Our friends at VA Mortgage Center.com (who helped us with Charity for Charities and have a nice milblog in their own right) released a video today outlining some of the benefits of the VA Home Loan Program. You can watch it on YouTube here - VA Loan Video.

With the ‘housing crisis’ we are currently living through, it’s most important for qualifying Veterans and Active-Duty members to be aware of their options. Don’t forget to look into what the VA program might be able to do for you upon purchasing or even refinancing a home.

And heck, everyone loves a good time-waster video (especially if you are bored at work). Might as well learn a few things in the process. Give it a look and come on back to VA Joe!

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 Fixing the money thing!

We have tackled many topics regarding your personal finances, however it’s time we tackled the pending financial disaster in America.

Today the stock market fell once again. Sound familiar?

Remember 2000 to 2003?

The stock market has fallen more than 1000 points in the last month, most of that in one week. Is this just another minor market correction?

Why are the cost of goods going up at an alarming rate? Why are there so many forclosures on new homes? Why with so little unemployment are we seeing the kind of economic indicators we saw during the Carter administration? Should I be alarmed? What can I do to protect myself from a financial disaster if one should occur.

Joe intends to tackle these issues in this blog.

Lets look at some of the factors that have contributed to the unsettling times we are facing.

High national debt,the highest in history. High personal debt, also the highest in history. The blog host shows stastistics on his website that are alarming regarding personal debt and national debt.

Someone has to pay the piper.

Home forclosures are at a national record. In my sons 4 year old new home subdivision 1 out of every 5 houses is abandoned,  in forclosure or severely behind on their payments.

Why?

Builders, bankers, realtors and their lobbies influenced the Government to modify lending rules several years ago to keep the housing boom going. The lenders were able to get people approved for loans that 2 0r 3 years earlier they would not have approved.

Buyers with considerable credit challenges were approved and the builders and realtors were thrilled. They could now get people in homes that they would not have qualified  for before.

The problem comes in that the buyers were already in excessive debt and we just added hundreds of thousands to the burden. When you buy a new home the real estate taxes are based on the LAND only the first tax year.The second year the payment including taxes and insurance went up considerably. The third year,the loans were not fixed interest and the interest went up and so did the payment.

Buyers who were struggling to make the payment initially now were unable to make them at all.Thus forclosures! In many new home subdivisions people are just walking away from the home in the middle if the night.

The housing and mortgage industries are in a panic.The stock market is affected and so on and so forth.

Oh what tangled webs we weave in an effort to deceive!

 THE STOCK MARKET

In 1960 only 2% of Americans owned stocks.

Then came the Mutual fund!

Today most Americans have Mutual funds through employer retirement plans like 401k’s, 403b’s, 457’s, IRA’s, and Roth IRA’s.

What does that mean?

The stock market is vastly overinflated.

 Before mutual funds, the only people who owned stocks were people of means who were able to pay someone to watch, move, buy and sell on their behalf continuously.

Today the American people have been lied to by the brokers and agents who sell these mutual funds at big commissions and continued (Trail commissions ) even when the market goes down!

When the experts sell the mutual fund, owners are told to buy because the market is so good. When the market is low and the experts know what and when to buy the mutual fund brokers say again, buy now because the funds are a good value.

In other words, no matter what is happening they are giving you the exact same advice.

Sound a bit suspicious to you?

When in 2000 -2003 the market began it’s largest loss in history. The advice was exactly the same. It will come back, don’t worry!

Well, they were right! The market did come back.  Over all, the average holder of mutual funds and stocks had vertually NO GAIN for 7 years!

How often can you afford those kind of setbacks?

Now, with the largest one week loss in the history of the stock market earlier this month what do you suppose the advice of the mutual fund dealer is? Same old, Same old!

Why are we not suprised? They don’t want to give up those hefty commissions.

The stock market is more volatile than ever in it’s history and we predict a much longer and much larger loss than in 2000 -2003 over the next several years.

Can you afford it again?

What then should we do?

Lets start by using some of the common sense that our Government, Realtors, Builders , Bankers and Investment brokers seemed to have left on the Table of the BIG COMMISSION!

Start by developing an aggressive strategy to pay off all consumer debt!

First, make sure you have at least $2,000.00 in the savings accounts for immediate emergencies.

