Today the Senate passed a $300 billion housing rescue bill aimed at turning around the flagging housing market, helping homeowners avoid foreclosure, and propping up Fannie Mae and Freddie Mac. The fact that Senators came in on a Saturday to vote on the bill is an indicator of the importance that Capitol Hill places on the issue.

It remains to be seen who will benefit from this legislation, but one group of folks that surely are breathing a sigh of relief are the shareholders of Fannie and Freddie. It’s unlikely that these two publically traded stocks will return to their previous levels anytime soon, but this intervention at least makes it more unlikely that they’ll go belly-up.

Nationwide, foreclosure rates continue to skyrocket. RealtyTrac yesterday reported that foreclosure activity was up a whopping 14 percent in the second quarter, a rise of 121 percent over the second quarter of 2007.

It is hoped that the passage of this regulation will soothe Wall Street’s frazzled nerves. Oil prices (too high) and housing prices (falling too fast) are surely the two most troubling elements in our fragile economic situation. Both are complex and have deep reaching tentacles. The reassuring thing about the housing picture is that, unlike oil, it is an American market – therefore Congress may have some success in turning the ship. Washington hasn’t produced any legislation on energy– neither to curb speculation nor to increase offshore drilling. Lawmakers take some lumps from the public for their inaction, but it’s probably just as well since neither approach has the potential to improve the situation. The US controls a tiny percentage of global reserves, and traders move a small percentage of barrels traded, which leads us to a troubling conclusion: the U.S. economy is just one piece in the global puzzle, and things that happen outside of our borders are going to hit us in the pocketbook here at home.

But even if we’re struggling with our oil addiction, it’s hopeful that this piece of legislation might help the housing market. Much of the impact may be psychological, however. Democrats estimate that around 400,000 households might benefit from the bill, but last quarter alone saw almost twice that number of foureclosures – around 740,000 according to RealtyTrac. But we can hope that this bill shows that Congress is willing to act if necessary, and that might be enough to get banks lending again. And that might lead to fewer foreclosures, more buyers buying, more sellers selling, a shrinking housing inventory, and eventually a recovery in prices.

As things stand in early 2007, estate and generation skipping (GST) taxes will be repealed in 2010 and reinstated in 2011. And given that Democrats now have control of the House and the Senate, experts are predicting that the permanent repeal of the estate tax is unlikely in the next two years.

At present, for 2007 and 2008, the estate tax exemption is $2 million per person, rising to $3.5 million in 2009, repealed in 2010, and then the tax returns in 2011 with an exemption of $1 million. Given existing laws, experts suggest that using life insurance to pay for potential estate taxes is a very viable solution.

According to industry reports, the number one product sold for estate liquidity today is universal life with a secondary guarantee. In short, this is a policy whereby insurers guarantee the insurance benefit on a universal life insurance policy even if the cash value in the policy goes to zero. This is known as a ?secondary guarantee.? The policy owner agrees to pay a premium which is often less than a whole life insurance premium and if the policy owner keeps-up payments, the policy?s death benefit is guaranteed to age 100.

Policies with secondary guarantees are often used for estate planning where the crucial component is a guarantee of the death benefit and cash value build-up is secondary.

Survivorship life insurance (also called joint and survivor life insurance or second-to-die life insurance) can also be used for estate planning to create the cash liquidity to pay the estate taxes. However, in order for the insurance death benefit to avoid both income and estate tax, the policy must be set-up properly within an Irrevocable Life Insurance Trust (ILIT).

So what in general is universal life, what are its advantages and disadvantages, and when should it be used? According to Tools and Techniques of Life Insurance Planning, universal life ? which was first introduced in the late 1970s — is often referred to as a ?flexible premium,? ?current assumption,? ?adjustable-death-benefit? type of cash value policy. It?s flexible premium because the policy owner can pay whatever premium they wish within a given range and adjust later as needed. Policy owners can even skip premium payments provided there?s enough cash value in the policy to cover policy charges. It?s called a current assumption because current interest rates and current mortality and expense charges are used to determine the cash value of the policy. And it?s called an adjustable death benefit because the policy owner can lower the death benefit at anytime and can raise it with evidence of insurability.

Given this flexibility, universal life is a useful product should a person?s estate tax liability rise or fall with the Congressional tides. Typically, a universal life is best suited for long-term coverage needs; while a non-renewable term policy will generally be more cost-effective for short-term needs. Generally, however, such policies work best when flexibility is needed and policy owners need to reconfigure their premiums or death benefits.

According to some planners, the biggest advantage of using guaranteed universal life is this: The policy owner pays the least expensive premiums to guarantee a lifetime death benefit. The policy owner can also adjust the premium. If, for instance, there?s enough cash value to cover the mortality charges, the policy owner could even skip premium payments.

However, caution should be followed in skipping or delaying payments on these contracts since the ?guarantees? could be impacted. Even premiums received during the grace period could affect the accumulated values and ?guarantees.? Policies differ on this and need to be reviewed before any change is to be made.

The policy is also transparent ? the policy illustrations and annual reports break out and report each element of the policy, such as premium, death benefit, interest credits, mortality charges, expenses and cash value, separately.

