I was saddened to read of a 93 year old man who froze to death in Michigan because the utility company shut off the power to his house. Like 87% of those who answered the AOL poll, I believe that the utility company was wrong in taking this action. The next thing that comes to mind is why didn’t the neighbors do something. In another AOL poll, 63% said they check on others in their neighborhood that might be in need of occasional assistance.
This tragedy can be viewed from another angle. Did the deceased have any responsibility? It seems likely that he did. There are numerous options available for those who can’t pay their utilities. Utility companies have entire departments devoted to setting up payment plans for those who are unable to pay. There are social service agencies available to help and they would surely have provided assistance in this case. It is likely that the deceased was trying to maintain his independence when he was no longer capable of doing so. I have seen numerous examples of this. It is unrealistic to expect neighbors and family members who may live considerable distances away to take responsibility for our care. I have had two circumstances when I was able to get elderly family members moved to more convenient locations in the nick of time.
I understand the desire to maintain our freedom and as a 70+ year old, I shudder at the prospect of losing mine. If that time comes, I only hope I have the presence of mind to do the right thing and not prevail on others to do what I no longer can do for myself.
A Different Sort of Post. I am trying something different. Sure, there are financial things to discuss, some of which could be construed as more political than financial (the so-called stimulus package). Unfortunately, it is sometimes difficult to separate the two since each one has a profound interest on the other. In my next post, I will get back to finance and such topics as managing your mortgage, paying off your house, and reverse mortgages.
Returning To Colorado For a few days in February. Not sure of the exact schedule but I will post it here as soon as I have made reservations. Send me an e-mail, call me in Texas, or call Susan if you would like to schedule an appointment.
Thursday, January 29, 2009
Monday, January 26, 2009
.MEET MY NEIGHBORS.
These Are Stressful Times. Oil prices falling and gasoline prices rising. Markets are up 200 points one day and down 400 points the next. Solid companies like Pfizer cut dividends in half; and the new president warns us that it will get worse before it gets better. With all this going on, it's hard to keep my blood pressure out of the stratosphere. I need to remind myself to go down to my happy place and talk to my neighbors. May we all have a happy place.
Monday, January 19, 2009
REBUILDING YOUR WEALTH.
Steps You Can Take. Looking at a year ago, who could have predicted the chaos which 2008 brought? I reviewed some of my older posts and as early as May of 2007, I wrote "Beware The Receding Tide." In that post, I warned that some of our previous investment success was more likely related to the strong markets than our ability to predict the future. While I am glad that I had some inkling as to the difficulties that we were likely to face, I have to admit that these difficulties were far in excess of anything I could have foreseen. I am now reminded of an old adage that I have tried to live by: "The ability to bounce back from unforeseen events is of much more value than trying to predict these events. So what steps should we take to protect and rebuild our wealth in the future?
1. Take Responsibility. A lot of people made mistakes that created the current chaos in the markets. Realize that much of the blame lies with those of us who insisted on buying more than we could afford, even if we had to borrow in excess to do it. Realize that you may be part of the problem and resolve to do something about it instead of waiting for others who "broke it" to get around to fixing it.
2, Look At Ways To Reduce Your Expenses. This is the safest way to build wealth. I have known several individuals who left the workforce way before their peers. Most of them will tell you that financial freedom is more about what you spend than what you earn. Cutting $300 a month from your living expenses is equivalent to having an additional $90,000 to invest at a safe rate of 4%.
3. Manage Your Debt. All debt adds risk to your life. Look at mortgage payments, car payments, credit cards, and consumer debt. A car loan at 6% seems to make sense but if you realize that you have to earn $840 before taxes to make a non-deductible $600 car payment, it makes less sense. Look at your mortgage loan. Now is probably the best time to convert adjustable loans to fixed rates. Regarding making extra payments on your mortgage loan, this is only a good strategy if you have no non-deductible debt.
4. Look at Every Investment Asset In Your Portfolio. What was your goal when you bought it? Has this goal changed? Is the investment still likely to help you accomplish that goal? If it has dropped in value, how likely is it to rebound in the future? Are you holding it just because selling it would be to admit that you were wrong when you bought it? Can you best recover your loss by selling it buying something else?
