Be Sure to Keep Eye Out for “Points” Added to Mortgage at Closing

So, the whole refinance saga is over for us. Did we get a great deal? Not really that great. I was hoping for a half point lower interest rate, but ended up not only getting a quarter point higher than what I wanted, I also ended up paying “points” to the tune of $3,000 in the end to get that lower interest rate. Makes you wonder how much money these mortgage financing companies are making off ridiculous reasons for fees like this.

And I also wonder how accurate the statement is that these points make up for the increased risk they take on that you may not pay your mortgage because your credit isn’t of a certain caliber to get the lower interest rate sans points. But touche, I supposed we buy homes, and this is the price we pay for the right to live the American dream without paying all cash up front for large ticket items like homes, right?

You really have to carefully weight whether refinancing is worth it for your situation. What you want to be fully aware of going in is that you are going to get quite a few closing costs and fees rolled into the principal balance of the new mortgage, so while this is good that you don’t have to pay many of these fees up front, the new, higher principal balance may be a shock to your system, especially when you had grown used to seeing that lower balance on your old mortgage statements.

Make sure you ask for a specific amortization schedule how much of each payment goes toward principal and how much toward interest also. Don’t be dazzled by a lower interest rate when in fact you could be digging yourself into deeper debt, and a longer loan payoff, in exchange for a payment that might only save you a hundred or a few hundred bucks. Is it really worth it, and is it in line with your future payoff goals if you like to pay things off early?

Also, as I said, when you close, pay close attention to the closing costs. Were you charged points for your interest rate? Honestly, I was, and I was not aware of it until the Title company sat down with us to close the deal and I saw that we were charged three thousand dollars to get a quarter point lower. It may have been worth it, but that’s three more grand we now have tacked on to our principal balance – youch! It’s a good thing this stuff is tax deductible, that’s about the only reason I can handle it. Even with that in mind, still look at the big picture and see if it’s worth it for you.

Haiti’s Problems Make Us Re-Examine Our Own Financial Bumps

I will admit, I tend to obsess over my finances. I think constantly about how we can pay off debt, how my husband and I can maximize our tax benefits, how we can make more money, and how we can secure a future that is free of the financial uncertainty that I have seen so many retired people go through. After all, I’ve seen lots of people, including family and friends, open themselves up for financial ruin after retirement because they didn’t properly prepare, that I’m probably over cautious about this happening for us.

I think about it too much, that’s the conclusion I came to when I heard about Haiti, and continue to hear about the devastation and utter ruin it’s people are experiencing now. Not only the earthquake though, it’s so apparent that Haiti’s citizens live in squalor and go without things we take for granted on a daily basis, their daily existence a constant question and their dailly needs and comforts always in jeopardy. I realize how good I have it, and how good the majority of us have it here to be honest. I know we have our fair share of homelessness and poverty here in America, but overall, compared to third world countries, we have a lot less.

I hope that we can all pull together in some way, no matter how small a donation we can make individually, and help these people out. It’s a wonder to me that even in the grips of the worst economic recession in decades, we have pulled together and donate millions of dollars and hours of aid to help people in need. To me, anyone who says Americans are selfish really don’t know what they’re talking about, or they ignore the good points like this when everyone seems to pull together and forget about their own problems to help people who are in much more desperate straits who don’t have the means for the help they need.

When disaster strikes, a people’s true strength shines through, and that is when you see why people are so resilient, and why there is still good in the world and you shouldn’t sweat the small stuff as much as you do. Of course, I know I say this and I’ll probably continue on to my worry wart ways after this is forgotten, but I like to know that there are moments of clarity lingering on the horizon that give perspective and a sense of gratitude for the blessings in one’s life.

Is It Ever a Good Idea to Withdraw from 401K?

To put my opinion in a short, succinct sentence, no I do not personally believe that you should ever withdraw money from your 401k account, unless it is for dire circumstances which cannot be financially remedied some other way, instead of raiding your dear life savings and safety mattress. This is something that we should all try to keep intact for as long as we possibly can, not only for the sheer financial security of it, but also for the tax implications and the numerous other cuts that government actually gives us as a reward for being disciplined retirement savers.

Even if it if for an emergency, such as losing your job, you must really consider the penalties that you may pay before considering this avenue of cash generation. Sure, there may be government relief efforts under way to help you withdraw money from tax sheltered savings accounts like 401k’s in dire straits, but even so, you still need to look at the big picture. Some of the considerations to make are the following.

