Personal Finance for Real People

Q&A: Why is Gold Increasing?

2010-05-16T10:42:00.000-07:00

I received the following question today, and I thought that the question and my reply would be a good topic for a posting:

Randall, I know you won't agree, but to me it looks like gold is the next bubble. It's value has increased 6 times faster than the SP500 (sic) over the last 5 years. - Jonathan

Jonathan, the price of gold is an inverse indicator of the strength of the currency that you will use to purchase it. Gold has skyrocketed of late, because countries are printing fiat currency, as if no day of balancing will ever come.

Let me put it to you this way: If you have an eight-slice pizza that is worth $8, and a case of Pepsi is worth $8, you could conceivably trade one for the other, right? It's an even exchange.

Now, let's say you cut that pizza into 16 slices, but you still claim that the pizza is worth $1 per slice, rather than $8 in total. Nobody in their right mind is going to let you eat half that pizza and give you the case of Pepsi in exchange for the other half, right?

Well, this is exactly how the USD and Gold interact. The government prints more bills, and tells you that they are still worth the same amount. The person selling Gold is on to the game, and makes you pay more dollars to purchase the gold.

As long as countries continue to print fiat (counterfeit) money, with no value increase to justify the expansion in the supply of currency, gold and other raw commodities will continue to increase in value.

With all of the additional debt that the US is accumulating through increased spending (e.g. Bailouts, Health Care, Fraud), the only way it will ever be repaid is through the continual printing of new money to pay old debts.

This will cause a dramatic up-tick in inflation, as the costs of all goods will sky-rocket in order to adjust for the diminished value of the dollar. Interest rates will also increase as a result.

Gold is not an item subject to bubble. It has a fixed value. If Gold decreases in value, that is only because the USD has become stronger. Gold is an inflation hedge. It helps you to maintain the purchasing power you had on the day you purchased it.

If Gold increases in value, you still have the same purchasing power as when you started. If Gold decreases in value, you still have the same purchasing power as when you started.

Buy purchasing Gold, you are stating that you expect the value of the USD to decrease. Buy not purchasing, or selling, Gold, you are stating that you expect the value of the USD to increase.

Does it make more sense to you now? The hard part for most Americans is coming to the realization that the current administration is hell-bent on destroying our country from within.

Remove the blinders, so that you can see what is happening before your very eyes.

You may have noticed a lack of frequency in my postings over the past year or so. I have been quite busy, and I have not made this blog a priority.

Hopefully, I will soon be able to start posting on a regular, even weekly, basis soon. In the meantime, I am working with a number of high-liquidity, high-return investment projects overseas.

If you have an interest in investing in projects with very high returns (5% monthly to 300% annually), please post a response to this blog. All responses are moderated, and your personal information will not be publicized.

Stop HUD From Eliminating Seller Financing!

2010-02-15T16:58:00.000-08:00

Every once in a great while, the government steps in to fix a problem, and actually gets the job done. With the proposed changes in HUD's interpretation of the SAFE Mortgage Act, the government again shows that it just does not understand how to fix the problem that the Fed created. HUD proposes to severely limit or eliminate seller financing by placing the following limitations:

Limit to five the number of seller-financed loans that one can give, unless one attains a lending license (Attention investors, this means you!)
Disallow entirely any partial seller financing for FHA loans (no more 5% seller carry-backs to handle closing costs and/or down payment requirements)
Eliminate all seller financing for non-owner-occupied homes.

I have posted my personal opposition to these proposed rules, and my comments to HUD are as follow:

I'm sure that like all Americans, I just love when the government steps in to fix the problems of commerce. Well, not all the time. In the instant case, the proposed regulation goes too far to fix a problem that doesn't really exist, and it does so at the expense of exacerbating the problem it is attempting to fix.

Please, allow me to explain. While everyone understands that something went horribly wrong in the mortgage industry, which led to the financial meltdown of our nation, no one seems to have the spine to direct the problem where it truly lies: At the feet of the Federal Reserve. The Federal Reserve Board is charged with monitoring the lending practices of its member banks, and it also sets primary interest rates, upon which all other lending rates are eventually based. If one wants to get to the heart of the problem, correct the Fed's lack of oversight and the loose banking practices that it promoted that led up to the present crisis. Predicting the outcome from keeping rates at an artificially low level, and lending money, as if it was free, to people that could never qualify for loans under traditional underwriting (i.e. 100% LTV, No Income/No Assets, Neg-Am and Variable Mortgages, etc.) was a recipe for disaster. When the Fed raised rates in order to stave-off the inevitable inflation that arises from a loose monetary policy, the resulting drop in home values and increase in mortgage payments was a given. If I could see that, why did these so-called "experts" not see this coming? As for the proposal at hand, eliminating seller financing will take away from the market one of the strongest forces that is allowing properties to sell. Many people still cannot qualify for loans, and the knee-jerk increases in underwriting standards have made it near impossible. Seller financing is involved in many transactions, and helps with hard-to-finance properties such as vacant land, mobile homes, distressed properties, and more. Please keep it in place!

Now, you can also comment, but the deadline is Tuesday, February 16, 2010, which means you must take action immediately, if you want your voice to be heard. In order to comment on this proposed regulation, please follow the instructions below:

Click on the Title of this blog to get to the regulations.gov website.
Review the document by clicking the link or just click on "submit comment."
Complete the form providing required information and your comments and then submit

I hope that you will take this opportunity to comment on these proposed rules. The quicker the housing market can recover, the sooner that the rest of the economy may follow.

I have serious doubts about the integrity of the U.S. Dollar, and I am recommending investments in hard assets (i.e. Real estate, gold, silver, and other precious metals) as well as investments in foreign currencies and foreign stocks.

If the return on your current savings is not up-to-par, I have a limited-time opportunity in which you can earn a fixed 4% monthly (48% APR) return on a six-month investment of $1,000 to $10,000. This is a securities-backed investment and is highly secure. You must act quickly, because when the capital requirement is filled, this opportunity will be gone.

If you need more information on how to attain maximum results on your investments, in spite of the current economic situation, please comment to this post. All comments are moderated, so your personal information will not be displayed publicly.

Blog to you soon!

An Open Letter to B. H. Obama

2009-05-09T12:07:00.000-07:00

I sent this to Barack Hussein Obama prior to the 2008 Presidential Election in response to his website posting asking for input. I doubt that he ever read it, because he never called me to discuss its contents.

I thought you might enjoy reading this, so here you go!

Mr. Senator:

While I agree with many of your goals, I have to disagree with your methods. You need to surround yourself with advisors who are non-political, and who really understand the driving forces around the economy, energy, foreign policy, immigration, and medicine.

Income Taxes

You will not improve the economy by increasing taxes. This has never worked effectively, and it will cripple an economy that is already fighting to maintain balance. Also, remove the semantics from your argument. You state that you are not going to raise taxes. We both know that to be untrue. By allowing the prior cuts to expire, taxes are being raised from their current point. We know that the poor don’t pay taxes, but the working poor do qualify for the EIC and other programs. Telling the middle class that you are going to transfer their taxes to the wealthy is pandering. Placing more of the burden on the wealthy brings down the whole country, by taking away the incentive to produce.

The Pareto principle tells us that 20% of the people have 80% of the wealth. Well, of the 20%, we know that 20% of them have 80% of that wealth. The American Economy is driven by Free Enterprise. Owning a business is the American Dream. Now, you propose to punish those in the top 3% of incomes for having achieved success. You also want to remove the cap on SS contributions for those who earn over $200K per year. This is another bad idea.

Windfall Profits Tax and Energy Policy

Your proposal to place a windfall profits tax on the oil companies is another idea that will not produce the desired results. This seems a lot like a government takeover, since the companies are being penalized for being successful. Ideologies aside, corporations do not pay taxes. Their consumers pay the taxes, because the tax is included in the retail price of every product or service produced. The owners of the corporation pay taxes on their dividends, but corporate taxes are a cost of doing business, which is passed along to consumers. If you insist on stealing money from the oil companies, they will simply raise prices to overcome your tax. For example, a 50% windfall profits tax, when taxes are at 9% of retail price will result in a price increase of 6% to cover the tax, thereby maintaining the profitability of the enterprise, in spite of the taxes.

If we want to have lower gas prices, then we must be able to increase the supply of crude oil. While it may take ten years to realize the benefits of new domestic drilling and new refining, we still need to move forward in these endeavors. Had we done this ten years ago, we would not find ourselves in the current predicament.

We need to push for alternative fuel methods and expand production of hybrid vehicles. However, if the hybrid costs more than a comparable gas-only vehicle, the difference in cost may be too high to overcome in simple fuel savings. Tax breaks for production and purchase of these vehicles would be a good step.

It is possible to modify vehicles to work on other inputs, from used vegetable oil to propane. We should explore ways to help people that cannot afford new vehicles to be able to modify their current vehicles, so that these alternative fuels may be put into use.

Social Security

You will not fix Social Security by taking money from the wealthy. Social Security, as designed, is a Ponzi scheme, and we all know that those don't work. If you want to fix the system, make it fair to everybody. The system was poorly designed, and the government has been scrambling since the 1970s to try and fix it. If the system ran like a 401(k) or 403(b) program, where each contributor had control over the way their money is invested for their future, then the government wouldn't have to shoulder the blame for the system going bankrupt. The government has to meet its promises, but it can't. If you aim to be president, you must fix this problem right away. It can be done. If you don't know how, just ask me.

Social Security currently is an unfunded liability estimated to be as high at $20 trillion. Why not allow people to opt-out of Social Security, forfeiting all of their prior contributions, if they will agree to put at least 8% (an increase from 6.2%) of their gross income toward their own retirement under the privately-managed mutual fund family of their choice? The Financial Services Industry can easily set-up investments of this type. They would run similar to a Roth IRA, but with additional restrictions (i.e. No loans, available if permanently disabled, or retired at 62+). The rules for disbursement would be similar to current Social Security rules, with the annuity pay-out based on the amount invested and age-related factors. Accounts that are not annuitized during the lifetime of the recipient could be rolled into the account of a beneficiary or provided as a death benefit to heirs.

For those who opt-out of Social Security, their employer will continue to fund the FICA program based on wages paid, just like now. Self-Employed taxpayers would follow the same formula: Minimum of 8% into their own program, 3.1% to the government (SE Tax - capped), plus 2.9% (uncapped) for Medicare. This allows the system to continue to benefit from the labor force, without increasing the future liability of the system. Don't place an age cap on this, because the only people who will opt-out are those who can afford to fund their own retirement, and who don't need Social Security anyway.

Foreign Policy and Homeland Security

We need to get out of Iraq, but not until they can maintain their own security. We also need to continue to display to the world that we are united in our resolve to protect our interests and to remove the threat of terrorism. We don’t accomplish these goals by shrinking from fights that we are winning and by talking to despots and terrorists. Iran’s leadership is a problem that we need to correct now. We cannot wait until they have nuclear capability, and we cannot just let Israel attack, because the whole Middle East will go up in flames, and oil production and delivery will be affected.

We need to protect our borders and develop an immigration policy that makes it easier for productive members of other societies to enter, while making it harder for undesirables to enter. We need to allow those who protect our border to have access to the same technology that our military uses to perform surveillance activities during wartime, and we need to allow for military assistance with this problem.

Medicare and Health Insurance

The government does not need to be in the insurance business. Medicare is already an underfunded disaster (some estimate over $70 trillion with the new prescription drug program), and now you tell me that the government wants to increase its presence by taking over the industry? Bad idea!

Forcing employers to provide health insurance will result in higher unemployment. Forcing people to buy their own insurance will be a disaster unto itself. If you want to fix insurance, you need to deal with the underlying issues that contribute to high costs:

· Litigation costs · Malpractice Insurance Premiums · Medical Education Costs · Shortage of Doctors and Nurses · Inappropriate Usage of Benefits · Impact of non-paying Illegal Aliens

If you visit an emergency room in almost any state in the country, but especially in California and other border states, you will find a large number of patients using the emergency room, when it would be more appropriate (not to mention cheaper) for them to visit a family doctor. Why are they in the ER for a non-emergency visit? They are there, because they fall into one of the following categories:

· Medicare recipient · Uninsured Illegal alien · No medical insurance

Hospitals in the United States are not allowed to refuse care. Any other business or industry has the right to refuse service to anybody. No Shirt, No Shoes, No Money, No Service! I am not advocating the restriction of life-saving measures based on ability to pay, but I am advocating a more sensible approach to health care.

If we can reduce the cost of litigation and reduce the insane punitive damage awards, we can reduce the cost of both malpractice insurance and the provision of medical services. I know that the lawyers have a lot of money dedicated to lobbyists, but litigation legislation is necessary and long overdue.

Government assistance for medical education would be a big help, as doctors and nurses graduate with hundreds of thousands of dollars in education debt. This drives up costs as salaries must account for these debt service payments.

Deporting illegal aliens who cannot afford to pay for their care would be an important step toward reducing these costs for states that cannot afford them. Illegal aliens who reenter the country after deportation should be jailed for fraud and deported after their release.

Allowing hospitals to refuse patients who enter emergency rooms for non-emergency services, based on an inability to pay would help reduce costs for everybody. Force non-emergency patients to seek family practitioners or urgent care centers for this type of medical care. Even if the government were to cover the cost of these services, it would still be much cheaper than ER care.

Conclusion

The United States of America is the greatest country on earth, but we have lost sight of how we became to be so great. Our country was built by entrepreneurs and tradesmen who believed that small government was good government. They did not believe that the government should tax its people, but should derive its income from tariffs imposed upon the importation of goods.

While we need the federal government to provide infrastructure and national security, the government has moved far afield from providing these basic necessities. Government is now immersed in almost everything we touch, and those in power seem to want to keep increasing its reach.

The economy would run more smoothly with a lower tax base. Gas prices would be lower without the restrictions on drilling and refining that have been imposed by the government. Government has let the people down with regard to immigration, and is finally doing a better job on Homeland Security. Medical care does not need to be provided by the government, but the government should take steps to lower the cost of care, so that everyone can afford it.

If we can get the politicians to stop and realize that their job is to protect the country and serve the citizens, rather than to succumb to the whims and fancies of lobbyists and their local constituents, then maybe, we can see some change. Until we change the way we elect our leaders, I don’t see anything changing for the better, which I find unfortunate.

