2-28-06

More and more people find themselves in financial difficulty.

Some people are obviously aware of this and are doing everything possible to get out of this situation.

Other people just aren’t sure if they are in trouble.

In this blog, I want to address financial difficulty and give you some information to help determine if you or somebody you know might be in trouble or getting close.

The first thing you should do is determine your loan-to-debt ratio. This is fairly simple. Figure out the gross income for the family. Next, figure out what your monthly payments are on all loans, including credit cards, student loans, etc.

Your debt-to-income ratio should be less than 36 percent. If you are above that total, you need to address this now. If you don’t, there is a good chance that you are in trouble.

Here are some other questions you need to ask yourself.

*Are you having to use more and more of your income to pay debts?
*Can you only pay the minimum payments on loans and credit cards each month?*Are your credit cards either maxed out, or close to that level?
*Do you find yourself borrowing money or using credit cards to pay for items you used to purchase with cash?
*Are you having trouble making your payments on time?
*Do you run out of money before you run out of month?
*Is your account frequently overdrawn?
*Do you have to use money from savings to pay bills?
*Have you put off visits to the doctor or dentist because you can’t afford them?
*Are collection companies calling?
*Do you have to work a second job or overtime just to make it through the month?
*Is money something you worry about a lot?
*Do you know how much you actually owe?
*You have to use credit cards to pay for food or rent?

These are just some of the questions you need to ask yourself if you are worried about your finances. The more of these questions you answered yes to, the worse off you are with your finances.

2-27-06

Some people feel all debt is bad. Others believe only some debt is bad.

So who’s right? It depends, of course.

In my opinion, there is some good debt and bad debt.

The bad debt is easy to identify. It is the credit card debt, personal loans, finance company loans or the check cashing scams that are really hurting a lot of people.

But I don’t think that list includes all bad debt. I believe all debt is bad unless it brings income back into your pocket.

If it is something that takes out and doesn’t give back, that is bad debt. That includes your house, cars, in-ground swimming pool or any other debt. Now if you can rent out that empty bedroom, use the car as a taxi service or charge people to use your pool, that debt isn’t bad.

Most people wouldn’t be all that crazy about doing that. Debt is called a liability. Even your house and autos, which are typically categorized as a person’s biggest asset, are liabilities.

Why? Simply because it takes money out and doesn’t bring any back. But everybody has to have a house over their head and transportation, right?

Yep. It’s something most of us have to borrow to purchase. But it still doesn’t make it good.

Acceptable, yes, but not good.

What makes this debt even worse is when people go over their heads by buying houses or autos that are more than they can afford.

In both areas, you need to figure out what your needs are when it comes to a house or car. Stick to that, not what you want. Better yet, when you are looking for a house, look for one that is underpriced because of lack of upkeep, buy that house and fix it up.

The same thing goes for buying an auto. It is always better to not buy a new vehicle, especially one that is almost a year old but is still on the lot.

If you want to buy something else, like a motorcycle, ATV or anything that is more like a want than a need, debt on this is not acceptable. After you have taken care of all your other debt, save the money up to buy items like this.

One other item I would like to bring up is that you should always be a smart sharper. Know the contract details. Find out the interest rate, fees, etc. Check with some other lenders to compare.

If this doesn’t sound like a good deal, go somewhere else.

2-23-06

(Today's blog is part of an article about debt that will be included in the new web site I about building on personal finance. If you would like to check out the site, please click here.)

Every person needs to borrow money occasionally. It could be for a home, auto, furniture, recreational vehicle or whatever.

Borrowing money also applies to using a credit card to go out to lunch and pay for it with plastic.

So as you can see, there are many different things to borrow money on. The first thing I would like to point out in borrowing is the difference between good debt and bad debt.

Good debt (yes, it does exist) is borrowing money that will hopefully bring money back to you. This is in the form of investing either in a business or real estate that will either be sold for a profit or used for rental purposes.

Any debt that does not bring money back to you is bad debt. The simple reason is because this simply takes money out of your pocket or checking account. You usually receive something for this debt, but unless that asset can eventually be used to bring money back to you, it is bad debt.

Some kinds of bad debt have to be acceptable. This includes borrowing for a home and transportation.

Most people can’t get away from incurring debt to buy a home or a car. One key is not buying something that is too much. If you have analyzed your finances and situation and believe a $50,000 home or $10,000 auto will meet your needs, then go that route.

Where many people get in trouble is going beyond their needs and relying on wants instead. If this is the case, you will buy more home or auto than you need and the payments will probably run more than you need.

Your money will be tied up on making payments instead of reducing other debt or limit the amount of money you can invest.

Educate yourself as much as possible on debt along with other areas of personal finance. The deeper you go, the more it should scare you about the dangers.

There is a good reason the Bible says a borrower is servant to a lender. You might not feel this way until you start having financial trouble (which I hope never happens to you), but if it does, it’s like the whole world is coming down on your shoulders.

