Debt Free

Get a Better Mortgage Step #1 –
Get a copy of your credit report. Open it up and go through it with a fine toothed comb. Not only look for any inaccuracies, but look for any accounts that may be problematic in other ways. For example, sometimes accounts will be reported as unpaid even though you only owe about $5 on them.

Although technically not a credit report inaccuracy, an account showing as unpaid in this manner will have a derogatory effect on your credit and cost you money on your mortgage. This sort of thing happens when you pay the amount you think will close an account, but other last minute fees or interest is added to the account balance, and you are short. This points to the necessity of always checking weather an account is actually closed before moving on.

The good news is that banks are giving better rates to borrowers with great credit, even as they cut the legs out from other borrowers. Another reason to increase your credit score before you try for your mortgage.

Get a Better Mortgage Step #2 –
Now is a great time to try and get that raise you’ve been wanting. Do it before you apply for the mortgage. The added income will help in your debt to income ratio. Do not use the added income to try and get a larger, nicer home. Just use it to get a better mortgage. Do you really need slab granite countertops and Viking appliances? Well, maybe so, but that’s a subject for another day.

Get a Better Mortgage Step #3
Learn a bit about the home buying and mortgage lending process before you apply. If it’s your first home buying experience, find out what you can expect. Some knowledge will help you when you shop for your mortgage. Know what you should expect in the way of fees, interest rates, closing costs and so on. Find out who is a reputable mortgage broker in your area, check the interest rate at your bank, and look at what you’ll get at a comparison shopping service such as LendingTree.com.

Get a Better Mortgage Step #4
Negotiate with them. I know, it seems like they have all the power, but you’d be amazed how often you can get a better mortgage by negotiating. Ask for fees to be dropped or .05% lower interest rates. The worst they can say is no. They’re not going to be insulted or rescind their mortgage offer because you had the audacity to ask for a better rate or a lower fee. Even a small fee reduction or a few tenths lower interest will add up big time over the term of the loan. Remember, all those fees that are added in to the loan you will pay for over the entire term of the loan, meaning they will accrue interest you’ll have to pay for.

These four things will help you get a better mortgage. Remember, do your homework. The money you save will be your own.

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Here are a couple of Monday morning rants:

Rant #1 –
Undocumented is what happens when you forget your driver’s license when you head to the mall. Undocumented is not what happens when you sneak across the border into another country illegally.

Rant #2 –
Rosie should hop into her carbon spewing private jet with her pistol toting private bodyguard and head to Oakland, where she could view first hand the effects of burning fossil fuel on structural steel. Rosie, and all the rest of you celebrities who profess to be paragons of authority and virtue on economics, environmental science, and engineering, unless you are actually educated in those subjects, shut the F up. Quit using your mastery of oratory to convince us poor plebs you are a master of other subjects. It would be easier to take if you all followed your own advice instead of living in huge, resource consuming residences, and traveling about, this way and that, in private jets at your every whim. Oh, and Rosie, there are several thousand combat vets who have been on ships at sea that are constructed of structural steel that can attest to the effects of aviation fuel fires on its structural integrity.

Actual personal finance to follow.

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Money Saving Tip #1

Get All Your Money at Once – Take out your budgeted (remember your budget?) spending allowance at the beginning of the week and leave your ATM card at home. That prevents those little, nickel and dime, withdrawals from the cash machine that soon evaporate into nothing. You’ll pull out a 20, then soon it will be gone, and you’ll have nothing to show for it. If you know you only have a set budget and you actually have no way to get more money with you, you’re apt to spend less.
 

Money Saving Tip #2

Make Yourself Feel Good Inside – Too many spend money as a way to full some unsatisfied emotional need. Find out what that need may be and do your utmost to take care of it. That’ll quell those “feel good” trips to the mall, credit card in hand, in a misguided attempt to find satisfaction. Take a long, realistic look at your life and find out if you are one of those that spends for satisfaction. If you are spending as therapy, try to straighten it out. Only then you can be satisfied by driving too fast or yelling at your kids, like the rest of us.
 

Money Saving Tip #3

Brand Loyalty Cost You Money – Many times we buy the same brands through force of habit. Sometimes there is a valid reason for our loyalty, but often it just vacuums cash out of your wallet. In most cases there are store brands that can be had for 25% - 50% less than the big, national brands. In many cases there is no difference in the product, just a fancier package surrounding it. Try looking lower than eye level for the better bargain products, many times they’ll not get premium shelf space.

Money Saving Tip #4

Pay For CHild Care With Pre Tax Dollars - If you're single and head of household, or married and file jointly, you can  stash up to $5,000 in a dependent care pre-tax expense account. You can use this to pay for recurring child care expenses. If you pay 27% in taxes, that's like getting a nice discount on your child care expenses. One caveat, if you make over $100K per year, you classified as "highly compensated" and will only be able to put away $1,800 this year.

These are just some money saving tips that can keep you from spending money, and save you a bit when you do. Have a great weekend.

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The question is; will this robust earnings trend continue, and will it be enough to propel MSFT to some impressive gains. After a healthy run from 1986 to 2000, Microsoft has experienced pretty flaccid stock performance, much to the dismay of many who had expected the stock’s performance to remain upward bound.