Bankruptcies Are On the Rise

2009-04-04T00:00:00.000-07:00

According to recent news articles, bankruptcies are at their highest level since October 2005, with an average of 5,945 filings per day during the month of March. Adding to this the fact that 663,000 Americans lost their jobs last month, indications appear to be that this number will only increase during the coming months.

While this is a shame, all too many people file bankruptcy when it is not their best financial option.

Bankruptcy comes in two versions that apply to most consumers. Chapter 7 is a total liquidation of assets and near total elimination of debts. Chapter 13 is basically a negotiated repayment plan, with terms set and monitored by the courts.

Certain items cannot be discharged in bankruptcy; notably any tax liabilities for the past three years, federal guaranteed loans (i.e. student loans), and any debts incurred as a result of fraud. Other exceptions vary by state, including what assets can be exempted from bankruptcy. As each state sets its own rules in addition to the federal guidelines, I will not get into that discussion here.

The key point to realize is what exactly is being protected by filing bankruptcy. If no one is suing you or threatening to take anything away from you, then you do not need bankruptcy protection. Filing bankruptcy is a move that shields your assets and income from attachment by creditors. If creditors are not filing lawsuits or taking repossessive action against you, then you do not need to file.

Now, what if you do find yourself facing multiple lawsuits and foreclosure actions? Well, take a moment to evaluate your situation. If you are facing the potential loss of your home, take a look at the numbers before you. If you only have a first mortgage, and the property value is under water, you would likely be best served to either attempt a loan modification with your lender or walk away from the property. Many states are non-recourse states, meaning that the holder of a first mortgage who repossesses your property cannot come after you for a deficiency balance. This does not hold true for auto loans, however.

Should someone file bankruptcy to hold onto their car? Probably not. If you are holding onto a car which you cannot afford, then you do not need it. You can try to negotiate new terms with the lender, and I can guarantee that you will face a lawsuit for any deficiency balance on the sale. You would be better off to sell the car short, and then try to make up any difference. An attorney retained prior to a repossession order would likely be a good investment.

OK, so we try to hold onto the house, and we let go of the car. Now what do we do?

Next, take a look at that stack of bills that you cannot pay. If no one is actively suing you, let them sit for now. If they are suing you, then take a look at what you have at risk. If you have no equity in your house, you won’t lose that. If your car is secured by a loan, other creditors can’t touch it. Your personal property along with any property that you use in your business, trade, or profession, is off-limits in most states also. That leaves your bank accounts and your paycheck as the primary avenues of recourse for a creditor’s attachment.

If you know that judgments exist against you, keeping as little money in the bank as possible should be a given. As far as your paycheck goes, part of your pay is exempt. This varies by state, but you are protected to a minimum of $5.15 (Federal minimum wage) x 30 hours per week. This money cannot be touched. After that, depending again on your state of residence, only 10% to 25% of the remaining Net Pay can be attached for ALL of your garnishments. It does not matter how many judgments or garnishments you may have against you, the limit is what it is.

Many Chapter 13 bankruptcy plans and many plans negotiated by CCCS for their “clients” require payments that can be much higher than that amount. You likely pay more than that now for your unsecured debts, if you are actually in financial trouble.

The problem comes when people facing hard financial times ask a bankruptcy attorney what they should do, and never consult anyone else. Now, I don’t want to upset the legal establishment, but I would venture to guess that at least one bankruptcy attorney out there recommends bankruptcy as the answer almost every time. Just consider how it is they earn their living: If you file, they get paid. If you don’t file, they don’t get paid. What would you recommend in their position?

Some items are not subject to the previously quoted exemptions. They include back taxes owed to the IRS, Federal Student Loans, spousal and child support, and some others that may vary by jurisdiction. However, bankruptcy won’t protect you from these either, so you are stuck with them.

By all means, if you are having financial difficulties, you should consult an attorney. You should also consult an accountant and a financial planner. I would personally do everything in my power to keep you away from CCCS, because they work for your creditors and not for you. That is why I put “clients” in parenthesis earlier. You are not their client, just their potential victim.

Other ways out of a financial crisis include loan modification, debt negotiation, and debt settlements. You can do an Internet search to get information on these types of programs, and I will caution you that a great number of people and companies are employed in these areas of expertise, and not all of them are trustworthy. Tread carefully, and try to deal with reputable firms and organizations for this type of help.

As with any advice you may read in articles, and especially online, keep a discerning eye out for your own best interest. Nothing herein should be regarded as legal advice, and it is not intended as such. Should you need any legal, accounting or financial planning advice, seek the counsel and recommendation of a competent, licensed practitioner in your area.

Security Freeze - Protect Against ID Theft

2009-03-28T00:49:00.000-07:00

Identity Theft is one of the fastest growing crimes. Over $50 billion is stolen each year via Identity Theft, and you need to protect yourself. One of the best ways to protect yourself is to lock-down your credit reports with a PIN number.

By establishing a PIN number for your credit reports, you will keep prying eyes off of your information, which will help keep someone from being able to pretend that they are you, and then open accounts in your name. Of course, this only offers protection against potential future attacks.

Be sure to review your credit report to ensure that no accounts appear thereon, which are unfamiliar to you. If a review of your credit report reveals strange information, be sure to dispute it with the Credit Reporting Agency that is showing the faulty data.

Asking for a PIN number is a simple process. You may request via web, telephone, or mail. The downside is that Equifax is still in the stone ages, so they do not have an online way to ask for a PIN. You must either contact them via phone or mail. You may find information on all three of the CRAs below, if you want to establish PIN numbers for your credit reports:

TransUnion 1-888-909-8872 Fraud Victim Assistance Department, PO Box 6790, Fullerton, CA 92834

Experian 1-888-397-3742 PO Box 9554, Allen, TX 75013

Equifax 1-888-298-0045 PO Box 105788, Atlanta, GA 30348

If you have been a victim of Identity Theft, you can get a PIN for free, but you must make your request via mail only. Fees for PIN numbers vary by state. If you live in Indiana, your PIN is free. Other states allow charges ranging from $3 to $20 per bureau, so you may have to part with up to $60. However, this is chump change compared to the aggravation that any case of ID Theft may cause.

Another protection against Identity Theft is to join a program such as LifeLock or join the National Consumer Rights Alliance, which provides Identity Theft protection and up to $25,000 of insurance protection for potential victims of Identity Theft.

If you have been a victim of Identity Theft, be sure to file a police report, and obtain a copy for use in fighting unauthorized transactions and accounts. Undoing an Identity Theft can be a time-consuming and costly undertaking. Do everything you can to protect yourself upfront.

Flash: Congress Tries to Recapture Bonuses Through Taxes

2009-03-20T01:36:00.000-07:00

In what may prove to be one of the most asinine attempts at penalizing people for doing their jobs, each house of Congress has passed (or is considering) new bills that penalize companies that have received Stimulus (Porkulus) money and the employees receiving bonuses under contract.

If you missed the news, the House version of the bill (HR 1586) would impose a 90% tax on companies paying bonuses, and the Senate version would impose an excise tax of 35% each on the company and the employee, if the employee's household compensation exceeds $250,000. One would expect that state taxes would be at least 10%, thus taking away the entire bonus and returning it to government coffers, under the House version.

What the American people are not being told is that most of these bonuses are required as part of compensation packages that were negotiated and signed long before any bailouts occurred. The companies are legally obligated to pay these bonuses, and in some cases, the bonus comprises the majority of an employee's compensation.

The original Stimulus Package contained a provision that would have kept bonuses from being paid by Stimulus Package recipient companies. However, the Obama Administration didn't think that it would be legal to do this, so they removed the limitation from the package, over the howls of Republican lawmakers.

Now, the Administration is pushing for this new tax. Here is my question, "If it would have been illegal to block the bonuses, where is the legality of passing an ex-post-facto tax on this money?"

People have decried executive compensation models for decades. However, the reality is that companies cannot attract top performing executives without these compensation packages. The talent will simply go to another company that offers a better incentive package. This means that the companies that are already failing and that are desperately looking for new leadership will not find many takers.

Regardless of what version of this bill finally passes, look for a number of class-action lawsuits to be filed on behalf of the affected employees. The government will probably spend more money defending itself against the lawsuit than it would raise in new taxes. Since the government already owns 80% of AIG, it seems that Congress should be able to call a special Shareholders' Meeting, elect new Directors, and then voluntarily refund whatever amount of assistance they deem appropriate.

This is just a case of buyer's remorse, and it penalizes the wrong people. Should executives get a bonus for running a company into the ground? Of course not. However, in the AIG example, over 400 people are receiving bonuses. I have to think that not all of these people are in senior management positions of executive-level responsibility. Many of these people are probably regular working stiffs, who depend on this bonus to round out their incomes each year.

I have worked in businesses where I received a bonus based on what I accomplished during the year. I would always work hard to ensure that I qualified for my bonus. If the guys at the top screwed up the company by not doing their jobs, why should I get shafted, when I did the job I was hired to perform, and earned the bonus for which I was eligible? What if this was you?

I invite and welcome your comments.

This is the Perfect Time to Fix Your Credit

2009-03-14T00:00:00.000-07:00

We have all read the headlines about the current economic crisis. We have seen the “Stimulus” packages passed. We have all wondered aloud, “What is in it for us?”

Well, on an individual basis, you may have a lot of ways to take advantage of the current economic situation. Opportunities abound if you have a fist full of cash and/or excellent credit. The sad reality is that most of us have neither. While I could write about a number of ways to fill your hands and pockets with cash, this article is about fixing your credit.

You see, if you don’t fix your credit, your ability to put cash together to take advantage of opportunities will be limited. We live in a credit-based society, and many items are overpriced due to the availability of credit. Do you really think that homes and cars would cost so much money if people had to pay cash for them? Of course, they would not cost so much!

The burning question then is “how to fix your credit?” You have two choices: 1) Do it yourself, or 2) Hire a professional. Let’s think this through.

If you opt for the Do-It-Yourself route, you need to do a lot of research. Why? The decks are stacked against you. Every American wants perfect credit. If it was so easy to fix their credit themselves, they would have done it by now. Instead, the average American’s credit score has been dropping each year at a record pace. The average American’s credit score is now 678, when it was over 720 just three years ago.

You could research the credit laws, pore over case histories, and study the various Federal and State Acts and laws that have been enacted to protect your consumer rights. You could write brilliant letters espousing your innocence against the spurious allegations against you that say that you do not honor your commitments and pay your debts. You could keep meticulous records, building evidence for lawsuits that you would later file against your creditors, collection agencies, and credit bureaus.

The sad truth is that you could do all of these things yourself. The sadder truth is that you probably won’t. Most consumers make a brief effort to write a couple of letters and hope their credit reports will magically improve. Unfortunately, these feeble attempts rarely achieve the goals set by these same consumers, and they sadly give up, and face their fate. Even those who get proactive, take all the right steps, keep their documentation in order, and follow-through are in for a battle that could last two years or longer, and still not get the results they desire.

Your creditors, in concert with the credit reporting agencies and others, have spent a lot of money to back those very same Federal Acts and other legislation that supposedly protects your rights. Do you realize that these laws do little to protect you, but do a lot to protect those who disparage your reputation by saying you don’t pay your bills? It’s sad, but true.

In fact, the three major credit bureaus have spent millions of dollars in lobbying for laws that severely restrict the ability of third parties that would help you fix your credit. Nearly every state in the union has laws set-up to make it very difficult for a so-called “credit repair company” to exist and do business. Why would they fight so hard for this? The reason is simple, “The CRAs do not want you to engage professional help, because they know it works!”

Consumer Reporting Agencies exist for one reason only. They exist to protect the creditors and collection agencies who provide data to them and who rely on this data to make credit decisions. It makes sense that the CRAs would rather have inaccurate, negative data against you than to possibly miss something negative. Since your creditors use the data provided by the CRAs to turn down all but the most solid risks, it is in the best interest of the CRAs to ensure that ALL potentially negative information about you is reflected on YOUR credit report. If the CRA told your creditor that you had a very low risk of default, your creditor gave you a loan, and then you defaulted; it makes them look bad!

This is why when you try to get the CRA to remove any adverse information (regardless of merit) they do everything in their power to avoid removing the item. They stall. They force you to jump through hoops. They ask for more information. They simply tell you that the creditor has confirmed the information as accurate. They tell you that your dispute is frivolous.

They do all of these things, because they know that you will probably not follow-up. They count on the fact that you do not know your rights, and that puts you at their mercy.

This is why you need PROFESSIONAL help. A professional has seen all of these tactics. A professional knows the laws that protect consumers. A professional can cut through the stalls, and attack the CRAs and your creditors using the laws in YOUR favor.

Sure, you could do the work yourself. However, I don’t know a single cardiologist who would do her own angioplasty. A professional should be able to get results for you within three to six months, rather than the two years or longer it might take you to do it yourself. Considering the cost of bad credit in higher interest rates and lost opportunities, it is an investment with a very high return.

Where and how do you find a professional? This is the difficult question. You can hire an attorney to do this for you, but that could cost you thousands of dollars. You could find a company that charges a low monthly fee to do the work (and their motivation to work quickly will be?). You could find an organization that charges a fair amount of money, but actually gets the job done.

Whichever route you choose, choose wisely, because credit repair organizations earned the bad rap they received back in the 90s by not performing. Things are much better now, but you need to choose your solution wisely. Do your homework. Ask the right questions. Contact this author for suggestions.

Help is available, if you know where to look, and whom to ask. Fix your credit, and then we can talk about how to use that access to capital to start building your wealth.

How the Stimulus Package Hurts Real Estate

2009-03-07T03:00:00.000-08:00

We all know that the economic stimulus package exists because real estate crashed. Now, I am working on another article that will detail and explain how we got here, but that is a story for another time. The Economic Stimulus (Porkulus) Package contains several key provisions that directly affect real estate.

Now, the National Association of Realtors feels that anything that reduces the prices of houses is a bad deal. Their argument has some justification, because when the price of a house reduces to a value less than the obligations (liens, mortgages) standing against it, then we have a recipe for foreclosure. However, that is not their real motivation. Lower housing prices mean lower commissions, as most commissions are based on a percentage of selling price.