5. If You Are Retired Consider Part-Time or Temporary Work. A little extra earned income never hurt anyone. Our grandparents often retired because they were physically unable to work. Most of us are in much better health than our grandparents were at this age. We will certainly live longer than they did; therefore, we require more capital to fund our retirement than they did. Going back to work may sound like an extreme measure; however, these are difficult times and may require us to do some things that we haven't considered in the past.
5. Be Patient. Just as we didn't know how fast the value of some of our assets would drop, we don't know how fast they will recover. We are operating in an environment that we have not seen for decades and there is no sure-fire way to protect yourself.
1. Take Responsibility. A lot of people made mistakes that created the current chaos in the markets. Realize that much of the blame lies with those of us who insisted on buying more than we could afford, even if we had to borrow in excess to do it. Realize that you may be part of the problem and resolve to do something about it instead of waiting for others who "broke it" to get around to fixing it.
2, Look At Ways To Reduce Your Expenses. This is the safest way to build wealth. I have known several individuals who left the workforce way before their peers. Most of them will tell you that financial freedom is more about what you spend than what you earn. Cutting $300 a month from your living expenses is equivalent to having an additional $90,000 to invest at a safe rate of 4%.
3. Manage Your Debt. All debt adds risk to your life. Look at mortgage payments, car payments, credit cards, and consumer debt. A car loan at 6% seems to make sense but if you realize that you have to earn $840 before taxes to make a non-deductible $600 car payment, it makes less sense. Look at your mortgage loan. Now is probably the best time to convert adjustable loans to fixed rates. Regarding making extra payments on your mortgage loan, this is only a good strategy if you have no non-deductible debt.
4. Look at Every Investment Asset In Your Portfolio. What was your goal when you bought it? Has this goal changed? Is the investment still likely to help you accomplish that goal? If it has dropped in value, how likely is it to rebound in the future? Are you holding it just because selling it would be to admit that you were wrong when you bought it? Can you best recover your loss by selling it buying something else?
5. If You Are Retired Consider Part-Time or Temporary Work. A little extra earned income never hurt anyone. Our grandparents often retired because they were physically unable to work. Most of us are in much better health than our grandparents were at this age. We will certainly live longer than they did; therefore, we require more capital to fund our retirement than they did. Going back to work may sound like an extreme measure; however, these are difficult times and may require us to do some things that we haven't considered in the past.
5. Be Patient. Just as we didn't know how fast the value of some of our assets would drop, we don't know how fast they will recover. We are operating in an environment that we have not seen for decades and there is no sure-fire way to protect yourself.
Wednesday, January 07, 2009
LOOKING FOR OPPORTUNITY?
A Quote From Dan Reeves. "We take what the defense gives us." While I must apologize to those who have less than fond memories of Dan's tenure as coach of the Broncos, this statement has stuck in my head for the past 20 years. I'm not much of a football fan but it definitely applies to the financial markets. Where are the opportunities in this market? Although there may be some in both the stock market and the real estate market, these uncertain economic times make investments in this area anything but a certainty. There is one opportunity out there where investment success is a sure thing: The opportunity to lower your borrowing costs.
Now I know I've been counseling readers to pay down or eliminate debt but this mainly applies to consumer debt. Because of the lower cost and tax deductibility of mortgage debt, the decision to retire the debt on your home mortgage should be made only after careful planning and analysis (perhaps that should be the subject of another post down the road). For most of my clients paying off the mortgage on the family home is not an option due to lack of funds. Everyone else needs to take a careful look to evaluate their current mortgage against others that are available out there.