As I noted in a post a few days ago, increased earnings are one of the prime harbingers of climbing stock prices. These latest earnings figures certainly qualify. The EPS quarter / quarter was up by about 65%, right in the range where it helps convince investors to be in a buying mood. The last time Microsoft released a major OS product revision, over a decade ago with Windows 95, the stock just dribbled upward for about 6 months, then more than doubled in the following 12 months. Will we see something similar this time? Time will tell, but MSFT stock has been far from impressive so far this year, actually losing ground since Jan. 1^st, although it has posted fairly strong gains since mid-March, with gains of about 15%. Unfortunately for Microsoft shareholders however, that 15% only served to get back some of the losses experienced in Q1.

Another trend noted to help increase stock prices is the introduction of a new product or service. Well, Microsoft certainly did that. In addition to Vista, they also released their version of a portable media player, the Zune, and a download service to go along with it. Only time will tell if the Zune becomes a thorn in the iPOD’s side, but whatever the fate of the Zune, you can be sure that Vista will thrive for at least a few years to come. It might be a great time to look at some hardware manufacturers stocks as well, due to the memory, speed and 3D requirements needed to make the most of Vista.

One other non-MSFT related note. If you have shares of cell phone service provider iPCS, today’s a happy day indeed as they announced a special cash dividend of, now sit down, $11 per share! It’s enough to make you get out the old cell phone and start calling some friends. Sadly, I hold no shares in either company.

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Credit affects so many aspects of your daily life. Many people use it for a myriad of purchases, while others confine credit to cars and mortgages. In any case, even for those who only use credit for major purchases such as vehicles and real estate, knowledge of credit will be vital to get the best interest rate and fee structure. Given the level of debt of the average American, you can never know too much about credit. Here are 3 things that you should be aware of when shopping for credit.

Credit Knowledge Point #1 – APR does NOT indicate the true cost of your credit.

Many consumers are under the mistaken assumption that APR reflects the true cost of the credit they are applying. Well, you know what happens when you assume…….. In any case, APR does give a better picture of how much your credit is costing than the interest rate alone, but to give the most accurate reflection of how much a particular debt will cost for a year, you should use the Effective Annual Rate (EAR). EAR takes into account the interest, fees and compounding effect of the interest. To calculate EAR (you’re forgiven if you hate this part), use the formula EAR = ((1+APR/n)^n)-1. You’ll not that you need the APR to arrive at the EAR. This will give a better indication of your total cost of credit per annum. The difference between EAR and APR is more pronounced on longer term loans, such as mortgages and vehicle loans.

Credit Knowledge Point #2 – Your FICO score will not determine weather or not you get a loan.

It can influence weather or not you get a particular credit account, however it’s only one piece of the credit puzzle. Lenders will use it to give a general picture of your credit worthiness, distilled to a single, 3 digit number. All other things being equal (and you know they never are) a higher FICO score will get you a better rate on a particular loan, but typically it will not determine, in and of itself, if you get the loan or not.

Credit Knowledge Point #3 – Your credit score is not reduced every time you apply for credit.

There are two types of credit inquires, also known as “pulls”, hard and soft. Soft credit inquires will not affect your credit score in any way, no matter how many of them are requested. These are common when someone is getting your information for a pre-approved credit offer (junk mail), when you are opening a bank account, or when current creditors are evaluating your ongoing credit worthiness. Checking your own credit, which you should do a few times a year, also counts as a soft pull.

Hard credit inquires, on the other hand, will come into play when your credit score is being calculated. Every had pull will ding your credit score by approximately 5 points, and will stay with you for about 6 months. You have to approve any hard inquiry on your credit, but you may approve it without even being aware of it. Make sure you check in the bowels of any contract you sign to verify weather or not you’ve given permission for your credit to be checked. You’ll have a hard pull the next time you apply for a credit card, make a major purchase on credit or get a mortgage. 

These are three things you should be aware of regarding your credit. A little knowledge here will help you save money and ultimately get debt free.

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As most of you know, house prices throughout the country vary widely depending upon your location. In my post a few weeks ago we looked at prices in 6 areas of the country, and the variance in the type of home you are able to purchase for the money was pretty astounding. In Seattle, Boston and SanDiego you get a salt box for $300,000, while in Houston you get a veritable mansion on the golf course, with sweeping staircases and slab granite countertops, for the same money. That post proved to be very popular, so here is what you can expect for house prices in 5 other areas of the country.

House Prices in City #1 - Denver, CO

House #1

$289,900 - 3 Bed, 3 Bath, 2,038 Sq. Ft., 0.23 Acres, built in 2003, stainless appliances, landscaped yard, 5-piece master bath, CAT-5 network wiring, sq footage does not include 1,000+ sq ft unfinished basement.