Personally, I think that we should be looking at housing affordability. In other words, what combination of factors will allow MORE people to actually be able to OWN homes? We need a combination of low interest rates, favorable mortgage terms, and low housing prices.

The problem in all of this relates to how housing prices are set by the marketplace. The rental market has an impact on this, because most people who are looking to buy a first home currently rent a house or apartment, and they will be trading a rent payment for a mortgage payment. They will also be divesting themselves of some level of their personal savings for a down payment and/or closing costs.

A person who is accustomed to renting will take a look at the family budget, and determine what amount can be allocated toward a mortgage. Most people overlook all of the extra costs that go into owning a home, including taxes and insurance, maintenance, water, trash collection, etc., but we’ll ignore those costs for the moment.

If a family determines that they can afford $1,200 for a mortgage payment, they will volunteer this fact to their mortgage broker and Realtor®. In turn, a determination will be made as to how much house that family can afford. If interest rates are at 5.75% (a currently available fixed rate), then this relates to a principal amount of about $207,000. Assuming that the family has the proper down payment of 20%, this means that the family can afford a house valued at about $260,000.

Now, the Realtor’s job is to find a house for which the family is willing to spend $1,200 per month. So, the family will look at the marketplace of houses, and determine from the range of homes available, which is worthy of their $1,200 per month budget. As a result, all houses in the market that justify a monthly expenditure of $1,200 will be worth about $260,000. This is a simplistic depiction of how retail housing prices are set.

What can complicate this scenario and formula is when the government (or the Fed) steps in to try and affect the housing market. Here are some items in the budget, which are supposed to help the housing market. Analyze each, and try to determine what effect each will have on the cost of housing. Then, determine the effect each measure has on the affordability of housing:

1. An income tax credit for first-time home buyers of $8,000 2. A reduction in the mortgage interest deduction for families earning over $250,000 per year 3. $100 down payment mortgages on FHA loans to buy HUD repos

1) An income tax credit for first-time home buyers will increase the price of houses by making more money available for the purchase. In other words, no one likes to leave money on the table, and the sellers will grab whatever is there. The downside to the credit is that it is only applicable to purchases that occur by first-time home buyers in 2009, which eliminates a large part of the buyer pool. In addition, the credit won’t be received until 2010, so it is not available for down payment money.

2) Lowering the mortgage interest deduction will actually reduce housing prices, because the net cost of ownership in high-cost areas will increase, when those capable of making the higher payments have a higher net cost of ownership, due to this tax increase (Note: A reduction in tax deduction has the same effect as an increase in tax).

3) $100 down payment mortgages increase the prices of homes by increasing demand. The offset here is that this program only applies to homes that have lost value and been subject to short sale/HUD sale auctions. The lack of a down payment does not reduce the price of the homes, but this will help to provide a bottom for housing prices in some markets.

This gives us three proposals, all of which will increase the net cost of buying houses, and decrease the affordability of those same homes. If the government did not get involved, housing prices would continue to fall, thereby making homes more affordable for everyone. Oh well, at least the government tried to help out.

Special: 12 American Solutions for Jobs and Prosperity

2009-03-05T00:00:00.000-08:00

SPECIAL NOTE: This post was to have appeared on February 19, but was lost due to a technical issue. It now appears in its entirety.

Dear Readers:

Recently, I received the following announcement from American Solution s, an organization led by former House Speaker Newt Gingrich. While I don't always agree with Newt, and I don't agree with everything mentioned in this plan (see my comments in red italics), this is a much better start than the pork-barrel bailout that the Democrats have forced upon the American taxpayer. The American Solutions article begins after the message from our sponsor.

Washington solutions of more money for more government, more power for politicians, more debt, and more bureaucrats will not lead to real growth in jobs and prosperity.

We need a clear and decisive alternative that creates jobs and rewards work, saving, and investment.

Payroll Tax Stimulus. With a temporary new tax credit to offset 50% of the payroll tax, every small business would have more money, and all Americans would take home more of what they earn. (This would add some fairness by eliminating the self-employment tax, which unfairly burdens small business owners. I would prefer to see a permanent elimination of the self-employment tax, coupled with an individual investment account provision.)
Real Middle-Income Tax Relief. Reduce the marginal tax rate of 25% down to 15%, in effect establishing a flat-rate tax of 15% for close to 9 out of 10 American workers. (This would actually help Obama keep one of his campaign promises.)
Reduce the Business Tax Rate. Match Ireland’s rate of 12.5% to keep more jobs in America. (This lowers the double-taxation burden on corporations and should spark an increase in equity investments. This would also serve to lower bond interest rates, thereby increasing bond prices. This could lead to a rare, simultaneous increase in equity and bond prices, providing overall economic growth. A serendipitous benefit to this would be a decrease in inflation, as businesses would not have to offset their tax burdens by charging higher prices.)
Homeowner’s Assistance. Provide tax credit incentives to responsible home buyers so they can keep their homes. (I don’t totally agree with this measure, as it will artificially inflate housing prices. However, with all the giveaways for irresponsible home buyers, something had to be done to make things equitable for the rest of us.)
Control Spending So We Can Move to a Balanced Budget. This begins with eliminating Congressional earmarks and wasteful pork-barrel spending. (A balanced budget is not always the best way to stimulate the economy, but we need to severely reduce wasteful Congressional spending, so this is a good idea on the whole. A line-item veto would usually help here, but with a Democrat-led Congress and a spendthrift President, it would be of no consequence now, as evidenced by the $1.2 Trillion spending package signed last week.)
No State Aid Without Protection From Fraud. Require state governments to adopt anti-fraud and anti-theft policies before giving them more money. (This is a good idea. The question here is “Who pays for (and conducts) the investigation and enforcement?” Is it possible to expand this to include accountability for money given to foreign governments?)
More American Energy Now. Explore for more American oil and gas and invest in affordable energy for the future, including clean coal, ethanol, nuclear power and renewable fuels. (Always a good idea. We need to get away from fossil fuels in order to clean the air and shore-up our economy. The problem is the big money interests (Energy, Auto Makers) who don’t want to pay for the change.)
Abolish Taxes on Capital Gains. Match China, Singapore and many other competitors. More investment in America means more jobs in America. (This is an obvious move to spur investment. By the time you pay taxes on your income, your interest, and your capital gains, it hardly seems worth all the effort. I would also like to see a repeal of the Alternative Minimum Tax (AMT) or at least an inflation-adjustment to the income trigger.)
Protect the Rights of American Workers. We must protect a worker’s right to decide by secret ballot whether to join a union, and the worker’s right to freely negotiate. Forced unionism will kill jobs in America at a time when we can’t afford to lose them. (Unions helped build this country in the last century. They gave us the 40-hour work week, workplace safety measures, and numerous other employee benefits. Unfortunately, unions have become more of a bane than a benefit, and they have outlived their usefulness in most industries. When unions get so greedy as to actually begin to destroy the business model of the companies that employ the union’s members, then we have a problem. We should also eliminate the unions of all government employees immediately.)
Replace Sarbanes-Oxley. This failed law is crippling entrepreneurial start-ups. Replace it with affordable rules that help create jobs, not destroy them. (Corporations spend hundreds of millions of dollars annually just to stay compliant with these worthless regulations. Accountants love it, but no one else is benefiting.)
Abolish the Death Tax. Americans should work for their families, not for Washington. (Absolutely! You work your whole life to build your estate. You pay taxes on your income, interest, investments, and even on your Social Security. After you die, the government wants to take up to 90% of everything you created during your lifetime, even though they already taxed you all along the way. Eliminate this unfair burden now!)
Invest in Energy and Transportation Infrastructure. This includes a new, expanded electric power grid and a 21st century air traffic control system that will reduce delays in air travel and save passengers, employees and airlines billions of dollars per year. (This is a no-brainer. In the 1970s, states and the federal government spent billions on the National Highway System and local roads and bridges. Now, these throughways have fallen into disrepair, and they are largely obsolete. I would also like to see a relaxing of the environmental impact reports and other useless requirements that delay these projects for up to ten years or more. By the time most projects are completed, they have cost over twice as much as the original budget, and they turn out to be too little, too late.)

If you would like to learn more visit www.americansolutions.com. You may endorse this program at their website, and you may also read more about this and other initiatives of the organization.

For those of you who were waiting for my regular article last Saturday, I apologize, but my significant other had different plans for me on Valentine’s Day. I will be posting periodic comments on the Economic Porkulus Bill, which Obama signed yesterday, as I have time to go through its various entitlements. I have no faith that this bill will do anything to stimulate the economy, but it should be a boon to campaign donations to the Democrat Party.

Until next time, enjoy life, and watch your wallet!

Can You Smell What the Prez Is Cooking?

2009-02-28T01:09:00.000-08:00

Yes, my friends, the bacon is sizzling! The President's "porkulus" (stimulus) package passed with liberal colors during my absence. I'm not sure what kind of "change" this signifies. Democrats spending over $1.2 TRILLION over the next ten years with one swipe of the pen doesn't sound like change to me, unless "bad to worse" counts as change in the Obama dictionary.

I'm not sure what is the "real" crime in this bill. Could it be the fact that somehow they were able to compile over 600 pages of spending so quickly, or the fact that they expected lawmakers to fully digest the bill in about eight hours from delivery to voting? Of course, no one bothered to read the complete bill once it was printed, so just about anything goes as far as spending projects are concerned. Certainly, I have not had time to read the bill, but I hope to spend some time on it over the next couple of weeks. Of course, I have been waiting four days so far for it to finish downloading (just kidding), and I can promise that I will be spending more than eight hours reading and deciphering it. What I really enjoy is seeing President Obama speak with a straight face and tell the American People that this bill does not have a single earmark in it! What a laugh! The definition of earmark is that money is allocated for a specific purpose, generally for a pet project of a senator or congressman, who brings money back home to the district, which will later result in reelection votes. Now, I'm not sure, but I heard that we are spending $8 billion to see if a mag-lev rail from Disneyland to Las Vegas would make any sense. (I'm sure that Harry Reid (NV) and Nancy Pelosi (CA) put this one together.) Give me half of that, and I'll give you the answer right now. (Uh, no!) See how easy it is to save money in America? I just cut $4 billion from the budget in mere seconds! Why can't the Democrats figure this one out? Now, before my Democrat-registered readers get up in arms, this bill was clearly a Democrat Party concoction, as less than a handful of Republicans supported the measure. I already have spoken on the failure of the previous bailout attempts, and why they were doomed for failure. What I find interesting is that we are going to have to borrow $2 TRILLION in order to fund all of this spending, between the new porkulus bill and the previous "bailouts." This money is going to have to come from the Chinese, to whom we already owe over $1 TRILLION from previous borrowing. What will happen when they foreclose? Perhaps, we should all brush-up on our Mandarin. By next week, I expect to have had some time to work on some of these issues. Perhaps, I will find a few issues to post sooner, so keep checking your inbox (if you are a subscriber) or check back here often. ---- On a personal note, please allow me a moment to thank many of my friends, fans, and readers who expressed condolences over the past week, since the passing of my mother. I appreciate all of the heartfelt support. Having been a financial planner for over ten years now, it is interesting that this is the first death claim I have had to handle in all that time. ----- Until next week, I wish you all well. Hang on to your wallets! It's going to be a bumpy ride!

Announcement

2009-02-21T08:08:00.000-08:00

To the loyal readers of "Personal Finance for Real People." Randall Parker's article will not appear this week, as he is mourning the loss of his mother, Ann Brown Parker, who passed away in the early morning hours of February 20. She was 83 years of age. Coincidentally, February 20 also would have been Randall's father's 89th birthday. He passed June 21, 2006, at the age of 86. Randall hopes to have an article prepared for next Saturday, February 28, 2009. Thank you for your understanding, kindness, and condolences. Randall does have a new website for the mortgage side of his business, which just launched this past week. Please visit the site, when you have the opportunity.

Special: Bailout Update

2009-02-09T03:03:00.000-08:00

Early edition this week. I just received information on where some of the early bailout money went, and how it is allocated. I seem to recall hearing that the monies were to be invested in such a way that taxpayers would be repaid as quickly as possible by those to whom help was given. I didn't believe it then, and given the new information that I have found, I certainly don't believe it now.

Here is a partial listing from the original $350 billion in allocations:

$250 Billion for purchases of Senior Preferred Shares under the Capital Purchase Program (This is the money we are supposed to get back right away, when things turn around)
$ 20 Billion to Bank of America - The government is to share in the losses on a $118 billion package of assets. (If we are sharing in the losses, how do we get this money back later?)
$ 20 Billion to Citigroup, same as BofA above, where the government (you and me, folks) will share in losses on a $301 billion package of assets. (Again, same question as above.)
$ 5 Billion to Citigroup to cover additional losses with TARP funds.
$ 40 Billion to AIG Insurance. (This is certainly money well spent!)
$ 21 Billion to prop-up the US Auto Industry. (Of course, the industry doesn't have to make any substantive changes, but GM is offering $20K buy-outs to ALL employees and a $15K new car voucher, if they will retire or quit early. Why not just offer $20K to every taxpayer to buy an American-made car?)
$ 20 Billion to the Federal Reserve to improve consumer access to credit. (Really? Do we need this? Isn't loose credit what got us into this mess in the first place? Also, doesn't the Fed already control all of the money supply?)

This just explains where about $376 Billion of our dollars went. With over $1.5 Trillion to $2.0 Trillion in total bailout money, which will be added to our current $1.0 Trillion deficit; where, when, and how will we ever pay this money back?

The answer is, we won't! The Fed will have to print new money in order to make these payments on behalf of the government. They are trying now to sell $2 Trillion worth of Treasury Securities in order to fund these programs. Who still has money left, and who is going to lend to the US government now? Good luck with that!

This is just another example of your government screwing you big-time! While you can't fight back against the government, you can use the bailouts of financial companies to your benefit.

