Top Posts of 2012 (so far)

Why Personal Finance Matters in Politics

Understanding the connection between personal finance and politics is important. Not only do tax payers have a vote in changing legislation, but those who are in office are influenced by their own financial status. As a result, who we elect often depends on their personal finances. Find out why the 2012 elections may be decided by the personal finances of the candidate.

Why the Recession was a Good Thing

Everyone hates recessions, right? Not necessarily. The recent downturn in the U.S. economy has actually resulted in several positive results. Find out what they are and whether you are benefiting from the recession.

Why Gas Prices Rise

With the summer practically here, we know two things will happen. Hot weather and high gas prices. You may understand that gas prices go up in the summers, but do you really understand what affects the prices? Find out for yourself.

Top Posts All Time

Should We Adopt a National Sin Tax on Junk Food to Reduce Obesity Epidemic?

Written in 2009, we asked whether it would be helpful to tax junk food in order to reduce obesity and subsidize the much needed healthcare reform. In it, we affirmed our commitment to keeping taxes at a minimum while also making sure that everyone has adequate healthcare. As a result, interesting debates arose. Should people who embrace their obesity get the same benefits as a veteran who lost a limb fighting for their country? See for yourself by reading the original article.

The Psychology of Bubbles: Using Hindsight to Examine Why We Bought into the Hype

This post was also written in 2009. In it, we discuss the psychological factors of investing that everyone should be aware of. If you are afraid that you are buying into the hype or making an investment at the wrong time, make sure to read this article. It features analysis of past investment bubbles so that you an be aware of a future bubble that could cost you big time.

10 Benefits of Using a Headhunter/Recruiter

If the title is not enough to convince you to read the article, we provide 10 great tips on why and how to use a recruiter to find a job. If you aren’t taking advantage of this opportunity, you are missing out and it could cost you lots of money in the long run.

No matter how dire your situation has become, there are options. Banks and the Federal Government have a number of programs for those facing foreclosure. However, you’ll never take advantage of these options if you don’t know what they are.

Deed-In-Lieu of Foreclosure (DIL)

In some states, banks can seek payment on your mortgage debts even after you’ve lost a house in foreclosure. If you want to avoid financial recourse from losing your home, you should seek a deed-in-lieu of foreclosure. In a DIL, you voluntarily turn over the deed to your home to the bank, but in exchange, all of your debts and obligations are released. Unfortunately, you still lose your home, but it is better than paying debt long after you’ve moved out.

Short Sale

One of the biggest challenges due to the recent housing bust is that mortgage prices have hit the floor. It has left many homeowners owing more on their mortgages than the property is worth. It also makes it hard to sell if you need to list a home over market value in order to get the mortgage company to release their lien interest.

In a short sale, the struggling homeowner gets an offer to buy for a price below their mortgage balance. The seller then submits a hardship packet to the bank and a request for short sale approval. If the bank approves, you are given permission to sell and resolve your mortgage. However, in some states, mortgage companies are given the right to potentially collect on the mortgage balance at a later date.

Home Affordable Modification Program (hamp)

The government offers a special loan program that temporarily sets your mortgage payment to 31% of your monthly pre-tax income. While the program provides noticeable payment relief, it doesn’t forgive your loan or relieve you of your debt. It merely allows you to pay reduced payments for a period of time.

There are other related programs as well like the Second Lien Modification Program, which lowers payments on 2^nd mortgages.

Special Bank Programs

The government is not the only institution that can offer loan modifications. Some mortgage companies have their own programs.

For example, Bank of America has a Loan-to-Lease program. It works a lot like a deed-in-lieu of foreclosure except that after a homeowner surrenders their deeds they become tenants in their own home.

Another example is Mortgage reduction. This is where the bank forgives a portion of the borrowers mortgage balance.

Whether it’s a bank or government program, if you are facing foreclosure there are plenty of options. You just need to pick the one that is right for you.

You may already know the wonderful perks included in timeshare offers, and since it’s been made obvious from day one by agents with great marketing schemes, there is one question you need to consider before putting your hard earned money in this arrangement. With all the wonderful amenities that you will receive, is it all worth it? Will you get your money’s worth? Timeshares are not cheap because you have to pay for exclusivity, but is it a good investment in the long run.

What is a timeshare?

A timeshare, also called vacation ownership, is a type of ownership wherein you may not actually own the whole facility or property, but you get rights to use it. Timeshare arrangements can be applied to condominiums, resorts, hotels, houses and even vehicles like private jets and yachts. There are many types of timeshare arrangements. Timeshares can be considered real property if the timeshare is purchased with deeded contracts. You become a part owner, and you can use the facility for the time allotted to you. You can also leave it to an heir.