House #2

$299,900 - 3 Bed, 2 Bath, 1,907 Sq. Ft., 0.12 Acres, built in 1931, central A/C, 1 car garage, 2 fireplaces

House Prices in City #2 – Nashville, TN

House #1

$297,000 - 3 Bed, 2.5 Bath, 2,450 Sq. Ft., 0.18 Acres, built in 2003, coved ceilings in dining and living rooms, central A/C, hardwood floors

House #2

$280,000 - 3 Bed, 2.5 Bath, 3,700 Sq. Ft., 0.9 Acres, new construction, hardwood & tile floors, hot tub, central A/C

House Prices in City #3 – Tampa, FL

House #1

$289,900 - 3 Bed, 2 Bath, 1,879 Sq. Ft., 0.16 Acres, house built in 2000, on golf course, community pool and tennis, central A/C

House #2

$295,900 - 3 Bed, 2 Bath, 1,942 Sq. Ft., 0.19 Acres, built in 1991, 5-piece master bath w/ sunken tub, cathedral ceilings, swimming pool w/screen lanai, crown molding, ceramic tile floors, stainless refer & Bosch  dishwasher, central A/C

House Prices in City #4 – Albany, NY

House #1

$292,000 - 3 Bed, 2 Bath, 2,134 Sq. Ft., 0.4 Acres, home built in 1961, tile and hardwood floors, central A/C, 2-car garage

House #2

$279,900 - 3 Bed, 2 Bath, 1,629 Sq. Ft., .35 acres, built in 1984, tile floors, 2-car garage

House Values in City #5 – Rapid City, SD

House #1

$284,900 - 4 Bed, 3 Bath, 3,014 Sq. Ft., 0.86 Acres, built in 2003, RV parking, central A/C, breakfast bar

House #2

$297,900 - 5 Bed, 3 Bath, 3,241 Sq. Ft., 1 Acres, home built in 2004, fireplace, central A/C, tile and hardwood floors, large corner soaking tub in master, built-in oak cabinets in family room.

There you have it! Another demonstration of the difference in house prices throughout the country.

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Between October 1^st 1965, and April 1^st of 1982, the Dow actually lost ground with closing values on those dates going from 969 to 784. Considering inflation, you’d have been hating life had your retirement savings been in an instrument that roughly tracked the Dow. Obviously, there were individual stocks that outperformed the broader market by a considerable margin.

The Boeing Company for example, buoyed by the expansion of commercial air travel and aerospace applications, saw its shares climb from $2.15 on that same October 1^st date, to $2.29, a trivial climb it would seem, but the aerospace giant was on the way up and had more than doubled it’s stock price by the end of 1982, to $5.92. Seems like a great buy now, no?

Some stocks have done much better over short time intervals. What is the prime determining factor in spotting these equities that outperform the overall market, especially at times when the market is doing poorly? There are a few factors that seem to precipitate large gains in stock price, and thankfully, these are relatively easy to spot. It should be noted however, that these factors definitely do not guarantee the stock price will rise.

Here are some of those factors that appear to directly precipitate a strong performance in stock price:

Strong Growth in Stock Prices Factor #1 – Earnings
Investors are looking for a great company that makes money, and this factor demonstrates it. Stocks that have showed earnings increasing more than 25% over the prior quarter have historically done well. The other very important earnings factor is annual earning per share. Those that had an EPS increase greater than 50% over the prior year did very well too. Look at Exxon-Mobil, who has reported record earnings recently and showed a solid increase each quarter. Their stock has advanced from $40 in Jan of 2004, to almost $80 today.

Strong Growth in Stock Prices Factor #2 – Product Introductions
Many times a new product introduction will pump up a company’s stock price. As the product succeeds in the marketplace, investors respond favorably. In addition, a successful new product usually serves to initiate an earnings increase. Note that the new product launch must be successful in order to positively affect stock price, which many are not. Only about half of new commercial products introduced actually succeed in the marketplace. Of those that succeed, only about 20% are true, long term successes. The Marketing Science Institute reported in 1989 that the average gain precipitated by the introduction was .75% in the three days immediately following the product’s announcement. They also found that: “Financial markets positively and quickly recognize the value of marketing decisions. This is both a long- and short-term effect. In addition to the 3-day stock return effect, the 14-year price/earnings ratio of introducing firms is twice that of a matched sample of non-introducing firms.”

Another key finding of the MSI study was that original new products have a positive affect on the firm’s stock price while the market fails to recognize product updates. Another interesting point was that the frequency used by the firm for the product introductions has an affect as well. Companies that announced multiple products experienced almost twice the long term stock price increase as those that introduced a single new product.

Strong Growth in Stock Prices Factor #3 – Institutional Buying
Buy what the big boys are buying. This is true at the beginning of the large funds purchase cycle. Initially interest by large funds will drive the price up, due to the demand itself, and the investor perception that such interest reflects positively on the company. In time that may lead to an excessive ownership stake in the firm by institutional, which does not help the stock price.

Strong Growth in Stock Prices Factor #4 – Demand
Weather it’s toothpaste or stocks, if the demand outstrips supply, the price will rise. You probably learned that if you weren’t sleeping that day in Econ 101. So it is with stocks. This axiom more readily affects smaller cap stocks. The demand for something with a smaller quantity is easier to get to a level where it will increase the price. William J. O’Neil, who founded Investors Business Daily, did a comprehensive study of stock prices with respect to demand factors. One of his key findings was that, over the 38 year term of the study, 95% of companies that experienced a strong move upward in stock price had fewer than 25 million shares outstanding when they started their upward climb.

There you go. These 4 factors have been shown to foreshadow a nice increase in a firm’s stock price and overall market value.