It might sound strange coming from a person in my position as a lender at a bank, but I have seen the dangers of debt. Some of that comes from wanting to keep up with the Jones, but a lot of it stems from a lack of education.

I have seen good friends, relatives and people I have known all my life lose pretty much everything they have from getting in way over their head.

Almost every day, I come across a customer who is overloaded. These aren’t just the 30-50 year olds. This includes young people just getting started and the older people past retirement age.

For the younger ones, this includes student loans, credit card debt and buying that new and expensive vehicle once they are out on their own.

The older ones seem to get worse every day. Faced with limited social security and skyrocketing medicine bills, they have to turn to credit cards to pay for their prescriptions.

I remember one older man who came in to see me recently. He is 67-years old, draws around $800 a month in social security, doesn’t own anything other than household goods and an old jalopy that is constantly breaking down and is worth less than $1,000.

He came in wanting to pay off his credit card debt. I proceeded to do an application. As you can see, his assets weren’t much. I was expecting a loan request of $1,000 or so.

I proceeded to pull his credit and saw where he owed $65,000 in credit card debt and that is what he wanted to borrow. No collateral, just on his name. His monthly minimum payments were far more than his monthly check.

Sadly, we couldn’t do this. Who is to blame? Was it the older gentleman? Partially, but the credit card companies should have never extended this much credit.

The use of credit cards has gotten terrible over the last few years. We frequently see people with good jobs and income with credit card debt in excess of $50,000.

2-22-06

For most people, buying a house is one of the true highlights of life.

That shows a maturity level. You have left home and actually grown up. Owning a home helps show others that you are getting serious about life.

For many people, buying a home is easy. You find a house you like, submit an offer, get financing and buy that baby.

Life is good, huh? But sometimes, people make the mistake of buying the wrong house or messing up with the financing.

If you buy the wrong house, this can lead to financial ruin if you lose your job, get divorced or something happens to the local economy that knocks the value of the home to less than what you paid for it.

This isn’t necessarily the case if you are still renting. You might get stuck for a few months on your lease, but won’t be nailed down for the next 28 years or whatever.

Some people also mess up the financing. They go to the first option available or try and get fancy and wind up with some kind of creative mortgage that doesn’t really meet their needs.

It has never been easier to get financing for a home, even if your credit is not so great. You can have bad credit and get a home, provided you have more money to put down and you don’t mind paying a little higher rate.

There are mortgages available that will let you borrow up to 125 percent of the value of the home. Sometimes, this is a good option if this is the only option available other than bankruptcy.

You can even get mortgages that feature interest only payments. Wow. What a deal, huh?

Uh, not so fast. This encourages a borrower to buy more house than they can afford.

If the local market is going up and continues in that fashion, you are okay. But if the market crashes, which it frequently does, and you still owe the same amount that you originally did, it is easy to owe more on the home than what it is worth.

A lot of financial planners and experts say to put down as little money as possible and I agree on that. This means you will have money available for an emergency and will have funds available to make the house payment or whatever.

There are several mortgage companies that will allow you to get away from paying PMI (which is an insurance that the borrower must pay if they borrow more than 80 percent of a home’s value) by doing an 80-20 loan.

You have a first mortgage on 80 percent of a home’s value.You also have a second mortgage on the remaining balance. You don’t have to pay PMI, which doesn’t go against your loan, but you do have an additional payment and the second loan is typically at a higher rate.

2-21-06

According the most recent statistics by the Federal Reserve, consumer debt rose 3 percent for 2005.

For much of the year, debt actually decreased before jumping at the end of the year.

This is not surprising as most people's debt does tend to go up and there are always more people getting into debt every year than there are people getting out of debt.

Here's some information that I came across about debt:

20 percent of Americans have their credit cards maxed out;

25 percent of American adults have a history of credit problems;

Average credit card debt for an individual in the United States is $8,400;

Americans pay approximately 18.9 percent average on credit cards;

The average household pays $84 per month in interest on credit cards;

A typical credit card purchase is 112 percent higher than if using cash;

More than 40 percent of American families spend more than they earn;

And people wonder why people have problems with debt. A lot of that is because of the lack of education that I have discussed previously.

Another problem is the lack of discipline. I read a book by Tom Robbins that a person's behavior is based on two things: seeking pleasure and avoiding pain.

A lot of times people think that if they buy something this will give them pleasure. This is typical behavior when a person is down in the dumps or depressed.

This might provide a short-term lift, at least until the person has to pay for the purchase.

That is one reason why it is always important to put off making a major purchase until you have had time to think about it. Rash decisions are bad, which probably doesn't surprise anybody.

Whenever I buy something major, now I'll always think about it for a day. If the person trying to sell you something is too pushy, just walk away.

One thing that always amazes me is when a person finances something but never knows what the rates or fees are when the transaction is completed.

