The Digerati Life

I’ve been reading a lot about anguished homeowners recently, who’ve been whipsawed by the subprime crisis and are now mulling their future. In some spots in California, things haven’t been too pretty with the real estate market, thus leading to a rise in foreclosures. And just as easy credit flowed easily not too long ago, fueling the rise in subprime mortgage and “no money down” loans, we’re now seeing the consequential rise in yet another disturbing trend: people simply deciding to walk away from their homes.

I can’t imagine what it’s like to face the prospect of losing your house. It’s a financial quandary that has many possible solutions that can depend on your specific situation. If I were in such a position, how would I go about figuring out what to do? I thought I’d put together some arguments and reasonings that go behind making such a huge financial decision — the decision to foreclose or to walk away from one’s home and mortgage.

Making The Decision To Foreclose

How you decide to resolve your mortgage issues may depend on your personal circumstances, so read on for some points to consider while making your decisions.

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Can you really double your salary without having to work more? What a premise!

I’ve never met anyone who didn’t want to get paid more for the job they were doing. I’ve heard it described time and again that the best job out there, is one that offers you the most money for the least amount of work that you need to do. If you’re delivering the goods day in and day out, I don’t see why you shouldn’t feel that you deserve just a bit more.

Conventional wisdom tells us that if we work harder, we’ll end up making more money. Although reward is certainly very often tied to more effort and more contributions, effort and reward don’t always go hand-in-hand. Just ask the guy who’s been sitting at the back cubicle for the last 5 years, pulling all those all nighters. Do you even remember his name?

Anyway, enough snark. There are things we can all do to increase our employment income without necessarily having to do any more work or having to change our job description. Some ideas are easy to implement, while others may sound a bit more radical but may float your boat anyway:

Want More Salary? Work Smarter, Not Harder

So you’d like to get paid a bit more for your time, effort and services. Well, if you use a little bit of strategy, be a little more scrupulous and do a little more planning in advance of getting a job, you may just snag a better paying position.

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The case against short term trading.

The typical learning curve for an investor begins when he or she gets their feet wet by placing some money in the stock market on a stock tip. I, along with many former colleagues, were in this boat sometime ago, before we found out that some discretionary income plus peer pressure and a sense of competitiveness over who can achieve the highest rate of return in the shortest amount of time can be a recipe for quick financial wipeouts. But we were young and silly then, so we can all just chuck it up to inexperience and youthful bravado.

These days, we know better. And most of us champion the prudent approach of taking a long term view towards investing as opposed to randomly playing the market when the urge strikes, although I do still have many buddies who like to time the market and feel more comfortable being invested for short periods at a time. My market timing buddies aren’t able to commit their portfolios to market forces without perpetually worrying about their money, and have thus felt more secure trying their luck with guessing when to enter the market and when to pull the trigger. So far, I’ve heard that the pay off from this strategy hasn’t been that exciting.

Over time, I’ve learned to gravitate towards long term investing as I gained more education and experience with investing. This is the strategy that involves building a diversified portfolio and following an asset allocation that is in tune with your risk tolerance. It involves a commitment to keeping a portfolio invested in the markets, regardless of market behavior. Like many finance enthusiasts out there, this is my preferred manner of investing, and here’s why:

Reasons To Invest For The Long Term

#1 The power of compounding is your friend.

One complaint I hear from those starting out as investors is this: it takes too long to make any money in the market. Everyone seems to want that immediate gratification and quick results. That was why the dot com era lulled so many people down the wrong path, convincing them that anything they touched was golden….on paper. Practically everything was on an uptrend, and everyone enjoyed the thrill of making quick virtual money. Unfortunately, many a portfolio did not meet with a happy ending.

If we had just all ignored how the market was behaving then, and focused on the long term, that particular boom/bust cycle wouldn’t affect us so grandly. Long term investors with their eye out into the future usually ignore current market conditions, or at least, don’t obsess over them. They may tweak their portfolios a bit, but they don’t overreact to market movements.

Our focus should be on starting an investment plan as soon as we can, and investing on a regular basis. This strategy will then allow your money to compound through the growth of reinvested earnings and a regular savings plan. You also don’t have to wait that long to see the effects of compounding: the formula, called the rule of 72, tells you how long it will take for you to double your money. Given a reasonable long term rate of return of 8%, you can expect to double your money in 9 years: 72÷8 = 9.

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I’ve been off my schedule a little bit here since I have some relatives over for a short visit. And it’s Mother’s Day, so I decided to take most of the weekend off and strayed a little from my regular routine — something I do once in a blue moon.

