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After I posted this post, my readers corrected me in that ING Direct is actually a very responsible lender and company. I apologize for overreacting to the sub-prime mortgage.
With so many news articles about subprime loan and people being suckered into low teaser rates that ultimately reset, one would think that there wouldn’t be many ads about mortgage products that shouldn’t be sold to the general public in the first place. Today however, I got an ad from ING Direct advertising their low Adjustable Rate Mortgage (ARM) rate.
I was quite disturbed by this ad because it was these same products that got the United States into the whole housing mess in the first place. Sure, ARM is a great choice for mortgage for a small minority of people. However, no where in the ad do I see that this type of mortgage might not be for everyone. All I see is:
During the initial 5-year fixed rate period, you can save more than $8,200 in interest compared to a 30-year fixed rate mortgage. (Interest savings is over the first five years for a $235,000 loan) Start saving today with an Orange Mortgage.
If you just read this statement without knowing much else about mortgages, you would think that you are saving so much money. I don’t see anything in the ad that says what the interest rate is after it resets in 5 years, nor do I see anywhere that advises people to seek advice from professionals first because this is not for everyone (not that these so called professionals really tell you much truth judged from what’s been happening the last few years).
To make this worst, the reason why I got this ad is because I once had an online savings account with them. Did I even ask for a mortgage product pushed on me? If I was really stressed out about my mortgage payment, I might just fall prey to this ad and apply for this type of mortgage. To make sure we don’t spend enough time to research this, the ad says:
Apply by February 19, 2008 to receive One Low Closing Cost of $895.
Owning your home is a dream that many can relate to. My first experience with real estate came when my wife and I almost bought our first home in March of 2007. We were very excited at the time because it was going to be our first house and we even drove over to see other similar houses in the same neighborhood at 3:00am. We decided in the end to hold off because we thought the housing downturn would get drastically worst.
That turned out to be one of the best decisions we made financially, as we essentially side stepped the worst housing slump in US history. We reside in California where housing prices were going to the moon, and our decision to hold off on buying that house saved us $200,000. Yet, we still felt like we were missing out while we waited because we didn’t get to enjoy a space we can call our own. I know we don’t really own our home until we pay off our mortgage but signing the closing documents certainly brings the sense of ownership that no apartment living can substitute. [ continue reading… ]
In life, we need to take action. Today, I need everyone to start saving immediately if you haven’t yet. How many of us have always thought about saving but think that we can always do it tomorrow? We always think that we can wait, but you will be waiting forever to be financially free too.
We can’t wait until we buy the next big screen TV but we can always wait to setup your 401k accounts.
We can’t wait to go on a vacation but we can always wait to pay down our mortgages.
We can’t wait to get rich quick but we can always wait to learn how to get rich through time.
We can’t wait to leave work but we can always wait to learn how to increase our wealth.
We can’t wait for early retirement but we will have to wait.
If it is you, change.
If you want to feel financially secure, save.
If you give yourself excuses, stop.
Trim down your spending and start saving. Otherwise, I guarantee you will regret it.
One of the reasons why we don’t like to go to work is because there seems to be so much we need to do. Endless deadlines that need to be met and we just want to throw our hands up and say “That’s it. I give up.”. Sometimes I feel very unmotivated because it doesn’t seem like I will ever get everything done on time as there are just so many tasks piled up.
However, I realized that it is likely because I don’t do everything right away. This “I will get to it later” attitude is the root cause of this problem. As I wait for everything to pile up, I become inefficient because part of my energy is spent worrying about how to complete the tasks instead of actually doing it.
I know I’m not alone because people I know always wait till the last minute to finish projects. For example, if the deadline is this Friday, most people will do it late Thursday night (if not on Friday) even if the task takes 15 minutes. This way of doing things has got to change. If we just do the 15 minute task right away, then we don’t need to think about it ever again. I bet that by waiting till Friday, we’ve spent 3-5 minutes of the week just thinking about the task.
So, let’s start taking action immediately and get things done as soon as possible. Once we don’t feel the frustration of having too much on our plate, we will indirectly be more motivated to work on Mondays, and perhaps this weekly piece can seize to exist.
Every year, I analyze my spending during the past year to spot irrational behavior and see where my money went. By doing this, I’m able to help myself find ways to save more in the future because I’m aware of where I like to splurge. I also use this opportunity to improve my personal budget for the next year by readjusting the categories to better track spending effectively.
