The sooner you and your spouse can agree on where the family money goes, the better. The best time to figure out finances is before you’re married when both of your money is separate.

I’m getting married in November. The shared finances discussion has begun. It will continue for the next few months until we’ve covered all of the ground rules. These premarital financial discussions should minimize the fights while we’re married.

[Photo Credit]

Sponsor: Brohans Video Blog - It’s Like Binary Dollar. Except you don’t learn anything.

ShareThis

The other day I picked up a copy of Malcolm Gladwell’s newest book, Outliers: The Story of Success. I’m only a third of the way through the book, but here’s my take on what I have read so far.

Gladwell believes that success is more than just “pulling oneself up by their bootstraps.” He tells the story of Bill Gates and that the real reason for his success was that his private school (Gates came from a well-off family) purchased a computer before computers were widely-used and that Gates was naturally drawn to it. In other words, had Gates gone to a different school, I might not be typing this blog post because computer software might not exist as it does today. In other words, circumstances matter.

The problem I have with the book is that Gladwell seems to take the approach that success is simply too hard for the poor to achieve. Yes, I’ll admit that it would be harder for a poor person to achieve success in life but that doesn’t mean it’s impossible. I think half the battle in achieving anything is mindset. If a person or class of people is constantly told they CAN’T do something, they end up believing it.

How would I level the playing field? My solution:

1. Allow parents vouchers so that they can send their kids to any school they desire. Not all parents would take advantage but some would.

2. Reinforce education and the importance of reading. Enlist the help of ‘famous’ athletes and musicians to get the message out to kids and PARENTS that EDUCATION IS IMPORTANT! Promote libraries and reading clubs. Offer reading classes to parents.

3. Don’t pass kids if they don’t make the grade.

4. Stop glorifying trash and stop filling our kids’ heads with hatred. Show kids how to respect themselves and those around them.

5. Require kids to watch The Big Idea.

Like I said, I’m not through reading Gladwell’s book yet. I don’t agree with some of his thoughts but I do like his style. There aren’t a lot of non-fiction books out there that are enjoyable to read.

GIVEAWAY

If you’d like a chance to win a copy of the book from me, leave a comment below explaining your thoughts on success. I’m going to make this my FIRST EVER subjective giveaway in that I am going to pick my favorite comment (and the comment doesn’t have to agree with me!) and the winner will receive a copy of the book. The deadline for entry is Friday, December 12, 9am CST. Just remember my rule:

1. you must be a resident of the U.S. or Canada (I won’t mail internationally).

ShareThis

This Thursday is Thanksgiving in the United States.  If you’re traveling, please do so safely.  And especially with all of the market turmoil and uncertainty, please do what you can to focus on what you have and be thankful for it.

Here are this week’s posts selected for the Carnival of Debt Reduction, starting with the earliest submission:

• Tough Money Love has some choice words for credit card issuers and some debtors who would benefit from a bailout.
• Money Help and Tips comes through with a quickie on how not to abuse your credit cards.
• Destroy Debt lists over six dozen ways to save money while saving the environment.
• Financial Wellness Project wrote a guest post over at Clever Dude reviewing You’re Broke Because You Want To Be by Larry Winget and highlighting twelve rules of debt elimination.
• Deposit Accounts Blog gives a few ways to save money by trimming household expenses.
• Master Your Card shares six things she’s learned from being in debt.
• Economic Crunch played a high-stakes salary-negotiation game that paid off handsomely toward her debt reduction.
• Fix My Personal Finance has some thoughts on how to boost savings.
• Studenomics explains an interesting debt-ranking system.
• Bible Money Matters illustrates a way to control spending using the envelope system.
• Debt Reduction Formula has some reflections on money and debt.
• Budgets Are Sexy asks if you really have to use your credit card for things.
• Debt Free Destiny asks how freely your cash is flowing.
• Credit Card Assist lists the top three ways to build better credit.
• Finance Tips 101 asks if you’ve considered debt consolidation.
• Discover Debt Freedom gives a few suggestions for rescuing your finances.
• Digerati Life asks how the economy has affected how you save money.
• Broke Grad Student lists eight resources for finding college scholarships.
• The Smarter Wallet gives a number of frugal tips for clothes-shopping online.
• Saving Advice rattles off a number of ways to feel better without spending a lot of money.
• Credit Addict explains how to evaluate balance transfer credit card offers.
• The Happy Rock reviews Dave Ramsey’s Baby Steps.

Next week we have Green Panda Treehouse hosting.  Have a great week!

