October 2006
You are currently browsing the articles from General Finance written in the month of October 2006.
You have been wanting to buy a home for years. You have done everything right; you put your savings in a high interest rate savings or money market account. You have weathered the real estate boom and are ready to take advantage of the current buyer’s market. You go to a lender that was recommended to you and you secure a 30-year fixed rate mortgage at 6.25% and you plan on putting down 20% of the purchase price. You go with a recommended real estate agent and find a home.
The home is a little expensive, but you can make the mortgage payments. Here comes your mistake–you did not consider real estate taxes or home insurance as fixed costs that go along with your mortgage. If you purchased a $200,000 and put down $40,000 you probably do not have a lot of money left saved up. $985.15 is your mortgage payment due each month and that was all you considered when buying. If you add property taxes of $300 a month and $45 a month for home insurance your payments have increased almost 35%–Yikes!
Maybe you can still make those payments, but now you might be “house poor.” How will you save for retirement? How will you accumulate enough money for an emergency fund? How will you really get to enjoy life and your home? So please make sure you consider property taxes and home insurance when buying a home.
Written by Nagel on October 31st, 2006 with no comments.
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Friday was the final day of the attorney review period stated in ourcontract to purchase the home. We had bid on the house and agreed upon a purchase price with the sellers last Sunday. The Tuesday after we had the inspection and had hired a real estate attorney. There were some issues that came up during the home inspection and we passed that information on to our lawyer so he could draw up a letter to the sellers. The sellers agreed for workers to come in and check out our concerns and we will have a response from them on Monday. They will need to decide from what the workers said if they are willing to fix the issues or pay us money to fix it ourselves. If this negotion goes well it should be clear sailing until the closing.
Written by Nagel on October 30th, 2006 with no comments.
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The U.S. Commerce Department stated on Friday that the economy grew at its slowest level in over three years. “The Street” overreacted to this news and the U.S. stock market plunged the remainder of the day wiping up the gains made in the morning and more. “The Herd” sees this as a sign that the soft landing many predicted might not come to fruition. In recent weeks these are the same people who raised the stock market and Dow Jones to record levels because of good economic reports. So . . .
Who is right? Well, no one knows for sure, but there will always be speculators who jump on good and bad news and move the stock market like it was moved on Friday. A hard landing might be coming, but you never know.
Written by Nagel on October 29th, 2006 with no comments.
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Have you ever wondered why every company you deal with asks you for your social security number? Typically, people just hand it over to them without thinking twice. Now that people are becoming more aware of identy theft there are not as many willing to give it out unless necessary.
Think about who really needs your social secutiry number? Government entities (Tax department vehicle, welfare), money-handling entities (banks, brokerage, and employers).
Most other businesses have no legal right to demand your number. So just say “no.” The less entities that have your social security number–the better. Just ask them if you can use another form of identification. The company might not do business with you, but now you know you do not have to give it to them.
Written by Nagel on October 28th, 2006 with no comments.
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Most people never consider having an emergency fund because they are young, healthy and not thinking that something bad can happen–sometimes it does. Having short-term and long-term disability might seem extreme if you are 22 years old, but it can save you from serious financial problems. Moreover, having an emergency fund of money that is liquid is essential.
Things happen in life. Did you expect the car to break down? Did you think you would need a new refrigerator? Did you think you would get fired or laid off? Hurt? These things happen everyday and sooner or later it will be your turn. You need to have at least 6 months, preferably 9-12 months, of money saved that would cover all your expenses. This is not extreme and it makes financial sense in the long run. Obviously, credit card bills with large APRs would come first, but you need to build up a stash of funds to pay for life’s little problems.
Written by Nagel on October 27th, 2006 with no comments.
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It was no surprise that the Fed Chair,Ben Bernanke, kept the fed funds rate at 5.25this is the third straight time they have not touch the rate. This news was welcomed on Wall Street as the stock market was up again. The Dow Jones has hit record highs and all the major stock market indices have done very well the past few months during the rate stabilization. Unexpected was the non-story. Many predicted the Fed was emphasize their concerns about inflation, but they stated the economy is going at an acceptable rate. This is another positive indication that investors on Wall Street look for when they want good news. This news will probably help the U.S. equity market in the short run.