Way too many people are concerned solely with the monthly payment and not what it will cost them over the long term. This is one reason why I always advise people to keep their payments on as short of a term as possible.

There is no reason to finance a used vehicle for five or six years unless that is the only way you can make the payment.

Your payments will be lower, but you'll pay for it over the long term, which is something a lot of people don't seem to worry about until it is too late.

2-17-06

It's hard for people to save money.

Most people would like to have some money set aside, but have trouble getting a plan together.

In this blog, I would like to share a few ways to start building up that nest egg.

First off, you need to make sure your finances are in order and your debt is under control. If you have a lot of debt, especially credit cards, that needs to be taken care of first.

But let's assume you are in good shape as far as debt goes and are looking to start a saving's plan.

Most experts say you should save at least 10 percent of your gross income. That can go in a retirement plant or 401K, mutual funds or a plain saving's plan.

I know, it's hard to start taking 10 percent of your income and living off the other 90 percent, at least it is for a lot of people.

Before you start, you need to track your expenses and see what can be set aside for a rainy day or retirement. As you track the expenses for a month or so and your budget is set up, you will start seeing some expenses that can be cut out such as eating out, $3 cups of coffee, entertainment or whatever.

Start taking that money and put it in a saving's account instead of blowing it. You probably won't be able to start off with 10 percent, but start easy with 2 or 3 percent and gradually build that total up.

You really need to have three months of living expenses set aside before you start the real savings plan. That is in case you lose your job, medical expenses or whatever that comes along.

After you have that much set aside, that is when you should start putting the money into a saving's account, CD, mutual funds or whatever.

You should base your plan on your risk factor. With your money in savings or CD's, you won't have to worry about ever losing the money.

Historically, you get a better return through mutual funds, but with the way the market is now, there is a chance your money will go down.

2-16-06

As a loan officer at a bank, I have seen almost all a customer has to offer.

In this blog, I am going to share some ideas on what we look for when a customer comes in looking for a loan.

Also, I will give out some information on what to look for if you are looking to buy a business or investment real estate.

When a customer enters my office and informs me that he would like to borrow money, the first thing I do is find out what and why he is wanting to borrow.

After this is completed, I get some information on the customer’s finances and credit. Depending on the size of the loan, I also verify income. The person’s credit and financial statement tell a lot about a person and whether they have a good chance at getting the loan.

The next step is to do a cash flow to determine if the borrower can pay for the loan without getting it in financial difficulty. Everybody wants the loan when they request it, but sometimes loan officers can actually do the customer a favor by turning down the loan.

On a consumer loan, the person’s debt-to-income should generally not exceed 38 percent of payments divided by gross income.

If everything has looked good so far, next it is time to evaluate the collateral to try and determine the value.

Sometime during this process, we will discuss terms and conditions of the loan. The more sophisticated the borrower is, the quicker this will take place in the application. Whenever I am borrowing money, the first thing I want to know is the interest rate.

It always amazes me when I do a loan for a customer and they never inquire about the interest rate. Part of that is the trust they have in me knowing that I won’t sting them like some bankers would.

Another thing that surprises me is how unprepared most customers are when they come in to see a loan officer. You will have a better chance of getting a loan by being prepared with current financials and income information.

If you decide to take the loan, check out the fees and rate prior to signing the loan papers. NEVER take credit life or gap insurance. We sell credit life to customers who want it, but the insurance is costly and not as good as traditional insurance such as term and whole life.

Also, if you do not like the terms or conditions, go somewhere else. Banks are wanting to loan money to good customers and everybody does things differently.

Now, I would like to share some information on what to look for when you are looking into buying a business or investment property.

It is best to get the seller’s last two tax returns (three is even better). You should also get a year to date profit and loss statement. On the tax return, look at the net income from the tax return.

Everybody always says they make more than what the tax return says, but you should concentrate on the tax returns unless they can show you something otherwise. The loan officers will usually not give any credit to sellers who don’t show income that is not reported.

After this, you can add the interest and depreciation back to the net income. Take this figure and do a ratio to determine the cash flow. The more prepared you are and the due diligence you do, the better chance you have of succeeding with or in the business or investment.

Hopefully this has given you some useful information

2-15-06

For most of us, money is more than a scrap of paper. It can bring great joy or problems like nothing else.

We either have too much or not enough. Both can cause problems through a variety of ways.

This is not a new problem, even though many people feel this is something that has caused difficulties just over the last hundred years or so.

But ever since man used money as a bartering tool, it has caused problems.

There are thousands of people who make a living giving people advice on how to improve their financial standing by either eliminating debt or getting a better return on their investments.

Would you believe that people were getting advice on their money for over 2000 years? It's true.

Just look at the most popular book of all time: the Bible.