Another type of timeshare arrangement is the “right of use.” With this arrangement, you get less security since you only get the right to use the facilities or property for a fixed period of time, and the contract can expire and all rights will be turned over to the owner.

What do you get from a timeshare?

With a timeshare, you get exclusive members-only (or owners-only) access to different facilities (as in a resort). You are allotted a specific time (it can be flexible depending on the contract) wherein you can use the property. Timeshares mostly are used for vacations and out of town getaways. Compared to actually buying a vacation home or a condominium, buying properties in timeshare actually costs less, but, of course, you do not actually own the property. You can also purchase a timeshare as a gift or give it to charity.

Timeshares as an Investment

Some people consider timeshares as an investment because you can sell it, or you rent out your time allotment. Especially if the resort or property is popular, you can actually get quite a nice income from renting it out. There are many people who may rent your timeshare if the resort is exclusive and offers amenities they can enjoy. You can rent out the all the time or save some for yourself. Usually timeshare resorts and hotels have more amenities and perks as compared to ordinary hotels.

Point systems are available in some timeshare contracts wherein you can get a certain amount of points each year depending on your ownership level. Some points can be exchanged for airline tickets, amusement park tickets, hotel accommodations, etc.

Why can timeshares be a bad investment?

1. The value of timeshare does not appreciate in time. They may be considered real property but unlike real estate, the possibility of reselling timeshare in a higher amount than the purchase price is small. A buy and sell investment set-up with timeshares is not a good money making scheme.
2. Annual maintenance and service fees are usually expensive. The maintenance is fixed whether you use the property or not.
3. You can only visit or use your property on a specific date and for a specific limited time only each year. It is unlike any other property where you can go and use your property anytime and anyway you like.
4. You also need to pay for property taxes. You are only a part owner of the property yet you have to pay property taxes.

Is it worth it?

If you have a lot of money to spare and if you are into vacationing in exotic and unique places then a timeshare may be reasonable for you. However, keep in mind that unique may only be applicable to the first few visits to the property, and you have to use the property over and over again to get your money’s worth. After a while, the property may lose its unique appeal to you. If you are considering buying a timeshare as money-making investment, it is a bad idea. Aside from the huge upfront payment, it is laden with fees and other yearly expenses, making it an expensive investment that is hard to sell.

Weighing the facts, do you think timeshare is a worthy investment? Do you have a timeshare? Why did you buy yours?

YFS is owner and author of Your Finances Simplified. He was born and raised in West Philadelphia and is now a financial adviser, IT contractor, landlord, and treasurer of a non-profit. He created his blog partly due to his desire to help people with their finances.

Multiple Forms of Payment -  Any business that relies solely on cash will be limited in its appeal to customers. Any business that hopes to hav ea sizable client base should have a credit card processing account in order to accommodate to the demands of the customer. After all, if you are unable to keep the client happy, it’s likely that they won’t return.

Quality Assurance – Public reviews are much easier to access these days than ever before. While one negative customer experience may not have significantly affected your revenue 5-10 years ago, it has the potential to do damage. In order to increase your client base, you need to please each and every customer. It’s as simple as that. If you don’t work to keep a positive rapport with your clients, you will have very few referrals and client growth will be slow at best.

Competitive Pricing – Again, public knowledge is higher than it has ever been. Between that and large corporations, competitive pricing is more important than ever before. If you think you can compete with prices that are higher than the market average, you will be quite surprised. It is necessary to follow the trends of supply and demand closely to find the optimal price for your product or service.

If you are looking grow your business and avoid bankruptcy, be sure to stay current with the times. This means staying aware of the requirements of customers and up-to-date with technology.

Tax incidence is a term used in government to define the party who pays the financial burden of a given policy. Just because a piece of legislation outlines a tax or fee to one entity doesn’t mean that the identified entity bears the brunt of the legislation. Taxable entities and individuals often have the ability to shift legislative burdens to others, which means it’s important for policymakers to understand where the buck stops before crafting legislation that has unintended consequences.

Workers Pay Corporate Taxes, Not Corporations

Let’s go back to my introduction and talk about corporate taxes. There are many economists that believe that workers pay corporate taxes and not corporations. The argument is that taxes are considered a business expense, which means businesses need to find a way to come up with money to pay those expenses. They could raise prices on consumers and this does happen sometimes, but often it means less money for expansion or smaller payrolls. In recent decades with the massive popularity of outsourcing, foreign nations often legislate low tax rates as a way to entice corporations to move operations overseas and boost international employment.