How long will it take you to replenish this money that you have withdrawn, or borrowed against, your 401K? If you borrowed it instead of just withdrawing it, of course that is a better option because of course you have then had to pay yourself back with interest usually with most plans, but even if you borrowed you have to consider this. While that money is out, you are less that amount out of your account, which means you have less “principal” in your account on top of which to build your earnings.

If you’ve ever heard of the concept of compound interest, then you know the value of having a large beginning amount in your retirement account, since the more money you have, the more the money exponentially builds “on itself” to create true wealth. Withdrawing this money through borrowing it is less offensive than taking it out and not repaying it as a loan, but you are still reducing your compound interest because you are reducing that money for a period of time, which means it’s not growing.

Withdrawing and not paying it back is a whole different, and much worse, animal since you are taking the money out and not replacing it. How long has that money taken to build up to where it is now, and how long do you think it will take for you to get it back up that high again? When I think of this, it makes me shudder, personally! To think that you have to start all over is scary, and this money is supposed to be protected in the event of bankruptcy, so it is wise to always see what your other options are before you dip in to your 401k money.

American’s Job Satisfaction Lowest in 30 Years

As I sit here, thinking about my job, and how at the moment I’m not exactly thrilled with it, even though I know I should be ecstatic just to have a job in the current economic climate we find ourselves in, I remember that I’m not alone. In fact, almost half of the Americans surveyed have indicated that their job satisfaction is low right now, and it’s the lowest it’s been in about 30 years.

Even though many things have improved over the years like working conditions, and many people have gotten considerable bumps in pay, increases to benefits (not that there haven’t been decreases too) and other fringe benefits like flexible work scheduled, there still is a general feeling of malaise toward one’s job here that is the pervasive feeling across America.

I think I may know the answer why, actually more than one answer, as I think that it is part of my own personal problem with my job right now as well. Because so many Americans have been laid off and lost their jobs, the rest of us that are left have had to pick up the slack, big time. In an effort to increase productivity and decrease work force, many companies have left the ones that are left with mounds of work, and, you guessed it, overworked and underpaid, the old cliche!

Not only that, but malaise toward one’s job also has a lot to do with the psychology of knowing that there really isn’t all that much out there if you did want to jump ship and try something new or just get a better gig. Just this alone kind of has a reverse psychology effect on us, and we tend to not like our jobs even more, even if we really would have had no intention of leaving it had the economy been better at the time.

I think another reason for dissatisfaction on the job is that many companies have cut back on the nice to have’s so that they can increase their profitability and cut costs. These nice to haves might be generous holiday or performance bonuses, parties, luncheons, freebies, fringe benefits, and regular health and dental benefits. When these little things start to fall by the wayside, employee satisfaction definitely suffers, and I think that all these factors combined created the perfect storm for widespread job dissatisfaction.

Returns Mediocre on Investments in 2010?

There are so many predictions and speculations running rampant today on what’s going to happen, not only with the economy in general, in 2010, the new decade, but what is going to happen with the stock market at large as well. We had such an odd year to say the least, with the unexpected, and certainly many think, as well as myself, unwarranted, rally in stocks that continued all the way to the bitter end of 2009, that it makes one wonder what will happen in the new year. Will this rally continue and stock prices continue to be inflated in relation to what’s actually happening out there in consumerland and the housing market?

While that is anyone’s guess, it is my educated guess, and of course my gathering of numerous other opinions of experts who have like minds, that the market will be soft this year. I don’t think at this point, like I did last year, that there is another impending huge dip in stock prices as there was in 2008 that devastated so many people’s retirement accounts, but I do think that we will not see any spectacular, meaningful movement in the stock market as a whole in the year to come.

There just isn’t enough underlying reason for this to happen. Think about it. Government spending has largely propped up many businesses, banks, and even the housing market, artificially by infusing money into them where consumers could not because of the ridiculous unemployment rates.

Further, these so called “improvements” in the housing market aren’t really improvements in large part. They are mostly because the foreclosure rates are so high, and because houses that are just sitting there, built, yet vacant, already written off by construction companies, aren’t even included in the housing numbers, so the numbers you see, I hate to break it to you, are largely not the accurate, true reflection of what is actually going on.

I don’t think you need to worry about stock prices totally collapsing as they did in the not so distant past, but don’t expect robust returns in 2010, unless we have some major marvelous recovery that no one could have predicted.