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By law, the reverse mortgage is limited to those over 62 years old. It can be a boon to senior citizens on fixed incomes. In many cases, their retirement, pension, and social security allows them limited financial freedom, but they are sitting on hundreds of thousands of dollars in home equity. That equity does them no good if they don't want to move out of their homes. A reverse mortgage will allow them to tap that home equity for necessities, medical care or to improve their standard of living.

The downside to reverse mortgages is that closing costs tend to be higher than traditional mortgages, on the order of 5%. Don't worry, I'm sure we'll start hearing those infernal mortgage company radio ads any day now where they offer to pay your closing costs. We can only hope we get a bit of a reprieve in this area for a while, at least. It can really help in many cases, because, since the creditor isn't required to pay back the loan until they're out of the home, there'll be no mortgage payments. In fact, there will be, but they'll be coming to the homeowner. A nice change, no?

I got's to get paid! Normally there are several options available when it comes to receiving the money from a reverse mortgage. According to HUD, the federal agency that insures reverse mortgages, you have the following payment options:

• Tenure - The borrower recieves equal monthly payments. You can continue to receive these payments as long as at least one borrower lives and continues to occupy the property as a principal residence.

• Term - equal monthly payments for a fixed period of months selected (The term).

• Line of Credit – This is like a HELOC, where the borrower gets unscheduled payments or in installments, at times and in amounts of borrower's choosing until the line of credit is exhausted.

• Modified Tenure – This an option to receive both a regular, monthly income and be able to tap greater amounts of home equity when desired. It's a combination of line of credit with monthly payments. The borrower will receive the monthly payments for as long as at least one of them resides in the home.

• Modified Term - combination of line of credit with monthly payments for a fixed period of months selected by the borrower.
  

For many senior citizens the reverse mortgage can be a godsend. In many cases real estate taxes are taking a larger and larger bite out of their fixed incomes. If they want to stay in their beloved home, a reverse mortgage may be the only option. If your kids don't mind you spending their inheritance, it's probably a good one, just watch the fees.

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Net worth, as many of you probably know, is the difference between your debts and your assets. As you can see there are two ways to grow your net worth. You can reduce your debt, or increase your assets. You can also do both to increase your net worth even faster. Keeping track of your net worth on a regular basis will give you an excellent picture of your financial health in that one moment. You should track your net worth on an annual basis. You can even calculate it every 6 months for a more complete picture of where you are financially. You should definitely do this so you can keep your net worth going up and make any adjustments necessary to ensure it continues to do so.

How can you calculate your net worth? It’s fairly simple, actually. You must first total the value of all your assets. Don’t worry about any debt connected with them; you’ll get to that in a minute. Make sure you include real estate, bank accounts, investments, and material possessions such as vehicles, furniture, and jewelry. Don’t forget 401K or other retirement vehicles, such as pension plans (if anyone still has one of those). Next you’ll want to (well you may not want to, but you must for the purposes of this calculation) add up all your debts. Include everything; mortgages, credit cards, car loans, store accounts, business debts (if you’re a sole proprietor), etc.

It’s nice to use a spreadsheet to do this. That way you can save it as a template and just add any new entries, and change the numbers for your next net worth calculation.  Personal finance software such as Quicken can make this process much easier. (Debt Free readers - You Save up to 36% off Quicken here) If you use the software consistently, you’ll already have all the information to make the calculation without all the troublesome math and stuff.

Once you’ve calculated your net worth, or lack thereof, you’ll know how far you must travel to meet your retirement goals. As you get closer to achieving your retirement goal, you’ll notice a feeling of warmth and jubilation wash over you like a warm bath. You’ll no doubt get giddy with anticipation. The truth is you can always keep working if you love your work, but it’s always nice to know you’ll never have to again.

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For example, if you sere to invest the money you saved in a tax deferred retirement savings account earning 8% interest, here's a sample of how it could contribute to a healthy retirement.

An HDTV –
I'm as big an HDTV fan as the next guy, bigger, my wife would argue. I love the sense of depth, the vibrant colors and the fine details that really convey subtle emotions you just don't get with regular TV. However, if you were to forgo grabbing that 42” plasma HDTV when it's on sale for $1,000 this 4^th of July, here's how it could add up:

In 20 years - $4,660

In 40 years - $21,500 – and the TV won't be any good by then anyway

Entertainment -
Spending $100 bucks a week on dining out and a movie may seem like a pretty small entertainment budget, and granted, it's not all that big. But if you skipped the dinner you bought with that $100 and invested it instead into your retirement savings account, Viola! You'd have amassed over $351,000 at the end of 40 years.

Lunch -
If you brought lunch from home and saved $40 a week, you'd build up an additional $70 G's in the old IRA!

Premium movie packages –
How much do you really watch HBO anyway? Showtime? Unless there's a show you just can't miss, you probably should, because the $10 a month may not seem like much money. However, the 10 spot you spend for the privilege of curling up in front of the TV those 3 nights when you actually have the time, are costing you even more free money out of your retirement. Cut those back until after you retire when you have the time to watch them, and you'll end up with a robust $35,000 more to keep you plump and happy in your golden years.