Many Will Miss Out On This Opportunity. Here are some reasons why. 1. The hassle factor. The press of other business keeps many borrowers from taking the time to deal with this issue. It's not like placing an order online to acquire a listed stock; however, the process is much less cumbersome than it was five years ago. While credit standards and income requirements have tightened in recent months, it is still relatively easy for a qualified borrower to re-do a mortgage. 2. Greed. Everyone wants the lowest possible rate in the marketplace. The first question we are always asked is how low we think rates will go. Anyone who has followed this blog knows that we don't really know; however, I can tell you right now that I believe the current low rate environment can's last. With record deficits and huge government borrowing almost a certainty, it appears logical that interest rates will only go higher from here. Waiting for 4.75% instead of five carries a high risk that you will miss out on the opportunity altogether. 3. Reluctance to pay closing costs. Most everyone believes that closing costs are a rip off. Some mortgage lenders help perpetuate this myth by advertising no closing cost loans as an advantage they offer over other lenders. Virtually any lender can advertise zero closing costs just as any lender can offer very low rates. Both are available, just not in the same loan. The trick is to choose the right combination for you. 4. High Expectations. Many borrowers turn up their nose at an opportunity to save a relatively small amount of money like $120 a month. I might remind them that a low risk investment that produces $1440 per year at a return of 6% is worth $24,000. Even worse, there are no low risk investments that produce a 6% return in this market. Since 1980, my main business activity has been counseling borrowers in managing their largest liability. I have been well paid for this advice. I am offering my readers, at no charge, an analysis of their mortgage situation and recommendations as to the best course of action for managing this liability. Simply send me an e-mail or call my office (720)449-0200 and ask for Susan. She will tell you how to contact me by phone.
Gasoline Prices Up Again Already. A week ago, I warned that this would happen. Russia has cut off natural gas supplies for many homes in Europe and Iran and Venezuela are jaw boning for lower oil output in response to the renewed hostilities between Israel and Hamas . Keep your powder dry (stay liquid) and keep your eye out for opportunities. I will try to keep you informed as to prudent strategies.
Now I know I've been counseling readers to pay down or eliminate debt but this mainly applies to consumer debt. Because of the lower cost and tax deductibility of mortgage debt, the decision to retire the debt on your home mortgage should be made only after careful planning and analysis (perhaps that should be the subject of another post down the road). For most of my clients paying off the mortgage on the family home is not an option due to lack of funds. Everyone else needs to take a careful look to evaluate their current mortgage against others that are available out there.
Many Will Miss Out On This Opportunity. Here are some reasons why. 1. The hassle factor. The press of other business keeps many borrowers from taking the time to deal with this issue. It's not like placing an order online to acquire a listed stock; however, the process is much less cumbersome than it was five years ago. While credit standards and income requirements have tightened in recent months, it is still relatively easy for a qualified borrower to re-do a mortgage. 2. Greed. Everyone wants the lowest possible rate in the marketplace. The first question we are always asked is how low we think rates will go. Anyone who has followed this blog knows that we don't really know; however, I can tell you right now that I believe the current low rate environment can's last. With record deficits and huge government borrowing almost a certainty, it appears logical that interest rates will only go higher from here. Waiting for 4.75% instead of five carries a high risk that you will miss out on the opportunity altogether. 3. Reluctance to pay closing costs. Most everyone believes that closing costs are a rip off. Some mortgage lenders help perpetuate this myth by advertising no closing cost loans as an advantage they offer over other lenders. Virtually any lender can advertise zero closing costs just as any lender can offer very low rates. Both are available, just not in the same loan. The trick is to choose the right combination for you. 4. High Expectations. Many borrowers turn up their nose at an opportunity to save a relatively small amount of money like $120 a month. I might remind them that a low risk investment that produces $1440 per year at a return of 6% is worth $24,000. Even worse, there are no low risk investments that produce a 6% return in this market. Since 1980, my main business activity has been counseling borrowers in managing their largest liability. I have been well paid for this advice. I am offering my readers, at no charge, an analysis of their mortgage situation and recommendations as to the best course of action for managing this liability. Simply send me an e-mail or call my office (720)449-0200 and ask for Susan. She will tell you how to contact me by phone.
Gasoline Prices Up Again Already. A week ago, I warned that this would happen. Russia has cut off natural gas supplies for many homes in Europe and Iran and Venezuela are jaw boning for lower oil output in response to the renewed hostilities between Israel and Hamas . Keep your powder dry (stay liquid) and keep your eye out for opportunities. I will try to keep you informed as to prudent strategies.
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