The National Consumer Rights Alliance (NCRA) offers the following services, all of which will help you to lower your outstanding debt, reduce your interest rates, improve your cash flow, and potentially save your home:

Mortgage Modification / Forbearance / Short Sale / Recission - These are all tools offered by the association to help protect you from your mortgage lender. You may qualify for a reduction of principle in your mortgage, a reduced interest rate, postponement of late payments and penalties, conversion from an adjustable to a fixed rate, a short-refinance, or other concessions from your lender. The NCRA offers these services at much lower costs to its members than you will find anywhere else.
Debt Settlement / Renegotiation / Bankruptcy - Debt Settlement can reduce your unsecured debts by 50% or more, and enable you to become debt free within three years, in most cases. Renegotiation can help you lower your interest rates. If you absolutely cannot pay your bills, or you have judgments or extended liabilities that have wreaked havoc on your finances, or if you just have no other way to save your home, the NCRA can refer you to a local bankruptcy attorney who will represent you at drastically reduced rates. We rarely recommend bankruptcy, but if it is your only way out, at least we can save you money.
Credit Restoration / Secured Credit Lines / Bank Accounts - NCRA now offers NO-COST Credit Restoration services to its members. They used to charge a $5.00 fee per deletion, but they have now waived this charge, in order to further assist members in the current economy. NCRA can also provide referrals to secured credit accounts, which will help to reestablish credit, and if you have found yourself in the ChexSystems database, NCRA can refer you to a local financial institution that will let you open a checking account without a ChexSystems verification.

Since the Federal Government is giving so much money to financial institutions, they have been mandated to work closely with debtors to work out arrangements for debts. Since the government has agreed to cover the losses, it only makes sense for an intelligent consumer (that would be you, dear reader) to take advantage of this situation for your own gain. After all, it is OUR tax dollars that these companies are receiving. Take advantage of the help that is being afforded you. Until next post, I wish you well, and I hope that this information will help you. Spend wisely, and sleep well!

Here is a Special Offer from the NCRA for my readers, so listen up!
For a limited time, just for readers of my blog, the NCRA will give you a family membership for the same price as an individual membership, for full payment upfront. This is a savings of up to $800 over the price of purchasing a family membership under their payment plan! Again, this is only for readers of this blog. In order to avail of this special, send an email to administrator@ncramembers.org, mention that you are a reader of this blog, and that you would like this special pricing. NCRA accepts PayPal, bank check, and credit card. Your benefits will begin immediately upon joining. This special pricing is not noted on the website, so be sure to request this special via email. This offer is good for the month of February 2009, and is subject to revocation without notice. In other words, this is a limited time offer. NCRA has promised this pricing for the first 100 readers who sign-up for the special. I suggest you send your email today!

Stimulus Package: WillI It Fix the Economy?

2009-02-07T18:50:00.000-08:00

I am saddened by the fact that the people we choose to lead our country are trying to fix the economy when none of them has any clue about basic economic principles.

If you want to fix the economy, here is how you do it:

1) Let the banks fail. We already have the FDIC and Federal Reserve to bail them out and protect depositors. 2) Let non-competitive companies fail. The automakers have not been competitive for years, because the unions have ruined their cost structures with inflated salaries and unrealistic retirement and health benefits. 3) Give money to the consumers, and let them choose where to spend it. Let the people vote with their wallets for which companies and industries are offering the best combination of value and service.

The United States was established on sound economic principles and good morals. The productivity and ingenuity of the American people has long been our steadfast advantage. Unfortunately, our lame educational system and overzealous (greedy) unions have conspired to encourage stupidity and laziness.

The founding fathers would probably puke if they saw us today. We have gotten fat and lazy, and we have lost our ambition. People did not travel half-way around the world over 300 years ago, to an uncertain future, so that they could have a job at the local 7-11.

The Free Enterprise system is geared toward business ownership, not indentured servitude (jobs). The American Dream is not about home ownership, it is about business ownership.

Our people have been deceived, and it is about time that some REAL change is made. The country is destined to fail, and this fact is belied by the government trying to steer the economy by spending money it doesn't have.

Get ready for high interest rates, a very tough credit market, a continued housing crash, and rampant inflation. The government will have to start printing money in order to cover its debts. This will increase the prices of imports, drive inflation, cost jobs, and reduce purchasing power.

I hope everyone is happy with the CHANGE for which they thought they voted.

BTW, where is the change, when all I see is the same old people being appointed to important jobs? What changed, exactly? Democrats are still spending money, and Obama lied about the tax thing (we all knew he was lying, right?).

While you are waiting for the economy to correct, fix your credit!

Your Way Out - Personal Economic Recovery

2009-01-17T00:00:00.000-08:00

Judging from the record number of comments that I received from all of you this week, I realized two things: 1) I have a lot more readers than I suspected. 2) You are an impatient bunch! OK, perhaps it was cruel to make you wait, but the last post was so long that I wanted to ensure that it got enough time to be read, and I didn't want to put so much into one post, that no one would read it all the way through.

The Four "I"s

This topic has nothing to do with wearing glasses. Last week, I asked you to gather all of your financial data from the last year. Since most of you didn't do it, do it now.... I'll wait.... .... .... Welcome back! Now, the Four "I"s consist of Income, Investments, Insurance, and Interest. In order to succeed financially, you must have all four of these items in place in your life. Most likely, you don't, but we can fix that.

Income consists of all inflows to your household, regardless of source. Primarily, this consists of profits from your business or your salary or wages from employment. You may also have income from investments or savings, hobbies, and avocations. You need to maximize this aspect of your life. To the extent that your income derives directly from the "amount of time" you spend on an activity, you need to maximize your return on that time (i.e. Become more efficient).

Investments consist of continuing returns on prior income. In other words, first you worked for your money, and now your money is working for you. To the extent that you are successful with your investing, you are now using time to compound your return on your original labor. Insurance is the method by which you protect everything that you have accomplished in your life to date. Some methods are obvious, while others are not. I have written a few articles about insurance, which you may peruse. The less obvious insurances may include unemployment insurance and workers' compensation, which protect your income. Life insurance protects your family by replacing your income, while property and casualty insurance protects your accumulated assets. Liability insurance protects everything you own against the claims of others.

Interest will either work for you, or it will work against you. You may derive interest on savings or investments in debt securities (bonds or corporate notes payable) and you may lose interest on borrowing (mortgages, auto loans, credit cards, etc.). Albert Einstein said something along the lines of "Those who understand compound interest will be investors, and those who don't will be borrowers." Which of these describes you?

Using the Current Situation to Your Advantage

At present, financial institutions in the United States are reeling. They cannot possibly keep up with all of the issues that they face. Approximately 16% of mortgages will foreclose this year. This will keep real estate prices low, which contributes to foreclosures. Yes, this is a vicious cycle. As people see their credit ratings destroyed due to non-payment of their mortgage obligations, they will tend to care less about paying for unsecured debt (credit cards), which will take away the banks' most profitable income center. A record number of bankruptcies is expected this year (well over two million cases).

Since I do not wish to create a forty page blog posting, I will lightly cover the areas that you need to address in order to solve your financial issues. This is not a do-it-yourself posting, as I cannot give you all of the information, skills, and tools needed to solve this problem yourself, in the space of a single blog posting. I will ask that you contact this week's sponsor, as they are in a position to help you accomplish all of these tasks, and as an advocacy organization, can do it much more efficiently and more cost-effectively than you can handle them yourself.

National Consumer Rights Alliance, Inc.

The NCRA is an advocacy organization dedicated to the protection of Consumer Rights for all Americans. They provide a number of benefits to their members, including credit repair services, a nationwide legal network, IRS Audit Defense, debt settlement assistance (not bankruptcy), mortgage modifications, and mortgage attainment assistance. They also assist with second chance bank accounts (no ChexSystems verification) and second chance (secured) credit cards. I believe so much in this organization that I have accepted a position as its President, in order to help drive their mission forward. I know of no better organization, public or private, that is in a better position to assist consumers in the ways that I suggest below. Of course, you may take all of these steps on your own, but I think you will find better results by allowing their experts to work on your behalf. Even if you were a skilled surgeon, you still wouldn't perform your own appendectomy, would you? Save time and money by joining the organization today.

Your Personal Recovery Steps

Income - You need to find ways to increase and diversify your income. In the current job environment, changing jobs is probably not the best option. In fact, you may be doing all you can to hold onto the job you have. Perhaps, you have lost your job, and find yourself in a very difficult spot. Try to find ways to supplement your income. Most online methods are scams, so be careful. It is possible to make money on E-Bay or Google and with certain blogging opportunities, but most people fail. NCRA has a referral program that can provide a good second income, so that might be worth investigating. Investments - Assuming that you still have some money invested, you need to find a way to build back up. If you are still able to invest each month, I suggest that you continue to invest. In most cases, the companies in which you are invested lost value due to the overall market, and not due to anything directly related to the performance of the company with respect to its peers. If this is the case, continue to invest in the same companies, and allow dollar-cost averaging to work for you. If you need to realign your investments, speak to your investment advisor. Insurance - Be sure that your insurance policies are up-to-date. Is your life insurance protection adequate to replace your income for at least twenty years? If not, reevaluate. Be sure you are getting the best value for your health insurance as well. Many individual and family policies now provide benefits as good or better than your workplace may provide. Oftentimes, these policies are cheaper if your family is in good health, due to the elimination of "adverse selection" that exists with group policies. Interest - Good news! This is the area in which you have the most control at present. These are the areas that we can address here, which will help you to solve the majority of your financial problems. Of course, if you have no income, that is a severe issue, but you can still work on alleviating much of the pressure you face by addressing these issues.

Reducing Interest and Credit Liabilities

Mortgage Modification is a great way to reduce your mortgage liability, payments, interest rate, or a combination of the three. I highly recommend that you NOT DO this yourself. Even if you are not behind on your mortgage, you may be able to renegotiate your mortgage into a better interest rate, longer terms to lower your payments, reduction in pricipal, and other options that can help you save your home and/or lifestyle. I have seen instances where individuals have lowered their monthly obligation by as much as 75%, reduced interest rates to as low as 3%, and had tens of thousands of principal balance forgiven. This is not an area for do-it-yourself. Help will cost you one mortgage payment on average, but you will have one month in which you will not owe a mortgage payment to your lender, so it is a service generally provided at no net cash flow loss to you. NCRA can connect you with a law firm to handle this for you. Debt Settlement is another way to greatly improve your cash flow. What would it mean to you if you could slash your total outstanding debt by 50% or more, reduce your interest rates to single digits, be debt free in 36 months, and actually come out of the process with excellent credit? Even if you have good credit and can afford to pay your debts now, this may be a great way to free up money for investment. Again, this is a service provided by attorneys, and you don't want to play this game on your own. Credit Repair/Restoration can help you qualify for much better terms on mortgages, auto loans, and credit cards. Do you have old collection accounts, chargeoffs, or even some late payments showing on your credit report? These items can cost you dearly when it is time to obtain financing for any purpose. NCRA provides attorney-assisted credit services at almost no cost to its members, as a benefit of membership. You only pay $5 per deletion obtained. Mortgage Refinancing is available if you can prove your income, have a debt-to-income ratio of 45% or less, including your mortgage, and have a credit score higher than 720. If you have these attributes, then you can probably refinance in the low 5% range on a 30-year fixed mortgage. If not, then take some of the steps above before trying to refinance. A mortgage modification may be a better deal anyway, as the cost of modifying a mortgage may be much lower than the cost of obtaining a mortgage. Margin Account Borrowing is available to investors who have active trading accounts with the major wirehouses. If you have been purchasing stocks without borrowing against them, you can open an account, which will allow you to borrow up to 80% of the value of the shares at rates as low as 2%-3% per annum. If you take this money, and payoff your high interest credit cards, your savings could be significant. If you will take this tact, I advise that you only borrow 50% of what is available to you, and then repay the monthly payments that you would have made on the credit cards back to your margin account. In the alternative, you can take that monthly payment to reduce the liability on other high interest accounts, but be sure that as you accumulate these payments that you eventually pay off the margin account. That's all for now. Once you take these steps, keep me apprised of your results. Of course, I am always here to help, so keep those comments coming. If you need individual help, let me know. If I receive similar questions from a number of readers, I will post my comments, so that we can all benefit. See you soon!

Happy New Year - Time to Catch-Up

2009-01-10T20:13:00.000-08:00

Please allow me to begin by apologizing for the severe lack of posts over the past six months. Between a major move, having my first child, taking on two new administrative positions, several consulting projects, the college football season, my mother's moving and health issues, and more; things have been quite busy for me lately. I have also taken responsibility as co-owner for two CBS Sports Official Fanatics sites as indicated below:

CBS' Official USC Football Fanatics Grou p CBS' Official CSU Bakersfield Basketball Fanatics Group

Please click on the links above to join each site. ------------------------------------------ OK, now that we have all of that out of the way, let's get on to real issues. Apparently, this may not be the best design for a blog site, as I know that a lot of you have commented, but approved comments do not appear to be showing on the site. Perhaps, I am doing something wrong or the design is flawed, I'm not sure. Please, continue to post your comments, so that I can keep up with what you are doing, and so that I am able to help. If you would like your comment to appear, do not place any personally identifiable information in the comment (i.e. Real name, phone number, email, SSN#, etc.). You may make two comments, one with your public comments and the second with your contact information, if you would like a response. I will ensure that your personal information does not appear on the site.

State of the Economy (How Did We Get Here?)

