Money Smart Skills: Resisting impulse buying
Nothing will derail your money smart plan like impulse buying. There you are on track to reduce your debt burden when your dream horse(car, house, farm, saddle) becomes available at a great price. My friend and I both had this experience last week and together we managed to resist our old impulse buying habits.
My friend is moving cross country and had just reduced her horse herd to 2. She got a call from a neighbor who was forced to sell his good horse at a very reduced price. Knowing that the same horse would cost about 5 times as much under normal circumstances she was very tempted. As she and I discussed this we tried hard to stay rational in evaluating the pros and cons.
Pros
Great horse
Great price
Cons
Extra horse to haul cross country
Extra bills for feed and shoeing
Money out or her emergency fund
Extra chores to care for new horse
Sanity prevailed and my friend spent the afternoon appreciating her 2 current horses.
In my case, I did not find a horse but a saddle. All last year I looked for a saddle just like this one and it was very fairly priced. I really wanted this saddle but I knew I was not willing to increase my debt burden or dip into my emergency fund to get it. I thought about what I could do to afford the saddle without derailing my money smart plan. I determined that I could sell another saddle that only fits one on my horses and I recently sold one of my goats and I had that money.
Unfortunately, as I was making all my plans, the saddle sold. I am disappointed and at the same time certain that sticking with my money smart plan will allow me to buy as nice or a nicer saddle in the future. Having friends who support you in becoming money smart is important. Disappointments today will become celebrations in the future. Madalyn
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Money Smart Skills: The Power of a Mastermind Group
A coach can be essential in developing money smart skills but a different kind of power can the found in creating a mastermind group.
“Economic advantages may be created by any person who surrounds himself with the advice, counsel, and personal cooperation of a group of men who are willing to lend him wholehearted aid in a spirit of perfect harmony.”
These are the words of Napoleon Hill in his classic book, Think and Grow Rich.
Coaching is one person working to help another achieve his goal but when two or more minds come together with the intention of a single goal then according to Hill, this creates a psychic power known as the third mind. With the mastermind group each person contributes his or her knowledge which creates a vastly greater overall sum of intelligence.
It is this process of working together in harmony, towards a common objective, that opens up the mastermind group to the source of Infinite Intelligence. Although Napoleon Hill did not say this I choose to call this power, God.
God wants us to turn to him for guidance but we can only receive from Him through the information we have accumulated in our life experience. By getting a money smart coach, God can give you additional information through your coach and this can be valuable expert knowledge. When you create a mastermind group you increase the intelligence of the third mind and increase the power of intention on the single shared goal. The mastermind group allows God to work through a wide range of intelligence and the increased energy moves an intention forward.
A mastermind group can:
Expand the knowledge base
Increase the power of intention
Shorten the time required to reach a goal
Open many channels for God to work through
Results from a mastermind group may not happen instantaneously but they will happen if you stay together, organized and focused. Ask yourself who shares your common goal and get a mastermind group working. You will be amazed. Madalyn
To join one of my passive income mastermind groups contact me
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Money Smart Skills: Understanding good or bad debt burden
Yes, some level of debt burden can be valuable when understood and managed well. There are some clear rules for good and bad debt burden, but also some gray areas. Pretending debt is not important or that it is all bad is not money smart thinking. Although it takes some effort, our quality of life is hugely affected by how well we understand these differences.
Rules for bad debt: What money smart people avoid
Do not accrue debt burden for the purchase of liabilities such as a car or other non income generating item such as a vacation, swimming pool etc.
Do not use credit to cover monthly living expenses.
Do not use credit to gamble or make risky investments
Rules for good debt: What money smart people use to their advantage
Do use debt to leverage your money when investing in income producing assets such as rental property or a home based business
Do use debt when avoiding it could end up costing much more. For example, use credit to spread out repair expenses such as a leaky roof or a leaking radiator.
Do use debt for the purchase of inventory that can be sold for a profit before the debt becomes due.
Do use debt for the purchase of equipment that generates cash flow well over the payments.
Gray areas between good and bad debt: Even money smart people struggle here
Mortgage debt burden is a true gray area. Money spent of rent does not generate any equity but home ownership has more responsibility attached than simple mortgage payments. Mortgage interest is tax deductible and equity does build over time with home ownership. There are formulas available to help you evaluate all the expenses involved with home ownership. Be sure and do your homework before taking on mortgage debt.
Business expenses that don’t directly generate income such as continuing education, licenses, legal fees and client entertainment are gray areas in debt burden. In theory these expenses should be budgeted for but there are occasions when accepting short term debt is offset by the value of the expense. For example, late fees for licensing can be quite high and legal advice or services can save significant money down the line.