Even Though Real Estate is Gloomy, Opportunities Will Present Themselves

The negative news in the real estate market continues. Every week it seems like a new report is out highlighting record drops in home sales, lower home prices, and more difficulties in obtaining a loan. For those who already own a home, or are trying to sell their home, this is obviously a difficult time. I don’t want to dismiss the hardship that this crisis has created, but I am glass is half full kind of guy, so I wanted to highlight some of the positive aspects of what is going on.

Looking Ahead a Few Years

When will the real estate market settle down? That is the million dollar question right now, and there are a lot of different thoughts. And to make things more difficult, some areas of the country will begin to rebound faster than others, so without a crystal ball, the best we can do is guess. That being said, I think it’s fair to say that it will be a while before we see any significant improvement. Whether it’s a year or two, or five years from now, it doesn’t really matter. Trying to pick the absolute bottom is like trying to pick the day the stock market bottoms out. If you’re a little early or little late to the party, you’ll still be fine.

So, if you’re thinking about buying a house in the coming few years, you have a tremendous opportunity in front of you. In many cases, you could buy a home right now at a 25% or more discount from just a year or two ago. As prices continue to fall in coming months and years, you should find even steeper discounts. The good news is that there is no rush in buying. Even if home prices do begin to stabilize earlier than expected, they won’t immediately spike back up, especially with the excess inventory out there. This means that you’ll have a pretty long window of time where you should be able to buy your home without being concerned about skyrocketing prices or strong demand.

Start Getting Your Credit in Order Today

Even if you don’t plan on buying a home for another few years, it is never too early to begin thinking about your credit score and the effect it will have on your ability to secure lending. Banks have learned their lessons (at least I hope so), and that means we’re returning to times where credit is harder to get, and those with poor credit will find it extremely difficult to obtain financing, or may pay a significantly higher interest rate. This makes having a clean credit history more important than ever.

When it comes to improving your credit score, it’s important to have time. This is why it’s a good idea to start planning as early as possible. For one, if you have negative marks on your credit report, the only thing that will remove them is time. In most cases, seven years, or ten if a bankruptcy. So, check your credit report and look for negative marks. How long ago were they? If you have a late payment showing up five years ago and think you’ll be buying a house in about three years, it looks like that would be removed, and improve your score once it’s time to apply for a loan.

Even if you do have more recent dings on your score, the good news is that their importance diminishes over time, so that is still in your favor. Just make sure you don’t make any more late payments! In addition, if you have a few years yet and you currently have very little credit, you have time to open or close lines of credit as needed in order to maximize your score. Remember, length of credit history is also very important, as well as what types of credit you have, and the credit utilization. This gives you time to maximize those aspects of your report as well. Use this time wisely, and don’t wait until just before applying for a loan to begin thinking about your credit score. And don’t forget to check out these tips on how to improve your credit score.

Think About the Down Payment

In the past, it was common to put 20% down on a home. In the 90s, with rapidly increasing home prices and easy access to credit, this became less common, and many people were able to get attractive financing with little or even no money down. Of course, when your home is expected to increase in value by 20% each year, it made sense. As we’ve seen lately, having equity in your home from day one has many advantages, especially when it becomes clear that home values don’t always increase each year. Not only that, but putting 20% down can get you out of paying private mortgage insurance, or PMI. This keeps your monthly payments low, and helps you put more money in your pocket.

That being said, more banks are now requiring money down. There are still plenty of offers out there for zero or low down payment loans, but you’ll need even higher credit scores, and might pay a premium for those loans. Bringing money to the table will help you if you have less than perfect credit, and will help ensure you’re getting the best rate.

This doesn’t mean you have to spend years and years trying to scrape together $50,000 or more, but you have enough time to begin thinking about a down payment and to start saving up now. If you’re looking at a home purchase in the next few years, just saving a couple hundred a month can make a good dent in your down payment over time. Again, time is on your side here, and the sooner you can begin taking advantage, the better off you’ll be.

Don’t Screw This Up

If you don’t own a home and want to buy, or are thinking about upgrading in the coming years, this is a tremendous opportunity. You have just enough time to get your financial house in order so that you will be able to take advantage of the decline in home prices. Use this time wisely, and don’t screw it up. If you wait until the last minute, you’ll miss out on plenty of areas where you could maximize your purchase.

And above all, don’t make the same mistakes people have made in the past. Once the economy begins to recover, the stock market takes off, and home prices begin to rise again, it’s easy to forget about what got us into this mess. Remember, you buy a home for a place to live first and foremost. Find a home that is suitable for your needs, and understand exactly how much home you can truly afford. Don’t borrow too much, and don’t put yourself at further risk by taking on an exotic mortgage. And most of all, don’t go into your home purchase expecting the value to double in five years.