Caribbean Cruise –
Now I know you probably danced to Billy Ocean's Caribbean Queen in college, but you're not going to find her on a ship somewhere, trust me. What you will do is suck over $50,000 away from your retirement savings for the average price of just one cruise for two. Ouch!

These are just examples, but they show how seemingly small expenses can add up to big piles of cash in the future. After all, there really is free money out there if you know where to look.

Prayers and condollences out to the family and friends of the Virginia Tech killer's victims. 

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Here are some of the most common mistakes the IRS finds when opening those last minute tax packages.

Tax Filing Mistake #1 - Failure to sign the tax return. Remember, if you’re filing jointly, both spouses must sign and date the return. Just take one last peek to be sure everybody signed on the dotted line.

Tax Filing Mistake #2 – Failure to enclose your W-2. As with mistake #1, remember if filing jointly, you both need to enclose your W-2 forms to keep the Feds from going into a tizzy.

Tax Filing Mistake #3 – Failure to enclose payment. Remember, even if you’re filing an extension, you still need to pay what you think you may owe. If you really don’t have any money, you can ask for an installment plan, or if you can prove hardship, you can file IRS tax for 911 to ask for a waiver. Be prepared to prove it.

Tax Filing Mistake #4 – New for this year, forgetting the Federal long distance tax refund. More than half the people who were eligible for this failed to claim it. That’s a $60 dollar mistake. The money is yours for the asking, a rare thing from the IRS, agreed?

Tax Filing Mistake #5 – Missing out on deductions for state sales tax, tuition, and educators out of pocket expenses. It’s relatively easy to miss these deductions, because congress screwed around so long there wasn’t time to include them on printed tax return forms. Maybe that was the plan all along? In any case, these could add up to substantial money back for you, so make sure you include them in your calculations. See here for more information on how to claim these deductions.

What the hell are you still reading this for? You’re late, go get those taxes filed.

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First of all, one amazing statistic is that about 30% of the mortgage fraud cases investigated by the FBI last year originated in only three states; Michigan, Illinois and Ohio! That says to me there were some pretty large operators running mortgage schemes in those areas. Couldn’t they leave some room for the rest of the country?

Here are some of the main types of mortgage frauds that can affect you, your lender or both:

Mortgage Fraud 1 – The “straw buyer” –

This bit of financial underhandedness actually involves several different individuals, like several of the mortgage fraud types investigated by law enforcement officials. In the straw buyer fraud, a second buyer is used with better credit, or the buyer uses a fake or stolen identity and forged financial records to get a mortgage loan for a property. A crooked appraiser and title company employee are involved in the scheme to inflate the value of the property and allow a larger loan to be secured than is necessary to purchase the property. The seller is then paid the full price for the home. The extra money is split between the fraud perpetrators, and they go on to their next victim. What they do not do, however, is pay the mortgage. The lender is left holding the bag on this one.

Mortgage Fraud #2 – Property flipping fraud -

Flipping fraud entails using a team of crooks to, as the name suggests, buy a property and then “flip” or quickly resell it for a profit. Nothing is wrong with that, thousands of successful, legitimate real estate investors do it every day (although not as many as last year!). The fraud comes in when those perpetrating the fraud do a little ambitious appraising (seeing a common thread here?), and then fudge the loan docs and buyer financial records to allow the whole thing to proceed smoothly.

The FBI has investigated such frauds and found that almost all parties involved in the transaction can be in on the scheme; the real estate agent, the appraiser, title company employees and the buyer. The one who gets stung is the last buyer, who ends up with a home that’s not worth nearly what was claimed. Use your own appraiser to check the value of a property you’re thinking of purchasing.

Mortgage Fraud #3 - Troubled homeowner pre-foreclosure scam –

Here’s one where the seller, who’s in financial hot water already, gets scammed. In this scheme, people in financial trouble whose homes are in pre-foreclosure are targeted. The crooks swoop in with promises of saving the homeowner’s credit and some of their home equity, if they have any. The problem arises when the homeowners are asked to either quitclaim or transfer their property’s deed to the fraudsters. When that happens they fraudster’s don’t of course fulfill their part of the deal, they just abscond with the equity in the property.

Mortgage Fraud  #4 – Can’t get no satisfaction –

In this scheme, the fraud perpetrators file forged loan satisfaction docs with the appropriate government agency, usually the county, claiming the property is free and clear. In fact the mortgage is still outstanding. One variation of this scam involves renting a property, then forging the legitimate homeowner’s signature and other requisite financial documentation to get loans from unwitting lenders. The scary part comes when the lenders show up on the real homeowner’s doorstep claiming their right to the property because the payments on the fraudulent loan were never made.

Mortgage Fraud #5 – Fake wife fraud –

This is my favorite. Some people just have no shame at all. In this fraud, the husband actually uses his girlfriend to impersonate his wife! The girlfiend gets fake ID with the wife’s information, which obviously the husband has complete access to. She shows up at the mortgage signing claiming to be the wife, so the husband and “wife” team can get a second mortgage or a HELOC against the equity in their home. Then the two vanish to Mexico, leaving the unsuspecting wife holding the bag, the kids, and a home she now owes far more than she should on.