Home improvements that increase property value. Spreading this debt over the life of a loan may pay off big time when you put your property on the market. Make sure the entire expense, including interest, is covered by the increase in sale price.
Debt burden is a complicated subject and our lives would be much simpler if we did not have to worry about it. Unfortunately, burying our heads in the sand won’t make debt burden disappear. Evaluate debt burden and set a course to eliminate that which is bad. Life will improve dramatically. Madalyn
Hope is not a strategy when it comes to reducing debt. Increasing you cash flow monthly can help your pay down a bad debt burden. Contact me for thoughts about how you can create passive income and get out of debt.
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Refinance Now! – Ensure an Honest Mortgage Lender
Guest Post: Gina Pogol
Everyone expects their mortgage lenders to check up on them. But how many borrowers investigate their mortgage lenders? The cases in Florida show that even people convicted of violent felonies or crimes like money laundering and fraud can worm their way into mortgage lending. You don’t want felonious financial fraudsters messing with your refinance mortgage or new home loan, do you?
No worries–just use these top tips to make sure that your refinance lenders are on the up-and-up.
Tip #1: Don’t Be Paranoid
Even if you do nothing, the odds are good that you’ll get an honest mortgage lender or broker. If you check out the FBI’s Web site, you’ll see that your lender has more reason to be afraid than you do–the vast majority of mortgage fraud at the federal level was committed by borrowers against lenders. Real estate experts concur:guru Robert Bruss and industry news site Realty Times both state that, while there are bad guys out there, in most cases you’ll end up with an honest mortgage lender.
Tip #2: But Don’t Be Stupid
Doing nothing is easy, but doing something isn’t that hard. And identity theft is such a buzz kill. So smart shoppers (that’s you, right?) take a little time and vet their lenders before they refinance a mortgage or buy a new home.
Tip #3: See How Tough Your State Is
Some states are vigilant about who gets into mortgage lending and who doesn’t: they conduct background checks and require that loan officers take classes, including ethics training, and pass exams before they can be licensed. Continuing education is also likely to be required every year. Other states license anyone with a heartbeat who can pay the fee. TrainingPro provides loan officer licensing training and lists state-by-state requirements for mortgage loan officers and brokers. If you live in a “heartbeat and fee” state, know that a license means very little and that you will probably want to dig deeper.
Tip #4: Check Your Lender’s Licensing Status
Most states offer lender databases, which you can find online. You can check these databases to determine if your lender is licensed to do business with you, and to see if there are pending investigations, code violations, or consumer complaints. Your local Better Business Bureau may also have information on your mortgage lender.
Tip #5: Get Quotes from Several Mortgage Lenders
This is the most reliable way of making sure that you are being offered a fair and realistic interest rate. Making lenders compete flushes out the ones who routinely overprice mortgages or steer borrowers into more expensive loans. You’ll also be able to spot abnormally low rates; just know that until you have an interest rate locked, nothing these low-ballers tell you represents a commitment to refinance your mortgage.
Tip #6: READ Your Disclosures (Your Eyes Won’t Fall Out)
Anything in writing trumps the word of a loan officer or mortgage broker. Starting on January 1 this year, disclosures became easy to interpret–everything you need is front and center, with no burrowing through piles of riders and boilerplate to find nasty fine-print boogers. In addition, whatever terms are on that final disclosure (usually received when you lock in your interest rate) are the terms you close with, within certain tolerances. Ugly surprises at closing are now illegal.
Tip #7: Use the Right of Rescission
Mortgage refinances on primary residences don’t close until three business days after you sign your final documents. You have that time to back out of the loan if you get buyer’s remorse–just do it in writing. Use that time to make sure your refinance loan is what you expected.
Tip #8: Be Nice to Your Lender
A good mortgage professional is someone you can trust with a large financial transaction. You’ll discuss personal stuff–money, credit, life plans–and take advice from this person. You’ll expect a high level of service–promptly returned calls, careful explanations, expert guidance–and hopefully together you’ll celebrate the successful conclusion of a profitable mortgage refinance.
Article originally published at HSH.com
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Money Smart Skills: Refinancing: Save Money Five Ways
Article originally published at HSH.com
If your current mortgage rate is above 5%, you can probably save by refinancing to a lower interest rate. To maximize your refinance savings, look into these five ways to get discounts on your mortgage lender fees, title and escrow charges and interest rate.