Consider the following scripture found in 1st Timothy, Chapter 6, Verses 9-11:

"But they that will be rich fall into temptation and a snare, and into many foolish and hurtful lusts, which drown men in destruction and perdition.

"For the love of money is the root of all evil; which while some coveted after, they have erred from the faith, and pierced themselves through with many sorrows.

"But thou, O man of God, flee these things; and follow after righteousness, godliness, faith, love, patience, meekness."

How about get rich-quick schemes?

This is found in Proverbs 13:11:

"Wealth from get-rich-quick schemes quickly disappears; wealth from hard work grows."

Here's another found in Proverbs 28:22:

"A greedy person tries to get rich quick, but it only leads to poverty."

What about the dangers of debt?

Look at this found in Proverbs 22:7:

"Just as the rich rule the poor, so the borrower is servant to the lender."

Pretty good advice, huh? People have been needing to hear this for much longer than you or I have been around.

2-14-06

Thousands of people fall for “get rich quick” schemes, when in fact, the only people who are making the money are the ones selling the product.

Flip around the channels on your television or surf the internet and you will likely find somebody promising to make you wealthy and your life one of easy living.

This could be from answering emails, buying real estate WITH NO MONEY DOWN or many other ways.

The sales people use copy writers to attract us to whatever need we want. All for a low-low price.

Most of the information they send out is worthless. If you want to find out about buying real estate, do a search for real estate. You will come across people trying to sell you stuff that probably won’t work, but there is a ton of information out there in cyberland about buying real estate.

Many people buy the courses or the information and if they follow through on the suggestions, find out they are in worse shape than they were previously. This isn’t always true. But if you are interested in say buying investment real estate, research the topic first.

If you do buy real estate the right way, that could eventually be your calling. Based on some of the things we have learned through the years, here are a few simple tips.

1. Research your market. Go through the newspaper, shopper or web sites in your area. Then go look at the houses and compare prices.

2. Make sure your finances are in order before you start buying real estate.

3. You make money when you buy the property, not when you sell. That means to buy property at a good price, not the first one you come across. You can find houses for sale at a bargain, through proper research. There are a lot of people needing to sell their houses because of job changes, divorce, bankruptcy or because they are buying another home.

4. The best way to make money through real estate is to buy the house, make a few cosmetic changes and then resell or flip the house.

5. Don’t buy the nicest house in a neighborhood, unless it is a really good buy. Also, don’t buy homes in rough neighborhoods. The chances of reselling or getting somebody in the home will be tough and you will have to put up with people messing up your property.

6. If you do want to buy some rental property, follow the same advice as above. But you will need to know how much property in this area will rent for and make sure after you make your payments, pay the insurance and taxes, that you will make a profit.

7. After you get your feet wet by buying single-family houses, consider moving up to multi-family units such as a duplex, triplex, fourplex or above.

8. If there are any economic factors that could cause a downgrade of property values, don’t buy. Wait until prices have dropped and that will be the time to buy. Even if you get a great deal on a house when the market is hot, if the market cools off, that could wipe out whatever equity you have built up.

9. Unless you are a good handy man or woman, don’t buy property where you are responsible for maintenance. That is why it is better to buy and resell the property. If you do want to buy and rent the property out, consider doing a lease with an option to buy. I love these deals and that is what we do on most of our investment property. First off, we get some option money up front that reduces the sale price. Then, the renter is responsible for maintenance, upkeep and a lot of other expenses.

10. Don’t get greedy. If you are using the property as rental, don’t take all the income and blow it. Put some back in case the property becomes vacant or you need to repair something. Also, if you are trying to flip the property and you get a good offer, even though you think the property can bring more, go for it. Then go and find another good deal.

Again, these are just a few lessons I have picked up through the years with our properties and dealing with other real estate investors.

2-13-06

So many people say that it takes money to make money.

Is this correct? Yeah, in some ways. But if you don’t have money and want a better life, there is hope.

Everybody who is well off didn’t come up with a silver spoon in his or her mouth.

There are a lot of people doing better than all right who didn’t have a nice trust fund or wealthy parents.

Every day, there are people who start businesses or have ideas that will eventually pay off, provided they do it the right way.

First off, a person has to either have an idea or improve on an idea already out there. Find out what is wrong with something or a need and go after fixing it or meeting somebody’s needs.

You need to educate yourself on whatever you plan to do. Research whatever you are interested in and after you are at the point where you think you know everything, do some more research.

Then you have to come up with a business plan. There is no guarantee that you will succeed, but if you study the topic and have a good plan, that is a good start.

Everybody always harps on how nine out of 10 businesses fail. I don’t have any reason to argue with this statistic, but I would wager a bet that out of those nine businesses that do fail, the person who started the business didn’t have what it took to succeed.

Plus, even if you start 10 businesses and nine do fail, with proper planning, maybe your ship won’t be sunk. But if that one business does proper, you have a better chance of being well off than anybody working 8-5 for somebody else.