Tax Incidence Also Works for Tax Incentives

Bruce Bartlett had an interesting article in the NY Times today. He was looking to see if there was a correlation in lower payroll taxes and employment.

It has long been argued by economists on the right that lowering employment and corporate taxes lowers the costs of employment to companies and will ultimately increase hiring. However, Bruce Bartlett pointed out that workers have seen record low taxes in the last few years, so shouldn’t there also be record employment?

The big question: if record low taxes haven’t boosted employment, then who is benefiting from tax breaks? Is it shareholders? Is it management?

The Role of Political Narrative

The trouble with economics is that it is very useful, but also very useless. While we are certain that tax incidence exists, the problem with the concept of incidence is that the outcome of policy is often open to political narrative. Is it that tax cuts don’t increase employment as Bruce Bartlett penned? My personal guess (and it’s definitely a guess, I haven’t looked at any research or data) is that tax breaks are helping to subsidize the rising burdens of employer health care costs.

As health care costs continue to outpace economic growth, it is becoming more expensive to employ workers. So when a tax cut comes along to reduce employment costs, increasing health care costs eat up the benefit.

You see how easy it is to come up with an economic explanation for why tax cuts haven’t boosted employment? The scary thing is I could be right and not even know it!

Still, the issue of incidence is a bit disturbing. Who knows what political party’s policies are coming out of your paycheck?

Shaun is the author of the blog Smart Family Finance, a site dedicated to exploring the challenges of family finance; from starting a marriage to starting a family, from teaching your children about finance to helping them pick a college, from single income to multiple income. The intricate world of family finance unlocked, one post at a time.

This type of travel, while serving as a break from the annoyances of your life, usually costs a small fortune. However, there is a cheaper, more fulfilling way to travel, if you make a few trade offs and rethink the idea of travel itself.

Make it About the Place

Sure, Paris and London sound lovely but these touristy, luxury-focused destinations can cost you a great deal of money. Between the Eiffel Tower and Big Ben, you’ll find yourself scrapping the bottom of the piggy bank for your flight home. In fact, most of Western Europe is so marked-up that a budget trip is hard to come by.

As an alternative, consider venturing to non-English-speaking territories, like Eastern Europe. If you’re looking for beaches and a great nightlife scene, cities like Zagreb, Croatia, have a lot to offer and for a much less. Eastern Europe is relatively new to the travel scene, and it has a lot of interesting things to see (like underground wine cities in Moldova).

Additionally, this area has yet to adopt the Euro, and in general, the dollar is stronger than the local currency. While you’ll still have to put out for the plane ticket to Europe, once there, budget airlines like Ryanair will get you around for as little as 1 Euro (plus taxes) if you book early.

Make it About the People

Befriending the waitstaff at your hotel doesn’t equate to mingling with actual locals. In fact, staying at a hotel, period, keeps you at a distance from actually experiencing the destination from the ground up. Americans were introduced to the idea of hostels through a gruesome movie that implanted thoughts of death and torture in our perception of these places. This is total bullshit.

While some hostels may be less than pristine, there are many scattered around the world that are just as clean, private and inhabitable as some mid-level hotels, and at a heavily discounted price. Rethinking your travel accommodations will cut the cost of your trip in a huge way. And really, who cares where you sleep? Since most people that stay at hostels are on the broke train and/or are seeking out non-touristy spots, you’ll be exposed to cheaper local hangouts like bars and restaurants, which gives you the chance to actually interact with the people of the place you’re visiting (and save some green along the way). If you’re traveling solo, sleeping on a bunk bed for a few nights may be a fair trade for a more memorable trip.

Make it More Meaningful

Sipping Pina Coladas on the beach in Cancun has its appeal. But, when the straw gurgles that last drop, all you’re left with is a hazy recollection of your vacation, a nasty sunburn and a hole in your wallet. Consider traveling for a cause to save some money and inject some meaning into your trip.

Get your hands dirty with WWOOFING. Nothing to do with barking, WWOOFING stands for World Wide Opportunities on Organic Farms, an organization that connects willing volunteers with farms around the world. By joining the network, you have the choice of working on a farm almost anywhere in the world. Once you are placed, your labor is repaid with free accommodation and meals prepared from the food that you helped harvest. The best-known farms are in the south of France (think vineyards) and since a lot of farms are in rural parts of the world, you get to really see how the locals live and taste authentic, home-cooked, regional cuisine, for free.

Travel doesn’t have to be expensive if you stay off the five star path. Making just a few adjustments to the way you approach travel can keep some of that hard-earned cash snugly in your pocket.

Do you have a travel story to tell? Tell us about it in the comments!