This week, I encountered lots of tips and hacks from all over the money blogosphere. Seems like a lot of people were in a list-making mood.

Personal Finance Reads

• The Simple Dollar: A step-by-step plan for dealing with your debt is right here: The Debtor’s Toolkit. It’s a nice package of simple financial principles to help you vanquish your debt.
• Lazy Man and Money: You know that eureka moment, when you hit upon an idea or a vision that gives you a sudden surge of energy and catapults you on top of the world? Well, I could just see this happening as I read Lazy Man’s post about this new dream he has. Now I’m dying to know what it is!
• Money Smart Life: I love this great, practical list of prudent tips for the new college graduate. I wish I had these reminders way back when!
• Gen X Finance: The weather is getting warmer so it’s time to dust off some warm weather money tips!
• The Sun’s Financial Diary: With gas prices going up up and up, here are some money saving pointers on how we can cut down on our gasoline costs.
• Mighty Bargain Hunter: How do you handle charities that call you up? I’ve turned down many because I don’t accept phone solicitations. And because I try to keep within my charitable donations budget and already support those charities whose causes I care for.
• No Credit Needed: Here’s a very telling tale about store-branded credit cards, proving that there’s some type of upsell that goes with buying stuff in department stores.
• Million Dollar Journey: This article tackles the comparison between Canadian and U.S. retirement accounts. There’s also a handy table that lays it all down.
• My Dollar Plan: Here are some helpful ideas on how to secure your financial future. It’s all in the planning!
• Brip Blap: Simplify your life with these random simplification tips. Learn to cook, don’t buy stuff, adapt to change.

Additional Readings

• The Economic Stimulus Check Means Higher Taxes To Come @ My Two Dollars
• The Checks Have Started Arriving! There Are Better Things To Spend On Than Botox Or Gambling! @ My Investing Blog
• Student Loans Aren’t Always The Enemy @ This Wasn’t In The Plan
• Dealing with the Debt Time Bomb @ Gather Little By Little
• Valuable Gift Ideas for Mother’s Day @ My Supercharged Life

Recent Carnivals

• Dressing For Interviews, Dollar Store Buys and Why Debt Stinks
• Carnival of Real Estate: Thank you to Active Rain for including my post “A Look At Real Estate: Is It Time To Buy?” as a Top 10!
• Bank Holiday Best of Me Symphony
• Carnival of Financial Planning
• Carnival of Money Stories
• Cavalcade of Risk
• Money Hacks Carnival
• Kids and Money Carnival

Think back to the time when you’d take on summer jobs or interned while you were still in school. It was fun, easy and earned you some extra bucks. So who says we can’t keep on doing this long after our teenage years are over?

I actually have a family member in an interesting dilemma. He’s a practicing lawyer from a different country and just moved here a year ago. He just took the California bar exams but while waiting for the results (which takes some months), he’s decided to take on some odd jobs to be productive and to make a bit of money. The odd jobs aren’t all that odd if it’s in line with what you’re doing — hence, he’s doing some data entry and office work at a law firm. Sure, he doesn’t need a legal license to be the office manager at a law firm — anyone with office management and computer skills can qualify — but it’s one way to get his feet through the door of the profession he’s chosen, which should work out well for him once he gets all the necessary credentials by passing his exams.

There’s really no shortage of things that you can do. If you’ve got a certain talent, or have education and experience in some form of activity that is “in demand”, there’s usually a way to get paid for it.

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The Carnival of Personal Finance #151 highlighted a prominent theme this week with an edition aptly named as “Bloggers On Surviving The Squeeze”, held at Alpha Consumer. The “belt tightening” theme continues to be the talk of the day in the money blogosphere as we grow more attuned to the nation’s growing financial challenges of late. But I also found several posts that covered a variety of topics:

• How to Dress For an Interview @ Cash Money Life
• You’re NOT Homeless! @ You Might As Well Burn $5
• Is CPI Manipulated? @ Amateur Asset Allocator

More saving scenarios were offered by The Festival of Frugality #124 which is currently running at the “mother of all frugal sites”, Frugal For Life . The layout of the carnival was simple and straightforward — it’s done in alphabetical order!