These are just some of the rising tide of mortgage frauds that are swamping the mortgage industry and contributing to its problems of late. Most of the frauds affect the mortgage lender, but some directly affect the homeowner, you, so be careful. If you're trying to get debt free, make sure the debt is legit, not paying for someone's new, red Lambo or Mexican vacation. Have a great weekend.

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The age in which we live has been equated by some to the gold rush days of the 1840's and 1890's. Never before has it been possible to so easily find and take advantage of a home business opportunity. Thanks to the Internet, such opportunities are strewn about like so many grains of sand on a beach. The different types of home business opportunity are almost as varied as the number of them out there, waiting for you to jump in and pan for your fortune. One insurance industry survey in 2002 found there are approximately 12 million home businesses in the U.S., so you'll have plenty of company.

Like the gold rush days of yore however, many of the would be entrepreneurs grabbing at the golden ring of home business are destined to come away with little or nothing. There are a myriad of reasons for this. Some of the most common reasons for home business failure are these:

1 - Lack of focus – Too many home business entrepreneurs get awed by the multitude of different opportunities available to them. They try to get involved in too many different ones, never focusing on one specific business. This occurs more often in home business than a more traditional bricks and mortar business. This is often attributable to cause #2 of home business failure, below.

2 - No business plan – Your business plan is a necessity for a multitude of reasons. It helps you to plan for eventualities and have a strategy for dealing with them so you can be proactive, rather than the more common scenario of reacting to situations. At the startup phase, a solid business plan will help you cover all the details that make a home business (or any other business for that matter) successful. It's easy to overlook something and a business plan will help keep that from occurring. If you're seeking outside financing, the financiers will want to see a solid business plan to help gage your commitment and chances of success. Depending upon their level of involvement, they can offer suggestions based upon your plan that may improve aspects of your home business.

You'll need to address all aspects of your business in your plan; you must choose a legal business structure (either a sole proprietor, partnership, S-corp, C-corp), decide how you'll be making money, lay out a financial and marketing plan, and define the businesses key personnel, their experience and their positions in your home business. It's okay if that's only you, your spouse and your uncle Earl right now.

3 - Treating your home business as a hobby, rather than a real business. This leads to a failure to apply solid business principles and methods. You need a real accounting system for example, not a shoe box in which to store your cash and scraps of paper to use as a journal.

4 – Ineffective marketing strategy and/or implementation. Many who try a home business opportunity have no real business or marketing experience, have never studied marketing and don't really have an idea how to market their product and/or services. This is why some entrepreneurs choose to investigate one of the many franchise opportunities. The advantage here is that the marketing plan is well laid out and has been followed successfully before. In addition, most franchisers offer marketing assistance. The disadvantage to franchise opportunities are high start up costs and relative lack of freedom. Some home business entrepreneurs are seeking freedom after careers in a large, corporate environment. With a franchise, you'll be required to adhere closely to a set business plan. That's both a blessing and a curse for those individuals.

5 – Never really getting started. Too many entrepreneurs fail because they never seize the initiative. They piddle around, and before they know it, they've condemned themselves to failure in their home business.

6 – The most common reason for failing in a home business opportunity – Lack of persistence! You've got to stick with it, often in the face of daunting adversity. Many successful entrepreneurs have failed multiple times, on multiple levels, before experiencing their first taste of business success. Expect that you may experience some bumps along your road to success as well. The key is to never quit and to make the adjustments to your business that are necessary to ensure your success. Countless successful business owners can attest to that.

If you're trying to get debt free and stay that way, a home business opportunity may provide the vehicle in which you can travel. In many cases however, you'll accumulate substantial debt, especially during the start up phase. Different home businesses will require different levels of financial commitment. The level to which you are willing or able to make a financial commitment will be one of the determining factors that will help you decide the right home business opportunity to pursue. Some on-line business for example can be started with little more than a credit card and a hundred dollar limit, while another home business opportunity, such as a franchise, may require hundreds of thousands of dollars in start up capital.

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Obviously, the affordability of a home in your area has a huge impact on your standard of living. It varies widely throughout different areas of the united states. So widely in fact, that it sometimes appears to have no correlation with reality (not realty). Here is a sampling of what you can be faced with if you are transfered by your employer or just want to explore opportunity in different parts of the country. Although sagging real estate markets made the news, in many cases these were only much needed corrections to keep raging markets in check. In 45 of the top 148 metro U.S. markets, real estate prices fell. The hardest hit were homeowners in Detroit, who faced average double digit declines. In 102 markets, prices actually kept on rising, adding value to home owner's properties, while frustrating those still trying to enter the market.

Here is an example of the difference you can expect depending on where you will be purchasing a new home. It's pretty dramatic. I looked at homes priced from $275,000 - $300,000 in 6 major U.S. markets, courtesy of Realtor.com.

Seattle – Here's what 275,000 of your housing dollars will let you settle up in in the Emerald City. Not much, is it?

#1 - $275,500 – An 880 square foot, 3 bed / 1 bath on a 3,495 sq ft lot. Cozy, huh?

#2 - $284,450 – A 970 sq foot, 3 bed / 1 bath, 20 miles south of downtown, on a much larger lot @ 13,939 sq feet. Home built in 1955.

Houston – Movin' on up and spending the same dough.

