The Dangers of Owning Your Own Home

Blueprint for Financial Prosperity is running a Devil’s Advocate series and his first article is Rent Forever, Don’t Buy A Home. We own our home and despite the repair work and property taxes he mentions, I’m glad we decided to buy our own place. However, there are two that mistakes I think it’s easy for homeowners to make.

Over Valuing Our Net Worth
Many people figure the value of their home into their net worth. I don’t like this for two reasons:

The first is that, like a stock, your home isn’t actually worth anything until you sell it. Once you sell it, where will you live? If you buy another house then you’re just locking that money back up in property again. You won’t actually realize the gain until/if you sell your house and move into a smaller, cheaper one.

The second is that people sometimes feel they don’t have to save or invest as much because, according to an appraiser, their home has appreciated a great deal. This can be dangerous because housing prices can fall and if you haven’t been saving and investing then you could be in a pickle. Your house is only worth as much as someone is willing to pay for it.

Reckless Borrowing Against Equity
How many advertisements do you see or hear a day for home equity loans? If you’re sitting on thousands of dollars of equity in your house, it may be tempting to tap into it to take that trip you’ve always wanted or to speculate on a new great stock tip you don’t want to miss out on.

If you’re considering borrowing against the equity in your home, sleep on it for a while. Think about how nice it is to have a roof over your head. Is what you stand to gain from a home equity loan worth the risk of potentially losing your home?

Written by Ben · Filed Under Real Estate >Comments (4) 

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Win Free Financial Advice! The Small Idea, Big Change Challenge

After some suggestions by J.D. at Get Rich Slowly, this contest has been relaunched here. Looking forward to hearing about your FinanceSpirations!

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The blogosphere is full of financial wisdom and inspiration. Often, the smallest idea or article is all we need to help us make a much needed change in our finances. I challenge you to share what blogger inspired your financial success in 2006!Enter the Small Idea, Big Change Challenge and let everyone know what idea led to a big financial change in your life! The winner of the challenge will receive a 1 hour consultation with a certified financial planner.

Kristine McKinley is a CFP and CPA from Beacon Financial Advisors whom some of you may recognize from her contributions to various finance carnivals. The winner of the challenge will get a mini-version of her Right Start Financial Checkup. The prize is one hour of phone consultation with Kristine on your investment or tax issues.

So how do you win? Here are the rules:

1) Write about any small idea from a personal finance blogger in 2006 that inspired you to a big financial change.

It doesn’t have to be a small idea but usually that’s all it takes. If you have a blog of your own, post your entry there. If not, send me the information via my Contact page and I’ll post it on this blog.

The submission should contain two things:

• A link to original post from the blogger that inspired you.
• A link back to this post.

2) Voting
The winner will be chosen for the people by the people! As the submissions link back to this post, you’ll see them at the bottom of the page. Get out and vote for your favorite success stories by leaving a comment on their post. You can vote for more than one.

3) Winner
Whichever submission has the most comments by the end of the day January 15^th wins! At the end of the contest, I’ll write a summary post linking back to all of the submissions and announce the winner.
Kristine will contact the winner to schedule the meeting and determine the personal finance questions to be covered in the consultation.

Contest Updates
I’ll be giving updates on the contest over the next two weeks so subscribe to my feed to stay in the loop.
Good luck!

Written by Ben · Filed Under Contest, Personal Finance >Comments (1) 

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I Wonder What lifehacker, problogger, & copyblogger are Reading Today

You could find out not only what your favorite bloggers are reading but also what they think of it if only they used a cool tool called coComment!

The Comment is the Blogosphere
Okay, without blog posts there could be no comments, but without comments, how do you know anyone is reading your stuff and what value it is bringing to them? coComment lets you track the comments you leave on other blogs and then list them on your own blog so your readers can see what you’re reading and your thoughts.

End of the Link Dump?
Think of it. You wouldn’t have to take the time to aggregate and summarize your favorite reads of the day. If you enjoy a blog post, leave a comment, tag it with coComment, and your readers will take note. Of course you wouldn’t get a coveted link from an A-lister but if you write good stuff I imagine the comments will keep coming. The traffic they bring should result in links a plenty.