• Home Maintenance Tips @ Save and Conquer
• Top 10 Dollar Store Buys @ FIRE Finance
• How To Save By Making Credit Card Payments More Real @ The Personal Financier

Going on to debt slashing topics — we have the 138th Carnival of Debt Reduction over at Rocket Finance with a healthy dose of anti-debt articles:

• Why Debt Stinks: Life Doesn’t Just Stop So You Can Get Out @ Paid Twice
• Congress and Fed Take on Credit Card Industry @ DebtFREE-Revolution

I’d like to thank Rocket Finance for the honor of an Editor’s Pick for my article on saving money by making things last longer!

I’m not the most organized person in the world, though I’ve been working on it as best as I can. The funny thing is, I like things to be systematic and like things to be in order, but somehow, I still fall short sometimes, and I end up with a couple of missed bills and a debt collection warning.

But so far, I’ve managed to weasel my way out of any penalties or negative effects on my credit. I suppose some sweet-talking doesn’t hurt, but in all seriousness, when I do get a debt collection notice, here’s what I do:

#1 I don’t call the debt collection agency. I call the creditors directly and make my inquiries to them.

#2 To the company whom I owe money to, I let them know my bill is in collections, then I give a reasonable excuse for this unfortunate eventuality. They’re usually pretty forgiving (even with the “dog ate my payment” excuse) because they really just want to resolve the situation and get paid pronto!

#3 Then I offer to pay up immediately (over the phone, via credit card) and ask them to retract my bill from collections. No questions asked. I pay the credit card bill in full afterward.

And I’m happy to say that this has worked out well for me on those few occasions I’ve had to do this. No harm, no foul.

But the ending may not be as positive for those who are perennially late with their bill payments, or for those who’ve missed or avoided paying their bills altogether, since they’re up against a formidable force with professional debt collectors. Even those who haven’t had any trouble with their payments for some time or who may have forgotten an old debt many many years ago may sometimes find themselves getting contacted out of the blue by someone who is dead set in retrieving their money. Who knows… loans and debts can be bought and sold, so they may resurface to haunt you later.

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How tough is it getting out there these days? The general consensus is that it’s been getting economically tougher, with more reports surfacing and providing us newer metrics that prove we’re in the midst of a market decline.

And the latest proof that we’re in a slump? How about a marked increase in the sales of used goods? Apparently, more and more people are unloading their possessions, valuable or otherwise, at various second-hand markets and at a greater frequency than in the past.

And no, people aren’t selling stuff just because they want to declutter their home or have a desire to downsize. What the media is saying these days is that along with the arrival of recessionary forces and the frugality trend beginning to pick up, we’re also seeing this concerning new trend: people selling stuff to pay the bills. They’re actually selling off their goods — including their heirlooms and expensive possessions — in order to raise cash fast. I suppose that with the credit crisis coming to a head and sliding property prices preventing homeowners from using their home equity as a cash account, folks are simply running out of options.

This sounds a bit sensationalistic to me, but here are some points I culled from articles that are trumpeting a new kind of behavior among those who are trying to keep themselves financially afloat.

Selling Household Items For Cash: A Growing Movement

• Supposedly, desperation is driving people to unload their heirlooms just to pay off higher gas, medical and food expenses.
• Individuals with expensive tastes but who’ve lost their jobs are finding themselves in a bind: unloading high-priced, branded clothing like Hermes leather jackets, Versace jeans, silk shirts, handbags, and the like just to be able to pay basic grocery, utility and insurance bills.
• Collectors are unloading their highly prized collections at online auctions in order to pay for necessities. I guess it’s true: you can’t eat art.
• At Craigslist, for-sale listings are up 70% from 9 months ago and doubled from last year. Similar reports are coming from other online auctions and classified ad sites. The number of ads are much higher than normal.
• The ads submitted in online auction and “flea market” type sites are written in a more desperate tone.
• People are using online sites like they do traditional pawn shops.
• Hot items in the second-hand market are cars, clothing and furniture.
• Areas hit hard by high gas prices are seeing higher sales of vehicles in general but particularly those that are less gas efficient.
• Recreational vehicles like campers, trailers and boats are glutting the used goods market.
• Areas hit hard by the housing crisis are seeing more furniture on sale in used markets.
• Unfortunately, Goodwill and the Salvation Army have been negatively affected by the sales trends as donations are down 20% this last quarter.
• Prices of used items are going for 25% to 35% less than they did last year.

Though a lot of people have been affected due to job loss and dropping home prices, a lot of those severely affected have also been vigorous spenders in the past. From the aforementioned facts, it seems to me that a good number who are selling today are those who have a lot of extra things they can *possibly* get rid of; I wouldn’t actually consider recreational vehicles, electronic gadgets or branded merchandise as essential to living….

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