Universal life policies also offer two death benefit options, one that is similar to a traditional whole life policy and one that is like a traditional whole life policy with a term rider. The first, a level death benefit; the latter, an increasing death benefit.

When selecting a universal life policy, it?s especially important to consider the amount credited to cash values. The prospective policy owner should know how the insurer determines the amount credited to cash values. The amount credited to cash values depends on the expenses charged against the policy, the mortality charges assessed against the policy, net investment yield earned by the insurer on its portfolio investments and the method used to allocate interest to various blocks of policies.

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The month of May brought the largest number of visitors to date for Money Smart Life!  Many of those visitors came from sites in the the Money Writers and Money Blog networks whom you are familiar with via my weekly mentions.

I also wanted to say thanks to 10 other personal finance sites that sent over the most visitors by recommending an article on Money Smart Life.  I’ve listed each site and a recent article you might find interesting:

US News World Report (Kimberly Palmer) – Six Ways to Save Money on Vacation

MSN Money Blog (Donna Freedman) – Why is it so Easy to Throw Things Away?

The Simple Dollar – Financial Independence as a Goal

Frugal Dad – Used Car Buying for Teenagers

My Two Dollars – 29 Free or Low Cost Ways To Save Energy & Money

Frugal for Life – Slowing Down Takes Time

Not Made of Money – Four Tips to Saving Money on Home Improvement

Money Under 30 – How I Organize My Financial Records

Moolamy – Carnival of Personal Finance – Family Edition

Frugal Law Student – Save Time & Money by Working Out

This is a guest post from Amanda, a Colorado tech writer and an activist for children with congenital heart disease. This article is about Amanda’s personal experience with insurance. It’s not a prescription for other people, but insights into the value of insurance in her own life. It’s her hope that it will get you thinking.

There was a time in my life when the thought of insurance made my eyes glaze over. I’ve never been one to want to read details in insurance contracts, license agreements, etc. I also don’t always enjoy thinking through potential unpleasant situations. So, when it comes to buying and using insurance, I’ve learned some lessons the hard way.

I’ve made some mistakes with my car insurance, for instance. When I bought a second car to drive to grad school several years ago, I thought, “No, I don’t want to pay $3 extra a month for rental car coverage because we have two cars.” A few months later, I rear-ended a woman on the highway going 45mph. It took a while to get my car back, and my insurance went up a lot. But it also made it difficult for my husband Jim to get back and forth to work while I used the other car for work and school.

I had thought I didn’t need rental car coverage, because I figured, “Oh, I won’t be the one to cause an accident.” Ha! There is a reason it’s called an “accident.” So, lesson learned — I needed rental car coverage. I learned was to understand what I was buying.

Insurance details can be a pain:

• How high of a deductible can I actually afford?
• What kind of impact will that have on my emergency savings if I have to pay it?
• How much will I save by trimming features?

Recently I got a notice that wet- and dry-rot are no longer covered in my homeowners policy — do they know something I don’t? I’m still trying to figure out what this means to me, but I did notice that the price didn’t go down. Also, it took me five months to update the beneficiary information with the insurance company; I finally got it done right before Christmas. So, I’m not an insurance expert by any means, but I am a consumer and I have to make choices.

You’ve got my back — right?
In the early 1980s, my dad had his left foot crushed in a construction accident, and he nearly had it amputated. He couldn’t work for two years, during which our family of six lived on workers’ compensation wages of less than $1000/month. My sister was still a toddler and my dad couldn’t walk, much less care for her or pick us up from school, so my mom couldn’t get a job that paid enough to cover daycare.

When I was 19, working at McDonald’s I spent two months on workers’ comp after a pot of McHot McCoffee broke open and burned the skin right off my left foot. I was paid 75% of my wages, but did not have to pay taxes. Still, it was really hard to live on what amounted to less than minimum wage that summer.

When I was 21, my dad was diagnosed with esophageal cancer. For nine months, he lived off of his paid disability insurance through work. For his last nine months, he lived off of Social Security. There was a substantial difference in coverage. I have never been confused by an AFLAC commercial — I know exactly what that duck is quacking about. I don’t buy their product, but I appreciate what they’re selling.

When they offer disability insurance at work, I buy the maximum allowed. It’s a few bucks out of my pay check, but I ate enough government cheese in my childhood to know the value of this coverage.

At least I’ve still got my health
I could write a book on health insurance. (Maybe someday I will.) When my dad fought cancer in the mid-nineties, he had over one million dollars in medical bills. At the time, all but $4,500 were covered by his insurance. From 2003-2007, my own nuclear family paid out about $58,000 for insurance deductibles, copays and prescriptions; yet our insurance company has come closer to $3 million dollars (before their contractual discounts with hospitals and doctors). There are a lot of open-heart surgeries and a couple of c-sections, and an ambulance ride and a lap-coli in that tally, but as much as I might complain about my part:

• It’s not $3 million, and
• At least much of it was tax-deductible.

