If you're like most Americans, you've got some major credit card debt.  Part of the reason we're in this financial mess is because of the easy access to credit, which resulted in major overspending.  Credit lines were high and times were good... but what about now?

There's a new website called helpwithmycredit.org that was developed by the credit card industry to help consumers out.  Sounds sketchy right?  Well it's actually better than it sounds... The site offers help with managing your debt and introduces you to ways to get on the road to financial freedom.  It's not easy...  This will require an unpleasant lifestyle change where you actually save more than you spend.  So I guess it is easy.  Live within your means.

If you're in real trouble check out the site and give the number a call to get set up with a credit counselor.  If you're ready to do it on your own then simply start managing your finances and pay more than the minimum payment due.  Cut out the wants in your life and focus on the needs.  It's not rocket science... it's not even science.  Spend less than you make and you'll always have money.

There are a lot of misconceptions about buying a home. Real estate buyers are usually only concerned about the price of a property; however there are many other factors that ultimately determine the total cost of a real estate transaction.  First of all, these days you need a down payment.  For a $200,000 house that means you’ll need $40,000 before you even have a chance at getting a loan.  So with $40,000 down on a $200,000 home, you’ll be applying for a $160,000 mortgage.  Let’s go over some of the factors that come into play.

The higher your credit score, the lower your interest rate.  And a few points difference on your interest rate can vastly change the amount of interest you’ll pay for the life of the loan.  For the first several years the majority of your payment goes toward interest, not principal.  The lender makes sure they’re getting paid first.  After 15 years on a 30-year, $160,000 mortgage at 5% interest, you’ve only put $51,386 towards principal.  You don’t own half of your home, you own about 32% of it.

Another factor is the length of the loan.  The most common loan lengths are 15-year and 30-year loans.  There are benefits to both of these loan types.  A 15-year loan will save you a bundle on interest and you’ll have it paid off in half the time, however a 30-year loan is easier to qualify for, has lower monthly payments, and allows you to purchase a higher priced home. If you go for a 30-year loan make sure the terms allow you to pay off the loan early.  This way if you end up having extra money you can put it towards the principal and ultimately save a significant amount on interest. 

Another thing to keep in mind is the $8,000 tax credit for first time home buyers and the fact that you can write off all interest payments on your taxes.  That’s a huge tax benefit, especially for the first 15-20 years of your loan when interest is the majority of the payment.

Home buyers often go with the first mortgage person they meet under the assumption that all the rates are the same and that a percentage point isn't going to make that big of difference. As you can see above, a point can make a huge difference in your mortgage payment.

Obviously price is a very important factor when buying home, but make sure you look at interest rates and the length of the loan more closely to ensure you’re getting the best deal possible.  Now go buy something. 

Tagged in: Housing, Personal Finance, Interest Rates

How many of you actually write down your expenses?  Do you know the balance of your checking, savings, credit card, and investment accounts?  If you're like the other 127% of the population you probably don't.  It's time for you to get yourself organized and actually find out the monthly costs of your daily lunch outings, booze, gas, entertainment, hair products, tanning sessions, and whatever else you do that is totally unecessary...except for booze.  Anyway, my point is if you haven't done it yet... start writing down everything that you spend and keep track of it for a month.  Create a necessities category with things like food, gas, rent, bills and then a pleasureable category that includes entertainment, golf, movies, bar receipts that you don't remember and other things of that nature.  If a number 2 pencil and wide ruled paper are too old school for you then check out mint.com where you can securely enter in all of your account info and check it all out on one simple page.  Seriously it's safe; if you're going to get your identity stolen it will be from someone stealing your credit card offers via snail mail or copying the magnetic strip on your debit card a the Lonestar Bar in Austin, TX.  "It's the best free way to manage your money."  You can quickly find out how much you're spending each month and what you're spending that cash on. 

Start appreciating the value of money.  If you make $10 bucks an hour think about the fact that you worked a half hour just to rent a movie or worked 2 hours to take a date to the movies.  Getting ColdStone afterwards bumps it up to 3 hours.  And that's before taxes.  Put things in perspective.  I'm not saying don't go have fun, just think about it and make sure the amount of money you have coming in every month is greater than the amount you're spending.  If this doesn't work then I advise you go on an all cash system.  Give yourself a predetermined amount of money each week in cash and when it's gone that means it's time to stay home and sit in time-out... or read this website.  Quit using that credit card.  Again, spend less money than you make, it's not rocket science... or even science...it's common sense.  It's the foundation to living a financially responsible life, yet Americans somehow manage to have a negative savings rate year after year.   Hear of the credit crisis?  Spend less than you make and you'll always have money.  Savvy that?

If you would just stop for a second and quit spending money on a few unnecessary items a month I’m sure you can figure out a way to save $200 a month.  I don’t care if you make $10 bucks an hour or $100 bucks an hour.  Start paying yourself first and put some money away every month and you’ll soon realize the magic of compound interest.  Check this out.

If you start putting away $200 bucks a month right now with a 6 percent yield you’ll end up having $32,775.87 in 10 years.  That may seem like a long time, but trust me… once you’re working in the real world 2019 will be here in no time.  

If the stock market does a little better over the next 10 years and you end up with an 8 percent yield you’ll have $36,589.21.  This is after contributing $24,000.00 (which seems like a lot, but it’s only $200 a month).

(10 years later) Now let’s say you stop contributing to the fund and just let that 32k (from the 6% interest scenario above) compound at 6 percent interest for another 10 years... you’ll have $59,632.31.  It almost doubles by just letting the interest work for you.  If you can get an 8 percent yield you’re looking at $72,750.64.

Let’s look a little further out… if you simply put away $200 bucks a month for 20 years at 6 percent interest you’ll have $92,408.18 in 2029.  Seem far out?  It’s not; the only thing far out is your bank account.  Same time frame of 20 years at 8 percent yield and you’re looking at $117,804.08.

Once again, let’s say you save for 10 years and have that $32,775.87 saved up (and 6 percent yield is a very conservative figure)… you stop putting in $200 a month, let it sit for 20 years at 6 percent interest and that 32k will be a healthy $108,494.83.  Bump that up to 8 percent interest over the 20 years and you’ve got $161,480.25.  That 2 percent difference year over year for 20 years ends up being more than $50,000.00!

Finally, imagine you’re able to put away that $200 per month for 30 years in a row.  At 6 percent interest you’ll be staring at $200,903.01 in your bank account.  Don’t tell me that you’re not a little excited.  If you can get an 8 percent annual return then watch out…$298,071.89!  You should now realize the importance of compound interest and how your money can work for you.  Look at the difference between a 6 and 8 percent yield… almost $100,000.00 by the time you’re ready to call it quits.  Think of all the golf courses you could check out with all that extra cash.  

Okay, now take a guess at how much you’ll be making in interest alone if you collect 6 percent on the $298,071.89for only one year… that's $18,384.42 in your pocket… 8 percent yield and it jumps up to $24,739.82.  These returns are very realistic for the savvy investor.  Do your homework and you can end up with an extra six figures in your bank account by the time you retire.  Compound interest is magical.  Be sure to check out The Richest Man in Babylon by George S. Clason for a beginner’s lesson on the power of compound interest.

Remember, pay yourself first.  Start a savings account that automatically takes money out of your account before you even see it or find out if your employer has an automatic savings program.  If you never see the money you’ll never even realize you don’t have it.