YFS is owner and author of Your Finances Simplified. He was born and raised in West Philadelphia and is now a financial adviser, IT contractor, landlord, and treasurer of a non-profit. He created his blog partly due to his desire to help people with their finances.

Higher Credit Scores

Think your average credit score will be enough for a mortgage? Ever since the housing bubble burst, banks have been raising credit score requirements. Most banks require a FICO score of over 600 for an FHA loan. Over the years, the largest banks have increased its minimums as high as 640. The higher standards have cut out an additional 15% of borrowers who would otherwise qualify for an FHA loan.

Restrictions on Seller Concessions

While commercial banks are looking for higher credit scores, the government has been changing policies that also curtail new lending. A few years ago HUD dramatically reduce the maximum amount of allowable seller concessions for FHA loans from 6% down to 3% of the property’s assessed value.

It may not sound like much, but this restriction has a huge impact on those looking to buy a home. Seller concessions are commonly used to help finance a home buyer. For example, prospective buyers can use seller concessions to help pay closing costs, down payments and escrow as part of the sale agreement. This helps cash poor home buyers overcome the large upfront costs. These new restrictions translated into thousands in lost funding to potential homeowners in areas where housing prices are high.

20% Down Payment or Else

The new Consumer Bureau, set up by Frank-Dodd, is eying ways to make mortgages more restrictive. One option for consideration is setting a 20% down payment requirement. Any borrower looking to forward a smaller chunk of cash would face higher fees as a deterrent. Since closing costs are already a large obstacle to many potential home buyers, any increase could price consumers out of the market.

Increasing Mortgage Rates

Who can complain about mortgage rates today? They are at record lows and rates have been suppressed for nearly a decade. It only means one thing; they are about to go up. It’s hard to say when, but there are a number of economic variables that are signaling that a shift to higher rates is at our doorstep.

The first indicator being that inflation has been making a comeback over last year. Energy, food and clothing are all leading the way to a needed interest rate cool down.

The other variable would be public debt. While Treasury bonds have remained stable regardless of looming US public debt and economic turmoil, it could be a temporary anomaly. As public debt crisis spreads across Europe there is nothing preventing a potential run here in the US. Although, I think it’s safe to say government debt won’t have much of an impact in the short-run.

Shaun is the author of the blog Smart Family Finance, a site dedicated to exploring the challenges of family finance; from starting a marriage to starting a family, from teaching your children about finance to helping them pick a college, from single income to multiple income. The intricate world of family finance unlocked, one post at a time.

Credit cards are not a recent occurrence, and in fact, credit cards have been in existence for more than half a century.

Credit cards have numerous features that make trading easier and faster. Sad to say, however, some of the best features that make a credit card an enticing tool of trade can very well be the same features that cause the high amount of debt in the modern society.

According to a recent survey conducted by a website named CardHub, credit card debt in 2011 amounted to more than $47 billion, an estimated 424% increase as compared to the same period the previous year. Below are some prominent features of credit cards and how they can be disadvantageous for you.

Convenient to use

Credit cards are very convenient to use. You can take it anywhere and buy just about anything within your credit limit. It does not require numerous trips to the bank to withdraw money nor do you need to bring a lot of cash with you. Although, it is really convenient to use credit cards, these conveniences can lure consumers to buy more, and in some cases much more than they can actually afford.

Interest free grace period

A typical credit card allows you to pay within the grace period of up to one month without interest. It gives consumers more confidence in their ability to purchase an item. But a consumer needs to keep in mind that the interest free feature of credit cards is applicable STRICTLY within the grace period only. As soon as the grace period ends, interest will now start adding up. According to FINRA Investor Education Foundation in a study of credit card users conducted in 2009, 36% of respondents don’t know the interest rate of the credit card they often use.

Security

Credit cards offer more security than cash. It allows you to pay for huge price tags without having to bring the actual large amount in cash, but the security that credit cards provide may as well be considered a false sense of security. People tend to feel that they can afford more than they actually can.

Cash advance

Credit cards offer cash advances. They act like an ATM machine except the money you are withdrawing is a loan and not actually debited from an existing bank account. This can be an additional amount to be paid in the future. This can bury an indebted person in more debt.

Bankruptcy due to credit card debt

Bankruptcy due to credit card debt is very real. It can happen to anyone who thinks that paying just the minimum amount due or delaying payments for whatever reason is not harmful as long as you pay for it in the future after you saved enough. However, this is far from the truth. Interest will pile up alongside the new purchases and possible penalties. Adding everything up for a long time can render an individual bankrupt. Some individuals even resort to purposely filing bankruptcy just to avoid paying off their staggering credit card debt. However, these people need to realize that bankruptcy will ruin their credit report for years to come.

