Top Personal Finance Blogs
Tuesday September 26th 2017

Why and How You Should Avoid Late Payments on Your Mortgage

In this tough economy, home owners are increasingly struggling to make mortgage payments. The good news is that being a few days late paying your mortgage is not a big deal; most lenders give a 15-day grace period and as long as you get payment in during that time, there is no penalty whatsoever. After the grace period, you have an additional 15 days during which you will be charged a late fee. As long as you pay during this period, you are still considered to have paid on time. Now onto the bad news…

If you are 30 days late, your credit takes a hit. Depending on your beginning credit score, being just 30 days late can lower your score by 60-110 points and can take between 9 months and 3 years to fully recover from. The higher your score was before the late payment, the longer it takes to fully recover. If you start with a score of 780 and are 90 days late with a mortgage payment, your score may drop by 130 points, almost as much if you go through foreclosure. A low credit score can cost you more in many other areas too – they drive credit card rates up, affect auto loans and even drive up auto insurance premiums.

Clearly, it’s in your best interest to remain current on your mortgage payments. What should you do if you are having problems? First, keep your wits about you and don’t panic. Refusing to admit there’s a problem will not solve anything. Be proactive; contact your lender with your issues. Most of them are willing to work with you, but communication is key. Don’t just hope they won’t notice if you are late; they will.

Secondly, you need a plan. Track all of your expenditures to see where your money is going. Do it by hand, do it by computer spreadsheet; just do it. Keep track of everything for a month or two. This exercise alone may open your eyes. You may not have ever realized that you spend $15 a month on office birthday cards, for example, and may find something right away that you can cut out or reduce easily. It’s important to find out where your money is going.

Once you do that, you get to look for “extra” money. Don’t look at it as cutting things out or depriving yourself. Make it a challenge; make a game out of it. Cut back on obvious things first, like excessive shoe shopping or those office birthday cards. Analyze the expenditures you identified, and see what can easily be discarded without much trouble. Be ruthless, but make it as painless as possible. You may love your morning Starbucks coffee, but could you buy it at the grocery store and still enjoy it for less?

Then, take a closer look. There are tons of ways to save money you may not have considered. Cook more from scratch. Not only will you save money, you will eat healthier. Use generic products when possible; clip coupons and couple them with sales. Grow spices. Cut out commercial cleaners and start cleaning with baking soda and vinegar. You’ll breathe fewer toxins and help the environment at the same time. Be creative with your cost-cutting, but don’t make it painful or you will have a hard time sticking to it for long.

As you identify areas you can trim, take the “extra” money and pay that mortgage payment on time every month. You may find enough that you can even begin paying down other debts like credit cards too.

Hard times have a tendency to cause people to panic and get stressed out. You don’t need the added burdens that late mortgage payments and lower credit scores can bring. Remember, denial is never a good plan. Get help from your lender if you need it; then make a plan and stick with it.


Thinking About Going Into Business for Yourself? Maybe You Shouldn’t…

Thinking about going into business for yourself? Maybe you shouldn’t…

Thinking of going into business for yourself? With today’s uncertainties, it’s more appealing than ever. Who wouldn’t want to be their own boss? Having control over one’s own career and no need to worry about downsizing! It may sound glamorous, but it’s not for just anyone. Having your own business is hard work. There are personality traits that can make it even more difficult to succeed. Before embarking on such an undertaking, it’s important to take an honest inventory of yourself. See if any of these traits, as I outline, apply to you. If so, you may want to rethink opening your own business, at least until you have addressed some of these issues.

Indecisiveness

As a business owner, decision making will be part of your daily routine. If you struggle with decision making, because you fear making the wrong choice or of being wrong, then running a business will be more problematic than it needs to be. It’s important to be able to look at the facts, make a call and stick with your decision. You must be able to accept the consequences and make adjustments when necessary. Be willing to act; otherwise opportunities will pass you by.

Playing the Blame Game

Business owners must take responsibility for their business decisions and even those of employees. Being the boss means you are in charge, and that means being responsible. Blaming others when things go wrong doesn’t solve problems. Clients don’t want to hear excuses; they just want solutions. Learn to take responsibility; as the owner, you have to own everything that happens. A particular issue may not be your fault, but you need to step up and work to find answers instead of pointing fingers. Use problems that arise as opportunities to learn. Learning to run the business more smoothly will inspire confidence from both clients and employees.