Written by Nagel on October 26th, 2006 with no comments.
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We took another break from house shopping after we were fired. In the meantime we still scoured the internet for available places in our town. Our plan was to buy in town and then eventually go to the suburbs. Well, we took a 180 and decided for the suburbs right now because it had taken so long as is that we were eating away at our city-time and we would need to move soon after buying a home in the city. We decided on a suburb and then found a place in the town next to it to the east. We were very interested, but upon looking further into it we saw that there were too many potential problems. We continue to look in the original city until last week. On a whim, we decided to look in the town next to it to the west. The first one we saw we liked. We have looked at it twice now and now are in the midst of bidding on it.
Previously on “The Annals of Buying a Home”
Written by Nagel on October 25th, 2006 with no comments.
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During the earnest money loss debacle we had decided we needed to take a break. It was the middle of August 2005 and we were getting married in December. The entire time we were still looking online for homes, but we were busy and still felt burned. In February of 2006 we began looking casually at homes and going to some open houses on our own. We were weary about our real estate agent because we thought she handled the earnest money situation very poorly. However, she was reommended by a good friend so we went forward with her in March/April of 2006. In the following months we went throught the buying process again and again and they fell through for one reason or another. We decided against countering an offer by a seller of a condo our agent calling the mutual friend and told her she no longer wanted to represent us. Basically, we were fired by our real estate agent because we did not buy a place quick enough. This lead to another break in our search.
Previous Annals of Buying a Home
Written by Nagel on October 24th, 2006 with 1 comment.
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My wife and I have been searching for a home for about 18 months. We began in May of 2005 (the real estate market was booming). In that time we have seen the real estate boom and now seeing the bust. We have also changed our minds on what city we want to live. Most of all we have learned the lessons of the School of Hard Knocks.
At one time we thought we had purchased a condo. We had agreed on a price, but after that the wheels fell off. The lawyer review period came and went and our lawyer was not returning calls. We had an inspection and it brought up major concerns. We had already put earnest money up and the sellers did not seem too concerned about of safety concerns. Eventually, we fired the lawyer and the real estate agebt got us all to meet to iron out our issues. After the meeting we left thinking the sellers would fix our saftey concerns. Well, the next day we discovered them offering $1,000 and to clean the fireplace. The safety issues were approximately $10,000 of things that we refused to move in until taken care of. We rejected the offer and it was over. Not yet, because our lawyer had flaked on us the sellers said they were going to keep or earnest money. This began the month of stress. For the next month were worked on trying to recoup that money and eventually got the money back, but we felt burned. This was only our first experience trying to buy a home.
Written by Nagel on October 23rd, 2006 with 2 comments.
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I believe Walgreen’s (WAG) is an excellent stock to put in your portfolio right now. Most investors are running away from CVS and Walgreen’s because of Wal Mart’s roll-out of their new $4 prescription drug program. This news sparked “The Herd” of Wall Street to oversell Walgreen’s. Because Wal Mart influences the economy in so many ways their $4 perscriptions scared many away from Walgreens (off about 15%). Walgreen’s drug stores are great as is their stock–yes they did miss earnings–but they are Best-of-Breed in their sector and that means there is a “Buy” opportunity. After Wal Mart announced the prescription drug program Walgreen’s addressed the Wal Mart prescription issue right away in their conference call. Walgreen’s knows that Wal Mart will only be providing 300 prescription drugs in their plan. They know that Walgreen’s pharmacy has 3,000 prescription drugs to sell. Walgreen management also knows their prescription price often is around $3-5 which can be lower than Wal-Mart. I think once investors realize these facts (some might have already) Walgreen’s they will regret dumping their Walgreen stock. Plus, WMT has not really received much of a price bump from their “great” news.
I am not sure that Walgreen is a short-term buy, but I plan on holding it for a while and watch it increase in value over time.
Written by Nagel on October 22nd, 2006 with 1 comment.
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