Boon for Comments
As a new blogger I’ve learned that a large part of it is reading other people’s stuff. I’m often disheartened when hours of reading and commenting on blogs has passed and I have no new content on my site! Now with coComment I can interact in the blogosphere while feeding my blog at the same time. Maybe people that use coComment will be more likely to take the time to add their thoughts to the blogosphere.

Blogroll 2.0
It seems to me that a blogroll is “so web 1.0″ and that coComment is sort of a Blogroll 2.0. Instead of a static list of links, you provide a dynamic directory of what you read. Specific recommendations of a certain post on a certain site and what you think of it seems to add much more value to your readers and the blogging community.

Leave a Comment
I’m sure as a new blogger, there is something I’ve overlooked or oversimplified in my analysis of how coComment could change the way we blog. If that’s the case, leave me a comment and let me know.

Check It Out
See the bottom of my right sidebar for an example of coComment in action. Given the nature of this post I should probably move it to a more prominent position but it’s the middle of the night and I don’t want to break my blog theme right before you let everyone know about this great article!

Written by Ben · Filed Under Blogging >Comments (0) 

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Three New Personal Finance Books for Kids, Teens, and Generation X

In a recent article in the Seattle Post Intelligencer, Eileen Alt Powell covers three new books that can help younger generations get off to a good start with their money.

High School Money Book by Don Silver

“I want them to start thinking about money — to make conscious decisions for spending, saving and investing — so they can have financial and personal freedom throughout their lives” – Don Silver

The Ultimate Parenting Map to Money Smart Kids by Linda Leitz

Linda hopes to teach young people the following fundamentals:

“saving 10 percent of what you earn, taking advantage of any kind of retirement plan through your job, working toward owning a house, having enough liquidity to deal with an emergency, and avoiding debt.”

Getting Started: The Financial Guide for a Younger Generation by Brian Jones

Brian was inspired to write the book because “he felt many of the books aimed at 20- and 30-year-olds were dated.”

Written by Ben · Filed Under Books, Personal Finance >Comments (0) 

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Wishing You an Enjoyable, Money Smart Life in 2007!

Only an hour until the New Year!  Here’s to enjoying life and building wealth in 2007!  Don’t have too much fun tonight, tomorrow marks the start of a new year full of potential and opportunity.  Remember, the early bird gets the worm!

Happy New Year!

Written by Ben · Filed Under Personal Finance >Comments (0) 

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Our 2007 Finances – Moving to a Single Income Family

Family First
The year 2007 may be a financially challenging one for our family. After much thought and discussion we decided to put family before money and have my wife stay at home with our new son. We’ll drop to a one income family halfway through the year which will end our 7 ½ year run of saving around 30% of our annual income.

Financial Strategies
We’ve crunched the numbers and determined that we can get by financially on one paycheck, luckily mine is bigger, but we’ll definitely have to make some adjustments. Unfortunately we’ll have to reduce our savings rate quite a bit but there are three things that will help us keep saving as much as possible:

1) Be More Frugal
Our largest expense is our mortgage payment and short of moving this won’t change. We have no debt other than our house payment so there is a lot of wiggle room in most of our other expenses. Since there are a million ways to save money, being more frugal will be a dominant theme this year. The less we spend, the more we can save.

2) Increase Alternative Income
Ah, the elusive search for other streams of income. Currently eBay sales are the main source of our alternative income. My wife is going to jump into the eBay game as well, I’ll pass on everything I’ve learned to her. In addition, I have several other plans in the works. Not sure if they’ll all pan out but as I’ve learned from Seth Godin, you’ll never know if you don’t try!

3) Increase Salary
A successful year at work led to a terrific performance review, which sets me up for a promotion next year. This isn’t really a pure personal finance strategy but more of a matter of good timing. Luckily my hard work looks like it will pay off. The more I can earn, the more we can save.

Written by Ben · Filed Under Personal Finance >Comments (6) 

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Blog Contest Results – The Winner is Everyone!

Thanks to everyone who offered feedback for the What Sucks Most About My Blog Contest. I really appreciate your input and will make updates accordingly. To say thanks for taking time to offer your thoughts you all win something!