Then attack the debts one at a time starting with the highest intrest rate and going down.

Don’t add a little to each debt. Take all the extra money you can free up monthly and attack them one at a time!

Stop paying into retirement plans and eliminate consumer debt first.

That flies in the face of conventional wisdom due to the employers contribution.

Don’t let greed destroy you! Pay off the debt!!!

If a major economic downturn, recession or worse happens you will be on top and not at the bottom!

The choice is yours!

You can keep on doing the same thing you are doing now in whch case if the above happens you will be destroyed financially.

Or you can do something different.

The definition of insanity is doing the same thing and expecting different results.

Are you willing to bet we are wrong?

Joe Money Matters is a section of the VAJoe Blog to ask for quick financial tips and advice from an expert with more than 20 years experience in counseling families to live without debt and to reach there financial potential. Please leave comments on this Blog. You can learn more about the Joe Money Matters advisor at his website. The posts and comments by JoeMoneyMatters reflect his two decades of financial counseling expereince. VAJoe.com does not endorse any financial strategies, but offers this blog as a service to its site members for discussion.

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When should I start investing?

The popular belief in our culture today is that we should start investing as early as possible.

Generally speaking that is true, howeve , we want to look at the whole picture before jumping off the bridge.

1. Do I have a sound budget?

      If not, delay starting investments until you have identified where the money is coming from.

2. Do I have any debt?

     If you have a sound budget and debt is restricting your discretionary money,

     then start a systematic debt reduction plan. there are many books on the subject.

     The guest bloger ’s website has a free debt reduction planning area.

     Pay down or pay off all consumer debt before tackling investments.

     Paying consumer debt at the same time as investing is counter productive.

      What you earn and more may be eaten up by the interest you pay.

How should I choose what kind of investments to use?

We will not be going into great detail here in this blog on specific investment vehicles.

There are several basic groups of investments.

Savings

The most popular and widely known is a savings account at our local bank.

Everyone should have at least $2,000.00 in a savings account for emergency purposes.

You might choose to have more, but at least $2,000.00.

Bank or Savings and Loan savings accounts are relatively safe and earn a relatively small return. They are totally liquid and simple to understand and easily accessed.

Money market accounts pay a little more interest and generally are still very liquid.

They can usually be opened at your local bank.

Certificates of deposit (CD’s) yield greater returns the longer you commit to keeping them. CD’s are less liquid and have substantial penalties for early withdrawal.

Securities

Stocks, bonds,  and commodities are traded in the market. They offer potentially higher yields and potentially greater risk. These are purchased through licensed securities brokers or agents.

Mutual funds are the most common and widely known of security market sensitive investments.

Seen most often in 401k’s ,403b’s, 457’s and so forth ( Employer- employee based retirement/ savings plans. They are also used to fund many IRA’s and Roth IRA’s.

Mutual funds are intended to somewhat minimize risk through diversification ( spreading risk) while still affording the invester the possibility of greater gain.

Mutual funds make up probably the bears share of securities today and are easily purchased through employer plans, banks and brokers.

Caution! you should be aware there is a substantial risk of loss in these areas of investment. They should not be purchased without considerable caution.

Insurance based investments

Among this catagory of investments are annuities and insurances.

Annuities are broken down into 2 major catagories, Fixed and Variable.

Fixed annuities are generally very safe and produce a lower yield. A relatively new catagory of annutiy is the fixed indexed annuity. Still very safe while showing a very promising yield.

 Variable annuities are funded with mutual funds and have a substantial risk while affording a greater potential gain.( They generally have high fees and “hidden” fees).

Single Premium Life insurance has some unique benefits like tax minimumization or elimination and no risk earnings vary from policy to policy, but are generally good.

They are most often used to pass the death benefit along to beneficiaries and avoid or reduce the tax on the death benefit.

There are many other details and topics far too lengthy to explore on this forum.

Contact several advisors before deciding. Each, of course, will be happy to give you their perspective. Do not be rushed!

Joe Money Matters is a section of the VAJoe Blog to ask for quick financial tips and advice from an expert with more than 20 years experience in counseling families to live without debt and to reach there financial potential. Please leave comments on this Blog. You can learn more about the Joe Money Matters advisor at his website. The posts and comments by JoeMoneyMatters reflect his two decades of financial counseling expereince. VAJoe.com does not endorse any financial strategies, but offers this blog as a service to its site members for discussion.

