Federal Reserve Cuts Rates Again

Today, the Federal Reserve Board cuts rates again. This time they cut rates by a quaerter point. Many people incorrectly think that the rate cut directly, positively impacts home mortgage rates but it doesn't. Since home mortgage loans are usually tied to bonds, Fed rate cuts tend to hurt mortgage rates. Generally, mortgage rates are impacted by economic direction. A bullish market helps stocks and hurts bonds so mortgage rates goes up. A bearish market hurts stocks but helps bonds, making mortgage rates fall. Obviously, there are tons of factors that influence rates so don't think this simple explanation explains it all.

I will say that the rate cut does positively HELP credit card rates, home equities loans and car loans. It just doesn't help mortgage rates.

Also keep in mind that there is a difference between the Federal Funds Rate and the Discount Rate. In addition to the Federal Funds Rate, the Board aslo cut the discount rate today by a quarter point. The Federal Funds Rate and it is the rate at which banks pay to borrow from the marketplace and the rate that affects credit cards, home equity lines of credit, car loans and other consumer loan rates. The other rate that the Feds control is the "discount rate". This is the rate that the Fed charges to lend money directly to banks and other lending institutions.

Federal Reserve Helps You

On November 19, 2007, the federal reserve board announced a new program for consumers that need help in regards to bank problems. It's called Federal Reserve Consumer Help and the link is www.federalreserveconsumerhelp.gov.

The board says, "To make it more convenient for consumers to contact us, we created a one-stop complaint and inquiry site where consumers know they can go to get help."

The website allows for easy navigation and the ability to submit complaints electronically.

Here is all the contact information:

Online: http://www.federalreserveconsumerhelp.gov/
E-mail: ConsumerHelp@FederalReserve.gov
Toll-free: 888-851-1920 (8 a.m. to 6 p.m. CT)
Toll-free TTY: 877-766-8533
Toll-free fax: 877-888-2520
Mail: Federal Reserve Consumer Help, P.O. Box 1200, Minneapolis, MN 55480

Great Finance Tools for Kids

Unfortunately, many schools don't teach basic personal finances. As parents, it's critical that we educate our children about money and managing money. Recently, a program was featured on The Today Show. The program is called "PAYjr" and it is a website that allows teens to get pre-paid Visa cards. For kids under 13, there is a feature that allows for tracking of allowance and chores. I think it's a great idea as it allows kids to start learning about money at an early age.

Money Magazine's "25 Rules to Grow Rich By"

article: http://money.cnn.com/magazines/moneymag/moneymag_archive/2006/11/01/8392426/index.htm

Home
1 For return on investment, the best home renovation is to upgrade an old bathroom. Kitchens come in second.
2 It's worth refinancing your mortgage when you can cut your interest rate by at least one point.
3 Spend no more than 2½ times your income on a home. For a down payment, it's best to come up with at least 20%.
4 Your total housing payments should not exceed 28% of your gross income. Total debt payments should come in under 36%.
5 Never hire a roofer, driveway paver or chimney sweep who is going door to door.
Invest
6 All else being equal, the best place to invest is a 401(k). Once you've earned the full company match, max out a Roth IRA. Still have money to invest? Put more in your 401(k) or a traditional IRA.
7 To figure out what percentage of your money should be in stocks, subtract your age from 120.
8 Invest no more than 10% of your portfolio in your company stock--or any single company's stock, for that matter.
9 The most you should pay in annual fees for a mutual fund is 1% for a large-company stock fund, 1.3% for any other type of stock fund and 0.6% for a U.S. bond fund.
10 Aim to build a retirement nest egg that is 25 times the annual investment income you need. So if you want $40,000 a year to supplement Social Security and a pension, you must save $1 million.
11 If you don't understand how an investment works, don't buy it.
Plan
12 If you're not saving 10% of your salary, you aren't saving enough.
13 Keep three months' worth of living expenses in a bank savings account or a money-market fund for emergencies. If you have kids or rely on one income, make it six months'.
14 Aim to accumulate enough money to pay for a third of your kids' college costs. You can borrow the rest or cover it from your income.
15 You need enough life insurance to replace at least five years of your salary--as much as 10 years if you have several young children or significant debts.
16 When you buy insurance, choose the highest deductible you can afford. It's the easiest way to lower your premium.
17 The best credit card is a no-fee rewards card that you pay in full every month. But if you carry a balance, high interest rates will wipe out the benefits.
18 The best way to improve your credit score is to pay bills on time and to borrow no more than 30% of your available credit.
19 Anyone who calls or e-mails you asking for your Social Security number or information about your bank or credit-card account is a scam artist.
Spend
20 The best way to save money on a car is to buy a late-model used car and drive it until it's junk. A car loses 30% of its value in the first year.
21 Lease a new car or truck only if you plan to replace it within two or three years.
22 Resist the urge to buy the latest computer or other gadget as soon as it comes out. Wait three months and the price will be lower.
23 Buy airline tickets early because the cheapest fares are snapped up first. Most seats go on sale 11 months in advance.
24 Don't redeem frequent-flier miles unless you can get more than a dollar's worth of air fare or other stuff for every 100 miles you spend.
25 When you shop for electronics, don't pay for an extended warranty. One exception: It's a laptop and the warranty is from the manufacturer.