The Grand Prize of Quicken Premeir Home & Business 2006 goes to Blaine of The First Time Homeowner. In honor of the new tax year beginning tomorrow, I’d like to give everyone else a Travel Receipt Organizer to help track your 2007 receipts!

The lucky few who will be oh so organized next year are:

Trent
Tricia
Chicky
Big Cajun Man
Paigu

If you’re interested in one just shoot me an email here letting me know where to send it. Thanks again for your suggestions, have a Happy New Year!

Written by Ben · Filed Under Contest, Personal Finance >Comments (0) 

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How to Buy Low, Sell High, and Reduce Risk by Rebalancing Your Investment Portfolio

How often do you rebalance your investment portfolio?

My trend of rebalancing my 401k in the last days of December ended yesterday. I like to make the changes before the last business day of the year because our 401k administrator only gives us a certain number of free transactions per year. A busy day at work caused me to forget the rebalancing so now I’ll have to wait until the first week of 2007.

Why Rebalance?
Christine Benz from Morningstar explains in this article the benefits of periodically rebalancing your portfolio. One of the benefits is it helps you buy low and sell high:

“When you rebalance, you put money into those securities that have held steady or dropped in value (your losers) while paring back on those investments that have grown more expensive (your winners).”

She suggests the following points to “Tune Up Your Portfolio in Six Easy Steps”:

1) Find Out Where You Are Now
2) Find Out Where You Need to Be
3) Compare Your Target Allocations with Where You Are Now
4) Be on the Lookout for Investment-Style Bets
5) Tinker, Starting with Your Tax-Sheltered Accounts
6) Plan to Make a Habit of It

How to Rebalance
If you’re wondering about the best way to go about rebalancing, John Coumarianos over at Morningstar walks us through an example of doing some maintenance on a sample portfolio. He reminds us of the importance of this necessary task and that it can help reduce our investment risks:

“whether you conduct rebalancing at year-end or less frequently, it’s a great way to reduce your portfolio’s overall risk level and ensure that its current allocations are on track with your targets.”

Rebalance Away!
Use Morningstar’s X-ray tool to look at all your investments, not just your 401k or IRA. Don’t be like me, don’t forget to rebalance!

Written by Ben · Filed Under Investing >Comments (3) 

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Win Quicken Premier Home & Business 2006, Deadline Tomorrow!

I recently launched a new theme for my blog and am looking for input from those that matter most, the readers! I started a contest last week that ends tomorrow. So far Blaine Moore’s (First Time Home Owner) comments have offered the most value so he’s the guy to beat!

Your comments don’t necessarily have to be about the look and feel of the site. I’d be interested to hear what you think of the content, what you’d like to hear more about from me, or what you think could help improve the site.

Good luck, may the best comment win!

Written by Ben · Filed Under Contest >Comments (3) 

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Why You Shouldn’t Buy a Hummer

“What do you need that thing for”, I ask myself every time I see another Hummer driving through the neighborhood. Out here in suburbia I just don’t understand why in the world people would own such a money pit just to drive around town.

I searched online and found that Jim Walczak over at about.com wrote an article “Should You Buy A Hummer?” that covers the pros and cons of owning a Hummer. He sums it up

“the Hummer is a symbol more than anything. It’s all about image and attitude. It’s purchased more for looks and brawn than practicality and purpose. So, if you’re looking for another way to get noticed…the Hummer could be just what you’ve been waiting for.”

Below are some of the negatives that he lists about owning a Hummer:

• Insurance is higher than most vehicles.
• Gas mileage is poor (roughly 12mpg), especially when used as a daily driver.
• Maintenance costs are high.
• Resale value isn’t very high.
• Expensive to buy, and even more to keep.

In my opinion, owning a Hummer is obviously not a wise move financially. I guess I’ll never understand why people choose to buy one, the only thing I can say is don’t do it!

One thing to note, his article covers the H1 and H2 models, not the newer, smaller H3 that costs less and has better gas mileage. It doesn’t matter to me, H1 or H5, you’re not being smart with your money if you buy a Hummer! I guess if you have no debt, an emergency fund, and fully funded retirement accounts then you can spend your “play money” on a Hummer; but people who have 30K of play money laying around probably aren’t reading this article.

In summary, Just say no to Hummers!

Written by Ben · Filed Under Personal Finance >Comments (2) 

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