession?

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For those of you following the news, there have been whispers that the recession is over. Are the rumors true and weopportunity-road-sign are finally out of the recession or is the economy just declining at a slower pace? In either event, it is almost a certainty that things will not go back to business as usual anytime soon. Hopefully we have all learned some lessons over the past year and a half; lessons that we should not soon forget even when the economy begins to improve. Here are a few things to keep in mind while the recession is fresh in our memories.

  • There are no guarantees in life. Whether it be your health, job or retirement account, no one is immune from changes. This point was driven home in recent months as people lost seemingly “secure” jobs, watched their savings dwindle and found themselves struggling to maintain day-to-day expenses.

  • Exercise caution when using credit. One area that has seen big changes recently with more changes to come is the credit card industry. As we watched the housing market crash, banks fail and major corporations file for bankruptcy it was only a matter of time before the credit card industry was affected. Unfortunately many people have learned the hard way that the contract between creditor and card holder is binding only on the end of the card holder. For many, the terms and conditions have been arbitrarily changed to favor the credit card issuer, leaving the card holder “holding” the bag.

  • Debt hampers your ability to reach financial goals. In the best of times, having a lot of debt prevents you from investing money in your future. When the economy takes a turn for the worse, it can make it impossible to pay both your debt obligations and other financial responsibilities. If you fall behind on your credit card or other loan payments you will quickly see your balances grow exponentially, making it even harder to get back on track when your finances improve.

  • Those without savings will suffer. There are many people who make it a priority to save money for emergencies, retirement and other future needs. There is however a large percentage of the population that has little or no savings to fall back on during hard times. Without some form of “backup” plan, people who don’t have savings will find themselves facing a difficult time as the lending industry increases the standards for loaning money and using credit cards becomes less lucrative.

These are just a few of the lessons we have hopefully learned during the recession. Now is the time to put those lessons to use and make adjustments in the way we view and spend money. Even if the economy is on the road to recovery, there is bound to be another point in the future where things take a turn for the worse. If you were not prepared for this recession, take the steps necessary to improve your personal finances, putting yourself in a better position to weather the next storm.

Annuities Grow Tax-Deferred But Watch Out For Missed Opportunities

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clock-moneyDuring times of economic uncertainty, fixed annuities gain popularity. In fact, during the first quarter of 2009, the sale of fixed annuities increase 74%, according to a research association called LIMRA. Fixed annuities give people tax-deferred growth at fixed rates that are typically higher than certificate of deposits now. They also give the owners the ability to turn their fixed annuity into guaranteed income for life. Sounds too good to be true, right? A fixed annuity has a number of advantages – but it may cause you to miss opportunities that would result in earning more money.

Fixed annuities are often called “deferred annuity”. These are different from immediate annuities, in which you give a lump sum of money to an insurer and then begin receiving payments from the immediate annuity within a year’s time. Fixed, or deferred annuities operate more like a certificate of deposit in that you deposit your money under a teaser interest rate that can readjust annually based on the current economic and market conditions, but with a guaranteed minimum rate. People like this because they know their interest rate will not go below this guaranteed minimum rate, and that it could readjust for a higher rate in some cases.

Fixed annuities do not have a set time period that you must leave your money alone, however, you would pay a 7% surrender fee if you withdraw your money before five or seven years in most cases. This makes fixed annuities extremely difficult to back out of – which means if you find a higher interest rate somewhere else, you can’t just pull out your money and re-invest to benefit from the interest rates. Some fixed annuities are more flexible in that they allow you to withdraw up to 10% of the balance once per year without paying a fee.

As many experts predict, we will soon be entering an inflationary period. So locking in your money in a 4% fixed annuity could be financially devastating for you in terms of what you could have gained with other investments.

Where as money saved in a certificate of deposit is subject to taxable income, the money in fixed annuities will grow tax-deferred. Unfortunately, if you withdraw the money before you are 59 you will pay a 10% tax penalty, just as if it was a standard retirement fund. When you withdraw cash from a fixed annuity, you’ll also pay ordinary income tax on the interest you’ve earned.

Most annuities give you the option to “annuitize”, which is to turn the balance of your annuity into lifetime payments sometime after the first year. Many people with annuities choose not to do this though, because they use the annuity to grow their money tax-deferred.