Family of 9 Lives Debt Free on $35K per Year

I just read the article on abcnews.com site (20/20) about America's Cheapest Family. They live on $35,000 per year and there are 2 adults and 7 kids. The most amazing thing is that that they live DEBT FREE. There was a video on yahoo.com this morning as well. As most personal finance blogs seem to re-iterate, it's the small things that add up. This family goes to the store once a month and they literally save hundreds of dollars each trip using coupons. Over the course of a year, that's thousands of dollars. Thousands of dollars adds up to a huge percentage when the total salary is only $35K! They even wrote a book called America's Cheapest Family Gets You Right on the Money: Your Guide to Living Better, Spending Less, and Cashing in on Your Dreams

Credit Card 0% "Loans"; IT REALLY WORKS

In this post, I'll discuss how to use those introductory 0% credit card offers to your advantage. The basic premise is that you apply for a credit card that has a 0% introductory rate and use the credit limit that you are granted to get cash. You take the cash and put it in a higher yield savings account or money market account. Each month, you only pay the minimum due and keep the rest of the money earning interest for you. At the end of the introductory period, simply pay off the balance on your card. With enough of these cards, you can easily earn thousands of dollars a year. This method was discussed on other PF blogs as well: www.thesimpledollar.com and www.pfblog.com

Now, there some negatives associated with this practice. You must remember that since your income to debt ratio will be way out of wack, your credit score WILL GO DOWN. This is not really that big of a deal if you don't have any near term needs for credit. Even though you credit SCORE is affected, your credit report will still be showing on-time payments and your history will be increasing. After you're done with this "loan" idea, it will take quite a few months for your credit score to go up. It's very important to forecast when you might need to apply for normal credit (i.e., you really need to buy something like a car or house) so that you can begin to pay your loans off.

Another thing to remember is to stay on top of your payments. Do not be late! If you apply for many offers, you could easily have 5, 10, 15 or more cards to keep track of each month. The method I use is to have paperless statements sent to me each month in the form of an email alert. As soon as I see the alert, I go to that card site and schedule my next payment (I either pay the minimum or I pay off the card if the intro period is about to expire). To do this I use electronic funds transfer (EFT) from/to my savings account to the account I pay my bills out of it. Honestly, each bill pay only takes me about 5 minutes from the time I read the alert, transfer money, update my check registry, and schedule the payment.

Here is a very imporant point. When you are researching for new cards to apply for, of course you want to look for the 0% offers but you absolutely must read the fine print in regards to the fees. The best offers are the ones that have no fees associated with a transfer or cash advance. Others have something like 3% of the transfer amount but cap it off at $50 or $75. The worst offers are the ones that have no maximum fee for the amount trasferred. For example, if you apply for a card that has a 3% transfer fee with no max and you write yourself a check for $10,000, you will be assessed a $300 fee. I DO NOT RECOMMEND THESE CARDS because your margin will be very small. You really have to do the math when it comes to the term of the intro period, the transfer fee, and the max transfer free details. If the margin is very small, I do not apply for the card.