We are SCREWED! OK, well maybe it is not that bad for everyone, but we certainly have issues, and our government can't seem to get out of its own way. One of my biggest complaints about the educational system in the United States is that we do not teach our own system of economics to our young people. Columbus and the Pilgrims did not board wooden ships, and sail half-way around the world (and risk going over the edge) in order to set-up camp and find jobs at the local 7-11. The early settlers to our country left their birthplaces to avoid persecution, prison, to gain religious freedom, and to have the freedom to choose their own type of work and profession. In the late 18th Century, most women did not work outside the home, 95% of men who worked had some kind of a trade or profession, and the 5% or so who did work for someone else were generally working in some sort of an apprentice capacity in order to learn a trade or skill, which would allow them to become self-sufficient and self-employed. Towards the end of the 19th Century, the golden spike was driven into the East/West railroad, and our economic system changed forever. Up until that point, every community had to be largely self-sufficient. That means that anything needed by the town had to be grown or produced there, or brought in by inefficient means, such as carriages, carried on foot, or horseback. That limited the availability for many products and materials. It also created opportunity for those within the town or village to provide services or manufacture products for the town. We had tailors, seamstresses, metal workers, printers, hobbyists, carpenters, etc. serving the needs of the local town. Now that the railroad was in place, enterprising souls could take these seamstresses, carpenters, and other tradespeople from the small towns, move them into a factory setting, and mass-produce these same items for a fraction of the cost. The rail system could then distribute these goods nationwide, and make them available to towns that did not have locals to produce them. In some cases, the local providers were displaced by this competition (way before Wal-Mart, folks!). As manufacturing companies proliferated, they realized that they needed an educated labor pool in order to ensure that those incoming employees had at least the ability to read, write, and calculate (Think Reading, 'Riting, and 'Rithmetic). Prior to this time, most education was handled by churches or community centers that providing a "School Marm" to teach all grades on a daily basis. Watch some old episodes of "Little House on the Prairie," if you would like to see an example of this. Since education had to be made consistent nationwide, the government (God Bless Them) stepped in and created our current educational system. Curricula were decided, teachers hired, and funding provided to establish schools across our nation. Education was made compulsory shortly thereafter. The problem with this whole scenario is that the schools were not created to promote our system of economics (Capitalism), but rather to train students to become employees of these new factories and other centralized companies (Socialism). The new mantra became, "Get a good education and go to college, so you can get a good JOB!" (Many thanks to Dave Severn, who provided a similar historical account years ago on a mass-produced tape entitled, "Pigs Don't Know Pigs Stink!") This brings me back to my point. Since we have systematically destroyed the system of economics upon which this country was founded, and we have spent over 100 years not teaching the fundamentals of capitalism, we find ourselves at a point where the electorate (We the People) have no clue about whom we should elect to office, and the fools that we do elect have no clue about fixing the problem.

How Do We Fix It?

The only way to fix the problem now is to allow everything to crash, and let private businesses find the solution to prop it back up. This whole situation was caused by unrestrained greed. If we bailout the idiots who got us into this mess by providing capital to them, we only exacerbate the problem. Giving more money to banks will not fix things at the consumer level. Giving more money to auto makers will not give them an incentive to correct their issues. They need to be allowed to go bankrupt, reduce their liabilities and labor costs, and then give money to consumers to use for down payments, so that the public may choose which automaker should survive based on their ability to serve the demands of the consuming public. Better yet, just give out $700 billion in tax refunds, and let the consumers make all of the decisions as to whom should survive. I was disappointed with the $700 billion bailout. I understood the argument that providing $700 billion was better than allowing the market to lose trillions in market capital by allowing things to fall, but before the first dollar of the $700 billion was advanced, the market had lost $6 trillion dollars already, and the real estate market has lost over $2 trillion more. If the bailout is not going to fix anything, recall it! It is now too late for that, as much of the money has already been advanced. No matter what method is used to try and correct this situation, we are all going to feel some pain. The only answer that I can provide is how to protect and enhance your own (or your family's) situation. Unfortunately, I am going to make you wait one week for the answer. In the meantime, I will ask you to spend this week analyzing your current financial position. Gather together all of your investment account statements, your tax information, your banking and savings information, and all of your bills. Then, start a fire (just kidding). Bring all of this information together. Have it ready by the time my blog posts next week, and I will tell you how you can get rid of all of your debts and be on your way to financial recovery in the next five years. No fooling! Now, is the best time to take advantage of this situation, and to use it to your advantage.

Investment Opportunities (By Popular Request)

With the current economic meltdown, several of you have asked me for specific investment advice. While I refrain from making global suggestions for individual stock issues, I do have some worthwhile opportunities on my desk for the right investors. If you have interest in seeing these, and the ability to act quickly (i.e. Be able to wire money within two business days), you may place a comment here with your contact information, and I will forward information to you. These are private placement opportunities available only to accredited investors. Minimum investment is $25,000 and maximum investment is $10 million. However, you will not be allowed to participate if your participation constitutes more than 25% of your invested assets (not including your home).

That's all for this week. Happy New Year! See you next week, for real!

Obama Won, Now What Do We Do?

2008-11-05T05:02:00.000-08:00

My friends,

Our poor educational system has finally caught-up with us. We have managed to elect, as president, a man with no leadership or administrative experience, no experience running any kind of a company or payroll responsibility of any kind, questionable social and religious ties, and flawed ideas with regard to foreign policy and the economy. This is a real shame that we have let our country slide this far.

Here is what we can now expect:

Surrender in Iraq and Afghanistan
Nuclear proliferation in the Middle East
Increased chance of terrorist attacks against US interests
Higher Taxes
Higher Unemployment
Higher Interest Rates
A stock market that will stall
Prolonged real estate and mortgage crises
Deficit and National Debt increases that we will never pay back
Socialized Health Care
An exodus of capital and jobs from the United States to offshore locations

These are just if Obama keeps his promises! Imagine if he should have any new ideas, how much trouble we may find?

Unfortunately, McCain was unable to articulate his message as well as Obama was able to pander to the voting public. If you really think that we are going to transfer the rest of the income tax base to the Top 5% of earners in the country, you have not been paying attention.

For those of you who make over $100,000 per year (yes, I know Obama said $250K, but he wasn't being honest), you need to find a way to move your income and assets offshore. If you have a business, this can be simpler than you think. If you are employed, it is a little bit more difficult, but it can be done.

If you wish to protect you income and assets, then you need to act now! Put everything in place before the end of this calendar year, and take advantage of existing tax advantages before they go away.

Oh yeah, remember the Estate Tax break for 2010 (no estate tax, that year only). Unless you are confident that you will die in 2010, you had better start planning again, if you think that your total estate (including life insurance settlements) will exceed $3 million. We will go back to the old system, because Obama just loves to take our money.

I wish I had better news, but too many people do not understand that the real American Dream is BUSINESS OWNERSHIP, not home ownership! Taking from the rich to give to the poor only works in fairy tales.

Mr. Obama, I am perfectly capable of spreading my own wealth around. I don't need (or want) the government's help with this task. I also have no problem finding low-cost health insurance, so thanks for your efforts, which will only serve to destroy health care as we know it!

If you need assistance with protecting your wealth, whether assets or income, please post your contact information in reply to this post. Every post is moderated, so your personal information will not appear on this website.

Good luck, we will all need it!

Quoted in Bloomberg Article

2008-05-29T18:49:00.000-07:00

Hey Friends: I have been quoted in an article written by Seth Lubove, Los Angeles Bureau Chief for Bloomberg. You may view the article at the following link: http://www.bloomberg.com/apps/news?pid=20601109&sid=a8N_74GdteOg&refer=home While I was mentioned only briefly, much of the information in the article came from me. Attribution was light, in order to protect me from any liability. Enjoy the read. See you next post! Randall Parker, MBA

Health Insurance

2008-05-24T15:29:00.000-07:00

Health insurance is a topic often debated by two of the presidential candidates, with these two individuals each touting some form of Universal Health Care. This means that the government would provide health care to everyone, whether you feel like you need government "help" or not.

This is an inherently bad idea. Sure, it sounds good, but it just won't work here. Many other countries around the world have tried to provide universal care. Canada has created a dismal system that patients, doctors, and nurses all hate. It doesn't work there. The only example of a working universal health care system is in Australia. Austrailians seem to have a different view on consumption of medical services than Americans, so it seems to work just fine there.

I'm not writing this article to compare and contrast the two candidate's positions. Neither plan is workable, so let's just leave the argument right there. I want to discuss the benefits of having health insurance, and show you how to protect your family, if you are one of the many families who does not have health care.

You have three basic choices for health insurance: HMO, PPO, or 80/20. 80/20 is the coverage that most of us grew up with, but due to the high cost of health care, HMOs and PPOs are now proliferating.

HMO stands for "Health Maintenance Organization," and generally means that you must go to a certain facility and see your assigned doctor, whenever you need healthcare. If you need more specialized attention, you must beg for it, and you may not be able to get all of the care you would like, because someone is making decisions based on the cost of care to the organization, rather than your health needs.

PPO means "Preferred Provider Organization." In this structure, an insurance company signs hospitals, doctors and specialists to agreements, which detail what each member provider may charge to the company's policyholders. As an insured, you are free to see any provider in the network, and you will pay a copay, deductible, or both. If you need a specialist, just find one on the list and go. No other permission is required for basic office visits.

80/20 is the traditional type of health coverage. Generally, you will have a deductible that you will pay before obtaining benefits under the policy. You will then have a co-insurance corridor in which you will pay 20% of the cost and your insurance company will pay 80%. You will have a stoploss point, after which the insurance company then pays 100% of your expenses.

You also have the choice of a traditional policy or an HSA (Health Savings Account), which can be used as a retirement tool and comes with some tax benefits. If this is something in which you would like to have more informaiton, please contact me directly. HSA is an advanced financial concept and planning tool that is not appropriate for everyone, so I won't address it much here.

Depending on your age, health condition, financial status, and other issues, the best type of policy for you may vary. Usually, PPO policies have the lowest premiums, followed by HMOs, and then 80/20.

You can get an instant quote by visiting the following website:

https://www.sales.healthnet.com/Brokers/RandallParker_RANDALLLEEPARKER.asp

One key reason to have health insurance is the negotiated rates that you will get from the insurance company. For example, I don't go to the doctor very often. Most men fall into this category. Unless I'm am bleeding profusely or I have a body part hanging off, I'm not likely to waste my time on an office visit. Judge me later, but you know a lot of other people like me.

For my own use, I purchased a PPO policy with a $1,500 deductible that also had $15 generic prescriptions. As a 42-year old male (I know, I don't look that old), my premium is $124 per month. I rarely go to the doctor, and I probably won't hit the deductible. However, if I do have to go to the doctor, I will save a lot of money as compared to going to the doctor without insurance.

I had two office visits last year, which included some blood work and a minor in-office procedure. The doctor billed me $200 for each visit. My insurance company had a negotiated rate of $80 per visit, so I saved $120 per visit, just because I had insurance. Even though the insurance company didn't pay out any money, because of the negotiated rate, I saved almost enough to pay my monthly premium on each visit. i also saved 80% on my lab expenses, and my prescriptions were only $15 each.

If you plan carefully, you may be able to obtain health insurance for much less than you think. Covering children can also be inexpensive, especially if they are added to your plan. Use the link above, where you can get a quote and complete an application online, or give me a call with your questions.

Be healthy, stay healthy, get insured, and don't vote for anyone who thinks we need Universal Health Care. That is one policy we cannot afford!

Who Controls Gas Prices?

2008-05-17T14:41:00.000-07:00

Gas prices are all over the news right now, and I'm sure that the amount of your budget dedicated to fuel has increased dramatically over the past year, or you have made significant changes to the way you use fuel. Without taking a political stand in this blog, I would like to shed some light on the fuel price situation, because a lot of unsubstantiated information and claims are coming across the media, and you deserve to know the truth!

The gas price that you pay includes all of the following expenses:

Crude Oil (72%)
Marketing and Refining costs (18%) - Includes Port of Entry to Refinery to Local Gas Station
State and Federal Taxes (12%)

With crude oil now topping $100 per barrel, and no end in sight, the proportional cost of crude oil will continue to increase. Now, you might be outraged to know that it only costs the Arabs $2.00 to get one barrel of crude oil out of the ground. That is not a misprint, IT ONLY COSTS TWO DOLLARS TO PULL ONE BARREL OF OIL OUT OF THE GROUND!

In case you don't know, one barrel of oil is 55 gallons, so at $110 per barrel, the cost of crude oil is $2 per gallon. For those who think that the US oil companies are taking advantage, get over it! It's not true. They keep about 9% of sales as profits, which seems like a lot, until you start to compare with other industries. Also, much of their profit is reinvested in exploration and R&D activities. You may also be surprised to know that the oil companies give more money to the government in taxes than they keep as profits.

Why are we in this mess, anyway? What do we do about this? Who can fix this?

Well, worldwide consumption has increased, and continues to increase. You can blame China and India for this. Global oil demand is about 87 million barrels per day. At $100 per barrel, about $9 billion worth of crude is sold worldwide daily, for an annual figure that staggers the mind at about $3.175 trillion!

We all know that OPEC in the Middle East controls the worldwide supply of oil, because they pull more of it out of the ground than anyone else. Good ol' Hugo Chavez in Venezuela makes a bunch of the stuff, and we have some here, but we can't drill for it. I'm sure it will surprise you to know that the Middle East only supplies 14% of the crude oil consumed in the USA. In fact, 55% of the crude oil we use comes from within our own borders. 12% of our oil comes from South America, and 15% of our oil comes from Africa. Africa could be the answer to a very interesting trivia question! Who knew we bought more oil from them than from the Middle East?

The falling dollar is another factor affecting oil prices, because oil prices are always set in Greenbacks. Some have called for the Euro to become the standard, although I don't think the argument has much traction. Regardless of the currency used, the effect is the same. A falling dollar increases our cost of imports. Basic Macro-Economics.

Crude oil prices are set based on Supply and Demand. OPEC has the capacity to produce a lot more oil, but they have no economic incentive to do so. Even as prices rise, our demand has not diminished greatly, yet. If OPEC made more oil, they would lower the price and their own profits, because a lower price would not increase demand to a point that would increase their overall profits. We need to find a way to increase the supply of oil, without counting on them to do it.

We have enough oil in the USA to serve our nation's needs for the next 100 years or more. Why don't we increase drilling here? Short Answer: The Environmentalists won't let us. Even if we opened Anwar (Alaska), allowed drilling off the coasts of Florida and California, and increased drilling in South Dakota and other oil-rich areas, it would probably take ten years for us to be producing enough oil each day to really make a dent in the world market.

We are going to have to find a way to decrease our demand, if we want to see any lowering of prices. Keep in mind that crude oil doesn't just affect the price of gasoline. Crude oil also affects the cost of heating your home. The high price of gasoline affects the price of every product you consume and most services that you use. Trucks need fuel to operate, and these increased costs are added to the price of the products you buy. Airlines use a lot of fuel, and they are already losing billions of dollars due to the rising cost of fuel. Airlines are instituting new fees to offset these costs, because they can't charge more for the tickets; we simply won't pay higher fares.

The best recommendation at this point is to limit your driving, if possible. Join a carpool. Use public transportation (buses and trains). Ride a bike. Consider buying a vehicle with better fuel economy, but be careful about hybrids. The higher price of a hybrid can take from one year to sixty years (no fooling!) to recover through gas savings, even at $4.00 per gallon.