Over the years, I have seen many businesses succeed and a lot fail. The ones that do well are the ones where the owner knows what he or she wants to do and manages the ‘p’s’ and ‘q’s’.

They pore over every little detail and know whenever something is going south and automatically fix it.

For the businesses that fail, there are many reasons. First, the owner does not have a clue what it takes to succeed. They either don’t want to put in the time or don’t track their income and expenses.

All the little side businesses that I have feature a couple of things in common that I think it takes to succeed. The first is not having any inventory. Having too much inventory or not managing your inventory kills the business. So does a lot of debt.

Second, the owners take all the money out of the business and try to live high on the hog instead of putting the money back into the business to pay off debt or get needed equipment.

The best way to get rich is through real estate. That is how more wealth is built than any other way. But I also feel an idea can bring riches that real estate can’t even touch.

Look at Bill Gates and Michael Dell. They didn’t get rich by buying real estate and reselling it or renting the property out. They had an idea and built upon it. That’s why they are some of the wealthiest men in the United States and the world.

You might not reach the status of these two men, but there’s no reason why you can’t. It’s not like there’s some law against any of us getting rich, although the odds are stacked.

2-12-06

In a report just released, the Bureau of Labor announced that real wages only grew one percent for the 24-month period that ended after the second quarter of 2005.

That means for most of us, our income did not come close to going up as fast as our expenses.

For the lucky ones, they receive a raise every year. Others aren’t nearly as lucky.

Most of the ones who did receive a raise probably didn’t get enough to cover the increased cost of living since energy prices and the price we pay to buy gas have gone haywire.

That leaves us looking for ways to pay the bills and hurts the consumers as they try to reduce debt or save money. We’re all in this boat unless we’re entertainment superstars or get paid lavish salaries that only a few people receive.

So, what do we do to overcome this?

First off, reduce your spending. Look for ways to cut down on what leaves your personal stash. That means don’t spend as much on wants and try to get better costs on what you need.

You really need to examine your spending habits and cut out all unnecessary expenses such as the $3 cup of whatever at Starbucks, eating out so much and entertainment expenses.

Instead of heading out to the local Cineplex, rent a movie, watch what is on television or something in your collection.

Also, it should prompt you to increase your income. If you have a job and a raise is not in the picture, look for other ways to up the money coming in.

Try to get something going on the side that won’t interfere with your current job.

If you have a hobby or something you enjoy, try to figure out some way to make money off this. Say you do woodworking, offer some of your items for sale either to friends, or go to arts and craft festivals. You might even be able to sell something through ebay.

Signing up is easy. Your junk might be somebody else’s treasure. Do a search for whatever you can sell and find out how a similar object has sold. If there isn’t anybody wanting the object you wanted to sell, find something else.

There are lots of ways to increase your income. Research the subject through the internet or visit the local library or bookstore. This might even turn into something that might turn into a full-time career, if you have what it takes.

Even though income is down, there are more ways to make money now than ever before. People are tired of buying stuff from places that offer poor service. If you can provide good service and help people, you can make money even if you charge more than the discount superstore.

I hope this either helps or inspires you to be creative. Small businesses are the backbone of this country and will continue in that way.

2-10-06

At the branch bank where I work, we spend a lot of time helping customers with problems.

The main problem we encounter is customers having their accounts screwed up.

This isn't just with the less literate customers. Some of our smartest and best customers have problems at time, not just the ones that find out the money is gone before the month ends.

The customers will come in wondering why their account is off or overdrawn.

Some of the reasons for this are not writing down a check or especially not factoring in an ATM withdrawal or using the check card.

Then when the account gets short, they get hit by NSF fees.

There are plenty of ways to keep track of your accounts and not run into the problem If you are running out of money before the month ends, you will have to look at some of my other blogs.

Here are a few suggestions on how to better keep track of your finances.

1. If you have a computer, purchase some of the software available such as Microsoft Money or Quicken. These are easy enough to use and very effective.

2. If your bank has online banking or a number to call and check your balance, do that EVERY day.

3. Make sure you write down the correct amount of your debits and credits.

4. Double check your additions and subtractions. Yeah, we're all smart but some times even the smartest people write something down wrong.

5. Find out what your bank's balance is for free checking. Act like that is the 0 figure in your account and try not to go under that figure. That will keep you from having to pay bank charges or NSF hits. If you ever mess up, you might have to pay the monthly bank charge, but you won't ever go below the dreaded no money in the account.

6. Make sure you write down the correct amount of your debits. Keep your receipts and match them up as soon as possible.

7. When you get your statement, reconcile your account as soon as you get it. Make sure everything matches up. Yes, you make mistakes, but so does the bank. If there is a problem, contact the bank immediately and get it straightened up.

