Tuesday, July 6, 2010
ING Sharebuilder
A few months ago I began investing with ING because of their $4 a trade deal. There is one stipulation, you must invest on a Tuesday. I had been placing $100 in three different accounts each month at a fee of $4x3=$12. Recently I decided to change to one account at $300 each month and save $8. I feel so stupid for paying $8 extra dollars each month.
Sunday, May 23, 2010
$3000
My wife and I sold our car today. The cash value is $3000. I suggested we put the payment towards our house to build up the equity in the home. She wasn't thrilled by the idea, but a house is usually a family's highest debt.
The long term choice is putting the money into the house, but the short term is buying something that leads to instant gratification. My wife would prefer a deck, fencing or another dog. I like the prospect of the deck, but does a deck add value to the house?
I did a Google search and found out that decks do add some value to homes. But, would that value be $3000? The simplest website I found was on MSNBC http://realestate.msn.com/article.aspx?cp-documentid=16613127.
While I do envision myself with a nice new deck and entertaining guests, we can always use equity down the road for an addition and a deck. We have a tough decision. Anyone out there have any ideas?
The long term choice is putting the money into the house, but the short term is buying something that leads to instant gratification. My wife would prefer a deck, fencing or another dog. I like the prospect of the deck, but does a deck add value to the house?
I did a Google search and found out that decks do add some value to homes. But, would that value be $3000? The simplest website I found was on MSNBC http://realestate.msn.com/article.aspx?cp-documentid=16613127.
While I do envision myself with a nice new deck and entertaining guests, we can always use equity down the road for an addition and a deck. We have a tough decision. Anyone out there have any ideas?
Thursday, May 20, 2010
Budgeting with a 17 Year Old
Last night my wife spent about an hour budgeting with our 17 year old daughter. As mentioned earlier she is a stellar student, but still learning about the financial world. They determined that she will need about 50% of her income to cover her car payment and insurance.
To me that is crazy, I cannot believe that my 17 year old's car costs more than all of our family cars combined. We have a pick-up, van and an SUV. The difference is we purchased all those cars reletively cheap. The truck was $1000, the van was $16,000 but we put $8000 down and the SUV was my car from college.
Let's start with the van and forget about the cars that are paid off. Our van loan is for 36 months and we just recently purchased the van. The payment is about $184 and we pay double that payment each month. Our van will be paid off in 18 months max.
Our daughter's car payment is about $230 each month and she pays about $230 each month. She owes about $9400 on it, paid $12,000 for it and has 40 months left to go. Her car is already upside down and that is with a trade and down payment. Her actual vehicle value is $6000. I estimate that if she made payments for $400 a month she would not be upside down anymore within 18 months. She would have a car worth let's say $5500 and own about $2500 (this is math in my head).
Of course her payment is more than she can afford so she will never truly catch up. What is the lesson here? When determining a car payment always make sure you can make a double payment on the vehicle. If something comes up that month, pay a few dollars over the minimum instead of double.
To me that is crazy, I cannot believe that my 17 year old's car costs more than all of our family cars combined. We have a pick-up, van and an SUV. The difference is we purchased all those cars reletively cheap. The truck was $1000, the van was $16,000 but we put $8000 down and the SUV was my car from college.
Let's start with the van and forget about the cars that are paid off. Our van loan is for 36 months and we just recently purchased the van. The payment is about $184 and we pay double that payment each month. Our van will be paid off in 18 months max.
Our daughter's car payment is about $230 each month and she pays about $230 each month. She owes about $9400 on it, paid $12,000 for it and has 40 months left to go. Her car is already upside down and that is with a trade and down payment. Her actual vehicle value is $6000. I estimate that if she made payments for $400 a month she would not be upside down anymore within 18 months. She would have a car worth let's say $5500 and own about $2500 (this is math in my head).
Of course her payment is more than she can afford so she will never truly catch up. What is the lesson here? When determining a car payment always make sure you can make a double payment on the vehicle. If something comes up that month, pay a few dollars over the minimum instead of double.
Teaching our Children About Debt
My daughter is 17, year that's right 17. I am a 26 year old step parent of a 17 year old. My wife and I have attempted to teach her about financial responsibility. She works, has a car, makes some payments and has straight A's. She is basically the best 17 year old step daughter anyone could ask for.
She works at Fashion Bug and she is just like any other teenager, she loves clothes. In fact she loves them so much that she has a spending problem with them. A few months ago we spoke about saving versus spending and I tried to hammer in her head the idea of saving. Well I didn't check her bank account for four months. She has been spending more than she is making.
The bad part about this is that my wife and I have been helping her with her car payments so she can play soccer. The part we didn't realize is that she wasn't using the help she was just spending at a higher rate than normal since we were helping her.
We are going to make her write her own checks for her car payment and insurance instead of her paying us some and then having us make the payments. Any one out there have any ideas?
She drives a mustang convertible and is upside down on the value of the vehicle. My wife bought the car for her prior to us getting married. The payment is about $230 a month and the insurance is $70. Of course the reason the car is upside down is because they financed the car over 72 months.
NEVER get a car loan longer than 36 months!
She works at Fashion Bug and she is just like any other teenager, she loves clothes. In fact she loves them so much that she has a spending problem with them. A few months ago we spoke about saving versus spending and I tried to hammer in her head the idea of saving. Well I didn't check her bank account for four months. She has been spending more than she is making.
The bad part about this is that my wife and I have been helping her with her car payments so she can play soccer. The part we didn't realize is that she wasn't using the help she was just spending at a higher rate than normal since we were helping her.