As we are about to enter the general election cycle for President, it may become harder for me to avoid political issues, but I will do my best to discuss some of the topics, so that you can make an informed choice. I won't tell you how to vote, or for whom to vote, unless you ask for my opinion.

See you next week.

Mortgage Modifications

2008-05-10T20:02:00.000-07:00

After last week's post, many of you have sent emails asking about Mortgage Modifications, which I promised to discuss this week. Sorry for making you wait, but I was out-of-town most of this week. (Actually, I traveled back to California, arriving on Monday, El Cinco de Mayo). I then spent some time in Bakersfield and Fresno, and just got back to the LA area yesterday.

A Mortgage Modification is a renegotiation of the terms of your existing mortgage. This is another tool that we use to help people to avoid foreclosure. For the most part, you will have the best results renegotiating for your personal residence. If you have investment property, you may face more resistance from the lender, but approval is not an impossibility.

Mortgage Modification makes sense if any of the following apply to your situation or your loan:

Your property value has declined to the point that you owe more than its market value
Your loan interest rate has increase or adjusted (ARM loans) to a point that you cannot afford
Your job situation has changed or your income has been reduced for any reason beyond your control
You are now behind in your mortgage payments due to a temporary situation that has now passed, but you are unable to raise the money to bring your mortgage current

If your mortgage is current, you may have a tougher time trying to get a modification on your loan, but if you just explain to your lender that your income situation has just changed, they may be willing to work with you, before your credit score goes into the toilet.

If you have one of these situations, you may be able to get a modification of terms from your lender. A modification may include changing your ARM to a fixed-rate mortgage, an increase in the number of years of your mortgage, which would lower your payments (i.e. 30-year to 40-year), a permanent lowering of your interest rate, and forebearance, which capitalizes your late payments, and adds them to the principal balance on your loan.

Every modification plan is different, so the only hard-and-fast rules here are those that the lenders place upon their loan negotiators. Generally, if you are three months behind in your payment, you are in a position to renegotiate your terms.

Now, you may be asking, "Should I contact my lender and negotiate this myself, or should I pay for help?"

You could try to do this yourself, but this is about as effective as trying to beat the dealer when buying a car. They play this game all day, every day, and you are (hopefully) only going to attempt this once. My recommendation is to get help. A third-party, who is not emotionally involved in your situation, and has the experience and relationships with the lenders from having done this many times, will negotiate a much better deal on your behalf, than you would ever be able to negotiate on your own.

As part of the negotiation, your loan will be brought current, and you generally will get to skip one month's payment, while the lender goes through the paperwork process of modifying the terms of your loan.

You will want to stress to your negotiator what is important to you with regard to the mortgage, so that s/he may best represent you. You should determine how much payment you can afford, how long you plan to keep your home, and convey any other information that may be helpful, such as any knowledge of recent sales prices for similar homes in your area.

We offer mortgage modification services, which are provided by a legal team that we have under retainer. Generally, we charge the greater of $1,995 or one month's mortgage payment (after modification) as a fee. Our negotiators will save you much more than the fee by getting you a much better deal than the lender would likely offer, if you were to negotiate a plan yourself. We also have a 72-hour turnaround on most files.

You will need to provide information on your income and debts, including credit cards, student loans, and support payments. If you have additional regular expenses, such as children's or your own current educational costs or ongoing medical expenses, be sure to include these as well. We will determine what payment you can afford, based on your financial situation.

If a workable agreement cannot be reached with the lender, then go back to last week's article, and read up on short sales. If this is the route for you, let me know, as we can refer you to a short-sale experienced Realtor who can assist you.

As always, I hope this information proves helpful. Your comments and subscription to this blog are always welcome. See you next week!

*** Just a reminder: All reader comments to this blog are moderated and approved before they show up on the website. You may contact me via email at rlp@rpa-ca.com or by posting a comment to this article, and I will contact you, but remove your comments, so that your personal information does not appear in the blog. ***

What is a Short Sale?

2008-05-03T16:42:00.001-07:00

We will be discussing Short Sales this week. A number of other planners' clients have come to me recently wanting to know about these, so I thought it would be a good idea to touch upon short sales in this week's post. We are talking about Short Sales with respect to real estate, and not the White Sales that you might see at Sear's, Target, or Wal-Mart. Of course, if you find a good deal on Havana's or Dolphin shorts, go for it. Speedo's, not so much!

The reason a short sale helps you is that your lender does not want your home to go to foreclosure any more than you want that to happen. If property values have dropped, and you can no longer afford to make your payments, then a short sale is one way to avoid foreclosure. Another viable method is a loan modification, but we will talk about this next week.

Short sales basically help you to avoid foreclosure. If you are going to lose your home anyway, a short sale can help you retain some of your dignity in the process, and may even help you to save your credit. Basically, a short sale allows you to sell your home for less than you owe against it, with the lender accepting the sales proceeds as full satisfaction of your loan. If you never paid your loan late, your credit report should show a paid-in-full mortgage with no hits after close of escrow. In short (pun not intended), it will appear as though you simply paid-off your mortgage. If you already are late on your payments, you will still have the mortgage lates, but you will avoid the damage that a foreclosure would cause.

Many people who are in financial trouble would like to sell their homes, but the market values have dropped to the point that they are underwater. This means that the potential sales price is not enough to cover the costs of sale and the liens (mortgages) that exist against the property. By agreeing to a short sale, the lender is allowing you to sell the house at market value without you having to come out-of-pocket to pay-off the balance of the loan.

A short sale does require pre-approval from your lender. You will have to explain to them that you cannot continue making your payments, and that your only solution is to sell your home. The lender will order a Broker's Price Opinion (BPO) to get an idea of the value of your home. From this price, they will deduct their estimated costs of foreclosing and reselling your property. Generally, if you can get an offer that exceeds this amount, they will accept the offer, and let you sell the property.

If you have two loans on your property with two different lenders, you will have to work-out arrangements with both of them. If the same lender holds both loans, this may work to your advantage. In any event, it is illegal for you to profit from the sale of the home, so don't expect this option to put any money into your pocket.

Short sales aren't for everyone, and not everyone will get approved for a short sale. Many lenders will reject offers that seem valid, so you want to ensure that you are working with real estate professionals who have experience in this arena.

If you have run into financial difficulty, and you would like to explore the benefits of a short sale, feel free to contact me, or contact a Realtor in your area.

Special Edition: Philippine Peso vs. Dollar Valuation

2008-05-01T07:48:00.000-07:00

I posted this information in response to a question posted in Yahoo!Groups, "LivingInThePhilippines3." I thought that it would be appropriate to share here. Enjoy!

The peso and dollar should fluctuate within a narrow range for the rest of this year, at least through the time of the American election. The worst of the sub-prime mess is over now, but corrections continue in the real estate sector. Housing prices bottomed-out in many traditional markets in November, but other areas are still seeing fallout. The main reasons that real estate is still falling in certain areas, and will have a long climb back in others, is due to the high vacancy rates of homes (bank owned), tightly enforced requirements on borrowing (which are starting to ease), and a general credit crunch that is now shifting towards consumer borrowing. Average credit scores of Americans are dropping due to foreclosures, short sales, and Deeds in Lieu thereof, as well as people renegotiating their upside-down mortgages.

Higher interest rates, higher fuel prices, and an increase in unemployment are causing more credit card defaults as well, while banks are trying to raise interest rates into the stratosphere on credit cards (up to 30% or more)! Bankruptcies are also on the rise, and this trend will continue into the foreseeable future. Some banks will still incur multi-million or multi-billion dollar write downs (B of A/Countrywide $2B for renegotiations), and a couple of major bank mergers are on the horizon yet. All of this will eventually settle down, and we will have an American real estate economy again. This total recovery will take at least two years to get back to the price levels of 2006, but five to seven years to get back on track to long-term average year-on-year returns. Real estate is still a great investment if you are a buy-and-hold investor with enough liquidity and good enough credit to qualify for a mortgage.

The rental market prices are increasing, due to high numbers of recently-displaced families, so CAP rates in the multi-family housing sector remain low (gradual increases in CAP rate, but good increases in cash flow), in spite of the recent fall-out in values. Commerical credit is still surprisingly easy to attain for real estate or unsecured obligations.

In addition to the sub-prime mess, the peso has enjoyed certain benefits over the past couple of years. First, the economy has improved, so rather than the cheeseheads in government taking all the money for themselves, they have chosen to try to balance the budget. This still doesn't help that poor family of 16 on the corner who can't afford rice, but the country looks better (on paper) to the rest of the world. The improved credit rates achieved by the Philippine government have allowed fewer pesos to go farther with regard to reducing debt. The BSP's (Bankgo Sentral Philippino - Central Bank of the Philippines) policy of hoarding dollars has created an effective, although limited, hedge against fluctuations, but has put the country in the position of having to reverse itself in order to reduce inflation. In other words, they over bought dollars, and inflation is already starting to affect the average Filipino. Over the past two years, only we (who get paid in dollars) have noticed the double-digit inflation rate, as peso-denominated prices didn't change, but our purchasing power dropped like a rock!

The Federal Reserve Boards' actions in keeping interest rates low (2.00% as of today - Don't expect it to fall any farther), as a hedge against both inflation and a total meltdown in financial markets, has fueled an exodus from investments in the dollar, as higher interest rates are to be found elsewhere. Just look in the newspaper at the difference in interest rates offered by banks for the dollar vs. the peso. European banks give higher rates for Euros as well. If the demand for dollars was higher (usually meaning a lower trade deficit and/or more foreign investment streaming into the country), interest rates would have to rise, and the currency would do the same. (Side Note: Local banks have now adjusted CD rates on peso and dollar accounts to about the same rate, whereas the peso paid much more for the past few years This is an indication that the dollar and peso are expected to hold steady for the next year.)

If not for the sub-prime mess, we probably would have seen the dollar recover to at least 45:1 by now, with a target of 50:1 possible within the next 12-18 months. As it stands, 42:1 or 43:1 is the best it is likely to get by the year-end, unless some major breakthrough happens in the world. Unfortunately, big news is usually negative, so don't hold your breath for this one. The good news is that the dollar is unlikely to fall any lower against the peso, as Malacanang is not going to be able to balance the budget this year. Rising gas prices, a worldwide food shortage, and tightening of financial markets have served to rein in the currency exchange markets, and reduce volatility. In English, this means the exchange markets should be pretty stable the rest of the year, and trade in a narrow range.

Barring any terrorist attacks on US soil, the nuking of any rogue state, global warming putting us under water, or the Lord returning to take over, the exchange rate should be within 41:1 to 43:1 the rest of the year. In sum, a peso:dollar rate of worse than 40:1 is highly unlikely, as is 45:1, in the next six months. We could get to 45:1 by this time next year, if the world economy improves and fuel prices drop (they actually should), but don't expect to see a ratio of 50:1 or better anytime soon (perhaps never).

If you are looking for ways to increase the total return to your portfolio without taking on aggressive risk, please contact me regarding solid investment opportunities in the Philippines.

Received this the other day from a client. (Thank you, Samantha!) I think you might enjoy it:

I had a bunch of Canadian dollars I needed to exchange, so I went to the currency exchange window at the local bank. Just one lady in front of me, an Asian lady who was trying to exchange yen for dollars and she was a little irritated.

She asked the teller, "Why it change? Yesterday, I get two hunat dolla fo yen. Today I get hunat eighty? Why it change?"

The teller shrugged his shoulders and said, "Fluctuations". The Asian lady said, "Fluc you white people, too"

Insurance: How to Protect Yourself

2008-04-26T18:15:00.000-07:00

Insurance baffles many people. Some insurance you are "forced" to carry, such as basic coverages for auto liability and homeowner's insurance, and other coverages you want, but may not be able to afford, such as health and disability insurance, and of course, coverage you hope never to have to use, such as life insurance. Today, we will discuss the risk transfer aspects of insurance, so we will be dealing with those areas of protection that can keep you and your family out of harm's way financially, through the proper use of liability insurance protection.

We will speak today on personal liability, and save other types of liability protection (i.e. E&O, D&O, Business Insurance, etc.) for another day. The three most common insurance policies that provide personal liability protection to your family are Home, Auto, and Umbrella insurance coverages. We will deal with these coverages individually at first, and then tie them together at the end of this post.

Auto Insurance

In California (as well as most, if not all other states), the government forces you to carry at least a basic level of liability insurance. Commonly, this shows up as 15/30/5. What that means is that you must have at least enough insurance to cover:

Any harmed individual for $15,000 of personal injury damages
All persons injured in a common accident to a total of $30,000 for personal injuries
Property damage coverage of at least $5,000 per accident.

As you can imagine, it does not take a very severe accident incur liability in excess of these required amounts. While auto insurance is compulsory, at least 25% of our fellow drivers still have no coverage. The state is cracking down on this by requiring all insurance companies in the state to be linked electronically to the DMV for up-to-the-minute policy status information. If your coverage lapses, is cancelled, or goes out-of-force for any reason, DMV can immediately cancel the registration on your vehicle. It is getting harder to not have coverage, but not impossible.

My recommendation, unless you really have no assets or income to protect, is to always get the maximum amount of coverage that you can afford. As you will find, once you have the basic coverage, it can cost very little to increase your liability amounts, as compared to the amount of coverage that you would receive.

A search at 21st.com provides the following pricing data for a sample policy (42 y.o. male, single, LA County, clean DMV):

Coverage-------------------------------Limit--------------------Premium Bodily Injury Liability-----------------$15,000/30,000------$130.00 Property Damage Liability-----------$5,000-------------------78.00

Bodily Injury Liability-----------------$250,000/500,000---$169.00 Property Damage Liability-----------$100,000---------------$98.00

As you can see, the difference between the minimum and the maximum coverage for this good driver is only $59 per six months. Less than $10 per month provides over $550,000 in additional protection. Maximizing coverage is a very small investment with a very big upside in protection.

Some other questions for auto insurance concern other coverages, and which coverages might be necessary. Well, if you owe money on your car, your lender will require that you carry Comprehensive (other than collision) and Collision coverage on your vehicle. Collision is the category that pays to fix your car if you are found to be at-fault in an accident in which your car is damaged. Comprehensive covers for theft, vandalism, natural disasters, and any other harm that comes to your vehicle other than an accident. Your lender will tell you the maximum deductible amounts that they will allow.