1. Refinance with Your Current Lender
Your current lender might be able to save you some money on a refinance, if it is willing to offer you a competitive deal and if it is in a position to waive some processes and fees. If the lender that funded your mortgage still owns and services it, you have your best chance for achieving some savings — perhaps in the form of waived origination, appraisal, processing, credit or closing fees. However, your lender may not be all that anxious to replace your 6.5% mortgage rate with a 4.75% rate. If your current lender comes to you with a refinance offer, be sure to get a Good Faith Estimate (GFE) showing exactly what interest rate it’s offering and what fees will be charged. Typically, mortgage lenders offer their current customers low-cost refinance deals to keep them from going elsewhere, but the rate could be higher than what you can currently get on the market. Yet many homeowners accept it because it’s easier than going elsewhere.
To get your best deal with your current lender, shop with other mortgage refinance lenders first. Get some GFEs to compare the costs involved. Then, contact your lender to get your mortgage payoff amount. Most mortgage finance companies have retention programs that are triggered by a “request for payoff;” odds are that you’ll be promptly contacted by your current lender with an offer to refinance. Let whomever contacts you know that you have been offered a competitive interest rate to see if they can do better.
2. Try to Refinance Through the Home Affordable Refinance Program (HARP)
If you last refinanced a couple of years ago and have a “conforming” mortgage (one eligible to be sold to Fannie Mae or Freddie Mac), you may be surprised at the risk-based pricing adjustments that mortgage lenders add on these days. This is especially true if your loan-to-value ratio is high, your credit score is less than 740, you want to draw cash out, you own a condominium or manufactured home, the loan is for an investment property or second home, you need a loan with interest-only payments, certain ARMs or 40-year terms. The cost or combination of these costs may shock you. In the past, a credit score of 680 was easily high enough to get you approved for a prime mortgage rate. Today, it could get you approved, but you could end up paying several thousand dollars in pricing adjustments. With a HARP refi, however, you can still refinance to a lower rate, even if your home value and credit score have slipped a bit. As a bonus, the additional fees are limited to 2% of your loan’s value. However, your loan needs to be owned by Fannie or Freddie in order to qualify, but luckily, millions of loans are.
3. Ask About a Fannie Mae Streamline Mortgage
Fannie Mae is expected to offer some form of streamlined refinance for borrowers with Fannie Mae loans by April 2010. To be eligible, you need to be approved through the same Desktop Underwriter (DU) software that it uses to underwrite HARP refinances; however, you’ll need 20% equity in your home to take full advantage of discounts through the program. Ask your lender about Fannie Mae’s DU Refi Plus when you’re shopping for your mortgage refinance. If your current mortgage is guaranteed by Fannie Mae, you may qualify for a cheaper refinance.
4. Get a Short-Term Rate from Your Title Company
Title insurance companies offer various discounts for title insurance and escrow services, such as for first-time buyers, senior citizens, people in certain professions, a “short-term rate” for a property that has been resold or refinanced within the last five years, or a subdivision bulk rate for homes purchased in a new subdivision. Title companies may also offer a discount when both a lender’s policy and an owner’s policy are purchased at the same time. Discounts generally range from 5% to 30%, but you have to ask for them. Again, shop with a few title companies before checking with the one covering your current mortgage to see if its short-term rate is an improvement over other companies’ rates.
5. Try a Shorter Mortgage Term
If you are willing to take on a 15-year mortgage, you can get an interest rate about half a percent lower than the 30-year rate. If you have already been paying down your mortgage for a number of years, your mortgage payment may not even increase by that much. For example, if you took out a $400,000, 6.5% mortgage eight years ago, your principal and interest payment is $2,528 per month. By refinancing your $354,627 balance at 5% on a 30-year loan, you’d get a new payment of $1,904 — but it will take eight years longer to retire your mortgage. By refinancing to a 15-year mortgage at 4.5%, your payment would be $2,713. While your monthly payment would be $185 more, you’ll pay off your mortgage in just 15 more years — or seven years less than your original 30-year term. Another way to take advantage of a shorter term and lower rate is to refinance to a 5/1 ARM (a loan that comes with a fixed rate for the first five years then converts to an adjustable rate each year after that). Rates on 5/1 ARMs are typically 1% lower than for 30-year fixed-rate mortgages. The payment on that $354,627 at 4% is $1,693, or $211 a month less than the 5%, 30-year loan, for a savings of $12,660 over five years. However, you may be exposed to higher interest rates and payments when the five-year period ends.