#1 – $297,950 - 4 Bed, 3.5 Bath, 3,389 Sq. Ft., 0.22 Acres, stainless appliances, slab granite counter tops, island kitchen, on future golf course fairway, Home built in 2005.

#2 - $275,000, 4 Bed, 3.5 Bath, 2,930 Sq. Ft., 0.19 Acres, island kitchen with granite counter tops, in a gated community with a manned gate, built in 1995

Boston, MA – Up to the land of the Big Dig. Only 25 homes were even listed in this price range. Pretty slim pickens, huh?

#1 - $277,900 - 3 Bed, 1 Bath, 1,115 Sq. Ft., 0.15 Acres, renovated in 2003, built in 1900, near community golf course.

#2 - $280,000 - 2 Bed, 1 Bath, 704 Sq. Ft., 0.1 Acres in Hyde Park area, built in 1955, near community golf and tennis.

Kansas City, MO – If you're relocating to the mid-west, things are lookin' good -

#1 - $284,900 - 4 Bed, 3.5 Bath, 2,668 Sq. Ft., hardwood floors, island kitchen, built 2006.

#2 - $299,900 - 4 Bed, 3.5 Bath, 2,539 Sq. Ft., .22 Acre lot, Corian counter tops, island kitchen, built in 2005, 10 min to airport

San Diego, CA – Out on the Pacific, these dollars won't get you nearly as much. I hope the sun's worth it.

#1 - $299,000 – 1 bed, 1 bath, view bungalow, built in 1922.

#2 - $275,000 - 1 Bed, 1 Bath, 540 Sq. Ft., 0.08 Acres, built in 1925.

Columbia, SC -
#1 - $299,900 - 4 Bed, 4 Bath, 3,170 Sq. Ft., 0.46 Acres, laminate counter tops, heat pump, built in the early 1980's

#2 - $279,900 - 3 Bed, 3 Bath, 2,305 Sq. Ft, 8,900 Sq. Ft. lot, laminate counter tops, backs to state park

So, what you'll live in varies widely throughout the nation, to say the least. Keep that in mind when that plum job offer comes through.

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Then, after you’d left college a decade behind in your rear view mirror, you got a collection call about an unpaid debt. The call was from a collection agency that had purchased the debt from the original creditor. This is actually a fairly common practice. Old debts will be purchased form the original creditors for pennies on the dollar, with the expectation that most will remain uncollectible, but some will bear fruit.

What happens in this instance? Well, if your conscience nags at you sufficiently, you can write a check, but don’t do it because the collection agency is doing the nagging. Once you’ve passed the statute of limitations of the debt going into default, you are legally home free, and have no obligation to repay the debt. When that is, precisely, varies by state and the type of debt you incurred. Typically, unpaid debts are classified for this purpose as Oral Agreements, Written Contracts, Promissory Notes, or Open Accounts.

The average for the statute of limitations is about 6 years, but it varies widely by state. For example, Rhode Island and Wyoming have a 10 year statute of limitations on open account (such as credit card and revolving account) debt, while Washington, North Carolina and New Hampshire let you off in 3 years. Some vary by the type of debt, while others have the same statute of limitations no matter what type of debt is concerned. The ‘M’ states of Maine, Massachusetts, Michigan and Minnesota have a 6 year statute of limitations for all types of debt.

Usually written contracts and promissory notes have the longest statute of limitations, with some states, such as Ohio, Kentucky and Rhode Island allowing such debt to be legally collectible for a full 15 years after it has gone into default. Oral agreements have the shortest statute of limitations before a debt is legally uncollectible. In California, if you can avoid repaying the debt for only 2 years after it’s gone into default, the statute of limitations on the debt will expire, and you’ll be free, if you can live with yourself.

So, if you get one of those collection calls you though you’d escaped from, especially if it’s about 6:30pm, just as you’re about to enjoy another spoonful of peas, think about just how old that debt is. You can mention the words “statute of limitations” to the person no the other end of the phone. Maybe that’ll keep them from calling back, but the can be pretty persistent and intimidating. Maybe you could try a different angle, tell them the statute of limitations on the debt has expired, but the one on what you’ll do to them if they call back again will never expire, and you never want to hear from them again. That may be the only thing that will work.

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Why have cars gotten so expensive? Well, the quick and easy answer is the same as why every other product is more expensive no than it was 20 years ago; inflation. Unfortunately, with vehicles, it’s much more complicated than that. Inflation has played a part, to be sure, but so have many other factors. One major reason for the increase in the price of new vehicles is government regulations. The cost of compliance paid by the auto manufactures is obviously passed on to the consumer. Tighter emission controls, CAFÉ requirements and stricter safety laws have conspired to give us much better cars, but also much more expensive ones. Priced an airbag lately? How about steel intrusion door beams, an electronic engine management system or a direct fuel injection system? All are quite expensive, I can assure you.

To increase fuel economy requires some of the same technologies that are needed to improve emissions, such as fuel injection systems. Other expensive technologies employed in pursuit of better fuel economy are lightweight, composite materials and development time spent to reduce rolling and wind resistance.