You also have the option of purchasing Medical Payments Coverage, Uninsured Motorists' Coverage, and optional coverages including coverage for Accessories, Towing & Disablement, and others that vary from company-to-company. My quick recommendations for these are as follow:

Uninsured Motorists' Coverage: Get an amount that matches your liability coverage

Medical Payments Coverage: $5,000 if you don't have health insurance or if you have a high deductible Health Insurance Policy (HSA or MSA Plans)

Accessories: If you have over $1,000 in electronics or a special paint job, you need this coverage

Towing & Disablement: Unless this came with your car, buy it with your insurance. It is probably cheaper than AAA or other independently-purchased coverages, and may be less restrictive.

Homeowner's/Renter's Insurance

Your mortgage company will require you to have replacement coverage for your home. Renters are four times more likely to suffer a break-in, so renter's coverage is highly recommended. Both policies also include liability protection for injuries sustained by visitors or guests to your property, as well as fire legal liability should your property burn and cause harm to the property of others (i.e. The neighboring apartment).

Again, max-out your liability coverage, because it does not cost much to do so. Also, be sure that you get "replacement coverage" for all of your personal property. You don't want to have to accept ACV or depreciated valuations, plus your deductible, if you should have a theft, fire, or other property loss.

Discounts are available if you have a home alarm system with monitoring, sprinklers, smoke detectors, fire extinguishers, and/or other safety-related items. Check with your agent for these discounts, and take the appropriate steps to maximize your protection and savings.

Umbrella Policies

A personal umbrella policy does not protect you just in the rain. An umbrella policy protects you from all insured losses, over and above the amount of your other coverages. For example, if you purchase $1 million of umbrella protection, you have just increased all of your liability protections by $1 million. This means your auto is now $1.25 million instead of $250K, and your home is now $1.50 million instead of $500K.

Umbrella policies can be issued in amounts up to $5 million, but any amount over $2 million will probably require additional underwriting. Ask your agent how much coverage is appropriate for your situation.

It is unlikely, although possible, that you could have an exposure that will exceed these coverage amounts. If you do find yourself involved in a lawsuit that could exceed these amounts, have an attorney send a letter to the insurance company advising them to settle within policy limits if they should have the opportunity. This will further protect you, but see an attorney for legal advice if this happens to you.

Summary

Your auto, homeowners'/renters', and umbrella policies exist to shift the responsibility for losses from your family to the insurance company. Hopefully, you will never need to file a claim against any of these coverages. However, if you ever need to file a claim, you will be glad that you protected yourself as fully as possible.

Be sure to review all of your coverages with your agent at each renewal, in order to ensure that your coverages are appropriate and that you are receiving all savings to which you are entitled. We will discuss other types of insurance in future articles, but if you have any questions, be sure to post them here.

Until next time, be careful out there!

Business: How to Incorporate/Form LLC

2008-04-19T23:06:00.000-07:00

This week, we will follow-up the previous post regarding business structure. As you can imagine, my advice regarding business structure is almost always a recommendation to incorporate or form an LLC. While neither of these is all that difficult to complete, you must follow certain rules and procedures in order to do it properly. In addition, each state has its own rules, so I can only provide generic assistance in this forum. I highly suggest that you work with your accountant and attorney to decide which type of entity to form, and get their help with the formation, documentary requirements, and on-going administrative assistance.

Today's Issue of "Personal Finance for Real People," sponsored by:

With any luck, this will be a painless process, and you can have your company formed in just a few days. If you want to perform this process yourself, please visit our sponsor above to secure the necessary forms. The incorporation kit includes instructions for each state in which you may want to set-up your entity.

The first step is to decide which state you want for your corporate home. Nevada and Delaware are two of the friendliest states in which to incorporate. One big advantage of a Nevada corporation is that you don't have to issue your shares or reveal the names of your stockholders. If privacy is an issue, this is a good place to call your corporate home. Your CPA and attorney can help you make this decision.

You must also file as a foreign corporation in each state in which you have a physical presence. For example, if your corporate home is in Nevada, but you really do business in California, then you will need to also register your corporation with the Secretary of State of California, and pay the requisite fees.

Filing instructions for a corporation or an LLC are quite similar. Where they differ is in the amount of administration that is required. Many people who form LLCs are under the incorrect assumption that they don't need to be as careful about keeping the business separate from their personal lives. It is possible to lose the protection of an LLC, much the way one would "pierce the corporate veil." You must maintain the LLC as a separate entity from your person, in order to keep your liability protection in place. Also, you may have to pay the same franchise fee every year, whether you form an LLC or corporation. Each state may have requirements that you update your registration on a regular basis. This could be an annual or biannual requirement. Again, have your CPA or attorney do the research for each state in which you will register.

I highly recommend that you have a complete library of commonly-used business forms available on your computer at all times. Having these forms handy can save you a ton of time and thousands of dollars in attorneys' fees. The forms available from our sponsor have all been reviewed by attorneys, and are probably valid in all states. Double-check with your own attorney prior to using these forms, but you should be able to save a ton of money (not to mention time) by not having to ask your attorney to create these forms for you.

Also Available from Today's Sponsor:

While this article can only provide a limited amount of information with regard to the process, I hope that it has provided enough to get you started. In short, see your CPA or attorney in order to form an LLC or corporation. If you feel confident enough that you can perform the process yourself, then visit our sponsor above, and use the incorporation/LLC kit to get started.

I wish you luck in your new venture! Be sure to let me know if I can help you with your financial planning needs, whether they be personal or corporate. See you next week!

Happy Tax Day!

2008-04-15T22:23:00.000-07:00

Celebrate Good Times, Come On!

Well, maybe not quite, for most of us. CPAs are working feverishly to complete those last tax returns and extensions, and looking forward to the company parties this weekend. For the rest of us, we may be relieved, broke, and/or worried now!

Today's issue of "Personal Finance for Real People," sponsored by:

Probably the most oft-heard question I hear on April 15 of each year is, "What if I'm not done with my taxes? What do I do?" Well, PANIC!!! No, not really.

Usually, people are late for one of three reasons:

1) They are waiting for that last W-2 or 1099 to show up.

2) They are trying to decide on those final expense item amounts.

3) They just procrastinated too long, and there is no hope of filing on time.

If you are waiting for a form, but you know what data should be on it, there is no need for concern. If you need a W-2, but have your final paycheck of the year from the provider, then just copy the information from that last paystub as if it came from a W-2. If you file electronically, there is no need to attach forms anyway, so you should be fine.

If you are waiting for a 1099, stop waiting. Just be sure to include the amounts from any unreceived 1099 forms in "Other Income" on your Schedule C or Schedule K, and be done with it. The form may never come, but it doesn't matter, as long as you counted the income in your calcuations.

If you are unsure of an expense amount, it is ok to guestimate. Unless you are way off, it should not throw up any red flags. If you missed by a lot, you can always file a 1040X later to correct your return.

It is important to file by today if you want to get your stimulus check in May. If you file an extension, or if you file late, you might not get your stimulus check until October.

If you procrastinated, here is what you should do. First, calculate all of your income amounts. Second, estimate your deductions. Third, determine what your tax is based on these rough figures. Fourth, complete Form 4868 and request a six-month extension to file, and include any estimated tax due, and mail the form by midnight tonight.

If you know that you will have a refund coming, you don't really even have to file Form 4868. Just be sure to file when you have your numbers together.

Some people are confused about the stimulus check. Let me try to clear it up for you.

Basically, every person who has at least $3,000 of earned income (including SS, disability, and retirement ncome), and files a return showing this income, will receive at least $300 from the stimulus package. If you paid income tax, you will receive up to $300 of that tax back in addition to the first $300, which means you could receive up to $600. For a joint return, this is $600 - $1,200. If you have children, who qualify as dependents, you will receive $300 per. If they file their own tax returns, they will receive their own refund, but you won't get $300 for them. Those are the breaks!

Anyway, this is a special edition, so I made it short-and-sweet. See you on Saturday!

Credit: What is a FICO Score?

2008-04-12T16:39:00.000-07:00

I didn't plan on bringing you another credit-related post so soon. In fact, I expected that I would probably be giving you a post on tax issues about now, but maybe I'll do another post on tax day for that one. Anyway, today we will talk about one of the greatest mysteries in the world of credit: The (dreaded) FICO Score!

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The reason that the FICO score is such a mystery, is that Fair, Isaac, and Company (the developers of the FICO score) won't release the formula that they use to compute it. Over time, we have figured some things out about what drives the score, and I will share with you some of what we have learned to this point.

I'm sure that by now, everyone has heard of the FICO score, as it has become a topic of major discussion, and is one of the major components in the process of applying for any loan, but especially with regard to mortgage loans. With all of the news about the housing crisis and the tightening of mortgage lending, the FICO score has become a point of contention.

The basic breakdown of your FICO score is as follows:

Payment History - 35%
Outstanding Balances - 30%
Length of Credit History - 15%
Amount of New Credit - 10%
Types of Credit Used - 10%

Payment History

If you pay your bills on time, this helps a lot. If you have late payments, collections, back child support, and/or judgments appearing on your credit report, this hurts a lot. The amount past due, length of delinquencies, time since you last paid late, number of past due items, and number of accounts "paid as agreed" all play a role in determining the "Payment History" portion of your score. Obviously, if you pay all of your accounts on time, this is a huge help to your score!

Amounts Owed

Obviously, the amount of money that you owe is a factor here, but what is less obvious is that the amount you owe for certain types of debt can work against you. If you have amounts owing to Finance Companies (i.e. Wells Fargo Finance, Finance & Thrift, etc.), this will lower your score, even if the payments are always on time, because these are considered "lenders of last resort." If you could have been granted credit at better rates, the assumption is that you would have used another credit card or finance method. The unfortunate part of this is that these institutions often finance autos and furniture at stores you frequent, so you might have a balance with them, even if you have stellar credit otherwise.

American Express can also lower your credit score, because they don't show a credit limit. This means that the FICO system assumes that you are using 100% of your available credit on the card. Also, if you have an account where the limit has been lowered, this can hurt you as well. You don't want to be over your credit limit on any account, because you will take a severe hit to your score. The outstanding balance as a proportion of the credit limit is also a factor, with any balance in excess of 20% of the credit limit working against you, albeit on a sliding scale. For best results, stay under 20%. To avoid any dings, stay under 45%.

Length of Credit History

This is how long you have had a credit record, as well as how long your existing accounts have been open. If you have accounts with histories over two years, DO NOT CLOSE THEM! You can stop using them, but it is better in most cases to keep the accounts open with a zero balance.

New Credit

This runs in concert with Length of Credit History, but takes a special look at recently opened accounts and the number of recent credit inquiries. This factor also looks at your attempts to re-establish good payment patterns after a series of past payment problems.

Types of Credit Used

This looks at what proportion of your credit usage is comprised of mortgages, installment (auto or other purchase-money) loans, credit cards, finance company accounts, etc. If you have 100% credit cards, this can count against you, while a mortgage will generally help your score.

Summary

Keep in mind that your FICO score takes into account ALL of the above issues. Yes, some of these issues seem to overlap, but the overall weighting of each issue is as stated above. Your FICO score only takes into account information on your credit report, so your job, income, and education level do not play a part in your score, but they may affect a lender's desire to offer you credit. Also, the Credit Reporting Agency does not determine whether you get credit; only your lender makes that decision, but your credit score will be an important factor in that decision.

Clarification

You may hear some things in the news about FICO '08. This is a change to the scoring system that eliminates the advantage of riding on someone else's credit history by becoming an authorized user on their established cards. At this point, only Experian plans to use it, as both TransUnion and Equifax are in litigation opposing its implementation. If you plan to use this 'credit riding' technique, you can probably continue to do so for the foreseeable future. With most lenders looking at your mid-score, and TU and EQ still using the old formula, your EX score will matter less.

In a later posting, I will provide tips on how to Keep and Maintain a High FICO. Stay tuned!

Business Start-Up: Choosing the Right Structure

2008-04-05T20:52:00.000-07:00

One of the first questions that I pose to anyone who wants to start a new business is "What will be the structure of your company? Will you incorporate, set-up an LLC/LLP, or operate as a partnership or proprietorship?" The answer to this question will provide the basis for setting the company's legal status as an entity. Today, we will review the most common types of business structure, and we will explore the advantages and disadvantages of each.

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The most common types of business ownership are Sole Proprietorship (also includes Husband/Wife ownership), Partnership (various forms), and Corporation. LLC and LLP are other options, and include some of the benefits of a Corporation with some of the benefits of non-corporate structures. We will explore each of these in this issue.

Sole Proprietorships and Partnerships

By far, the easiest form of company set-up is the sole proprietorship. All you have to do is decide that you want to go into business, and then go through some basic set-up steps to legitimize it. If this will be a home-based business, you will file a name registration with your county (commonly referred to a DBA or "Doing Business As..."), publish it in a local paper, open a bank account in the business name, secure any licenses required (Home Occupation Permit, Business License, Resale Permit, etc.), and you are good to go! You will typically file your business income and expenses on IRS Schedule C and attach it to your Form 1040 at the end of the year.

While a sole proprietorship is easy to form, I generally don't recommend it as a business structure unless the business is never expected to ever grow larger than being home based, and it has minimal to no legal liability exposure. A partnership follows the same series of events as listed above, with the addition of the need for a partnership agreement. Partnerships can be either General Partnerships or Limited Partnerships.

A General Partnership has one or more General Partners, each of whom assumes full personal legal liability for the partnership. A Limited Partnership has one or more General Partners, along with one or more Limited Partners who may invest money, but who are not allowed to participate in the daily activities of the partnership in any capacity. A Limited Partner's liability for the partnership's actions is limited to the amount of money s/he has invested in the partnership.

Perhaps the single biggest disadvantage of a Sole Proprietorship or Partnership is the unlimited personal liability that attaches to the owners of either entity. If the business should go bankrupt, whether through mismanagement, a lawsuit, or other business reasons, the owner(s) must take personal responsibility for payment of the business' debts. Often, this causes the owner(s) to file for bankruptcy protection themselves. Another issue that can handicap either of these entities is the acquisition of credit. Since the business is not a separate legal entity from the owners, the owners usually wind up using their personal credit capacity to fund the business. This can make deduction calculations difficult, in addition to making credit acquisition difficult for the business.