If your goal is to find a safe growth for your money, you might consider putting your money in short or intermediate-term corporate and municipal bonds instead of annuities. They still offer interest rates that are higher than current CD rates, and have fewer restrictions than what fixed annuities offer. If the idea of the guaranteed income for life has tempted you toward a fixed annuity, you might want to look at immediate annuities which gives you pay outs within a year – the payment amounts will be greater than if you annuitize a deferred annuity later.

Living Simply and More Frugally

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amishYears ago, families lived more simply and much more frugally than the average American household. Today, the Amish continue to live simply and frugally, and as more families experience the difficulties of the lingering recession – it’s becoming more commonplace to look for new ways to live on less.

The Amish are careful with their finances. They are taught to save money from the time they are children, most are entrepreneurs and most have family and friends and churches to assist them if they fall onto difficult times.

Here are some ideas for living simply and more frugally – things we can learn from the Amish:

Start Saving As a Child: if you’re an adult that didn’t save when you were a child, unfortunately you can’t turn back time and do it all over again! But if you have children of your own, you can teach them to save money from a young age. A good way to do this is to allow your child to keep 10% of any money they earn or receive as gifts and save the rest in a bank account for the child when they turn 18 or 21.

Live at Home: In Amish families, most people live with their family until they get married. They work and help contribute to the family expenses, but it is far less expensive for everyone involved to not have a family with multiple mortgage or rent, multiple utility expenses, etc.

Own Your Own Business: If you own a business as a family, you can employ your own children for much less than it takes to hire workers.  Many times you can work a small business around a full time job, making it possible to increase your income.

Get Group Health Insurance: Many Amish families contribute to the church for health care premiums. The amount each person pays is based on the age and number of family members. The money is placed into a group fund, and if any member of the church has health expenses that cannot be paid on their own, money is pulled from the fund to help pay for the health care expenses. While you will be hard pressed to find a church doing this outside Amish country, there are many group health insurance plans that exist to help keep premiums more manageable for all participants.

Don’t be Wasteful: Use what you have rather than buying new whenever possible, don’t waste things. You can often make do with what you already have, but we’re so used to running out and buying something new whenever we need it that we forget to re-purpose items we have to fulfill other needs.

Thinking of Refinancing Your Mortgage? Think Hard

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With both the economy and the housing industry still working at a recovery, consumers are also still focusing hard on refinancing-your-mortgagegetting out of debt and avoiding bankruptcy and foreclosure. Many homeowners may be interested in refinancing their current mortgage at a lower rate to help save money and pay down some of their bills. They feel that reducing one of their larger financial obligations each month, they will have some extra cash to use elsewhere. However, in the current economic times, refinancing may not be the option to save any money and, in fact, may cost you even more than you are already paying.

However, refinancing your mortgage is not exactly going to be an easy procedure. Due to the economy, lenders, including those who are doing FHA mortgages are going to be raising the bar and those consumers who do not live up to the new standards may be out of luck for a good refinance. Lenders now want to see consumers have a higher credit score and tangible proof of income and asset before they will bring a good deal to the table. They would also like to see that any home equity loans and second mortgages have been paid off before a refinancing deal is made. Some consumers may find that even with a lower interest rate, a refinance is not a money-saving endeavor. There are higher fees associated with the refinance and end up deciding that a refinancing deal is too expensive to be relevant.

Credit scores and down payments will make a big difference in a lenders decision. Even with a score in the 700’s, lenders still would like you to contribute a 20% down payment, which is industry standard. Scores may be one of the determining factors because what used to be considered an excellent score now may just be average. You also better be ready to prove that you have income and assets. Even with all the right tings in place, lenders are not scared of raising interest rates if their conditions aren’t met exactly.

Before you go shopping for a refinancing opportunity, make sure a refinancing deal is a financially sound idea for your current financial situation. If your credit score has recently taken a hit, at below 720, or you still owe a balance on your second mortgage or home equity loan, you might be better off working first to improve your credit score and pay down your debt, while keeping your current mortgage intact. Rash decisions may lead to even higher fees and less savings of your money.