Here are some links for 0% card offers:









Here are some links for savings account with decent yields:








In summary, you can make money using 0% introductory rate credit card offers. However, you should read the fine print to determine the fees involved (hopefully they're none). Additionally, set up a method that works for you so that you can stay on top of all your payments. You definitely don't want to be late with you payments. Finally, be sure to track your expiration dates so that you don't forget to pay your card off when the intro period is up.

Get Rich Slowly Book Review

...just read the book review of "Debt is Slavery" from the blog Get Rich Slowly and I must say it was a great review because he summarized all the key points and explained each very well. I'm going to list each point but honestly, to appreciate the post, please read it: http://www.getrichslowly.org/blog/2007/08/07/book-review-debt-is-slavery/

Get the book here:


Here are the points:

1. Debt is slavery.
2. Money is time. (see the book Your Money or Your Life)

3. Possessions are a prison.
4. Don’t let advertising brainwash you.
5. Money buys freedom.
6. Don’t sell your soul for a salary.
7. Own.
8. Spend less than you earn.
9. Save 50% of your salary.
10. Control your money.
11. Start doing this now!

How to Protect Your Precious Credit & Identifty

I received this in an email and most of it makes sense but take it with a grain of salt. Research a little before you decide to do anything. Here is the email:

Read this and make a copy for your files in case you need to refer to it someday. Maybe we should all take some of his advice! A corporate attorney sent the following out to the employees in his company.

1. Do not sign the back of your credit cards. Instead, put "PHOTO ID REQUIRED."

2. When you are writing checks to pay on your credit card Accounts, DO NOT put the complete account number on the "For" line. Instead, just put the last four numbers. The credit card company knows the rest of the number, and anyone who might be handling your check as it passes through all the check processing channels won't have access to it.

3. Put your work phone # on your checks instead of your home Phone. If you have a P.O. Box for a mailing address, use that instead of your home address. If you do not have a P.O. Box, use your work address. Never have your SS# printed on your checks. (DUH!) You can add it if it is necessary but if you have It printed, anyone can get it.

4. Place the contents of your wallet on a photocopy machine. Copy both sides of each license, credit card, etc. You will know what you had in your wallet and all of the account numbers and phone numbers to call and cancel. Keep the photocopy in a safe place. I also carry a Photocopy of my passport when I travel either here or abroad. We've all heard horror stories about fraud that's committed on us in stealing a name, address, social security number, credit cards etc.

Unfortunately, I, an attorney, have firsthand knowledge because my Wallet was stolen last month. Within a week, the thieve(S) ordered an Expensive monthly cell phone package, applied for a VISA credit card, had A credit line approved to buy a Gateway computer, received a PIN number From DMV to change my driving record information online, and more. But here's some critical information to limit the damage in case this happens to you or someone you know:

5. We have been told we should cancel our credit cards immediately. But the key is having the toll free numbers and your card Numbers handy so you know whom to call. Keep those where you can find them.

6. File a police report immediately in the jurisdiction where your credit cards, etc., were stolen. This proves to credit providers you were diligent, and this is a first step toward an investigation (if there ever is one).

But here's what is perhaps most important of all: (I never even thought to do this.)

7. Call the 3 national credit reporting organizations immediately to place a fraud alert on your name and also call the Social Security fraud line number. I had never heard of doing that until advised by a bank that called to tell me an application for credit was made over The Internet in my name. The alert means any company that checks your credit knows your information was stolen, and they have to contact you by phone to authorize new credit.

By the time I was advised to do this, almost two weeks after the theft, all the damage had been done. There are records of all the Credit checks initiated by the thieves' purchases, none of which I knew about before placing the alert. Since then, no additional damage has been done, and the thieves threw my wallet away this weekend (someone turned it in). It seems to have stopped them dead in their tracks.