Once when I was sitting in the waiting room with my son at the cardiologist, a woman asked the receptionist how much an echocardiogram costs. The receptionist didn’t know; the nurses didn’t know; the doctor certainly didn’t know. It was early in my cardiology adventures, but now I could tell her it’s roughly $900-$1200, with another $200 for the cardiologist visit and $300 facility fee; so at least $1500 to tell her where her son’s murmur was on the spectrum of “let’s watch this” to “he needs a transplant or he’ll die.”

This woman, who ran a small business with her husband, had no insurance on her eight-year-old son. She had to talk to the finance department before she could decide whether she could afford to have this ultrasound to learn the secrets in her son’s heart. I don’t know what happened to her after that, but from what I know about congenital heart disease, she could easily be owing the hospital and doctors over a million dollars today. If their business was remotely successful they would not have qualified for Medicaid until a year after they went completely bankrupt. Today’s bankruptcy laws make it even harder for families to recover from these setbacks.

Your money or your life
Growing up, my father always emphasized the value of insurance. I knew our family’s insurance agent personally — he came to our house twice a year. When my dad was ten, his own father dropped dead of a heart-attack. My grandma lost the house, and they were forced to stay with relatives until she remarried. Like his father before him, my dad died young. He was only 48 when his battle with cancer ended — clearly cancer won.

My parents never had a lot of money, but my dad always made room in the budget for life insurance. My mother, who had been a stay-at-home mom since she was 17, had no work experience or job skills, but when my dad died, she was able to pay off their modest home and create retirement accounts for herself. Eventually, she used the care-giving skills she acquired as a parent, and taking care of my dying father, to start a career caring for the elderly. If my dad hadn’t obtained solid life insurance, my mother would have struggled to keep her house, and wouldn’t have had the luxury to try out a few different jobs before she found the right fit for her.

Those were my early life- and disability-insurance lessons. So, when we were 21 and 22, Jim and I bought our first life insurance policies. It’s no coincidence that my dad was going through chemo at the time. We started with $100,000 each. For a 21-year-old non-smoking woman, that was pretty cheap! Now I have a little over $1,000,000 and Jim has about half that (work doesn’t offer as much for the spouse as the employee). We pay about $80 a month for all of that life insurance.

I’ve worked it out, and with my son’s heart condition and the cost of our mortgage, we may be slightly over-insured for me, but not for Jim.  If he died and I took a leave of absence (or worse if I were in an accident with him and incapacitated) that money could handle our mortgage until I was able to get back to work and childcare after it, but that’s all. Also, if we both died, a trust would be created for our kids that would not be eaten up by our son’s medical expenses, so at least our kids could still go to college and have essentials during the rest of their childhoods.

I think I’ll always carry enough life insurance to pay for my funeral and settle immediate, because insurance usually pays out faster than investment funds. I learned this when both of my grandparents died last year. The insurance check came six weeks before the investment money. They had actually pre-paid for their funerals, but they were both in their late-70s and did that as a favor to their grandchildren (my dad was their only child) so we wouldn’t have to deal with those details or expenses. This I wouldn’t do at age 33, but I’d start thinking about it when I get north of 70.

We finally had our wills done last year, and it feels good to take care of that too. It cost $500, but that buys a lot of peace-of-mind knowing my kids will never end up in foster care while a court takes several months in probate to settle our estate.

Pick your poison
Everyone has unique insurance needs. These are my own family’s experiences. If I had two cars again, I’d buy a used one and carry liability based on it. If I were a single woman with no kids, I would probably rent or own a small condo, and have only enough life insurance to pay for my funeral and settle my estate so my mom wouldn’t have to do it for me. If we didn’t have dependent children, I wouldn’t have as much life or health insurance coverage as I do. When we’re older and have more money in retirement, we’ll carry less insurance.

None of this stuff is fun to think about. But it’s a simple and unavoidable fact that we all die.

You may die from a car accident, a work accident, cancer, heart attack, infectious disease, or just old age. Most of the time, you don’t get to chose when or how you check out. You also don’t get to choose whether or not you or your children will get seriously ill. I’ve known lots of healthy people who’ve lived well and still gotten cancer, and I know great parents whose children have died from brain tumors, leukemia, and heart disease. You can control what you eat and whether you exercise, and that will mitigate your risk, but it doesn’t eliminate it.

I think the trick is to choose all of your insurance coverage options carefully based on where you are in life today, and who would be impacted if you were hurt, fell ill, or died. But do not forget to update your coverage based on your own needs and circumstances as you move forward and experience changes. Sometimes you will need more; sometimes you will need less.

I didn’t share all this to scare people into wasting money on insurance, but to encourage them to think seriously and realistically about what would happen if the roof caved in, the car got wrecked, a foot got lost, you find a lump somewhere it should not be, or you just never make it home one night. The most expensive mistake we can make is believing it won’t ever happen to us or someone we love.

Amanda’s previous articles at Get Rich Slowly include:

Look for more from her in the future.

Auto accident image by Incase Designs.

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Related Articles at Get Rich Slowly:

• Drama in Real Life: Cancer Scare
• Steve Pavlina: The Power of Now
• A Brief Introduction to Insurance
• Ten Ways to Drive Down Your Car Insurance
• Daily Links: Out Too Late Edition

From Seeking Alpha’s Sound Money Tips . . .