Credit cards are like the opium in trade. One can get addicted to its use without feeling the downsides at first. Enjoying the highs of acquiring goods and services without feeling the burden of paying for it immediately can blind people to the facts and responsibilities of maintaining a credit card. The lure of increased purchasing power can be exhilarating and can easily get out of hand if handled by someone who has weak control.

Can you safely say that you are a responsible credit card user? Do you spend within your affordable limit? Have you ever let your desire to buy something get the better of you?

YFS is owner and author of Your Finances Simplified. He was born and raised in West Philadelphia and is now a financial adviser, IT contractor, landlord, and treasurer of a non-profit. He created his blog partly due to his desire to help people with their finances.

My personal finance point of view is tied to my corporate finance point of view. Not because I happen to work in corporate finance, but because decades of brilliant people have studied the best way for companies to make and spend money. Odds are, if I have a personal finance problem, I’m likely to find a corporate finance solution that I can apply.

Now that my refund check is in the mail, I’m trying to think of how a company might spend a large chunk of cash. Here is what I came up with.

Increase Your Cash Flow

This is financial-ese for widening the gap between monthly income and expenses. A hefty refund check can go a long way in paying off a loan. Once your debt is repaid, your monthly loan payment becomes cash that is free for you to use for other things. Think of it! If you don’t have a loan to pay back you can use the freed-up money to save for a vacation or boost retirement savings. Increasing cash flow is a popular and useful investment for your tax refund.

Hold it as Strategic Cash

There’s an old finance adage “cash is king.” With a sizeable amount of cash, there are few obstacles one cannot overcome. You can hold money in an emergency fund to help you weather tough times. However, companies also hold money to take advantage of opportunities that arise. For our personal finances, it could be holding out for a good price on a home or starting your own company.

Invest in New Income Streams

You may be happy with your day job and I’d never suggest getting a second. However, extra money in your pocket can be used to put even more money in your pocket. Your tax return could fund your first investment in the stock market or down payment on a rental property. There are nearly limitless ways to make extra money and there is no reason your tax return couldn’t be your ticket to making more money.

Spend It to Improve Productivity

Finally, I get to the option that is some popular with masses of Americans. Instead of saving, paying off, investing you can spend your money. The problem is that few people spend their money in a way that actually improves productivity.

Productivity is all about getting more work done without more effort. Sometimes, we are more productive when we spend on recreation. Taking vacations from work can refresh us so that we can come back and do more work. However, spending to increase productivity is tricky. Sometimes we are as likely to hurt productivity as we are to improve it.

Networking, learning new techniques and technology and even buying systems to organize our house/finances is excellent uses of productivity spending. It’s not about buying something you want, it’s about buying something that will improve you.

If a company had my refund check today, odds are these are the ways they’d be thinking of using it.

Shaun is the author of the blog Smart Family Finance, a site dedicated to exploring the challenges of family finance; from starting a marriage to starting a family, from teaching your children about finance to helping them pick a college, from single income to multiple income. The intricate world of family finance unlocked, one post at a time.

Take that minimum distribution

You are not allowed to keep your funds in your Traditional IRA forever. You are only allowed to keep your money in your Traditional IRA until you reach the age of 70½. By the year you turn 70½, you are REQUIRED to start taking minimum distributions on a regular basis. This requirement starts on the year you turn 70½ or on April 1st the following year. Failure to withdraw the required amount of funds will result to 50% excise tax. If you do not withdraw or if you withdraw less than the required minimum amount, you will have a 50% tax on the undistributed balance.

Be sure to make correct contributions

Contributing too much or too little can result in more taxes on your part.

Excess Contributions: Any amount in excess of the allowable contribution, which is $5000 if you are less than 50 yrs. old and $6000 if you are older than 50, or your taxable compensation for the given year, whichever is the lesser of the two will be subjected to 6% tax. This includes your contribution, your spouse’s contribution, or your employer’s contribution. This excess amount (including interests earned) can be withdrawn before the due date of the year’s return to avoid the taxes being imposed on it. However, as long as the excess amount remains in your account after the due date of the year’s return, it is subject to 6% yearly tax.

Rollovers

If you wish to transfer funds from a 401(k) to an IRA, do it through direct transfer from trustee to trustee. Otherwise, rollovers by withdrawing the money and reinvesting it will result to 20% withholding tax since the withdrawn money will be treated as income ,and you will be given only 60 days to reinvest the withdrawn amount.

In a trustee to trustee transfer, you will get no distribution; therefore, it is not taxable.