We are going to make her write her own checks for her car payment and insurance instead of her paying us some and then having us make the payments. Any one out there have any ideas?
She drives a mustang convertible and is upside down on the value of the vehicle. My wife bought the car for her prior to us getting married. The payment is about $230 a month and the insurance is $70. Of course the reason the car is upside down is because they financed the car over 72 months.
NEVER get a car loan longer than 36 months!
The Stock Market? For Me?
Many people will claim they are experts at the stock market, but the truth is most investors are playing the same game you are and getting lucky at it. That is why so many investors are in trouble right now.
However, you can participate. I would recommend using something like ING's Sharebuilder. If you make trades on certain days you are only charged $4. BE CAREFUL, buying stock is for the long term and if you buy it you should invest as much as possible to get the most out of that $4. Putting $25 in ING each month on the S&P 500 doesn't make much sense if you are losing $4 to the broker. Put in $250 or $2500 and sit on it for a few years.
However, you can participate. I would recommend using something like ING's Sharebuilder. If you make trades on certain days you are only charged $4. BE CAREFUL, buying stock is for the long term and if you buy it you should invest as much as possible to get the most out of that $4. Putting $25 in ING each month on the S&P 500 doesn't make much sense if you are losing $4 to the broker. Put in $250 or $2500 and sit on it for a few years.
Life Insurance That Pays!
For many of you Life Insurance is a gamble that nobody wants to take. $40 a month could buy your family $250,000 in life insurance, but you don't think that gamble is worth $40.
Consider buying a life insurance policy that is also a retirement or savings plan. Many insurance companies offer life insurance programs that are designed to benefit you even if you outlive the policy.
State Farm sold me my policy. I pay about $80 a month for $250,000 in coverage. Each month this money collects interest and if I make it until I am 56 (I am 26 now) I will have all of the money paid in plus 5% compounding interest.
Of course I could be paying $40 a month now and end up with nothing at age 56 which is what most people choose to do. Why buy life insurance that benefits the company more than you?
Consider buying a life insurance policy that is also a retirement or savings plan. Many insurance companies offer life insurance programs that are designed to benefit you even if you outlive the policy.
State Farm sold me my policy. I pay about $80 a month for $250,000 in coverage. Each month this money collects interest and if I make it until I am 56 (I am 26 now) I will have all of the money paid in plus 5% compounding interest.
Of course I could be paying $40 a month now and end up with nothing at age 56 which is what most people choose to do. Why buy life insurance that benefits the company more than you?
The Past Year
When I first got out of college I was in a ton of debt or so I thought. I had a few delinquent debts that I avoided in college and I remember the day I decided I was going to turn it around. I owed probably less than $1000, not including the student loans I still have, but I thought that the few hundreds I owed was crazy. I paid the debts and a a few more I incurred from moving and then I began to spend.
At first I bought a TV, an XBOX and gifts for my girlfriend. Then I realized that I needed to save some money and slowed my pace down a little bit. I stopped spending and starting thinking about the future. Then my girlfriend became my wife.
I didn't know it at the time, but my wife was in close to $30,000 worth of bad debts. She had previously been married and she was making minimum payments on just about everything and was paying more than half of her income on a Countrywide mortgage. Before I saw her bills I thought that my wife and her daughter had it made.
I soon realized that they were in debt up to their ears. For example her daughter had a computer that cost them $40 a month and was about a year old. They owed over $1000 on it and you could buy a new one at the time for $400. All of a sudden I was taking over the finances and I became the financial guru.
Finances weren't new to me, because my father is a Credit Union CEO, but I certainly don't claim to be an expert. We started slowly and began to make some sacrifices and make double payments on the credit cards. We also created a budget that outlined our spending each month and stopped using credit cards. At first it was hard and we longed for things like ice cream, TV and shopping. A year later we have nearly $1500 a month to spend on gas, food and whatever else we need. We were able to increase our monthly spending from $500-$1500 without adding to our debt.
Now some of you may be thinking that $1500 is not enough for a family of three. Well consider this, we have life insurance policies of over half a million dollars, we are putting hundreds away in savings each month and we have a new house and a new car. All of this on teacher salaries.
The first step to financial success is to stop borrowing. Second begin to make double payments. Third create a budget.
At first I bought a TV, an XBOX and gifts for my girlfriend. Then I realized that I needed to save some money and slowed my pace down a little bit. I stopped spending and starting thinking about the future. Then my girlfriend became my wife.
I didn't know it at the time, but my wife was in close to $30,000 worth of bad debts. She had previously been married and she was making minimum payments on just about everything and was paying more than half of her income on a Countrywide mortgage. Before I saw her bills I thought that my wife and her daughter had it made.
I soon realized that they were in debt up to their ears. For example her daughter had a computer that cost them $40 a month and was about a year old. They owed over $1000 on it and you could buy a new one at the time for $400. All of a sudden I was taking over the finances and I became the financial guru.
Finances weren't new to me, because my father is a Credit Union CEO, but I certainly don't claim to be an expert. We started slowly and began to make some sacrifices and make double payments on the credit cards. We also created a budget that outlined our spending each month and stopped using credit cards. At first it was hard and we longed for things like ice cream, TV and shopping. A year later we have nearly $1500 a month to spend on gas, food and whatever else we need. We were able to increase our monthly spending from $500-$1500 without adding to our debt.
Now some of you may be thinking that $1500 is not enough for a family of three. Well consider this, we have life insurance policies of over half a million dollars, we are putting hundreds away in savings each month and we have a new house and a new car. All of this on teacher salaries.
The first step to financial success is to stop borrowing. Second begin to make double payments. Third create a budget.
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