” . . . Don’t put originals wills, trust instruments, or powers of attorney in a safe deposit box. Instead, keep these in a fireproof safe at home or at your attorney?s office.

Why? When someone dies, a safe deposit box may be sealed for weeks, which could result in result in delays. You might even have to spend money securing a court order to open the box. Further, and here’s the Catch-22: the will’s executor will not be able to get to the box without the will that shows that he is indeed, the executor, resulting in headaches and delays.

So, just to be clear: Don’t put original copies of legal documents in a safe deposit box if they will be needed by anyone who cannot gain access to them. As we said before, feel free to put copies of legal documents in the safe deposit box . . .”

Good info. Of course, if you don’t have a will, that’s your first priority!

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Frugality is quickly becoming a buzzword in America with people’s retirement dreams taking a bit of a detour into a ravine — and right before the holidays, too.  How very inconsiderate.

Here are a few tips and tricks for descroogifying what might be more modest holidays:

• Check out the library and paw through some December family-oriented magazines. Ones like Redbook, Family Circle, and Ladies Home Journal regularly have articles with lists of frugal tips, especially around the holidays.  These magazines also have the advantage that the tips don’t get terribly outdated the way some other magazines might.
• Hit thrift stores for little kids’ toys. (And for big people’s toys, too.)  When giving a gift, consider whether “new” can be extended to include “new to them.”  Antibacterial soap and water for plastics, or a gentle wash for cloth, can do wonders.
• Resist the temptation to buy inflatable holiday lawn ornaments. I’ve long thought that big huge inflatable snow globes and the like are tacky, and if you don’t have them, consider yourself all the richer.  (As will I.)
• Put up a website with pictures instead of sending out Christmas cards. If you already have your own web space, most hosting providers will allow you to password-protect a directory.  Then you can e-mail the link, and the username/password, to your friends and family.  Well, you can e-mail it to most of your friends and family, but your 97-year-old great uncle might still appreciate the snail mail.  If you don’t have a website or if this is too much trouble, then DropShots.com lets you upload up to 500 pictures and 20 two-minute videos for free, without ads, and lets you decide who you want to see them.
• Try your hand at cinnamon-applesauce ornaments. My wife tried some of the recipes over at HandMadeCountry.com and found the second recipe to work pretty well.  You might be the only one in your circle of friends who does this, and they’re inexpensive (especially if you get the cinnamon at Costco).
• Speaking of cinnamon, it’s really good for you, and it adds flavor to a number of ordinary drinks.  Sprinkle a little bit of cinnamon on top of the coffee before brewing.  Or, warm some apple cider on the stove with a cinnamon stick.
• Attend a school holiday chorus/band concert. The music is better than you might think.  If the rehearsals are anything like when I was in high school, there’s probably at least 30 hours of solid preparation that goes into these concerts from the beginning of the year to December.  There’s at least a little bit of magic that happens during that time.  And you can’t beat the price.
• If you’re going to give money as a gift, you might be able to get by with giving a little less for the same “wow” factor if you give shiny Presidential dollar coins instead of regular bills. (One for each President issued so far only sets you back eight bucks right now!)  Or, if you’re a really big spender, a full assortment of state quarters is only $12.50!
• If you’re after one of those “hot, must-have” toys that you’ll fight tooth and nail for, stop. Take a deep breath, and step away from the shopping cart.  You might even consider not going on eBay, because there will be opportunities for you to pay way more than retail for it.  (I did this with Wii Fit but I felt I had a better excuse.)  Instead offer it to your kids after Christmas when there will probably be plenty of them around.  Maybe wrap a picture of it with a note.
• Through all of this, remember that the greatest gift of all is freely given for anyone who asks for it.

(Photo credit: shutter.chick)

June was a difficult month for me. I was busy in Real Life, distracted by home remodeling and by physical fitness. Things are settling, which will allow me to spend more time on the site. On top of that, I now have actual help around here!

• My wife, Kris, is processing the backlog of e-mail.
• My friend, Winston, who is one of the inspirations behind GRS, is doing research and handling publicity.
• Another friend, Lisa, will help copy-edit guest posts. (You may remember Lisa from “Saving with Albert” and other guest posts.)
• Meanwhile, JerichoHill continues to keep an eye on the discussion forums.

Thanks to everyone who is lending a hand. I appreciate it. And thank you for your comments, links, and tips. The readers are the heart of Get Rich Slowly. You keep the site a vibrant place for exchanging money-saving (and money-making) ideas.

Here’s a brief overview of some of June’s top stories on the blog:

• June 3rd: How to take a mini-retirement: Tips and tricks from Timothy Ferriss
• June 9th: Guarding against the invasion of Stuff
• June 11th: The new reader’s guide to Get Rich Slowly
• June 15th: Financial advice from my father (when I was nineteen)
• June 16th: Personal finance made easy: Pay yourself first
• June 20th: Cheap vacation: Be a tourist in your own hometown
• June 23rd: Subscribe to Craigslist search results to grab great deals
• June 26th: The non-conformists’ guide to personal finance (a guest post from Chris Guillebeau)

Best of the Forums
The Get Rich Slowly discussion forums were active again this month, spawning several interesting conversations:

• Living debt free…is it really possible? this is a great thread
• Going (mostly) car-less
• Unusual ways to save money
• Debt snowball vs. emergency fund
• How do you work your clothing budget?