Looking for Fast Money

If your sole motivation for opening a business is to make quick, easy money, you might want to re-evaluate. Of course every business owner needs to make money, but if money is your only motivation, you will lose heart quickly. All new businesses take big investments of time; you will have to put everything into it. Monetary rewards may not come for quite awhile; in the meantime, you need to be passionate and persistent at what you are doing.

Going to Extremes

If minor setbacks send you for a loop, you will be spinning out of control quite often as a business owner. You will make many mistakes, and things will go wrong. Being flexible, keeping a cool head and being able to “reset” are invaluable tools in owning a business. Most problems can be fixed quite easily if you remain calm and don’t overreact. On the other hand, avoid being wildly optimistic; don’t entertain delusions of grandeur. Be realistic and stay focused on your goals. If you are unpredictable and given to extremes, clients will be leery.

Chronic disorganization

Is your desk a mess? Does your workspace stress you out? If so, this is not any way to run a business. Chaos not only makes your job more difficult, a messy desk looks unprofessional. It also affects your frame of mind; a clear work area reduces tension and helps you focus. The good news is that perfection is not the goal; keeping a neat work station is not as hard as it may seem. You can take classes to help, and sometimes just a little time spent each day working on piles or keeping clutter at bay can pay off.

If you are contemplating owning your own business, a little preparation can save you a lot of grief down the road. Evaluate your characteristics honestly; if you’re not ready now, maybe all you need is a little time and a bit of self-improvement. Anything worth doing takes effort; owning a business is no exception.


Speculation’s Influence on Gas Prices

The weak American economy is receiving yet another blow as gas prices are quickly approaching $4 a gallon nationally. Americans are getting squeezed at the pump while large oil companies have seen a surge of profits. Indeed, ExxonMobil earned $10.7 billion in the first quarter, a 69 percent increase from a year ago. Other oil companies have seen similar increases as well.

This has led much unrest among American voters, forcing government policy makers to take notice of the issue. The person who has been feeling the heat the most has been President Barack Obama, whose poll numbers have been dropping over the past several months. With gasoline prices more than doubling since he took office, some voters have begun to question his ability to take control of the issue.

In order to ease concerns, the President recently announced a task force to investigate possible manipulation in the oil markets by speculators looking to make easy profits. As well, Democrats in Congress have been looking to eliminate $4 billion in subsides to oil companies, although it is not certain whether such a proposal will make it to the Presidents’ desk.

Unfortunately, there is some evidence to suggest that there is not much the government can do, at least in the short run, to significantly reduce oil prices. Despite the massive size of the major oil companies, there is no direct evidence suggesting that they are driving oil prices upward. OPEC, which is responsible for approximately 40 percent of worldwide production, has a much greater effect on oil markets.

As for the speculators like hedge funds and other traders, they may very well be responding to real geopolitical pressures that would lead to higher future oil prices. The unrest in the Middle East has done much to rattle oil markets. In the past six months, there has been a revolution in Egypt, civil unrest in Qatar and Syria, and a civil war in Libya. Many investors fear that this unrest could eventually spread to Saudi Arabia, the world’s number one producer of oil.

China is also having a considerable impact on global oil prices. China is still in the middle of an economic expansion, with much of its growth depending upon capital construction and manufacturing. As a part of this process, they are consuming massive amounts of energy including oil, to further this growth. The result of the Chinese feeling the effects of this economic growth will result in their demand for oil which will only continue to increase.

Given the importance of oil to a modern industrial society, it is not surprising that demand for oil is not very responsive to price increases. Indeed, many economists have estimated that a ten percent increase in oil prices only reduces demand by two or three percent, because of this, some have argued that the United States needs to open up to more oil production. It is true that America is the third largest oil producer in the world and has approximately 20 billion barrels of known reserves, but it is still a small producer in the global market and would likely not have much effect of global prices. The switch to alternative energy solutions may also be a long-term solution, but it will do nothing to affect prices in the near future.

In the end, continued geopolitical instability and rising demand from emerging markets will continue to push gasoline prices higher. In all likelihood, speculators are responding to these pressures rather than spearheading it.


Mixed News: U.S. Economy Still Up and Down

In the aftermath of the subprime mortgage crisis, the economy quickly fell into recession as credit markets tightened up considerably due to fears of continued losses. Despite the efforts of government policy makers to revive the gasping economy, things remain in a precarious state. The Treasury Department arranged for a bailout for many of the largest investment banks, most of whom were holding on to billions of worthless assets. Congress agreed to a $800 billion stimulus package in an attempt to boost overall demand throughout the economy. In addition, the Federal Reserve is already engaging in its second round of quantitative easing, buying up large amounts of Treasury bonds to keep short-term interest rates near zero percent. It’s begging to feel a bit like an amusement park ride.