8. Get a budget and follow it as closely as possible.

9. Have a savings account tied to your checking account. If your balance on the checking account goes negative, the money in your savings will automatically transfer over. Some banks charge for this, although I have never thought that was fair, but the charge for this will still be less than an NSF charge.

10. Never give out account information. There are so many crooks out there now just trying to get access to your account. Sometimes there are unauthorized debits to your account. Checking the balance daily and going over your statement will alert you to any problems.

Hopefully this will be useful and might save you some money. I know it can be a pain to do all this, but it still beats paying charges or having a check returned and then getting even more charges.

2-9-06

Like most kids and young adults, I never thought my parents knew what they were talking about.

It took me until my late 20s to early 30s before I realized that maybe they knew a little bit more about life and money that I did.

They gave me an awful lot of helpful advice that I promptly let go in one ear and out the other.

They always wanted me to do better and try harder in school. I coasted by, for the most part, and then got to college and majored in goofing off and drinking beer.

So my first job out of school was a low-paying one that barely paid the bills. Over time, I have changed my attitude and put out a little more effort.

They always stressed paying bills on time and that is one lesson that I have always followed. My credit is spotless, although a little heavy at this time thanks to real estate investments.

There were several areas that they either didn't tell me about or I was too hardheaded to listen to what they were saying. Here are some areas that I wish I had started earlier:

1. Avoid debt like it was the plague. As soon as the money came in, it started going out in additional debt. When I was barely making enough to pay rent, my only debt was an auto payment.

After the income started going up, so did my spending and the use of credit cards. I would get some equity in something and promptly refinance it to take care of credit debt.

2. Saving money. My first semi-sort of job was mowing yards as a kid. Every penny that I made went into buying crap. As I got older and started making more money, I continued to spend all the income that I got.

It wasn't until my mid-30s that I got serious about saving money. If I had saved 10 percent of everything I had made over the years, I would be sitting pretty right now.

3. Find a job that I love instead of one just to pay the bills. As a kid and through the first part of college, I wanted to teach. Everybody talked about how little you got paid teaching so I changed my major to a profession that paid even less.

After doing that for four years, I turned to banking, which was what my family has been involved in for 80 years. There are some things that are okay with the money, such as my salary is fairly decent and I do get to help people, but I don't get up every morning and look forward to going to work.

4. Learn when to say "no". This goes back to spending. For a long time, if I wanted something, I got it. I have always been creative in figuring out to get something if I really wanted it. The problem was "wanting" something instead of "needing" it.

5. Generate passive income. I figured this out on my own in my mid-30s, which was when the light went off in my head in many ways. Since then, I have bought investment real estate, learned photography to sell prints and also established a web site for our community that brings in money to fund buying photo equipment, an expensive hobby.

Those are five areas that I wanted to touch on today. There are many more in other areas that don't fall into personal finance. I have always tried to teach my children on the do's and don't of finance, but they don't think I know what I'm talking about, the same way I felt about my parents when I was their age.

Our youngest son will listen some. I have him convinced that he needs to get some real estate investments when he is older and also to have his own business and not get caught up with working for somebody else.

If he can start this early enough when he doesn't need a lot of income and can do it right, he will be much better off than I am.

2-8-06

Poor credit is running rampant throughout the country, especially where I live.

Every day, I get people in wanting to borrow money and their credit is challenged, to put it nicely.

I see a lot of bankrupty, charge offs, medical collections, repossessions and foreclosures.

Then people come in and want to borrow more money.

I'm not all that hard on people who have medical collections as there isn't a lot of people can do about that. A lot of the medical collection agencies will try to get a collection started almost before the bill is sent.

But the other problems aren't as easily forgiving. A lot of people have bad credit from past divorces, relationships, loss of jobs or some other reason that I have heard thousands of times.

Lately, a lot of people have blamed their credit problems or slow pays on the price of gas.

Uh, that's not a very good reason.

So if you have bad credit and won't to make it better, try these easy steps.

1. Start paying your bills on time. Nothing looks worse on your credit than seeing that you currently have past-due loans.

2. Get a current credit report. Sometimes, the poor credit might be wrong and you need to get this fixed. Also, you might see something negative on your credit report that you might have forgotten. If this is the case, start paying on it or pay it off. A paid collection looks a lot better than a simple collection that sits around doing nothing but collecting interest.

3. Change your paying habits. There are a lot of people who wait to the last minute to try and pay a bill and frequently, there might not be any money left to make the payment.

4. Pay your bills as soon as you get paid. This goes back to number four. The people with good credit usually make their payments as soon as they are paid, even if the payment isn't due for another week or two.

5. If you have something on your credit that you can't possibly pay, try to negotiate with the creditor or attorney. You will find that a lot of creditors will be happy to get say 50 cents on the dollar instead of nothing. They might also be willing to take the negative item off your credit report.

If your credit is bad, you will pay more on loans (provided you can get loans). I see people paying 18 percent and higher on loans all the time. Some of them don't know any better. Others don't have any choice because of previous bad credit.