The forums are a great place to chat with your fellow readers. Have questions about emergency funds? Ask! Want to chat about cheap vacations? This is the place to do it. (Since opening a year ago, the forums have 1800 registered users and over 21,500 posts.)

Subscribe!
You may subscribe to Get Rich Slowly via any of the following methods:

This weblog is a success because of you and your support. As always, I welcome reader contributions, either as ideas for stories, or as guest entries. If you have any comments or requests to improve this site, please feel free to pass them on.

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Related Articles at Get Rich Slowly:

• The Best of GRS: June 2007 Edition
• The GRS Garden Project: June Update
• Daily Links: 100 Pushups Edition
• Press
• Daily Links: Technical Difficulties Edition

Those who run real estate investment clubs have a big challenge in lining up speakers for each meeting.  Clubs do not usually have the kind of budget that would allow them to pay for speakers, therefore they need to do their best to locate those that will speak for free.  This invariably results in the talk being given by someone who has a specific agenda or something to sell.  This is not necessarily a bad thing, you just need to keep the speakers ultimate motivation in mind when you listen to the spiel.

Some of these speakers are quite good and their knowledge is obvious.  On the other hand, some of the speakers leave you scratching your head and wondering if they have ever owned an investment property.  Investing veterans have little difficulty in separating the fakes from those who are the real deal.  Novice investors may mistakenly assume that if someone is speaking to a group he must know something.  Hopefully they will learn before they are burned by one of these phonies. 

 My primary purpose for attending monthly club meetings is for the networking and resulting connections ( see: Getting the Most From Your Real Estate Club ), however I do enjoy hearing from good presenters. My local real estate club had two very well qualified speakers at a couple of recent meetings.  While both were very obviously qualified to speak about real estate investing, their styles and agendas were a world apart.  

 Guru #1

At our May 2008 club meeting we had a speaker who specialized in foreclosures.  Certainly a timely topic and on that I was looking to learn more about.  I had seen this speaker once before and knew that he was a good presenter and very knowledgeable.  After introducing himself and providing his background, he openly stated his agenda.  He was not there to sell books, tapes or home-study courses, in fact he didn’t have any of that.  The business model for his company was to purchase bank REO (foreclosures) properties in bulk.  He then sold these properties as-is or after light rehab to investors at wholesale prices.  To do that he needed two things, properties to buy from banks and investors to sell them to.

What he was pitching was a two day seminar on how to locate, buy and finance the acquisition of these properties.  He was charging $1800 for the seminar with the guarantee that he would refund your money after the first day if you didn’t feel it was worth it.  He then proceeded to spend the next hour sharing some of his knowledge of the subject.  He was truly impressive and it was a great example of what you would get in his workshop.  He had over twenty people sign up and most of them were veteran investors who are not easily impressed.

 Guru #2

At our most recent club meeting we had another speaker with impressive credentials.  He is currently featured on one the house flipping shows and has a real estate company on the east coast.  The club heavily promoted the meeting because they do not usually have a name speaker and the resulting attendance was much larger than normal.  Many of the regular meeting segments were cut short to allow this speaker to have as much time as possible.

This speaker had an array of tapes and course material displayed, so his agenda was obvious to anyone who was paying attention.  He began his talk with his background in real estate and talked about all of the mistakes he made when he began.  He kept telling us that he was going to teach us how to do this, that, and the other thing during his talk.  I kept waiting for him to actually “teach” something but all he really did was talk about what he was going to tell us.

As the talk progressed it was laced with sales pitches for a computer program, home-study courses and his five-day boot camp.  Some of the pitches were very subtle while others were blatant commercials.  After 90 minutes he closed with a final pitch for his boot camp.  The regular price was $5,000, but is you signed up now it was only $2,497.  But wait, there’s more! He would include a $500 credit for your travel expenses and the first few people to sign up would receive the $2,000 computer program for $1!

A handful of people did sign up.  From what I saw they were newcomers to the club or novice investors.  None of the veterans were impressed enough to part with their cash. 

The Bottom Line

Both of the gurus were qualified to speak about real estate.  However their value was very different.  One was geared to marketing courses and boot camps to novice investors.  Those who sign up would most likely gain valuable knowledge, but would it really be worth the price?  The second guru was targeting experienced investors with a desire to participate in the foreclosure market.  I spoke to several of the attendees who agreed that there was definite value, but it was not for everyone.

If you are ever inclined to sign up for some gurus course, do so with your eyes wide open.  Is the course geared to someone with your level of experience?  What do you hope to gain from the seminar or boot camp?  Will you be able to implement what you learn or are you just falling for a sales pitch from a smooth-talking speaker? Buyer beware.

The great difficulty in education is to get experience out of ideas.
George Santayana

This Post is from the BiggerPockets Real Estate Blog. Copyright © 2008 BiggerPockets, Inc. All Rights Reserved.

