The Truth of Credit

photo by Porrota and Errachy Curry ^_^

As I listen to the Dave Ramseys of the world, I cringe when I hear his catch phrase, “Save today, so you can live like no other tomorrow” or something to that effect. On New Year’s, I learned that a young man I had met in passing two nights before had died in a freak accident the day after I met him. Stuff like that will shake you; especially when the person is the same age as you. Throughout history the “Scrooges”, cheapskates, and ultra frugal have been scorned for their tremendous discipline. The question I ask of you today is, is being cheap really a virtue?

Has being cheap interfered with your way of life?

• Let’s face it, if you are on a first date with someone and all they did was complain about the cost of the meal, it would be safe to assume the second date is pretty unlikely to happen.
• How about the last time you bought a steak from the store, were your kids complaining about how tough the meat was?
• What I’m getting at is that there is a difference between being smart and cheap. The smart person is knowledgeable enough to know that there is a better deal somewhere else. A cheap person would rather save $.05 cents and will argue with the waiter to get it down.

Most things in life that people enjoy are relatively cheap:

• Personally, the things I like to do are relatively cheap. Blogging, exercising, video games, being with family; the most that these things cost is a little bit of your time.
• If you can’t afford a nice family vacation, that’s fine.  I think your wife, spouse, or girlfriend will understand. However, if you have been giving the same lame excuse for 10 years then you may need to look at yourself in the mirror.

Everyone can blame the economy on their particular circumstance. The key I have found is to curb spending without making life miserable. What is joy without pain? If it takes a second job to go on that Vegas vacation, do it. If it takes a brown bag lunch everyday to get your wife that Coach purse, do it. Just remember to live life.

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photo by lemonjenny

Simple logic would tell you that when people have less money, their priorities are going to be the essentials, i.e food, clothing and shelter. The old Discover, Mastercard and VISA will become the least of any one’s worries if they are in foreclosure or facing judgments or liens. However, the collection industry is going to have to eat too. There are certainly more accounts then ever before but most belong to “trash” or people who headed to bankruptcy in the short future. What this means this that collectors are going to have to get more aggressive.

How collectors will fill the void:

• Simply, they will use the “block party” technique. Meaning more than likely if they can’t reach you at home or work, they will begin to call relatives, associates and neighbors. This is nothing new, but I promise it will start to become more and more prevalent.
• If you think you are getting a lot of calls now just wait; it’s going to get worse. Call it harassment, call it illegal, call it excessive; if you haven’t turned your phone off yet, you might this year.
• Skip-tracing will be a premium. If you are trying to hide, you might want to stop updating your Facebook, Myspace or Twitter accounts with information like where you work or go to school.

Other things to look for:

• Watch your credit; make sure to check your credit twice a year at the very least. Some devious companies will ding your credit, just because they know it will take a year to correct.
• Default judgments will increase; you need to know how to protect yourself.

Not long ago, collections was a booming business; the reason being, signature loans and refinancing was available to even the worst debtors. Now, however those pools are dry, as is help from relatives or friends. So as the old saying goes, drastic times call for drastic measures. As a consumer the only way to protect yourself is through educating yourself on the Fair Debt Collection Practices Act (FDCPA) and do the best you can.

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photo by maquillage

I know 2008 was year to forget for most people but Yahoo broke down Billionaire Blow-ups of 2008. Reading about “experts” falling on their face will make you feel a little bit better if even for a second.

Let’s all make 2009 a year to remember.

Happy New Year!!

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Everyone knows the story about Bernie Madoff and his global Ponzi scheme but you have to be amazed at the people he fooled. We are talking about some very bright people: Steven Spielberg, Jeff Katzenberg, Abu Dhabi Investment Authority and numerous other high affluent charities. I guess you can chalk it up as another “too good to be true story”, but there is a few lessons we can all learn here.

1. This isn’t the first time - There were Ponzi schemes well before the world knew of Charles Ponzi. However, the Stock Market and other financial securities are an easy target for greedy people. Beware of the free stock tip!
2. Reputation shouldn’t equal instant trust - Few people had the reputation Bernie Madoff had before this whole ordeal. The guy used to be used in the same sentences as Warren Buffet and George Soros in terms of power on Wall Street. Sometimes the big names can’t be trusted either.
3. Shady salesman come in all forms - Many of Madoff’s clientele were the country club type. I very much doubt that the person who sold these people on Madoff’s investment funds were the same sweaty door-to-door guys selling Tupperware products. When making financial decisions make sure to get a clear perspective; in other words, just because everyone is doing it doesn’t mean it’s the best for you.  Research everything so that you truly understand what you are getting your money into.

Finally, if anyone ever tells you that the product/financial instrument/settlement/golf club/sport event tickets/Wii Console is closed or sold out and then in the same breath says they still might be able to get you one; BEWARE! This is usually indicative of a scam or illegal activity.

This is one of the oldest sales trick in the book.

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photo by bahia0019

Timing the market sounds like such an easy practice but few if anyone ever get it right all the time. Real Estate, much like stocks, is at an all time low and appears to be in a free fall. It’s true that fortunes will be made when this recession is over; there will be another Trump or Buffet parading their way into the “I’m Rich Hall of Fame”.  If you aspire to be wealthy, Real Estate and knowledge there of, is almost required to maintain wealth. Today I would like to talk about why now is a good time to buy and why now is a bad time to buy.

Why now?

• The key question you have to ask yourself is, can you afford to? If you have a job, have some kind of retirement plan and most importantly the credit, now might be a great time to buy.
• Mortgage Rates are at historically low rates. (5.14%)
• Banks are being flooded with foreclosures and REO’s (Real Estate Owned); you could literally steal these from the bank for a 1/3 of the cost.
• Property values maybe down but America is still the economic engine of the world.  People will eat, classes will be taught, supermarkets will open, buses will run and most people will want to live indoors—meaning we will come out of this economic funk and you’ll look like a genius for buying at these depressed prices.

Why not?

• Remember the old saying that Real Estate “ALWAYS” goes up? We should all know better now!
• Real Estate is not a very liquid asset. If you lose your job and need money fast you’re going to be up “Sh-t’s Creek”. Selling your home takes time to do correctly.
• If you are in it to make a quick buck, look elsewhere; it just doesn’t happen anymore.
• How far will this gopher hole go? Everyone is waiting for the prices to rebound, but will they?

So, is it time to invest in Real Estate? It depends on the situation you are in and how confident you are in the deal. It’s the American Dream to own a home and certainly a worthwhile goal to strive for. My best advice is to trust yourself. If you live by what is reported by the news each night, you’ll wake up at 50 years old still living in your parent’s basement.

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