Let's say you're borrowing $5,000 for 60 months. If your credit is bad and you have to pay 18 percent, your payments will be $126.97. Over the life of the loan, that means you pay $7,618,20.

But if your credit is better and you pay around 8 percent, your payment would be $101.38. Over the loan, you would pay $6,082.80. So you are paying $1,535.40.

It gets much worse if you have to borrow more money, of course.

Here is the easiest way that I have found to reestablish your credit with a local bank. You will have to either save up say $2,000. Deposit the money in the bank into a savings account or a CD and then borrow against it.

This is the safest loan a bank can make as the money is just sitting there in case the borrower defaults. You will be borrowing against your own money, which isn't always great, but you should get a better rate and if it is paid off as agreed, this will set a good track record for you with the bank.

You might have to do this a few times, but eventually if you pay as agreed, the bank will start thinking you are a good credit risk and you won't have to pay as high of a rate and you will be more likely to get money when you need it.

Hopefully this has helped.

2-7-06

Unless you are Warren Buffett or Bill Gates, most people either don't have enough money or want more moolah.

Turn on the internet or check your email and you are almost guaranteed to find something about surefire riches.

One thing I've learned is if something looks too good, it usually is.

The people I have found to be the most successful are very smart, willing to take calculated risks and have their own business. Then again, some people are just lucky.

For the most part, I don't consider myself all that lucky. We have been blessed in many ways, but are far from rich. I would say that my wife sees to that, but I also contribute in many ways.

We got married a little over seven years ago. My wife had two children and was not getting any help from the father. She was working at a job that was low paying and demanded that she work nights.

That wasn't all that attractive to a newly married couple and especially to a mother who wanted to be home with her children at night.

So I started looking into generating other income. I studied all kinds of income opportunities. In the end, I decided to go with something I already had going.

It was a rent house that I bought after returning to my home town in 1990. I lived in the house for five years before moving into a house owned by my parents that was next to some land I had bought.

After moving from my house, I tried to sell it but the housing market was not good at that time (not that it has ever really blossomed like so many other areas). After getting tired of paying rent and also the mortgage (along with turning down offers to rent the house almost every day), I finally decided to give this landlord business a try.

No, it wasn't rocket science. I figured out what it would cost to handle the payment along with insurance and taxes and rented it out. Wow, this worked good, I decided.

I decided this was better than sliced bread. I couldn't think of any other way that you could get people to willingly make your payment, thus building up equity for me.

So after my wife quit her cruddy job, I knew we couldn't get by on just my income and this little duplex in town kept catching my eye.

I had one house and decided two houses in one would be even better. It was for the most part. We bought the duplex and had payments of $376 a month. When both sides are rented out, the income is $700 per month.

After this, I became obsessed with this real estate deal. I must point out that I had good credit and worked out a line of credit for the downpayments on the house so technically, we didn't put any of our own money into buying the houses.

But we bought the houses at a good price for the most part and wound up with equity as soon as we walked away from the closing.

Within six months, we formed an LLC, transferred the existing rental properties into the LLC and bought 10 additional houses and a mobile home park.

This was in the last part of 1999 and early part of 2000. One day, we bought two houses and a mobile home park (that included a house, 12 mobile homes and 13 pads waiting for people to rent) all on the same day.

Am I bragging? No, not in the least bit. Instead, I am showing that it can be done even if you aren't rolling in money. We built up our little real estate deal about as much as we wanted.

It provided an extra $2 thousand or so in net profit per month. Was it easy? No, I spent countless hours reading about investment property in books and on the internet.

We made some mistakes, but nothing that overwhelmed us. Since that time, we have sold two houses. The first house we sold was the initial house that I bought in 1990 for $23,000. We rented the house for five years and wound up selling it for $38,000.

That was after making money on the house every month for a long time.

The second house we bought for $20,000. (We live in a low income area). We had the house rented within a week of buying it, had the same renters for four years and wound up selling the house for $28,000.

Real estate might not be your cup of tea. I don't like dealing with problems with the houses so on most of our homes, we do a lease with an option to buy. This is good because the people who are paying to live in our house are responsible for all repairs.
I hope this has either given you some information or maybe inspired you to see there are ways to generate income.

If you have any questions or comments, please send me an email and I will do my best to answer them.

Thanks again.

2-5-06

In continuing on this series of improving your financials, I would like to share a few more tips.

1. Educate yourself. So many people don't have a clue when it comes to money. There are numerous web sites out in cyberland when you can get up to snuff.

2. Prepare a financial statement. Most banks require a customer with a lot of debt to prepare a financial statement once a year. That isn't enough. Everybody should prepare a financial statement every month and track it on a spreadsheet. This will tell you whether your assets are increasing (which is good) or your liabilities are going up (which isn't a good sign, most of the time).

