Refinancing/A Reflection

Debt. We all hate it. We live with it, and those of us who are lucky, manage to dig our way out of it.

I recently thought about this subject again in response to a question on lowering interest rates. The lowering of interest rates has been a Godsend to those seeking to lower their housing payments.  We bought our little house in Alameda,CA in 2000. At the time we did, we had the first mortgage at 9% and a second at 12% to avoid having to buy mortgage insurance, all on a 30 year term. We were paying close to $3000 a month (without adding in property taxes) on the house.

Now, we are at 3.67% and will finish paying off the house in 12.5 more years, paying out $1688 a month on the regular payment, and an extra $400 toward principal every month. That's the plan.

What strikes me about this, is what we were willing to pay initially to be able to buy a home in the Bay Area. Housing costs in the Bay Area are steep.  We worked a variety of jobs and took on all sorts of odd jobs. We all carried our lunch to work everyday. We lived within a budget (we still do). We often worked 12 hours a day, most days.

And I don't think we were or are alone. I think this is typical. The American dream of owning your own home is strongly ingrained in us. In all of us.

That is why the housing crisis in the U.S. was, and continues to be, such a crisis. It strikes at the heart of what we think we can aspire to--a piece of land we can stand on and call our own.

Refinancing helps. But although rates are low, it is extremely difficult to refinance now. We patiently (and sometimes not so patiently) went through a very long period of time of providing information on the tiniest details of our financial life. And the process seemed to drag on forever.  I am hopeful, that this move will help us pay the house off faster. Every month, I see the effect that the additional payments make on the overall debt, and it is encouraging.

I am concerned though, that many people will fail to refinance. This may be the last time in our lifetimes, that we will see rates this low.  The Home Affordable Refinance Program (HARP), a federal program to help people refinance who are in trouble with their mortgages, ends in December 2013.

And with the housing market starting to come back, it is unlikely that rates will remain low much longer.  And with rising housing costs, present homeowners may find that their equity in their homes has risen substantially enough to help qualify for a refinance, even if they were denied in the past.

Housing remains one of the most important investment decisions that most people make in their lifetimes. The questions of what to buy, when, for how much, and when to refinance all enter into the equation.

When looking at the question of whether to refinance, work with a broker that you know and trust. Use common sense. Ask questions, and make sure you get answers to the questions asked before you commit to anything.

The widening gap between the rich and the poor

The June statistics are out and the gap between the rich and poor is the U.S. has reached levels not seen since 1928 just before the great depression.  I recently wrote an article about the gap itself for Helium and linked it through Redgage. I will leave both references below if you are interested.  If you go though Helium, you only click once. If you go through Redgage, you click through twice (and I get paid for both views).   

A writing friend commented to me that she didn't know what the answer was. Her comment started me thinking about long term solutions and short term solutions. I don't know what the answer is either and I know that there are plenty of Washington economists much well equipped to answer than I. But we have to find ways to survive.

In the article, I point out that part of the problem this increasing disparity creates is the inability for the middle class to remain the consumer class that has always driven out economy.  And I think that remains true.  The top 1% doesn't consume enough to drive the economy. After all, there are only so many houses and yachts that one needs.

So, short term survival for the rest of us 99% depends in some measure upon opting out of "consummerism."  It may not be life off the grid, but it is a matter of mindset really.  Creating wealth may be a far cry for some of us, but a realistic plan for getting out of debt is a neccessity if we are carrying debt.  Find a plan that works for you and stick to it.  (More on various tools and methods to come!)

And about this article, if you are not angry yet, please think about getting angry. At least one of the source that I looked at discussed looser lending practices as a means to quell the anger that the middle class and poor feel periodically about this huge gap.

http://www.redgage.com/links/audreyhowitt/the-growing-gap-bewteen-rich-and-poor.html

http://www.helium.com/items/2188384-the-growing-gap-between-the-rich-and-the-poor

















                                                                                                                                                                 

Student Loans

So, many of you out there have student loans. How many of you struggle to pay your loans. In this economy, it can be very difficult to meet our financial obligations: rent/mortgage, food, medical costs, clothing, bills.  For many of us, and I include myself in that number, bills come after the essentials of living and before luxuries such as entertainment.

If you have lost your job, or are making less money than you anticipated, you can look at the possiility of an Income Based Repaymet Plan.  In essence, the amount of your monthly income is capped depending upon the amount of your income.


Income Based Repayment Plans (“IBR”) are part of a legislative enactment called the College Cost Reduction and Access Act of 2007.  IBRs became available for use in July 1, 2009. This plan may be a helpful tool for borrowers who have incurred substantial student loans but who work in lower paying jobs such as the arts or the public interest sector.

IBRs are only available for Federal student loan debt such as the Stafford, Grad PLUS and consolidation loans. IBRs are not available for Parent PLUS loans or consolidations that include a Parent PLUS loan or loans.

One of the big disadvantages of the income based repayment plans is that you must supply sensitive financial information, such as your tax return, annually to your lender. Your lender then calculates your monthly payment under the plan according to federal guidelines. At the end of 25 years, any amount remaining on the loan is "forgiven" by the lender. However, under current legislation, any amount forgiven at the end of the 25 year period remains taxable as income in the year it is forgiven.

Of course, it is always better to pay off your student loans as quickly as possible. However, if it is not possible, take a look at Income Based Repayment. It may help you balance your life and end telephone calls from your lender.