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 “If you know the truth, the truth will set you free”.

20 years ago I found myself in a great deal of financial distress due to excessive debt. I was looking for ways to cut my monthly costs in order to attack the consumer debt.

In the process of searching for cost cutting ideas ,I began to read a book about the life insurance industry and how they make thier money.

 What I found out was a total shock to me.

The life insurance industry is the richest industry on the planet!

How do they make thier money? Largely they sell insurance against financial loss due to death.

If you pay, lets say $50.00 per month , for a $100,000.00 whole life policy, you are paying a very small fraction of that premium for the death benefit.

The rest of the premium goes into a cash accumulation account.

Lets say $25.00 pays for the death benefit and the rest accummulates in the cash account at interest.

Sounds good so far, right?

Lets say you have that policy for ten years and the interest credit is 0%

Your cash value would be $3,000.00, right?

Ok, lets say you need that cash you have saved in the policy, how do you access it?

1. You can borrow your own savings from your policy and pay around 7% interest to the insurance company. Your death benefit is reduced by the amount you borrow and the premium is increased to pay the interest.

$100,000.00 death benefit - $3,000.00 policy loan = $97,000.00 new death benefit. Old premium $50.00 per month,  new premium $67.50.

How do you like borrowing your own money, paying interest to the insurance company and they lower your death benefit?

2. You can take all of the cash value out by surrendering the policy. In which case if you die, your family is left $97,000.00 poorer.

3. If you die, the cash value is kept by the insurer.

$100,000.00 death benefit at purchase $100,000.00 death benefit ten years later.

Where did your savings go?

Still sound like such a good deal?

You either get your insurance or your savings, But Not both! This is true REGARDLESS OF THE COMPANY!

 Why not insure to insure and save to save?

Using a form of life Insurance called Term , you can get much more insurance benefit for your money and save the difference!

Most life insurance companies offer Term Insurance, but they strongly encourage their agents to sell whole life, universal life, variable life etc. because the profit is “Off the charts” compared to term.

Unfortunately that puts your insurance company in an adversarial position with you.

I’m a paasionate capitalist, but I am also opposed to being sold products without the client fully understanding the products they buy.

The agent makes a substantially larger commission on the cash value style insurance than he will on term insurance, so the insurer is putting the agent in a position where if he sells the best value his income is greatly compromised.

Term insurance can be designed around your benefit and budget needs more easily due to the greatly reduced cost.

Term is the better Value

Generally speaking, if you are 50 years old or younger and in reasonably good health you should buy term insurance.

The problem is finding an agent who will give you an unbiased assessment of term vs. cash value life insurance.

If you would like more information on this or any other “Money Matters” subject, contact the guest host, Joe Money Matters.

Next time, Savng and investing .

Joe Money Matters is a section of the VAJoe Blog to ask for quick financial tips and advice from an expert with more than 20 years experience in counseling families to live without debt and to reach there financial potential. Please leave comments on this Blog. You can learn more about the Joe Money Matters advisor at his website. The posts and comments by JoeMoneyMatters reflect his two decades of financial counseling expereince. VAJoe.com does not endorse any financial strategies, but offers this blog as a service to its site members for discussion.

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Mortgages and your new home.

Ok, there has been a lot of talk about subprime lending.

What is it?

Lenders take a larger risk when they agree to fund mortgages on homeowners who have high debt to income ratio’s, low credit scores,no money down, etc.

Home builders and Realtors are constantly trying to get loans for people with marginal credit or too much debt. The lenders started experimenting with making loans to higher risk clients under pressure from Builders and Realtors.the practice went too far and we found Realtors and Builders sales forces geting people home loans based on both spouses income and not considering their budget.This practice put many home buyers in trouble because with the new buy down loans, 3-2-1 loans,when the payments went up at the end of the first year,the homeowner could not make the payment.If one or the other was laid off or hours cut back or became pregnant or anything disrupted the income the homeowner could not make the payment.

The result of this practice is the largest rate of forclosures and Bankrupcies in History.

Each Political party will try to make this a political issue but the bottom line is “Poor money management practices by each of us.

“We want what we want when we want it”!