Inherited IRA

If you inherit an IRA or if you are the beneficiary of a deceased person’s IRA, it is advisable to stretch the distributions over your life expectancy to defer the tax over time. If you get the distributions in lump sum, then it will be subject to income tax, and a large chunk of the inherited IRA will be lost to tax.

The wrong kind of retirement

A huge investment mistake is investing in the wrong kind of retirement plan. IRAs are taxable, but it will depend on the type of IRA. The traditional IRA is tax-deductible during contributions (sometimes), but the taxes will be imposed once you start getting distributions. The Roth IRA is not tax-deductible, but its distributions are tax-free. To avoid making an investment mistake, it is imperative to study which kind of IRA will suit you better.

The first thing to consider when investing in an IRA is the time when you want to pay your taxes. All IRAs are taxable at one point. You just need to take into consideration your current situation and which one will be best for you.

You can avoid retirement tax mistakes, and there are ways to amend them once committed. If you have made one or some of these mistakes, do not worry, you are not the only one.

Have you made any tax mistakes on your IRA or 401(k) in the past? What steps did you take to amend them?

YFS is owner and author of Your Finances Simplified. He was born and raised in West Philadelphia and is now a financial adviser, IT contractor, landlord, and treasurer of a non-profit. He created his blog partly due to his desire to help people with their finances.

Legislation Slowed Foreclosures in 2011

In October 2011, legislation took effect to slow the foreclosure process. Banks are now required to file an additional affidavit to begin the foreclosure process. That additional paperwork adds time, and moved many homes facing foreclosure in 2011 into the 2012 foreclosure season. This was more than evident in the dramatic increase in homeowners underwater in their mortgages.

Major Banks Off the Hook

We are now coming to an end of the year of the “robo-signing foreclosure scandal.” Due to improper foreclosure processing by banks, major commercial banks like Wells Fargo and Bank of America found themselves the subject of a massive lawsuit filed by most states. While the court drama played out, the nation’s largest mortgage holders slowed down the pace of foreclosures to avoid fallout from the cases.

However, we’ve seen a settlement and end to the lawsuits and banks aren’t wasting anytime accelerating foreclosures in 2012.

Strategic Default

The federal government, in an election year, is aggressively pushing for a mortgage write-down policy. Essentially, those with underwater mortgages can have their mortgage principal magically disappear overnight. The idea has some merits. Those with equity in their home tend to resume payments. However, it also undoubtedly encourages people to default in order to benefit from the write-downs. With agreements with BofA already made and talk of a Fannie-Freddie write down policy, we may be starting to see the fruits of strategic defaults.

Shifts in Debtor Preferences

Sometimes it’s hard to separate the cause from the effect. Recent studies have shown that debtors have switched their preferences in loan repayment. Americans used to pay their mortgage first, auto loans second and credit cards third. However, that traditional order in consumer payment preference has shifted to car loans first, credit cards second and mortgages third.

It could simply be a product of all the factors above: underwater mortgage, strategic default or slow down in foreclosure process. Regardless, the way people treat mortgage as debt has altered, perhaps for the long-term. It could be an indicator for rises in foreclosure rates.

The housing industry has had a direct impact on our current economic turmoil. The fact that home foreclosure is picking up could mean more unemployment and slower growth. If you want to gauge what the future of the economy will be, keep an eye on the foreclosure indicators I’ve detailed above.

Shaun is the author of the blog Smart Family Finance, a site dedicated to exploring the challenges of family finance; from starting a marriage to starting a family, from teaching your children about finance to helping them pick a college, from single income to multiple income. The intricate world of family finance unlocked, one post at a time.

The Visa Black Card is here to provide you with some of the most luxurious benefits. The Visa Black Card has limited membership. Not just anyone can qualify for this credit card. The aim of limiting its membership is geared to maintain the high quality service available to the card owners. While I can’t guarantee that owning this credit card will make you stand out among your colleagues or friends socially, I can assure you of the many benefits that the Visa Black Card has to offer.

Benefits of the Visa Black Card

There are many benefits to the Visa Black Credit Card. Perhaps it’s most sought-after benefit or rewards is the 24 hour concierge service. This is ideal for the business person on the travel. We all know that traveling can be tiresome. After a long week of meetings away from home, the last thing you want to do is to face the annoyance of traveling. Being a proud owner of the Visa Black Card will allow you the piece of mind that you need. This means no more worrying about the details – you have someone at your disposal to take care of it for you. How good does that sound? More importantly, this card also gives you complimentary membership to VIP lounges around the world.

If this weren’t enough, all card owners receive 1% cash back or the option of airline tickets that do not have blackout dates. Let me say that again – no blackout dates! I’ve saved up tens of thousands of airline points before and have been extremely frustrated at how difficult it can be to use those points. The points you earn with this card doesn’t have the same problem.