I’m sure the benefits of analyzing spending are pretty obvious so let’s dive into the actual charts.
Housing expense is a necessity and its pretty stable so it is nothing exciting. Even though it’s steadily going up, it is still relatively cheap compared to other places that I am thinking about moving to.
Food expense is quite steady at roughly $150 – $200 a month. It is very interesting to note that the three big months (February, July and December) are all related to having a very nice dinner as follows:
February – Valentine’s Day
July – Fiancee’s Birthday
December – Christmas Dinner
I wonder if my fiancee will see this and ask me to spend less money on those three big dinners. 🙂
Goods represent my slurge money on gifts for myself. As you can see, there are many months that I don’t buy anything at all. The biggest slurging month by far is July when I bought an iPhone. However, I don’t regret the purchase one bit since it helped me be much more responsive to my customers by letting me check my emails while I’m on the road. Overall, I’m quite happy with my spending habits in 2007 because I rarely bought anything the entire year.
Entertainment expense was surprisingly sporadic and I spent the most money on entertainment in December. I drilled down further and golf expense was by far the number one entertainment expense. Normally, I would tell myself to spend less money if something dominates a category but if I don’t even golf anymore, I wouldn’t have any motivation to save money since I would have no entertainment whatsoever. Furthermore, this level of spending is acceptable so I will continue to watch this but not try to adjust at all.
I definitely need to tweak this category since everything is falling under miscellaneous. Actually, there are basically three months with big spikes in money outflow and they are as follows:
April – Prepay 6 months car insurance
August – $4,000 deposit for wedding
October – Prepay 6 months car insurance
As you can see, these were big ticket items that could explain the big jump for the month. I expect my car insurance to drop significantly next year as I get married and as my speeding tickets are erased from DMV’s record (it’s finally been 3 years). I will have even higher wedding expenses next year but that is to be expected and I would consider that a special case.
Overall, I’m quite happy with my spending for the year. As you can see, I usually keep everything under $2,000 a month including rent which is half of the total amount. In the future, I expect the 3 highest spending months to be drastically lower as my wedding expense and my car insurance premiums will be reduced. This thesis hinges on the fact that I do not move though. If I move after I get married, then my total spending will go up at least a couple hundred dollars per month.
There are two changes that I intend to make:
I’m changing housing expense to be called “necessary expense”. This means that my gas expense will be moved from miscellaneous to this category as will rent.
I contemplated a bit but I also plan to put all car related expense in necessary expenses since I really can’t function in Southern California without a car.
My entertainment expense includes outings where I treated my friends out to golf. I plan to separate this from entertainment. Starting in 2008, only expenses from my fiancee and I will be included here.
The separated entertainment expense and also all gifts will be under a new section called Gifts. In 2008, I want to see how generous I am with gifts to others.
2007’s goods expense included goods for only myself. 2008 will also include Emma’s goods that I pay for. As we get married, expenses for her will be considered as my own so this will include all my gifts for her such as flowers, birthday presents etc.
What do you think? Do you have any suggestions on what I should look more into? Are you impressed with my spending habits or do you think it downright sucks? I’d love to hear from you so I can see if I can save more money in 2008.
Most people look at their 401k and examine how much they have contributed during year end. We know this because most people talk about it during November and December when everything is set and done. Some think a little further ahead and try to plan for the next 12 months during year end but unfortunately most don’t. Therefore, I suggestion today that we all log into our 401k account to increase our contribution rate.
The beginning of the year is a great time to increase our contribution rate because the change will be reflected the entire year. Unless you are already at the contribution maximum, I suggest contributing an additional 2% this year. 2% won’t be much off each paycheck, especially since taxes won’t be charged immediately on the 2%. Furthermore, 2% is a lot of money if you keep on contributing your career earnings into it, especially since compound interest will work in our favor through the years.
Speaking of 401k contribution rates, many plans offer a way to automatically increase the contribution rate each year. This is a great feature for those that always put things off as it will automatically increase our savings each year. Remember, automatic savings is always good. I know that it’s always hard to decide to invest more money into our retirement when the stock market is down. Trust me on this one though, because everyone will thank me years down the road when we are wealthy.
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