Too many employers are still trying to feel out the recovery, and since they’ve found numerous ways to boost production and efficiency, and profit, without hiring more people but instead doing it with the people they have, this does not bode well for a true, consumer driven and employment driven recovery, which means stocks will just remain artificially propped up and not actually grow like they should. Maybe you could find a good dividend stock or two and stick with that, it may be the safest bet for getting returns on your money for retirement.

McMansions : The Home Improvement Frenzy

I have seen the destruction that our mass delusion with what we think we can afford has done to people who have been driven out of their homes because they flat out cannot afford the mortgage payment first hand. It seems that this mass delusion happened all at once to the American people, and that we really didn’t quite understand or grasp the true consequences of our borrowing actions until it was too late.

Such is life though, and as they say hindsight is always 20/20. Well, now we know, and I hope that we don’t fall into this same trap again, but I still see residual problems with the “house poor” phenomena with a lot more frequency than I would have hoped for to be honest. As a matter of fact, I have to watch myself, because I started to get caught up in the frenzy of home improvement myself over the past few months. I’ll explain why in a bit.

When this really hit home for me was when a coworker of mine was showing me a million dollar home that she had her eye on for almost two years online .Of course, this was a dream home, a fantasy that she knew she could not afford, but nonetheless, it was fun to pretend like she was shopping, and it was fun to look at it. We oggled the home online for a few minutes, marvelling over the woodwork, the full finished basement with a kitchen, the brand newness of everything, and the luxury feel.

People really get sucked into this stuff, and I see why, because I do too. But too many people have been caught up in this frenzy of home improvement that is only made worse by watching shows like “My House is Worth What” on HGTV and all the improvements that people do, and having realty experts come in and tell you your home isn’t good enough because it doesn’t have granite countertops of stainless steel appliances. I felt like Susan Powter when I wanted to say “Stop the Insanity”.

Don’t get me wrong, I love my home and I want to do so many things to it it’s ridiculous. But you have to know when to stop. Don’t go getting a second mortgage loan just to finance new amenities when it may not even be a good investment. Really look at your budgets, and make sure your mortgage is affordable and whether you can really live without that home improvement before jumping into more debt for your home. Don’t get caught up in the keeping up with the Joneses crap in other words, you could be seriously sabotaging your family’s future wealth and security.

Cars : Keep It Til It Dies!

My motto with cars has pretty much always been “if it gets me from point A to point B, then I still love my car”. Especially if it’s paid off! And that’s what my current car is, still running and paid off for several months now. I own a 2005 Honda CRV, which is a small SUV type of vehicle that is fuel efficient because it is still a 4 cylinder vehicle and I think it’s even built on a Civic frame, it’s just that it has the body of a small SUV instead. Yes, many people have dubbed the CRV as a “chick car” but hey I could care less what it’s called, as long as it runs and it is paid off.

It’s been wonderful not having a car payment for well over six months now. I accelerated the payments on purpose for the life of the loan, just so that I could have it paid off before it hit 100 thousand miles, since I have a pretty long commute to work every day, and we tend to use my vehicle to go on long trips since mine is the more dependable vehicle between me and my husband.

But we don’t mind. We’re not people who have to have the latest fancy cars, we’re pretty practical, and if you read any of the “get rich” books, then you know that the people who accumulate true wealth are the ones that do things like keep cars that are paid off for several years instead of trading up to the latest and greatest models whenever they get tired of their car or it goes out of fashion.

If you read books or study how truly wealthy people behave, they really don’t blow their money on things like new cars and vacations all the time, but rather, they save as much of their money as they can, and they live off a small percentage of their income, stashing away the rest in investments and savings that yield returns. A lot of people are learning that with this recession, wealth is very easily lost, and they are paying dearly for lifestyles that have been largely funded by accumulating debt and easy credit rather than accumulating wealth.

In other words, they were paying everyone else before they paid themselves, as the author of Rich Dad Poor Dad says, or something like that. It’s truly sage advice, and keeping your car til it doesn’t run any more is one of the best pieces of advice I’ve ever taken.

Stores Exit Season with Bare Shelves

As predicted, most retailers have exited the holiday season with almost nothing on their shelves. They know better, they’ve been burned due to overstocking in the past, especially in the unpredictable job and economic climate we’ve found ourselves in lately, and had to let things go for next to nothing. Gone are the days of things being reduced down to eighty and ninety percent I suppose!

I went shopping a few days after Christmas, and was pretty shocked at how barren all the shelves looked. Even places that were huge retail outlets like Target and Wal-mart, didn’t have their usual volumes of clothes and other ticket items for Christmas time, so I was a little disappointed that I wasn’t really able to find all the awesome deals that I had been able to in years past. It was kind of a bummer, but at the same time, I understand and am glad that these establishments have it figured out so that they aren’t forced to close their doors, and God forbid we then suffer another downturn, perhaps more severe than the first because of that.