Now, here are the numbers you always need to contact about your wallet, etc., has been stolen:

1.) Equifax: 800-525-6285 (NOTE: I looked this up on equifax.com and found the number to be 888-766-0008 so you should call this number; all other numbers below matched).
2.) Experian (formerly TRW): 888-397-3742
3.) Trans Union : 800-680-7289
4.) Social Security Administration (fraud line): 800-269-0271

6 Ways to Kill Your Savings (DON'T DO THESE)

1. Don't have a budget - If you squander every penny you get, you'll never be ready for the unexpected or retirement. Plan your spending that is within your means. And by all means, pay yourself first (i.e., save some money).

2. Indulge in your whims - If you like it, buy it, right? Wrong! There is no reason to buy things just because they seem nice at the time. Think about the long term uses of the item or the long term implications of spending $250 on a watch "you should have to have". Even spending $30 that you don't need to spend could go a long way to other things like paying down your credit card or adding principle to your mortgage payment.

3. Splurge on gifts - We all know that true love is demonstrated by how many gifts or how much you spend on your children, siblings, family, friends, etc... Yeah, I know: ridiculous. Unfortunately, some people fall into that trap each and every holiday season and end up spending way more than they should and have debt left over until the summer. It's just a bad move. Value is not always about the money! Find that perfect little gift will go a lot further than spending $$$ just to spend it on someone.

4. Go ahead; buy an SUV - When you get the super-dooper SUV that get 15 MPG or less on the highway, your checkbook will be screaming for assistance! See the "Silly Song" about an SUV.


5. Rely on credit for emergencies - Don't worry; you'll never get sick or get into an unexpected accident (like we expect accidents) and have to pay a deductible. Always have an emergency cash fund. It's okay if you pay with a credit card. Just be able to pay if off when the bills comes in!

6. Skip routine maintenance - As long as your car seems to be running fine, why should you do anything, right? WRONG! Get your oil changed regularly. Get your brake pads checked. If your check engine light comes on, go get it looked into immediately. Many times, it may not be a big deal. The key here is to remember that preventive maintenance is WAY CHEAPER than "oh man, my car won't start at all and is really broken" maintenance.

401(k)

If your employer offers you a 401(k), you should contribute the maximum that they will match. Feel free to add more but at a minimum, you should put in what they'll match. For example, lets say that your company will allow you to contribute 6% of your income and they will match 50% of the 6%. If you earn $36K/yr ($3K/month), then you can contribute $180 per month to your plan. That means that your company will GIVE YOU FREE MONEY in the amount of $90 per month. Effectively, that is a 3% raise in your salary. The only downside is that in most plans you must wait a certain period of time (like 3 years or 5 years) to become fully "vested". All that means is that the money the company matches is not completely available until after the vested period. However, even if you leave a company before you are fully vested, the money you contributed is 100% yours and you can move to another 401(k) with you new company. That's called a "rollover".

How to Use Credit Cards

Here are some basic tips for using/getting a credit card:

1. Find the lowest interest rate possible.

2. If you are financially able, pay your balance in full each and every month. If you are riding out a 0% introductory rate, ensure you can pay the full balance at the end of the introductory period.

3. If you are unable to pay your full balance each month, pay as much as possible and always tackle the cards with the highest rates first.

4. Try to find a credit card that offers "cash back" or some other incentive. I have a Chase Freedom Card that has literally EARNED me thousands of dollars over the years.

5. Try to find a card with no fees at all. For some people who've had credit challenges in the past, this may be difficult and you may have to get a card that has fees just so you can start establishing good credit. Ironically enough, bad credit is better than no credit. I used to work at a car dealer and it was easier for customers with bad credit to get a loan than customers with no credit history.

6. Pay your bill online each month if possible. Save the money that you would spend each month on stamps and put it towards your bill.

7. Don't overspend. This will help you meet #2. Sometimes you just need to make a budget so that you know how much you can afford to spend each month on your credit card.

Manage Your Money Online

One of the key things about managing your money is knowing where it is, knowing where it is coming from and knowing where it is going. There are quite a few ways to do this. If you follow the guidance from the book, "Your Money or Your Life", you should know about EVERY PENNY that comes in and out of your life.

Some people choose to use a spreadsheet. You can also use something like Quicken or MS Money. Additionally, many banks have an online tool for managing all of your accounts. However, my personal favorite is Yodlee Money Center. Yodlee is the company that creates the software that is run by so many of your favorite banks. I like the generic site provided by Yodee because it's simple and easy to use and doesn't have any sort of bank flavor.