A Tale of Two Real Estate Gurus

My wife has wanted to move into town for quite some time so that she can be a little closer to friends and to our other activities.  I’ve been reluctant to move for a few reasons.  First, I think if we bought now, it would be like trying to catch a falling knife.  Second, it would be a longer drive to work for me.  Third, I don’t like change.  (None of these are her fault. )

And just as much as I feel pressured when my wife tells me about a good house that’s come up for sale, she probably feels frustrated by my reluctance to take any serious action on it because “this is just the beginning of the downturn” and “there will be more, and better, deals later.”

Actually, regardless of how far I feel the housing market is going to go down, I don’t really know.  I can get warm fuzzies that it’s getting to be more of a buyer’s market, but I won’t really know until I start tracking home prices.  Tracking prices is pretty straightforward, and has some advantages:

• It’s easier to recognize a deal when it comes along.  There is a huge amount of information literally a mouse click away, and tracking the price of desirable houses over time shows clearly what these houses were being offered at.  Rather than sensing that a house is a good deal, I can see that it is.
• It’s active.  It’s searching with a purpose.  It’s still basically window shopping, but I know which stores I’m going to. 
• It’s focused.  We’re looking for a house to move into.  This narrows our search and makes it more time-effective.

Here’s how we’re going about it now:

1. I signed up for an account at Realtor.com.  This allows me to save searches — and have daily or weekly e-mails sent to me — filtered by ZIP code, price, number of bedrooms, etc.
2. Since my wife is pickier (!) she chose the acceptable candidates among the few dozen houses that met the search criteria that Realtor.com allowed.  We could have fewer results to go through if we filtered by square footage, but not all of the listings include a square footage.  So, we pile through some more listings but turn up a few more candidates.  We eliminate most split foyers since she really doesn’t like those.
3. We build up a spreadsheet with the following columns:  ZIP Code, Address (to identify the house), Subdivision, Bedrooms, Bathrooms, Square Footage, Basement (no, yes, or split level), Garage (no, one-car, or two-car), and Asking Price.  We make one row per house, and add columns at the end to track the asking price over time.  We also list the houses that meet the search criteria but don’t meet our criteria so that we don’t have to re-visit those listings each week.  The columns are the criteria that are important to us; if you do this, you may have other columns you want to consider.
4. Houses keep getting prices added as long as they’re listed.  If they’re taken off, then we keep them to see if they come back on again.
5. Later we may add houses listed for auction or on other services, since some sellers are going the route of national real estate listing without the commissions.

Here are some of the measurements that can be done from these numbers:

• Number of listings.  The number of listings can fluctuate with the seasons (winter is slower).  If prices are going down for similar properties, or if the prices for properties we’re following are going down, then an increase in the number of listings could be good, as it means people are coming to their senses and trying to sell for what they can get.
• Time on the market.  We’ve gotten a few new listings, so we can see how long they stay on the market.  Knowing this would help us should we want to make an offer.  If the house has been on for a good long time, we can offer more aggressively (lower).
• Price per square foot.  This is a rough measure but a useful one.  If we really can buy more house for our money, we should see a reduction in the price per square foot.

The nice thing about this method is that it’s free.  Once we get the hang of this and get closer to making a decision we may sign up for www.RealtyTrac.com to get a handle on foreclosed and bank-owned properties.  We’ll probably pull the trigger on this when we are in a better position to make offers.

Tracking prices takes a little time but I’m sure this will help us to make a wise decision when we decide to look in earnest.

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.

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Geezeo joins the ranks of Mint.com, NetworthIQ.com, and Wesabe.com as a social personal finance site. The USP (unique selling point) of the site is their mobile accessibility.

It works like this:

Henry’s walking down the street. He stops and wonders if he’s got enough for a Big Mac. He sends a text message to the ether and waits. Moments later a text message comes back with all of my account balances that he setup at the website. Welp. Looks like Henry will have to go another day without food.

It’s targeting students or recent graduates for their service but anyone can use it. They target them because they’re more “connected”. It’s also US-only. Sorry Canada. They have compatibility with 6000+ institutions.

Here are a couple of improvements I would make:

1. Instead of texting the word “geezeo” to get current account balances, make it a common word that I can enter without switching to “abc” mode.
2. Instead of texting the word “geezeo update” to update my balances, it should already be updated when you retrieve your current account balances (see item 1).  Why would anyone want non-updated information?  Deprecate this.
3. Send a pie chart or graph or something via MMS if possible.

There are more things but here’s the one sentence summary: “Geezeo tracks your money automatically and there’s also discussion boards as well.”

Is it useful?  Sure.  Consistent awareness of your financial situation is very important for building wealth or getting out of debt.

Will I use it?  Probably not.  Calculating my net worth at the end of the month is good enough for me.

-h

PS - Sorry about the absence.  I was doing pull-ups this entire time.