All vehicle cost increase can not be laid at the feet of government mandated safety and emissions regulations or inflation, however. We consumers shoulder a substantial portion of that blame. After all, who’d buy a car today with, gasp, roll up windows? I sure as hell wouldn’t. Ditto everything else that used to optional on luxury vehicles that are now standard on even the most basic economy cars.

You have air conditioning or automatic climate control (some with multiple zones), power windows, heated seats, central locking, keyless entry, trip computers (which are actually very inexpensive to implement because they use the government mandated on board diagnostic system), power seats, leather upholstery, CD players with 6 – 10 speakers and powered subwoofers, auto dimming mirrors, Home-link transmitters, high power engines, and the list goes on and on. These features were unavailable or optional on even the most expensive vehicles 20 or so years ago. Now they are standard or very popular options on almost everything that rolls off the showroom floor, except the lot boy’s motorcycle.

So as consumer standards have risen, we simply demand more from our vehicles, much more. This level of content drives prices through the roof. Not only do we want our cars to have a plethora of features, we want them to be supremely safe, so we ensconce ourselves on a cocoon of air bags, in front, on the side, above, and below. The front and rear of our vehicles are delicately engineered crumple zones, designed to absorb the energy of a crash, and keep it from the high strength safety cage disguised with the cars’ sexy bodywork. We have fantastic anti-lock, 4 wheel, disc braking systems, with rotors the size of large dinner plates, clamping down on 18”, styled aluminum wheels. These stylish wheels are wrapped in low profile tires that would outperform almost anything we could imagine 20 years ago.

Not only do we want our cars to stop on a dime, we want them to have power, and lots of it too. 30 years ago the Chevy Corvette was the premium American performance vehicle. It had a paltry 180 horsepower. Now that amount of power is simply laughable on all but the most basic compact family sedan. The Corvette leaves the factory with 400 raging horses under its fiberglass bonnet, and a version is available with over 500HP! Even with the substantial horsepower increase, the Corvette of today gets twice the fuel economy as the Corvette did 30 years ago. A 300hp engine was found in the Corvette only 15 years ago, and it was a rarity. Now 300 hp vehicles are as common as rats in a New York City apartment building. You almost can’t leave the dealership without being shown at least one.

We also need this much power due to the porkers our new vehicles have become. Even with the liberal (hate that word) use of lightweight materials, the weight of our vehicles has risen dramatically. All those new, standard features not only cost money, they add weight. All the soundproofing, electric motors, computers, wiring, and so forth make our cars hundreds of pound heaver than an equivalent ride was 15 years ago. So, you need the extra power partially to safely and easily merge on to the freeway (something all too many people can’t do very well), and partially to overcome the hefty tonnage the engines must haul around.

This stuff all costs money, and lots of it. That’s why your car was so expensive.

If you want to fight back against the rising cost of vehicles, there are a number of ways you can do it. Here is a directory that will show you where to find expensive cars, but pay much less for them - Cheap Car Directory

Here is a really innovative way to eiuther drive your existing car, but have someone else pay for it, or get a new car, and have someone else pay for it Take a look at the Free Car Guide. 

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That's plain wrong! You should pay little attention to how many dollars you save when comparing or pricing a potential purchase. What?? Am I crazy? Perhaps, but with this little tidbit. What you should really be looking at when making purchasing decisions is the percentage you'll save or the percentage difference of one item versus another. Think about it for just a second. I've seen it happen too many times for it to be just an anomaly. Someone considering a purchase will compare two items, say they're $2.00 and $ 2.50. They think “Oh, it's only a 50 cent difference.” While in absolute terms, that's true, the cost difference is only 50 cents, they should really be looking at the decision from a percentage perspective. Then, the picture changes dramatically.

That little 50 cent margin is actually a 25% difference in the price. Although the dollar amount seems trivial, that's only the case when take by itself. If you applied similar logic to many purchases, the aggregate would mean you were spending 25% more money than was necessary. Those little 50 cents all add up. Look at the percentages.

Another fallacy many folks are guilty of comes into play when looking at the cost of driving. The overwhelming majority of drivers only think about the cost of fuel when costing a trip. What about everything else that makes your car go? In addition to fuel, you need tires, regular maintenance, windshield washer fluid and blades, antifreeze (priced that stuff lately?), etc. Those things all cost money too, and are consumed as you drive. In addition, there's depreciation. This is not something only for the small business person to worry about.

The average person should consider the effects of vehicle depreciation as well. Every mile you drive your vehicle is that much closer to the next time you'll need to purchase another. With every mile that passes underneath the Goodyears of your fine ride, it's not only worth less, but you'll be that much closer to sitting in a car dealership somewhere while the salesman runs to check with his manager. When he comes back, you'll be faced with the awful truth that, yes, you do need to plunge yourself another $20,000 deeper in debt. For those of your that have other ways of paying for a vehicle rather than financing, you'll still have to use that money for a vehicle instead of for something really fun, like pizza. Hey, it's 50 cents off!

One other note. Paul Harvey this morning reported this disheartening fact (I'm assuming it's a fact). Illegal immigrants will receive on average, $3.00 in benefits for every dollar they pay in taxes. Hear that, you residents of California, Texas, Florida, New Mexico, Nevada and Arizona? If that's the average, chances are you're getting taken for even more.

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