Generation Debt

I ran across an interesting book when I was reading throught the "I Will Teach You to be Rich" blog. The name of the book is Generation Debt, by Anya Kamenetz. Although I haven't read the book yet, she poses some issues that plague many of us in our 20's and 30's.

The book is linked here:

Out of control spending

I ran across this today on bankrate.com and it just irks me that this soldier is probably going to get stuck with this huge bill.

http://www.bankrate.com/nltrack/news/debt/20070511_soldier_credit_card_debt_a1.asp?ec_id=brmint_ns_cc_20070521

I guess we only get to ready 1/2 of the story as we hadn't heard from the wife.

"It's Only"

How many times do you say to yourself "it's only" when you try to buy something. "It's only $10.99." Or, "It's only $6.99/month". Or, maybe you hear it from you significant other when they buy something they want (but don't need). First of all, stop buying things that you simply "want". Buy things that you NEED. I'm not saying to not treat yourself to things once in a while because you should. But, you must stop buying little knick-knack things that are only valuable to you at the time you see them. Before long, those things that seemed so desirable will be collecting dust in a closet. So, there are really two points here. Don't buy something just because you want it (using the "it's only" argument to justify the purchase to yourself or to your partner). Secondly, it's extremely important to realize that all those little things add up over time. Figure out how much you could have left over at the end of a year if you didn't buy the little things that you didn't need!

Online Banking

Get rid of your crappy Bank of America savings account (or whatever other low interest bearing account you may have) and put your money in an online bank. Two of my favorites are ING Direct (http://home.ingdirect.com/) and Countrywide Financial (http://my.countrywide.com/). Currently, CWF has a better rate (5.4%) so it's my primary savings account but ING Direct has a MUCH better interface. I'd recommend that if you are just getting started in online banking for your savings account, go with the ING account. It's very easy to use and easy to transfer money. If you start an account and refer your friends to ING, you get a bonus (and so do they!). No matter which online bank you use, look for no fees to transfer money to your external account (usually your checking account). Let me know how it goes!

Friday Post, This is a simple one...

Start taking your lunch with you to work. Everyone intuitively knows this but few do this. You know that you can take some leftover spaghetti from the night before instead of going to Baja Fresh for lunch. If you practice that consistentely, you will save a ton of money. Let's say Baja Fresh (with a drink) is about $8. Bringing lunch is about a buck. That's a $7/day savings. Just do that 3 times a week and you've now saved $1092 per year. That's HUGE!!! Now get to it....

Free Refills with your Girlfriend, Wife, Boyfriend, Husband, Whatever....

How many of you go to Burger King with your significant other and you each get a combo? Have you ever considered sharing a drink with them? I mean don't you already swat spit anyway? What's the harm in drinking out of the same cup? Let' say a drink costs about $1.25 and let's say you eat out at fast food joings a couple of times a week. (That's probably a conservative estimate, right?). Over the course of a year, you are looking at a savings of $130. It's sort of like someone coming up to you on December 31st and saying here is $130 for you. Do you want it? OF COURSE YOU DO!!!!

Now, I know what some of you are thinking: "But, that's taking free soda from Burger King". Is it really? I'm NOT suggesting you go in there and bring an empty cup from home and fill up your drink. That would be stealing. But, I am saying that I know my girlfriend usually only drinks a freakin' 1/3 of her drink anyway and I almost always get at least 3 refills. Not to mention that I'm already paying for all the food. Is 4 ounces of Coke that big a deal in the grand scheme of things when they know they have me as a loyal customer? Think about it....

First Post!

Recently, I ran across a blog called http://www.iwillteachyoutoberich.com/. It's a great resource, surely but I already practice many of the things that are talked about in the blog. I think the blog is also a great read. It's written in a no-nonsense, no-bullshit sort of way that hits home directly! It's freakin' awesome. It has inspired me to write. I have many ideas similar to what is mentioned in http://www.iwillteachyoutoberich.com/. But, I also have other ideas and methods that I use to hold on to my money. My blog will help show people how to hold on to their money and have it work for them.