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I’ve been reading more and more about the threat of deflation. What’s deflation? I can’t find a better definition for it than what’s in the Barron’s Finance and Investment Handbook*:

DEFLATION decline in the prices of goods and services. Deflation is the reverse of inflation; it should not be confused with disinflation, which is a slowing down in the rate of price increases. Generally, the economic effects of deflation are the opposite of those produced by inflation, with two notable exceptions: (1) prices that increase with inflation do not necessarily decrease with deflation—union wage rates, for example; (2) while inflation may or may not stimulate output and employment, marked deflation has always affected both negatively.

In other words, deflation is not a good thing even though price declines sound wonderful to the shopper!

Here’s a great little deflation tutorial if you’re interested: What is Deflation and Why is it Worrisome?

Are we headed for deflation? I have no idea. I think we’ve already seen it in housing and oil prices. Will we see it in other areas? I don’t know. I think it depends on how high unemployment goes.

Nouriel Roubini is expecting stag-deflation (stagnation/recession + deflation)…that doesn’t sound so good.

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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).

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Okay I admit it? I used to be an active ?chatter? in a local chat room on Yahoo. It was a room where many people from the Dallas area met up to?Chat. Many of us had met outside of the cyber room at local restaurants, clubs and the like.

Yahoo had recently shut down a lot of the member created chat rooms in the wake of all the negativity and sponsor lawsuits. Lets face it?The public opinion of chat rooms was not good. I was a virtual unknown person to most chatters because I stayed away from the ?in person? socials but, that all changed one morning. Here is what happened:

A room regular was talking on ?voice? and venting about his house early one morning and I was listening a few steps away making my breakfast. This is what ?Monte? said, ?I got this letter from some attorney who says he is going to sell my house! How does he think he can do that? He doesn?t own MY house so, how can he sell MY house?? My head spun around so fast that I almost gave myself whiplash. I ran to the computer and grabbed the microphone to speak in the room and here is what was said?

Jim: Monte, what is the name of the law firm that sent you that letter?
Monte: Uhmmm, it says ummm.. Barnett, Burke & Associates.
Jim: Would that be BARRETT Burke?
Monte: Yeah, that?s it.
Jim: Monte, email me your number. I need to talk to you NOW.
(That law firm processes nearly 40% of all foreclosures in the state of Texas)

Within a few minutes I was on the phone with him and I told him that I was a local foreclosure expert and taught classes at Foreclosure Listing Service in Addison. I told him I needed to meet with him and his wife right away because, the letter he got was his notice that his house was in foreclosure and he had less than three weeks left before it would go to the auction. He was shocked and claimed he had no idea (I didn?t know how he could be shocked after missing nine payments). Two hours later I was at his house and explained all about the foreclosure process to him and his wife and what options he may have to save his house.

I remember how bad I felt while explaining the situation because his wife just sat there, staring at me with her eyes wide open, not able to say a word. She had no idea the mortgage was past due at all. She had not seen any letters from the lender or taken any call from them. Monte never told her early on and the situation only got worse as the missed payments added up.

After going over all of the possible solutions, I decided that bankruptcy was likely the best option for them and they agreed. I made a call to Hariett Langston, a friend of mine who is a bankruptcy lawyer in Dallas. Monte and his wife were overwhelmed with the situation and asked if I would go with them when they met with the attorney and I told them I would.

We met with Hariett that same week and everything appeared to be set to stop the foreclosure. All Monte needed to do was pay the bankruptcy filing fee.

A week before the foreclosure sale I went to their house and was a bit surprised to learn that he had not paid the filing fee. I asked him when he was going to file and he just shook his head and said he didn?t know. I remember pausing for a few seconds and it dawned on me why he had not filed. I said, ?Monte? You don?t have the money to file, do you?? In a very humble manner, he looked down at the floor and shook his head. ($500 was the amount he needed to get the bankruptcy filed)

As I drove home I thought to myself that it would be simple if I just wrote a check for the $500 but, I thought that he really needed to pay something so important himself. I got an idea about that time and sent an email to one of the chat room regulars who organized the chat room socials. I recall stating in that email that online chat rooms have such a negative public image and went on to tell her about Monte, his situation and I asked her if she could set up a fund raising get together. It would be our way of proving that normal, everyday people go to chat rooms and this was a chance to show at least one chat room could do something good. I told her that he only needed $500 and all it would take is $5 here, $10 there and a $20 from a few? $500 could be raised.

She arranged to have a Dallas chat fundraiser social for that coming Saturday night. I called Monte and told him about the fundraiser. He asked me to not do it (his pride was the obstacle) but, I told him that we were going to do it anyway and it would be nice if he attended. He later told me he was so choked up that he couldn?t say anything but, he did finally say he would attend.

I expected a handful of people to show up for the fundraiser but, I was wrong. Much to my surprise? At least 50 to 60 regulars from that chat room showed up and contributed. At the end of the night, ordinary people from a Yahoo chat room donated more than $700 to help save someone from losing their house.

The next day I gave the proceeds to Monte & his wife and they quickly paid the attorney the fee to file their bankruptcy and their house?No?Their ?home? was saved.

The story got another interesting twist a few days later. I got a call from a reporter who wrote for a well known local media outlet. They had heard about the fundraiser and thought it was a great community effort story that should be told and asked if I wanted them to write about it.