The mentality for the last decaid or so has been “I can have what I want when I want it with no regard for how we will pay for it.”

I purchased a new home 4 years ago. When It was being built I watched the people coming in the sales office to buy a new home.

Many of them had credit so bad they could not quallify for the loan on one income or in some cases they could not quallify at all.

They would fenagle and wrangle and lie to get approved for loans they could not afford.

Thinking to themselves”My income will go up and then I can afford it”.

No consideration to the unexpected expensed asssociated with buying a new home,they quickly found themselves unable to pay.

Excessive use of debt is the major factor in this senario.

When should I buy a home?

The popular beliefe in america for decaids is why rent when you can buy a home?

Seems to make perfect sense doesn’t it?

One of the problems is this,if you rent and you find yourself in credit or income trouble,you just move into another lower cost apartment.

If you purchase that home and streatch yourself to the max and beyond

and find yourself in credit or income trouble your stuck!

In My town Home values were giong up 15% per year 5 years ago.Builders were unable to build homes fast enough to meet the demand. As the matrket became saturated and more of the people could not afford the payments on the new home,they found themselves unable to sell and fell further behind until they lost there home’s.

On my street alone (about 40 homes) there are 4 homes abandoned.

The owner could not sell and could not make the payments so they just moved out.

My county has one of the highest forclosure rates in the Nation!

Every street in the newer neighborhoods has forclosures on it.

The home value today in my neighborhood is $40,000.00 Less than it was 4 years ago on average.

We can not blame the Government for this, we brought it on ourselves.

When then shoud I go into debt for 30 years for a home?

Lets consider a few basics.

First we should have a sound budget. One that has money left over at the end of the month.

Second we should eliminate all consumer debt! Credit cards,store accounts,finance company loans  family loans etc.

Next we should establish a sound cash reserve(Savings account) at least $2,000.00

Then we should save at the very least 5% of the ammount financed(preferably 20% or more). for a down payment.

We should establish with great care form our budget what we can easily afford to Pay per month.

Take great care here you will have taxes , insurance and associalion fees added to your payment every month,in most cases and THEY WILL GO UP EVERY YEAR!

Once you have determined these paramiters then go shopping with the mindset, we will not exceed these limits we have placed on ourselves period!

If you follow these guidelines your new home will be a blessing.

If you do not you may find,as tens of thousands of new homeowners have found,how quickly that dream home becomes a nightmare.

Don’t be too quickly pressures by family, friends  Realtors or Builders to buy a home when it is not easily affordable, or when we are in debt. or when our income does not merit the cost.

Take your time, do it right, make that home a dream home! 

Next time we will discuss the largest financial loss area in the American family.

INSURANCE!

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Helpfull hints to find loss areas (Finding Money).

Lets see if we can discover some real cash flow together.

First as we discussed before, we must stop using debt to meet our needs.

Second we need to establish a sound budget.

People tell me all the time why they cannot do a budget or why “Budget’s don’t work for me”.

Sorry folks, that is a Copout!

Lets start with a reflective budget instead of a projected budget.

We can always look back and see what we did easier than trying to look into the future.

Just keep receipts for everything or write down what we bought. Then add them up at the end of the month and Presto,we have a reflective budget.

If we do this for several months in a row we can clearly see where our money is going.

 We Must Establish an emergency cash reserve!

Without a cash reserve to fall back on we are always on the edge of being forced back into debt.

When we find some loss areas and  begin to recapture these dollars, we must set them aside until we have an emergency cash reserve of at least $2,000.00, that way if the car breaks down or the hot water heater blows up, we have money to fix it instead of going back into debt.

This reserve must be replenished immediately if used for emergencies.

That way we always have a hedge against new debt.

The number one reason people fail to get out of debt is lack of an emergency cash reserve!

OK, where is this money coming from ?

There are many ways we can find cashflow without resorting to eating bean soup.

Lets start with tax returns. Most families get back $2,000.00 in tax return.

Can we, if we are strugling or desiring debt relief, afford to make intrest free loans to IRS? That’s right, if you are getting a tax return you are loaning YOUR MONEY to IRS interest free for a year.

Ok, how much do you get back on average? $2,000.00 We  need to INCREASE how many deductions we claim on our w-4.