Officially, the American economy has snapped out of the recession. GDP growth in the first quarter was 1.8 percent, a not very strong number but an increasing one nonetheless. Overall, the recovery has been very anemic. Indeed, there are real fears that the economy could slip into a double-dip recession unless appropriate measures are taken. Of course, there have been a few positive signs in the economy over the past year. The stock market did very well in 2010; the S&P 500 returned 15 percent last year. Many businesses appear to be recovering from the 2008 recession, although they seem reluctant to reinvest those profits given the precarious state of the economy. Unemployment has been trending downward over the past few months, but few economists would call such job growth numbers encouraging.

Unfortunately, there seems to be as many negative numbers as positive ones. Hourly wage growth grew at only two percent last year. And this has been part of a much longer trend of stagnant wage growth over the past thirty years, especially for those in the lower-half of the income distribution. It is true that this is at least partially due to increases in health care expenditures made by employers on behalf of employees, but there has been a disconnect between productivity and wages. As long as unemployment remains so high, there will be little upward pressure on wages.

The even more discouraging fact is that unemployment is probably even higher than the official rate reported by the government. Once you account for workers who are underemployed, such as full-time workers only working part-time or workers in jobs well below their skill set, and workers who have dropped out of the job market completely, the unemployment rate is closer to 15 percent.

As wages have stagnated or fallen, many workers are seeing their standard of living fall thanks to rising prices in many consumer staples like gasoline and food. Indeed, gasoline is quickly reaching an average of $4 a gallon, further reducing available disposable income. Overall, food prices are expected to rise four percent this year, although many important foodstuffs will increase in price even more than that.

On top of all of this, the government is currently operating under a $1.6 trillion budget deficit. As the debate in Washington turns from economic stimulus to debt reduction, the government may inadvertently squash a nascent recovery by reducing aggregate demand through broad-based spending cuts. Indeed, some economists have argued that even more spending may be necessary to boost the economy suffering under a large amount of excess capacity.

Unfortunately, the American economy is suffering from a variety of woes and it appears that the government has already exhausted most of its standard policy prescriptions. Interest rates are as low as they are going to get and government spending is not likely to get any higher. In the end, we can likely expect a very slow recovery into the foreseeable future.


How to Make Your Checking Account Pay You

Banks have always offered special deals for customers who have savings accounts, but very little has been offered to checking customers until now. Free checking has become almost standard at most banks as long as customers meet the free checking requirements. Banks are starting to experiment with the idea of offering cash back for customers in certain situations. The banks are hoping that these additional perks will draw in more customers as people look for new ways to save money.

Better Customer Perks

Traditionally, a bank could maintain healthy customer satisfaction through the return that the customers received on their checking accounts. Recent economic struggles have caused those interest rates to plummet in the last few years, however. At the current interest rate level, there is hardly any incentive for a customer to keep money in the bank. Banks have responded by creating new savings packages that can be accessed through a customer’s checking account. When someone spends money from their checking account, a certain amount of reward money is deposited into their savings account. People can use these programs to grow their savings while making everyday purchases.

Cash Back Checking Accounts

Some banks offer a reward that is a percentage of the money you spend. For example, you may earn up to 2% on all of your purchases for the first 6 months, then 1% on all purchases after the first 6 months. There is usually no limit on the types of purchases that you make, as long as they are made using your checking account with the bank that offers the special program. The cash rewards may not seem like much, but they can add up over time – especially if you spend plenty of money from your checking account.

Online Banking Rewards

Other banks are offering cash rewards as part of their push toward digital operations. With these programs, customers are awarded cash back as long as they agree to shift all of their banking needs to digital formats. Customers who choose to use the ATM rather than the teller and receive all of their banking information through e-mail and the bank website can take advantage of cash bonuses through banks that offer this type of program. Usually the offers include one-time bonus cash rewards rather than rewards that are based on the purchases you make.

Cash Rewards for Checking is a Growing Trend

The number of banks that offer these types of cash rewards for checking accounts is small right now, but interest is growing nationwide. As banks continue to receive a favorable response from these programs, more banks will begin to incorporate them into their checking account packages. Cash back checking accounts are poised to become banking staples, just like free checking accounts swept through the banking world a few years ago. Banks benefit because they gain more customers who may choose to use digital banking options, and customers benefit by pocketing a little extra cash from the bank each year.