If you plan ahead, stick to the basics, and don’t get greedy, you’ll find yourself in a fantastic position. You’ll have a nice roof over your head, you’ll be able to weather future economic troubles, and since you were able to buy at a significant discount, you might even stand to make some money when you sell in the future. Opportunities to learn from past mistakes and to take advantage of relatively low prices don’t come along that often, so make the most of it.

Image credit: TheTruthAbout

Prospective Home Buyers, This is an Opportunity of a Lifetime - Don’t Screw it Up

In the American Revolutionary War Colonel William Prescott admonished his troops not to fire till they saw the whites of the enemies’ eyes. Bottom feeders in this tanking real estate market are trying to show the same discipline, but it’s tough. As early as mid 2007 we were reading all sorts of stories about vultures swooping into overheated markets like Miami and Las Vegas to gobble up properties that had tanked in value. Funny – we don’t really see too many stories about what happened next.

But we know what happened next – they continued to tumble, and the bottom feeders who jumped in too early took a beating.

Today Case Shiller reported a 15.8% drop in their housing price index. This isn’t really news, actually – it’s the twenty second consecutive month that the index is down. And if I were a betting man I’d count on it being down next month too.

Foreclosures are hammering the market as banks unload their inventory of REO’s, pushing down the averages. There are some indications that Congress and the Fed are ready to step in – witness this week’s housing bill. This will reassure Wall Street, but it remains to be seen if the positive impact that this has on credit liquidity is neutralized by banks reevaluating the risk of the government unilaterally resetting the terms of the loans that they make.

I’ve remarked in earlier posts that there is a difference between investing and speculating – and that either one may be ok for you, but the danger is when you think that you’re doing one but you’re actually doing the other. “Investors” out there who are trying to catch the bounce aren’t investors; they’re speculators. In my view it’s more important than ever for investors to evaluate the risks, take a sober look at a potential cashflow that an investment will produce, and ask themselves what kind of return their investment will yield if they’re forced to hold for a few years.

“It takes as much energy to wish as it does to plan.”
- Eleanor Roosevelt

People wish a lot, but do they plan just as much? Set small financial goals, make them attainable and stick to them. Don’t set a goal like “This year I’ll get my act together.” Set a goal such as: “This year, I’m going to put $100 of every paycheck into my savings account.” That is a realistic goal. Setting short-term realistic goals is good because it gives you confidence every time you reach them. That confidence gives you the determination to do it again the next paycheck.

Let’s do some quick math..

$100 every 2 weeks in a month is:$200
$200 a month one in a year is: $2,400
Plus $100 in interest earned: $2,500

This means that if you save up just $100 from every check you can take you and your family on a vacation every single year. The only thing left is the hard part, sticking to your goal.

- Edwin, CashTheChecks.com

Finance Findings is Binary Dollar’s periodic link dump.

• My Personal Saving and Investing System [Sun’s Financial Diary]
• What Have You Got Against Credit Cards? [Tao]
• Curb Appeal: One Of My Best Investments Yet Or How I Turned $80 Into $5,000 With Minimal Risk [Digerati Life]
• Understanding the Fine Print of a Loan Can Save You Money and Grief [Generation X Finance]
• Alternative Income Streams Progress - June 2007 [Lazy Man and Money]
• Are Real Estate Agents Worth the Money? [Money Smart Life]
• The Best Online Brokers [Free Money Finance]
• Eight Things To Consider When Buying Someone Out [Mighty Bargain Hunter]
• Four Reasons You Should Get A Payday Loan [Blueprint]
• Eco-Friendly Energy Savings [Five Cent Nickel]

Send your submissions for Finance Findings to henry@binarydollar.com.

Sponsor: Parlayer - Henry and Matt blog about sports and stuff.

ShareThis

I read somewhere over the weekend a letter to the editor of some newspaper (I can’t for the life of me remember where I read the comment) by a guy who was lamenting the fact that investors get screwed no matter who is president. His letter mentioned that some stocks do well when a Republican is in office and other stocks do well when a Democrat is in office—he just didn’t know which ones.

I have a suggestion:

Buy the index and don’t worry about it.

Yes, we can make more money IF we know which stocks are going to outperform the market. The problem is either WE DON’T KNOW or it’s hard to know. Therefore, buying the index is the prudent way to go because you don’t have to worry about picking stocks (unless that’s something you love doing).

ShareThis