If you are a person on the move, this card may be the card for you. While many people avoid credit cards with annual fees, it is all about using the card to your advantage. Apply today and start earning rewards when you travel. Be sure to let me know how nice the VIP lounges are as well.

Whether you own a van for personal use, or own one or more vehicles for commercial use, insurance is a legal requirement and securing it at a good price is a hurdle van owners have no option but to tackle. Individually examining the different factors that decide the cost of your premium should help you identify potential areas for savings.

Firstly, as with other motoring insurance, you are able to select from three levels of cover when taking out van insurance; third party, third party fire and theft and fully comprehensive. While the basic third party cover will only protect you should you cause injury or damage in an accident caused by yourself, the second option also includes protection if your vehicle is stolen or damaged or destroyed through fire. The third level of cover, fully comprehensive, has the added benefit of offering cover even if an accident you are involved in is not your fault.

The model of the van you are insuring is one of the biggest factors that helps decide the cost of your premium and selecting a model with a good security record and built-in security features can assist you in keeping long-term running costs down.  If your van is not fitted with its own alarm system, it is worth considering investing in accessories such as a steering wheel lock. Ensuring you store your van safely will also be viewed favourably by prospective insurers. If you are able to store vehicles off the road in a garage, or in a secure parking compound your perceived risk is likely to be lower and your premium should reflect this.

One of the quickest ways to reduce the cost of van insurance is to increase the excess paid on your policy. However, if you are tempted to follow this route, you should always be certain you have enough savings to cushion the blow should you be involved in an accident, or fall victim to theft or criminal damage.

In fact, there are numerous frugal billionaires.

They have the money but live way below their capacity. They choose a low-key, simple kind of life. Sure, you might say that it’s unlikely that they became rich because of their frugal ways, but they definitely held on to their riches longer because of it. By looking at the way they live, there are definitely some things that we can learn.

Lessons from humble beginnings…

Not all billionaires were born with a silver spoon in their mouth. They had to go through hardships to get to where they are now. Their riches are the result of hard work and determination. From their past, they developed the appreciation for the simple things despite what they achieved and despite their current abundance.

Sergey Brin is the co-founder of one of the most successful search engines, Google. He is a Russian internet whiz whose parents had to struggle through temporary jobs and unstable income flow before they could leave Russia and go to America.

In an interview he said, “From my parents, I certainly learned to be frugal and to be happy without many things. It’s interesting—I still find myself not wanting to leave anything on the plate uneaten. I still look at prices. I try to force myself to do this less, not to be so frugal. But I was raised being happy with not so much.”

These are definitely some thoughts we can all live by.

Be practical, be frugal…

Being frugal is just like being practical. As defined in Wikipedia, frugality is the economical use of consumable resources and avoiding waste, lavishness or extravagance.

Azim Premji, whose wealth amounts to US$13 billion, can easily buy any kind of luxury car. You might envision him riding around in a stretch a limousine. But in reality, he walks to work because his home is nearby. And even if he needs to take a car, it is not a Porsche or Rolls Royce that he chooses, but his Toyota Corolla.

Ingvar Kamprad, IKEA founder is another billionaire who avoids wastage. He personally practices frugality. He recycles tea bags and even takes home packs of salt from restaurants. He extends his frugal ways to his workplace. In the workplace, he urges workers to use both sides of the paper. He is quoted as saying: “Ikea people do not drive flashy cars or stay at luxury hotels.”

Happiness in simple things…

Though frugality can be likened to practicality, it should not be synonymous to deprivation. It is finding the useful worth of simple things.

Warren Buffet, the third wealthiest person in 2011, owns a house in Laguna Beach, California worth $4 million, still opted to live in the house he bought 50 years ago for only $31,000.

John Caudwell, whose net worth is $2.2 billion, is known for being frugal, and he buys his clothes at Marks and Spencer rather than a high-end designer clothes’ shop. He believes that he doesn’t need to spend money to bolster his self-esteem.

Thrifty not stingy…

Even though frugal billionaires are known for being thrifty, many of them do splurge from time to time, spending money on worthy causes.

David Cheriton, the 19th wealthiest Canadian, opted to donate $25 million to fund the University of Waterloo’s School of Computer Science graduate studies and research instead of driving flashy cars.

Terry Gou is the Chinese business tycoon who is sometimes called a tightwad or a cheapskate, but he made a bold but generous gesture that raised some eyebrows in surprise. Before marrying his second wife, he vowed to donate 90% of his wealth to charity.