3. Check your rates on loans and credit cards. So many people just jump on the first loan they are offered by a local bank without shopping around for better rates. Most of the time it is easier this way, but you could be hurting yourself in the long run. When you are shopping for a large purchase, most of the time people compare prices. Do the same thing on borrowing. Same thing goes for your credit cards. Compare the rates you are paying and try to either get the credit card company to lower the rates or refinance it elsewhere.

4. Good credit helps. Check your credit score at least once a year. You don't want to do it too often as that will drive your score down. It's amazing how many times there are errors on your report. It might be from somebody with the same name or something that you have already paid off. If there are mistakes, report it to the credit reporting agency. There are three different ones: Transunion, Experian and Equifax. The better your score, the better rate you will get on loans, credit cards, etc.

5. Know the difference between your wants and needs. A want is something you want (like duh?). It is not something you have to have. A need is a roof over your head, clothing, food, transportation. Sometimes you have to borrow money for your needs and that isn't always bad. But if it is a want, you should do your best to save the money to pay for a want or be able to pay for it.

6. All debt isn't bad. Really. Let's look at the good debt and the bad debt. Good debt is the kind that brings money into your pocket, like a business loan. Bad debt is the kind that takes money out of your pocket and doesn't return any. This includes credit card debt, pretty much everything else. I know, we all have to borrow money for cars and homes. But this should really be your only debt.

7. Always look for ways to increase your income while decreasing your expenses. One of the best ways to up your income (aside from begging your boss) is to start a business on the side. Do this with something you enjoy, such as woodworking, quilts, etc. We are fortunate to receive extra income from rental properties, photography and web sites.

8. Examine your debt ratios. Take your monthly debt payments (including everything from your mortgage, auto payments, credit card payments, etc. Divide this total by your monthly gross income. If that figure is over 38 percent, you have too much debt. On your mortgage, it should not be over 28 percent of your total gross earnings.

9. If you don't know something, ask. There are a lot of people who would be willing to help you with whatever questions you have.

10. Don't bury your head in the sand. If you are having problems with making your payments, contact the creditor. Tell them what you can do and when. Some of the creditors could care less about your problems and only want their money. I know that if my customers let me know if they are having a problem, we can work together to try and get it solved. I hate it when they hide or lie. That's not the solution.

Thank you for reading and I hope this helps.

2-3-06

By this point, hopefully you are ready to get rid of your debt.

What you need to do now is make a list of all your debts, including credit card, auto loans, mortgage, home equity loans and whatever else you might have.

Put these on a spreadsheet with the smallest balance to the largest. You should also have a category on how much per month you have been paying on everything.

The extra money you have found available to pay on your debt from tracking your expenses will come in handy here. When the next payments come due, take your regular payment on the smallest debt and pay that amount, plus whatever extra you have available.

Continue making your regular payments on all your other debt. You will need to track the balances per month and also try to avoid picking up any more debt.

Some people say pay the debt with the highest interest rate first, but if you owe say $5,000 on a loan with 18 percent interest, that will take a lot longer to pay that say a $1,000 debt with 10 percent interest.

So I would recommend that you pay off the smallest debt first. This will also be encouraging to you by actually getting something paid off and you will see your efforts rewarded.

After paying off the first debt, when your payments come due again, take whatever you have been paying on the debt you just paid off and apply that amount along with your regular payment on the second smallest debt.

This will create a snowball effect. After you pay off the second debt, apply it to the third debt and continue on until you get your debt paid off.

While you are doing this, continue to examine your expenses to find if there is any other money available to get rid of the debt. Also, if you get a bonus or raise, start using that extra income to pay off the debt.

In a future blog, I will discuss ways to increase your income. One thing I really like about this plan (aside from getting out of debt) is that after the debt is paid off, you can take the money you have been using to pay off debt and start saving that money.

Next time, I will continue discussing ways to improve your finances.

2-2-06

This is the third installment of my series on personal finances and trying to get you in better shape.

In this article, I am going to take for granted that you have decided to right your financial ship and you have decided what you want to do.

Next, you will need to come up with some goals as far as short term (within one year) medium term (one to three years) and long term (over three years).

You should put this in writing and place it somewhere you will see it often. If your goals change, go ahead and change them out on your sheet.

What you will need to do after this is track your spending for a month. Whatever you spend money on, put it on a spreadsheet under whichever category it fits under.

You will wind up with several categories. It isn't necessary to have 100 different categories. You can have one, for instance, such as food, entertainment, utilities, etc.

On something you have every month, such as water, gas, electric, it would be a good idea to pull out your bank statements for the past year and figure out an average.

You should also start working on a budget, but I will touch on that subject more in a later blog.

After you have tracked your expenses for a month, you should examine your expenses and see which items can be eliminated.

The money you spent on these items is what you will use as extra income to pay on your debt.

Tomorrow, I will give some tips on how to attack your debt.