It took only a few seconds for me to process my answer but, I remember thinking that such publicity would be great for business and my classes would see a boost in attendance. Then I thought about the possibility of other homeowners that would read the story and what would my answer be to them if they contacted me and asked me to do a fundraiser for them as well?

I told the reporter that as wild as the story was, I never expected things to unfold as they did. I told them that I had to pass on their offer because, I had done it to help someone and wouldn?t feel right about profiting off of someone else?s stressful and humbling foreclosure experience. They understood and that was the end of it.

I have to admit . . . Of all the positive experiences I have had in real estate, helping Monte might rank as number one. What stands out in my mind was the fact that so many people pitched in to help save a family from losing their home and they did it for someone most had never met or only knew of by screen name?That?s what made it so great.

This happened in 2005 and two days ago I got a phone call from Monte. He just wanted to give me an update and I was happy to hear they still have their home.

During the call I told him about the reporter. He was surprised I hadn?t told him and more surprised that I turned them down. At the end of the call, Monte told me that three years was long enough and he encouraged me to tell the story of how a bunch of chatters from a Yahoo chat room, came together and did something good.

Thanks Monte.

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This Post is from the BiggerPockets Real Estate Blog. Copyright © 2008 BiggerPockets, Inc. All Rights Reserved.

Online Chat Room Helps Save Foreclosure Homeowner

When you get engaged, you’re not just promising to marry a person; you’re also marrying their money habits, their debt, and credit history.  If you’re not careful, unknown money issues can not only ruin a marriage but sink you deep into debt.

Hiding Credit Card Debt
Here’s a sad story of a former co-worker whose life was turned upside down by his spouse’s debt.  I met up with him for lunch yesterday to catch up and couldn’t believe the story he had to tell.

His wife had 50K of credit card debt coming into their marriage that she didn’t tell him about until several years after they were married.  She was only making minimum payments so over the years the interest mounted and the debt continued to grow.

He had owned a home prior to the marriage and they finally they decided to tap into it’s equity and take out a loan to pay off most of her debt. A few days later he comes home to find her packing her bags and on her way out the door.  Of course he didn’t share this story with anyone for quite a while since it was so painful and embarrassing but now happily he’s met someone new and is moving on. 

What’s the morale of the story?  Find out about your future spouse’s finances before you get married.  To help you do that, here are some questions to ask, courtesy of Real Simple:

Ten Romantic Debt Questions for Your Fiancé

• Do you use credit cards for everyday expenses?
• Do you pay your credit-card balance in full each month?
• Have you ever maxed out your credit cards?
• How many credit cards do you have?
• What are your debts?
• Have you looked at your credit reports in the last year?
• Did you ever require a cosigner for a loan?
• Have you ever been put into collection by a creditor?
• Are you a cosigner on anyone else’s loan?
• Do you have any tax or other liens pending?

These questions are obviously not very romantic but they’re definitely necessary things to ask.  Depending on your fiancé’s personality you might handle them in different ways.  It might be easiest to just sit down and go through them all straight up or you might have to slip in a carefully worded question here and there during the course of conversation. 

Here are some other finance questions the article suggests asking:

• Do you have a savings or checking account?
• Do you balance your checking account each month?
• Do you do research before making major purchases?
• Do you have a budget or a spending plan?
• Do you track your finances? How often?
• Are you aware of all your benefits at work?
• Do you have life insurance?
• Do you have health insurance?

Of course some of these things you might find out over the course of time as you get to know someone. However you do it, make sure you get these questions answered, I know my friend sure wishes he had.

Checking Their Credit History
If you’re worried that your fiancé is holding back information you could dig a little deeper. Not telling you everything is probably a bad sign for future marital communications but if you’re determined they might be the one you could always do some more research.

If you know their full name, social security number, date of birth, current address, and previous address you can probably pull your future spouse’s credit report to do some double checking.  Be aware checking their credit report without their permission can potentially get you into some trouble:

“Anyone who obtains a copy of someone else’s credit report under false pretenses can be fined substantially and jailed for up to a year.

Only businesses or individuals with a “permissible purpose” can access your credit report. “Permissible purpose” is defined in Section 604 of the Fair Credit Reporting Act (FCRA).“

Then again, if your fiancé is willing to throw you into jail for checking their credit history, probably a sign you don’t want to marry them.

How to Build Credit History
What if your future husband or wife doesn’t have any debt but they don’t have any credit history at all?  This happened to us, when we went to get a loan for our home my wife’s lack of credit history affected the interest rates we were eligible for. 

We ended up putting both our names on the title but only mine on the loan so that we could get a better interest rate but we wanted a way to help build her credit profile.

Our financial planner showed us a pretty slick way that worked wonders for my wife’s credit.  She put $1000 into a 12 month certificate of deposit at our local bank and then used the CD to get a secured loan from the same bank.

We setup our checking account to make automatic payments on the loan so she had a year’s worth of on time loan payments on her credit report. Then after 12 months we took the money out of the CD and paid off the loan.  The interest we had earned on the CD helped pay for most of the interest we had paid on the money we borrowed.

Marriage Money Summary
Get to know your fiancé’s money baggage and habits or they may come back to make you miserable, divorced, and in debt in the future.