It’s not enough to get a lower interest rate if you want to maximize your savings with a mortgage refinance. Getting the best rate with the lowest fees involves comparison shopping, asking the right questions, selecting the most appropriate mortgage term and perhaps even a little gamesmanship with your current lender.
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Money Smart Skills: How to plan for the future
These are exciting times we live in. Right now, in the midst of a major recession economy, you can make a plan for your future. Developing your money smart skills to focus on increasing your cash flow monthly will keep you in solid control of your financial destiny.
Here are three money smart skills to consider:
Look for trends!
Focusing on what is currently happening will not change your future. You have to look ahead. For instance, interest rates are at historical lows right now. It is tempting to think that they will stay low but history tells us that what comes down must go back up. When looking at taking out a new loan or refinancing now would be a great time to lock in at a low rate. A money smart person would resist the temptation of lower payments from an adjustable rate mortgage because they would be making a plan for the future.
We are also in a deflationary phase with the dollar right now. Prices for houses and other items of true value have dropped. I have rental property and the value has dropped and part of me wants to panic and sell but because I have learned the money smart skill of looking for trends I plan to keep my property until the prices trend back up. As long as my house stays rented it will bring me cash flow monthly regardless of how it is valued.
For those in business, study of trends can make or break your future. When a business correctly recognizes a trend it can get a jump on the competition. Right now there is a large movement of people into home based businesses. Companies are downsizing so jobs are scarce and many people do not want to commute to work every day. Personal computers allow individuals to reach large audiences without having a huge advertising budget. Even people with a secure source of income are seeing the benefit of additional cash flow monthly to make ends meet and to have money to plan for their future.
Budget for today, save for your future!
This sounds so simple but in our current recession economy it is not so easy. Chances are your money is already running out long before you pay for everything now, much less having anything left over to plan for the future. Money smart planning would be to get your head out of the sand and cut every possible expense you can right now.
Our government has poured literally trillions of dollars into our system to combat the recession economy and the bill for all this spending will have to be paid. At the same time you are cutting every expense you will need to increase your cash flow monthly. Plan to put your head down and work some extra hours to build a home based business.
Use the extra money to pay down your debt and then invest in assets to bring you more cash flow monthly. As a hedge against inflation, rather than saving money only in the bank or in other paper assets like stocks, you will want to hold a certain sum in precious metals such as silver. Hold a portion of these in physical form, not only in paper form such as exchange traded funds. Silver is a liquid asset that you exchange for cash if needed but it is not as easy to squander as paper currency. Silver is a metal used in industry so it has value other than as money and it is not as prone to speculation as gold.
Increase your money smart skills!
Your level of financial education will absolutely determine your future. Seek advice and guidance from professionals and successful money smart people. Not all financial advisers are actually successful investors themselves nor is everyone who writes a book or blog. I am blessed to have a very talented financial adviser in Neil Walters at Ameriprise Financial. Neil can be contacted at 512 314 5340. Much of the information I am sharing today is out of the monthly newsletter his firm sends out. I am also a huge fan of Robert Kiyosaki and his cash flow monthly principles.
The recession economy is a bummer but also an opportunity for money smart people to make plans for the future. The steps you take today will determine what the rest of your life looks like. Madalyn
Want to look at a good home based business model. One that actually follows a proven system and yields consistent results! Contact me.
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Money Smart Skills – restoring cash flow monthly
The last few months have been interesting. I was riding high in early April thinking I was close to having my debt from extra house building expenses almost paid off. I was dreaming of all the money smart plans I had for that extra $1300 I had been paying each month for 2 years to clear this debt.
From this positive place I decided to invest in my future money smart skills by signing up for the Kiyosaki Rich Dad education coaching course. The charge for this year long coaching class was $8000 which did not seem that high to me based on what I usually spend each year for my veterinary continuing education.
No sooner had the ink dried on the check when my financial utopia evaporated. First a call from my property manager said my renter had skipped out. Then my income tax bill came in twice what I had budgeted for and if that was not enough I had some major unexpected car repairs.
I am so blessed to have been exposed to some good financial training so I could deal with these setbacks. Instead of burying my head in the sand I set out to raise my cash flow monthly and cut expenses.
Here are the steps I took:
I took some extra veterinary work which brought is some extra cash flow monthly
I increased my prospecting efforts in my network marketing business
I cut back my direct TV channels
I had the needed repairs done on my car and sold it and started driving my truck full time
Since the car was sold, I was able to cancel the insurance on it
I was able to do a loan conversion to drop my mortgage by .5 point which saves me $120 a month in my payment
My webmaster worked with me to shift some of her work to an apprentice who charges less and can do the less skilled tasks. This is saving me about $200 a month.