For further information:

http://www.ibrinfo.org

http://www.helium.com/items/1862067-student-loans-income-based-repayment-plans

My Shadow Self http://ping.fm/Km5Oc

An Unlikely Poet http://ping.fm/TxE9G

Life: Not Quite a Haiku#poetry http://ping.fm/PKS3i

Sasha's Dream http://ping.fm/xVW6K

Paying off Credit Cards

I am on a painful quest. Besides my mountain of student loan debt, I (read this as we) have a mountain of credit card debt.  This year, as my husband started talking about retiring, I took a long look at our assets and liabilities, including the amount of credit card debt we have.  I joined a site called www.sparksavings.com. It is free and provides a fair number of tools for budgeting and tracking expenditures. One of the things that I like about it are tools for savings dreams.  That trip to Europe is now a concrete plan with a savings plan attached to it.  On the site as well are calculators that will help determine how long it will take to pay off specific debts. You inut the amount of the debt and the percentage interest as well as the amount you are paying monthly on the debt and it will tell you how long it will take to pay that debt off.  By playing around with the calculators you can determine how much extra to add monthly toward that debt to pay it off within the time frame that you desire.

So, we are on track. I signed up during December which is the worst month to start tracking expenditures, but so far, so good. We are on track with the plan. 

Check it out.

www.sparksavings.com

Budgets!!!

Budgets are fun! Budgets are playful! Budgeting can be a challenge, but not necessarily a chore.

Here is a challenge for you. Write down everything that you spend money on for 1 week.  Find a notebook hanging around the house somewhere, preferably one with ledger lines.  Just enter every receipt for a week. A pain, yes. But I must say I found it to be a very revealing one. I lumped my groceries all together for this chore. But there were also coffee, lattes, gas, a trip to the drug store, and a couple of nights of take-out.

I found that take-out (though I loooove it!) put a big dent in my budget at between $20-30 each.  (I live in the Bay Area--food is expensive) I was spending between $80-$120 a month on pizza, burritos and Chinese take-out.

The next day, I went to the local used book store and bought a couple of exotic cookbooks. I decided to try cuisine that I liked but had never tried cooking. So I choose a middle-eastern cookbook and a rustic Italian cookbook.  Each book cost me a dollar.

I tend to cook pasta and love it, but am always short on sauces after the traditional marinara sauce.  I found a wonderful olive oil, garlic and basil sauce. I harvested squash from the garden and tossed it with eggplant in olive oil.

I found that I loved garbanzo bean (chick peas) in all kinds of permutations. I learned how to make the rice stuffing in cold dolmas and stuff artichokes with it. (Pretty yummy by the way.)  I have had a blast exploring some new cuisine.  And best of all, the tab for my take-out bill dropped in half this last month.

So, I took that extra and applied half to a credit card and half to savings.

Eat hearty! Eat healthy! And save!

Gratitude and Prosperity: the New Mantra in Hard Times

"Ask  and you shall receive." How many of us still ask for things we want or need from the universe?  When times are hard it is easy to become discouraged. It is easy to lose faith in ourselves, in our skills, in our relationships with others. When we lose faith in our lives, we lose a part of ourselves.

There is no doubt in my mind that times are hard. I have a mountain of debt that I must handle. I have retirement looming in another 10-15 years and have saved very little toward that eventuality. I have a daughter still in college and we are taking out student loans to pay for her education: 2 years left of school, 20 years more of loan payments.  Sometimes I run to the bank with checks to deposit so that our account won't be overdrawn.

Somewhere along the way I got tired of worrying about it all. I was losing sleep over bills and I was cranky every time I had to write out a check to pay a bill.  I realized that I can make things work, even when times are hard.

More importantly for me, I discovered gratitude again. Instead of worrying and focusing on what I didn't have, I decided to focus on what I did have and on what I wanted from the rest of my life.  I started waking up in the morning and taking a moment to be grateful for the promise of another day.  That little practice has started to bleed over into other parts of my life.  I now do more with less and feel grateful for the love I feel toward my husband and family.

Finally, I have stated to ask the universe for what I want again. And little by little, hope returns.

Copyright. July 2010

Credit Cards, Only the Beginning

I love credit and I hate it. I am sure that most people feel the same way. We have become a credit society. We spend, banking on the fact that we can pay back in the future.  And that was true for many of us for a long time. I am not at all sure that is true for us anymore.


Our parents recall when we were a cash-based society.  If we didn't have it at the moment, we didn't spend it.  I am not necessarily advocating a return to a cash based society, but I wonder where we will end up if we maintain our present course of spending, both individually and as a nation.


I am not a pundit, nor am I an economist.  But I am looking at hard numbers in my case and trying to figure out what to do as I increasingly feel the absence of our governmental safety net.  Too many people are in debt. The country is in an amazing amount of debt. It is estimated that in 2010, the debt will be 94.27% of our Gross Domestic Product (GDP).  That seems amazing to me.


As bad as my personal monetary issues are, the country's monetary issues are worse in some ways. At present, my debt amount doesn't equal 94% of my income.


However, we have almost $20,000 in credit card debt, a mortgage, and a large, and I do mean large student loan.  So, within the next 5 years, my goal is to pay off the credit card debt.  The student loan amount is an issue for another blog or two.


So, the plan is to stop charging at least for now, to make more than the minimum payment due, each month, on time.  This month was good. I got the bills out on time and paid more than the minimum on all of them.


Did I forget to say that we graduated one child from college in May and the other child is half-way through?  Yes, congratulations are in order, perhaps to everyone concerned. 


Now it is time to catch up!


Copyright 2010 All rights reserved.

What is prosperity?

Prosperity can be defined as a successful, flourishing or thriving condition. Notice money is not a necessary component of prosperity. Nonetheless, prosperity connotes the presence of money. So how can we experience prosperity during times when we have little or no money? Can we flourish? Can we make money during hard times? Can we live frugally? And can we thrive when we have little?

I think we can and I hope to explore ways in my own life to thrive while I get out under the mountain of debt that I owe.