This means that people are starting to get the hang of the new economic reality, and that’s a good thing in the end. I do wonder how larger ticket items fared this Christmas season. It seemed that I was not seeing things like large exercise equipment and other typical large gifts that people might ask for as sort of a spoiler for themselves or for a loved on, go off the shelves (so to speak) like they have in years past. In fact, I didn’t even really see big ticket items like that advertised too heavily for this Christmas season either, so it doesn’t surprise me that they weren’t a hot seller.

However, the numbers do show that retailers have gotten bigger sales numbers this holiday than the last year, which is great news, and they actually had to bring in new merchandise to restock their shelves for the new year after Christmas, which is pretty unusual for this time of year.

The New Saver’s Mentality

If this recession has done one good thing, and infused one nugget of irrefutable wisdom into people who formerly were big time spenders who never looked at price tags and foresaked a potential gorwing life savings in pursuit of material products, services and high faluting lifestyles, then that is good for those people who really didn’t think about saving for the future or the true value of money and the fleeting nature of the material goods it can buy. People like this have been changing their ways since the recession for one simple reason.

They really had to do it not only to survive, but as a wake up call that millions of retirees lost billions of dollars in the financial crash, and they they too could have that happen, and what if they had nothing to fall back on when they were older and retired? This idea literally scared sense into millions of people, and the reports are showing that more and more Americans are turning to saving their money.

Savings has been at a multi year high lately as more people turn to putting their money away in safe places and giving up expenditures they no longer find are a necessity. People old and young have really re-prioritized their money, and this has lead to an all time savings high, and investing high that cannot be matched except for in times of learning the real value of money and security.

Now, with the new year, financial planners and stategists have had even more people coming to them for their “New Year’s Resolution” to help them save more money and perhaps more strategically plan to build it more effectively over the crucial years before their impending retirement. Not only retirement, but many people are now interested in things like emergency savings accounts for when things are a little tight or when things go awry again in the financial markets as a sort of “just in case” measure.

Also, more and more citizens are trying to cut costs where they can. People are doing things like cutting out all the unnecessary cable channels on their cable subscription, taking a hiatus from the gym and gym fees and working out at home or finding other creative ways to get their exercise in for virtually free. They are also looking at ways to scale back on insurance premiums, any monthly bills by cutting down heating costs and water costs for example, or looking for competitive prices on services like that.

One of my savings things has been to make sure my paid off car stays in great shape, so I take it in for preventive maintenance, because after all, that’s much cheaper than a monthly care payment. Where have you cut back on your budget?

Managing Credit Cards Around Christmas

Sometimes, especially if your company happened to cut back on holiday bonuses, or worse, but them out all together as many companies have done as of late with the financial conditions in this country, it can be extremely hard to budget for the spendy holiday season without pulling out the credit cards. We all know that it’s fine and dandy to pull out the plastic – as long as you plan on repaying it almost immediately to avoid that all too sinister finance charge that nails ya every time you pull out a credit card without full intent to pay it off before the interest charges kick in.

Credit card companies are not only increasing their interest rates for people all over the place, but they are also increasing their minimum payments per month, which is putting a lot of people under duress since they can barely afford the payments to begin with. Of course, Congress is attempting to minimize the inequitable practices by creditors in this fashion, but many people are actually seeing things get worse before they get better because the legislation keeps getting stalled.

In fact, as we speak now, I’m not even sure that they’ve enacted the pieces of legislation that are needed to help stop the unfair practices and help Americans get back on their feet quickly who are drowning in unfair financial debt that could be helped by more fair terms from their creditors. After all, what is “fair” I wonder, when it comes to financing American’s lives?

Since I’ve been through the wringer with the mortgage refinance process, I’ve often wondered what, if anything, is fair when it comes to a financial institution financing my mortgage. When you look at the incredible amounts of money they collect from you over the years, coupled with the time that it takes you to fall far enough behind that they can take your house with no questions, then you have to look and say “I don’t think this is really fair after I’ve made so many thousands of dollars in interest payments over how many years”.

And also, couple that with the PMI and the other fees you get stuck with, and buying a house is the most expensive thing you’ll do in your life, and it’s only offset by the fact that mortgage interest is tax deductible, and that you’re going to own something in the end, but no without paying a ton of money in interest first.