They say “If you’ve got it, flaunt it.”, but not for these frugal billionaires. They worked hard, invested wisely and now they are spending their money in an even more clever way. The most admirable trait they have is not just that they know how to become rich but, most of all, they know how to stay rich.

What would you spend money on if you were a billionaire?

YFS is owner and author of Your Finances Simplified. He was born and raised in West Philadelphia and is now a financial adviser, IT contractor, landlord, and treasurer of a non-profit. He created his blog partly due to his desire to help people with their finances.

What is the Pareto Principle?

Think of all your expenses. The odds are that the largest 20% of your expenses make up 80% of your total expenses. How about the places you drive your car to? It is likely that 80% of your miles are spent driving to 20% of your destinations. Looking at your cell phone bill you are likely to find that 80% of your minutes are used to talk to 20% of the people you call.

Of course, things rarely work out to exactly 80/20, but the overall concept behind efficient use of your time is worth noting, especially in the case of earning/saving money.

Pareto Principle: Scale Matters

Of all the time you could spend earning/saving money in a year, the Pareto Principle suggests that 80% of it would be earned from just 20% of the time you work. It also means that 80% of our time is spent making only 20% of our income/savings. With that kind of wasted time, you have to wonder if you can spend your time more efficiently by ignoring the small things.

If you wanted to cut your budget down, you’d find that (on average) 65% of expenses are created by just three bills: housing, transportation, food. It’s undeniable that if big cuts to these expenses can be achieved, it will have huge effects on decreasing your spending. The Pareto Principle is all about making maximum impact by using scale to your advantage, but scale is only one half of the equation.

Pareto Principle: Time Matters Too

The Pareto Principle isn’t about forsaking all small things to focus on large things, because there is another part of the equation. Focusing on scale is usually all about the “causes” side of the Pareto Principle. However, the concept also includes effort. When it comes to making money, effort is usually measured in time.

It’s important to grasp both ideas because small amounts of money are often earned by spending small amounts of time accomplishing something. It takes nearly no effort to earn a little interest in a savings account, but it could require hundreds of work hours to earn a promotion at your job. The promotion might be more money, but earning money in a savings account is effortless.

The Pareto Principle tells us to take advantage of time and effort. Focus on a few big things for maximum impact. Don’t spend a lot of time working on little things, but most importantly don’t ignore little things that are nearly effortless.Pareto’s Principle is one of the most helpful economic concepts for everyday finances. Sometimes called the 80/20 rule, it goes like this: 80% of the effects come from 20% of the causes. Ok, it’s a little cryptic, but the idea is very powerful; especially when you consider the impact of scale and time on your personal finances.

What is the Pareto Principle?

Think of all your expenses. The odds are that the largest 20% of your expenses make up 80% of your total expenses. How about the places you drive your car to? It is likely that 80% of your miles are spent driving to 20% of your destinations. Looking at your cell phone bill you are likely to find that 80% of your minutes are used to talk to 20% of the people you call.

Of course, things rarely work out to exactly 80/20, but the overall concept behind efficient use of your time is worth noting, especially in the case of earning/saving money.

Pareto Principle: Scale Matters

Of all the time you could spend earning/saving money in a year, the Pareto Principle suggests that 80% of it would be earned from just 20% of the time you work. It also means that 80% of our time is spent making only 20% of our income/savings. With that kind of wasted time, you have to wonder if you can spend your time more efficiently by ignoring the small things.

If you wanted to cut your budget down, you’d find that (on average) 65% of expenses are created by just three bills: housing, transportation, food. It’s undeniable that if big cuts to these expenses can be achieved, it will have huge effects on decreasing your spending. The Pareto Principle is all about making maximum impact by using scale to your advantage, but scale is only one half of the equation.

Pareto Principle: Time Matters Too

The Pareto Principle isn’t about forsaking all small things to focus on large things, because there is another part of the equation. Focusing on scale is usually all about the “causes” side of the Pareto Principle. However, the concept also includes effort. When it comes to making money, effort is usually measured in time.

It’s important to grasp both ideas because small amounts of money are often earned by spending small amounts of time accomplishing something. It takes nearly no effort to earn a little interest in a savings account, but it could require hundreds of work hours to earn a promotion at your job. The promotion might be more money, but earning money in a savings account is effortless.

The Pareto Principle tells us to take advantage of time and effort. Focus on a few big things for maximum impact. Don’t spend a lot of time working on little things, but most importantly don’t ignore little things that are nearly effortless.

Shaun is the author of the blog Smart Family Finance, a site dedicated to exploring the challenges of family finance; from starting a marriage to starting a family, from teaching your children about finance to helping them pick a college, from single income to multiple income. The intricate world of family finance unlocked, one post at a time.