I consolidated all my remaining credit card debt onto my bank credit line at a short term 3.3% interest
With all these efforts I am still $19,000 in debt but, with my lower monthly expenses and increased cash flow monthly, I have a plan to pay this off within 1 year.
My rental property now has a new tenant. My network marketing business is growing and I am getting a good education in my Kiyosaki Rich Dad education course. I am so blessed to have several sources of income and control over my cash flow monthly as well as financial mentors to turn to. Madalyn
Check out this post: Cash flow monthly verses a pay check
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Money Smart Skills: Understanding the hidden damage of financial stress
Sleepless nights, irritability, stomach ulcers, depression. All these symptoms are common to those suffering from financial stress. Over due bills, debt, lack of savings, unexpected repair bills, high college tuition are typical triggers for physical stress related maladies, but,
What about the less obvious damage that occurs from financial stress:
Disappointment in your kid’s eyes when you missed his birthday party because you had to work overtime
Regular frustration from working at a job you hate because it pays the bills
Less robust health from eating only conventionally grown food because organic is more expensive
Weight gain from skipping regular exercise because you are too tired
Chronic health challenges that could have been avoided with buying good nutritional supplements and better eating habits
So even if you can pay your bills, don’t have debt, ulcers or clinical depression you may still suffer from financial stress that is less obvious. An extra $500 of cash flow monthly could shift you into financial peace. Helping a few other people have financial peace can bring you financial freedom.
A home based business that can be built along side your current source of income is what many Americans are choosing to relieve financial stress. A home based business can be started with a minimum investment and can grow as big as you are willing to grow it. Think about it. Madalyn
Can you see the power of a home based business?
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Money Smart Skills: Being willing to work today for someday money
Money smart business owners understand the concept of working hard now for money that will come someday in the future. Patience is one of the most important money smart skills and also one of the hardest to develop. We live in a world of instant gratification and waiting for many people is not an option.
Building a business is all about working hard now for what you will reap someday. In most cases that someday is not well defined or completely in the control of the business owner. It takes someone with an entrepreneur spirit of adventure to work hard to lay the foundation of a business and wait for the payback but this is exactly what makes money smart people wealthy!
Business building activities that don’t generate immediate income:
Building a brand or reputation
Finding the best location or building the best website
Developing a product
Marketing a product
Hiring employees
Building infrastructure such as purchasing equipment and setting up utilities
Finding financing for start up expenses
It is pretty obvious why many people don’t jump right out and start their own business but what if most of these business building activities were already in place? A franchise is an example of a business that has much of the initial work done. Network marketing is another example with a much lower start up cost. Both of these business models are very profitable for the money smart person willing to put in the effort now for someday money.
You can always forget about ever being wealthy and just do what you are already doing that pays you right now but offers little hope for the future. Or with the money smart skill of patience you can start now, even as you continue with your current job or profession, and build a business that will someday allow you to live your dreams. With the right company and support team that someday could be much sooner than you think. Take you first action today and contact me. Madalyn
Along similar lines check out the post: Want it, See it, Do it.
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Money Smart Skills: What to do with extra cash flow monthly from your home based business
As you build your home based business, you will have extra cash flow monthly after you cover your expenses. How you handle the extra income will determine if you are able to advance to true financial freedom.
Money smart people reinvest extra cash flow monthly back into their business until the business is solid and growing at a steady pace. Money smart people resist the temptation to spend extra cash flow monthly on non business related expenses such as a new car or other luxury.
Money smart people realize that as they build their home based business they are building an asset that with time will buy them financial freedom. A home based business not only brings in extra cash flow monthly, it also provide tax savings each month in the form of business related deductions.
Money smart people understand that in the early stages a home based business does not bring in large amounts of cash flow monthly but if these modest sums are saved and invested with a long range plan, financial freedom is the result.
For example, say your income from your home based business combined with tax savings increases your cash flow monthly buy $500. You could spend this extra money on a new car payment or other luxury or you could use it to advance your financial freedom plan using the steps below.
Money smart ways to handle extra cash flow monthly:
Reinvest in your business for marketing, business training or infrastructure
Pay down debt
Invest in additional assets such as real estate, commodities or the stock market
Once your cash flow monthly from you investments surpasses all you monthly expenses you are financially free and you can spend any additional cash flow as you please. Not only that, you can choose whether you want to continue working in your business. This is the way money smart people think and plan their lives. Madalyn
Check out this blog: Invest in assets
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