We do not want to end up owing IRS so we take $2,000.00 -$200.00= $1,800.00

Divide  by 12 Months = $150.00 per month freed up in our budget every month by making this change.

First increase deductions by 1 and after 1 pay period figure how much our pay was increased by this change. Next divide that difference into the $150.00 or whatever amount weare wanting to attain. Then claim that many more deductions than before we started. This will ensure we don’t owe given we don’t change any other deductibles on our taxes more than normal.

Now we have freed up $150.00 each month.

Next, If we are struggling to get a grip on our finances consider temporarily stopping our 401k, 403b, 457 or Thrift Savings plan contributions. Even though our employer may match our contribution, if we are struggling stop temporarily, establish a Cash Reserve,  pay down at least all consumer debt and then resume the contributions.

“But everyone tells me not to stop my contributions”.

We must decide if we are going to remain broke like “Everyone.” or become truly free.

With the average family that means another $300.00 per month freed up.

That is a total of $450.00 and we havn’t given up pizza, movies, dining out or anything .

We will explore several more great ways to take control of your financial life next time.

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Ready for Christmas Yet?

At this time of year more than any other time, Financial stress is looming.

What to do, how to pay for things?

Joe Money Matters will tackle the things that make you feel sick at your stomach and overwhelmed. WE NEED ANSWERS ,JOE!

Everything you have always wanted to know but were afraid to ask about Money, Debt, Financial stress etc.

Let’s set the table.

We all have been in the place where there is more month and not enough money.

What do I do? How will I manage?

Especially Military families. We want answers but there is no where to turn.

Well Joe has the answers!

Post your questions and we will undertake to answer them.

In todays highly charged political climate it is easier to blame this party or that one, but the answers are not in the Government!

Lets start with some revealing statistics.

55% of all divorce is a direct or indirect result of financial stress.

Many emotional disorders, such as depression and a nxiety disorder are related in no insignificant way to Financial stress.

Heart desease,stroke and many other illnesses are stress related.

The average 65 year old still owes 20 years on his mortgage.

 Most people in America will retire below the poverty level.

How many of us will fall into that statistic?

125%  of the disposable income of families is eaten up by debt.

Mom & Dad are forced out of the home, sometimes against their will, to work at jobs they hate and in many cases; for companies they dislike in order to pay for things they just had to have! 

Researchers say the average family spends about 20 minutes per day talking with their children.

The average family has NO money saved and lives paycheck to paycheck.

This means if a tire goes flat on the car, out come the credit cards.

If all the personal debt in America was divided equally between every man, woman and child in America it would mean every child would be born owing $3,800.00

Where are we going?

The financial experts tell us we are likely to experience the worst recession in history in the near future. Stock Market losses exceeding 50% of it’s value are possible.

Gas prices over $5.00 per gallon are likely in the next year.

What is the answer?

Will the Democrats be able to turn this around?

Will the Republicans be able to save us from this impending financial catastrophy?

Will the Independants have the answers?

If I hit the lotto everything will be fine.

NO!

The answer is not in any political party or in reduced salaries for corporate CEO’s or any other factor than taking authoriy over our own financial issues.

No one is going to help us if  we don’t decide to change a few basic things about how we relate to money.

We all want to be more sucessfull in out financial lives, but what bad habits are we willing to change to accomplish some financial freedom or even have some breathing room?

Debt is the major curse in our lives! Debt has robbed you and I and Debt

is distroying the American family, our government, and our freedom.

Let’s start right now. How can I budget, cut costs or begin to be a better stewart of our finances?

One important step in gaining real financial freedom is to STOP USING THE CREDIT CARDS!

Cut them up and throw them away!

Let’s figure out in future blog’s  how we can save $500. 00 per month or more on average just by looking at some seldom looked at areas of loss in the average family’s finances.

Are you excited? I am .

Joe’s deserve to win in life and in their finances.

Leave a comment and let me know what areas of concern you have.

Joe Money Matters is a section of the VAJoe Blog to ask for quick financial tips and advice from an expert with more than 20 years experience in counseling families to live without debt and to reach there financial potential. Please leave comments on this Blog. You can learn more about the Joe Money Matters advisor at his website. The posts and comments by JoeMoneyMatters reflect his two decades of financial counseling expereince. VAJoe.com does not endorse any financial strategies, but offers this blog as a service to its site members for discussion.

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