A partnership will file an information report to the IRS every year on Form 1065. This form includes Schedule K, which details how the income and expenses of the partnership are to be allocated amongst the partners. Since a partnership is not a legal entity, it will not pay taxes directly to the IRS, but each member of the partnership will.

Each partner will receive a Schedule K-1 from the business, and will use this form to complete their income tax return. Note that the due date for Form 1065 is one month prior to the due date for the personal income tax returns of the partners. This is to allow the partners time to complete their returns by the standard tax filing day. The information from Schedule K-1 is reported by each partner on Schedule E, which is then attached to their Form 1040 and filed with the IRS.

Corporations and Incorporation

Incorporating can be a simple process, but the decision to set-up a corporation, as well as the continuing administrative requirements to keep a corporation legal, can be daunting. Setting-up the corporation does not take a lot of work, but you must follow some key steps in order to do it properly. A corporation may be set-up as a C-corp or an S-corp. S-corps are more common if you have a smaller company and/or a limited number of investors. An S-corp cannot sell shares to the public.

The first decision is to determine which of the fifty United States is most beneficial to the business as a home state. This does not have to be the same state in which the business operates, nor does the business have to have a physical presence in that state, other than a person who will agree to receive any court or legal documents on behalf of the corporation in that state. This is usually an attorney or accountant, but can be any person of legal age whom you authorize. They must have a physical presence (residence or office) in the state of incorporation, and they must be available to receive personal service of documents on behalf of the corporation.

When filing, you should have Articles of Incorporation and Bylaws to file with the Secretary of State of the state in which you will incorporate. You will also be required (in most states) to name the directors and officers of the corporation. In most states, these can all be the same individual. You will be required to keep corporate books and records. These records include Corporate Minutes, key decisions, Stock/Share records, and more. Today's sponsor has more information and guides available which can help you with this. Be sure to visit their site for more information.

You must also register your corporation in the states in which you will have a physical presence and conduct business. For example, you may decide to register your corporation in Nevada or Delaware, but actually operate your business in California. While your initial registration will be in Nevada or Delaware, you will also have to be a registered corporation in California. You do not have to register in every state in which you have customers (i.e. mail order), but you must register in any state in which you will have an office. There are exceptions to this, based on your line of business, so check with your attorney or CPA for additional requirements.

A corporation helps you to avoid the unlimited liability provisions of proprietorships and partnerships, but you must be careful to run your corporation as a completely separate entity from your person or your household. DO NOT pay any personal bills from the corporation. DO pay yourself a salary from the company, and use this money to pay your personal bills. If you don't truly run your corporation as a separate entity, then you run the risk of having your corporate status invalidated in court, and you could find that you are now subject to unlimited personal liability for the actions of the corporation.

Having a corporation also simplifies the process of procuring credit and trade lines in the business name. If done properly, you can avoid having these items appear on your personal credit report, and you can also avoid having to sign personal guarantees for these credit lines. If you would like more information on Business Credit, see future articles, or contact me by commenting on this blog. Since all comments are moderated by me, you don't have to worry about your personal contact information showing up on this site.

A corporation will file taxes on Form 1120 (c-corp) or Form 1120S (s-corp). A c-corp may issue dividends, and these dividends will be reported on a Form 1099-DIV issued to each shareholder. An s-corp will issue a Schedule K-1, just like a partnership, and the owners will transfer this information to Schedule E.

Limited Liability Companies (LLC/LLP)

An LLC/LLP works very similar to a corporation, but the recordkeeping requirements are less stringent, as you don't need to keep corporate books and records, but you must still ensure that you are running the business as an independent entity. An LLC/LLP has a manager and members. The manager is selected as the company's representative and the rest of the owners are the members.

An LLC/LLP can also get business credit, just like a corporation, and liability for the actions of the company is limited to the amount invested by the owners. Also, limited liability owners of an LLC/LLP ARE allowed to participate in the daily activities of the business (unlike a Limited Partnership), while maintaining their limited liability status.

An LLC/LLP is appropriate for many small businesses, and I highly recommend this business structure to most of my clients. As the business grows, you may eventually convert to a full corporation, but in most cases an LLC provides liability protection, access to business credit, and simpler administration.

Tax filing for an LLC is simple. If the LLC has only one owner, the owner can report all LLC income and expense data on a Schedule C, just as if the entity were a sole proprietorship. If structured as an LLP, or if an LLC with partners, then Form 1065 would be filed, and each manager and member would receive a Schedule K-1 and report on Schedule E. An LLC has the option to be treated as a corporation, in which case it would file Form 1120 instead.

Speak to an Attorney or CPA or Both!

Prior to setting-up your business, I recommend that you retain counsel and a CPA who will work with you and your business. The attorney can ensure that you are following the proper legal proceedures with respect to your business structure and set-up, as well as the ongoing administration of your status. The CPA will help you set-up your company books and records, and s/he will also be in charge of your annual audit and financial reporting.

We have not talked in detail about business credit here, but we will be speaking to these issues in future posts. Your CPA and attorney may play a pivotal role in assisting you with regard to business credit. In any event, you will (or should) find their guidance and counsel of help and comfort while operating your new venture. Your CPA will also help you with tax issues, if necessary. We will discuss some of the tax issues of each type of business structure in future posts as well.

Regardless of whether you set-up your new company as a proprietorship, partnership, corporation, or limited liability entity, you should be sure that you understand the pros and cons of each structure, and decide which provides the best combination of benefits for your type and scale of business. Working with your financial planner, an attorney, and an accountant will enable you to ensure that you are getting the most from your chosen business structure.

As with any of my posts, I urge you to speak to a licensed, qualified attorney or CPA in your area before acting on anything contained herein that speaks to legal or accounting issues, as I am not licensed to work in these areas. Any information contained herein is for informative purposes only, and should be verified prior to being acted upon.

Personal Savings: How to Start

2008-03-29T22:11:00.000-07:00

If you are like most people (most of you are), you find it hard to put money away in savings with any regularity, and even if you do put money away, you have trouble keeping it there and building it to any sizeable amount. Today, we will explore ways of building your savings and protecting yourself from yourself.

When we speak of savings, we must keep in mind all of the reasons that we save money. We might put money aside for emergencies, or we might be saving for a major purchase (i.e. car, boat, house), or perhaps for major needs such as college for the kids or our own retirements. In todays issue, we will speak mostly to saving money for emergencies and major purchases. College and retirement savings encompass many methods, uses, and tax consequences, so these will be dealt with individually in future articles.

Emergency fund savings seems to be the hardest for people to latch onto, because it is so hard to define a true emergency versus an inconvenience. In addition, if you carry debt, it can be all too tempting to just pay down credit cards, and use the credit cards when an emergency happens. I know. I've been there. However, a cash emergency fund is the way to go. If you have a credit card spending problem, raiding your savings account is not the way to fix it. We'll deal with credit card misuse and traps in a future article as well.

PAY YOURSELF FIRST!

The first rule in establishing personal savings is to PAY YOURSELF FIRST! I know, I know. You have been trying to pay all of your bills, and you are afraid that if you pay yourself first, you won't have enough money for the bills. Trust me. You can make this work, but ONLY if you pay yourself first. The government may not do a lot of things well, but even they know that if you pay them first, your taxes will get paid. Follow their lead here.

Your payroll check includes deductions for Income taxes (state and federal), FICA/MEDC for retirement (as if!) and future medical care, SDI (State Disability Insurance), and may also include withdrawals/contributions to retirement plans, 401(k), and other withdrawals that you have authorized. I will ask you to either authorize a 5% to 10% automatic deposit to your savings account by your employer, or implore you to make this deposit to savings yourself, when you deposit your check each pay period. Once you make this deposit, forget about touching that money.

Now, if you are used to living paycheck-to-paycheck, this may be difficult at first. You may find yourself running short on money near the end of your pay period. This may mean going to a couple less meals out or see fewer movies, or perhaps making some dietary adjustments. This is a good thing. You need to reign in your expenses, and a pay reduction is good medicine for that.

Where I find great success in this is when a client receives a promotion or changes jobs into a higher salary. If this happens to you, take at least one-half of the increase, and add it to what you are saving. If possible, take all of the increase. If you are just starting out, graduating college, or getting a first job, it may be easier to put money away, because you aren't used to having much anyway.

Your emergency fund should build to six months' expenses over time. (Some planners recommend six months' income, but I find that this sets the bar too high for most people.) This assumes that you are able to maximize your contributions and not touch the money. This can be hard when life throws you a curve ball, but if you can increase your emergency fund by one month's expenses every year, you will improve your financial security over time.

TAX WITHHOLDING AND REFUNDS

If you are receiving a large tax refund every year, I recommend that you submit a new W-4 to your employer that will eliminate this refund. This will result in a bigger paycheck, and I recommend that you take this increase, and add it to the 5% to 10% that you are already saving. It amazes me that people will struggle all year with credit card debt, and then use their tax refund to pay off the credit card. The IRS paid you 0% interest on that money, while you paid your bank up to 20% or more! Save the interest, and just take the money when you earn it.

Now that you have a savings account for emergencies, let's talk about major purchases. Since we live in an era of (usually) easy credit, many fall into the temptation to purchase expensive items that they cannot afford. I know that you would never do this, but I have a theory on how best to prove to yourself (risk-free) that you can afford something, while saving you a lot of money in the meantime.

BUYING YOUR FIRST HOME

If you want to buy a house, I make this recommendation (especially if it is your first house): Don't buy it yet. This is my recommendation in most markets, but in the present housing market, you have two years before things are really going to get back to normal, as short sales and foreclosures are going to depress markets for at least that long. Banks are starting to recover from the sub-prime fallout, but I think that more writedowns and closures are still possible.

What I would recommend instead is to find a house that you would really like to buy, and that you think you can afford. Take the sales price into account, and see a mortgage broker to find out what kind of terms you could get for a loan in your current situation (income, credit score, and other factors). Calculate taxes and insurance based on the listed price. Once you compute the total house payment (PITI), get an estimate for the upkeep costs on the property. Figure 10% of your monthly loan payment for maintenance, find out the cost to do yard maintenance if you would hire that done, and get an estimate for the utilities (gas, elec, water, trash, pest control). Add all of these numbers together. This becomes 'X'.

Take 'X' and subtract from that number the amounts you now pay for rent and utilities each month. This new number is 'Y'. For the next two years, I want you to deposit 'Y' into a separate savings account on the 1st of each month. If things happen, and you can't pay on time, and you happen to pay yourself after the 15th of the month, I want you to add 5% of 'X' to your savings deposit. If you can maintain this payment for two years, you have proven that you can afford the house, and you should have a sizeable kitty to use for a down payment, closing costs, and reserves. You may also find that you now qualify for a better interest rate, because your financial situation has improved over time.

CAR PURCHASE STRATEGY

If you want to purchase a car, I recommend a similar approach. Find out the cost to purchase the car you would like to have, determine the payments, insurance, registration, and maintenance costs of that car. Then, take the money that you would use for a down payment, and purchase a passable, but dependable, car for that cash. Each month, pay into a separate savings account the amount of costs that you would have had, if you had purchased the car you had in mind.

If the car you bought requires any excessive maintenance (repairs over $200), you may take the money from the savings account for those repairs. If you get an exceptionally large estimate, you can use the accumulated savings to buy a new car. If you only put $400 per month into the account, you will have almost $5,000 by the end of the first year. If your POS (lousy) car lasts two years, you should have about $10,000 available, less any repair costs withdrawn.

When the car dies, spend up to the total amount of cash you have saved on a replacement vehicle. Be sure to update the amounts you are saving to take into account the inflated costs at this point, and continue to place this new amount into your savings account each month. If you do this properly, in a few years, you will be able to afford almost any car you want for cash. Keep up this habit, and you will save yourself tens of thousands of dollars in interest payments over your lifetime.

If you want to purchase a boat or jet skis or any other non-essential item, do the same thing as with a car, but spend two years saving money towards the purchase. You might change your mind about buying the item, in which case you can apply the money to any other purpose, or you may be able to pay cash or a significant down payment when you are ready to buy.

These are just a few ways that you can save money. Build your emergency fund, plan ahead for a house, pay cash for your cars, and delay your gratification for other major purchases, and you will keep yourself from biting off more than you can chew financially. You may also find that this sort of discipline pays a benefit to you in that you will be less likely to act on a whim that can spell financial disaster for you and your family. If something really bad happened, but you were saving money for a car or house, you will be grateful that you had the extra cash on hand. Having extra money can also enable you to take advantage of opportunities as well.

I welcome your comments, suggestions, and stories. Blog to you soon!

Investing: Dollar Cost Averaging

2008-03-22T18:08:00.000-07:00

Happy New Week!

Many people often ask me if I have any stock tips. Usually, they hope for some kind of inside information, as if I had a clue! My basic recommendation is that if you have less than $100,000 liquid, investible cash, don't worry about buying ANY individual stocks. Stick to a mutual fund with an above-average management team. The cost benefits and professional management outweigh the risk involved in trying to make a killing on an inside tip. We will talk about Mutual Funds in more detail in another post, but today I want to talk about a way to maximize returns through systematic investing. We are talking about Dollar Cost Averaging.

Dollar Cost Averaging (DCA) simply means that we will invest a fixed amount of money, on a regular basis, without regard to market conditions. In an unpredictable market, DCA helps to minimize market swings, removes some of the investment risk, and allows for continuous market investment, regardless of market conditions.

Two methods of Dollar Cost Averaging are prominent. Lump Sum Allocation and Regular Contributions.

If you have a lump sum of money to invest, whether from an inheritance, lawsuit proceeds, or transfer from another investment (i.e. house sale), it is probably not a good idea to just throw all of this money into the market at once. If you pick a day that the market has peaked, you could see your investment diminish quickly in the short-term. Of course, you might get lucky, and pick the low point of the market, but I've never been that lucky.

With a Lump Sum, you would place the money into an investment account, but you would allocate that money for investment over a period of time. Let's say you wanted to allocate over one year. You would place the bulk of the money into a low-risk fund (i.e. Money Market, Bond Fund), and allocate the rest of it to your other investments (i.e. Diversified Mutual Fund). Each month, or even weekly if allowed, you would transfer a portion (e.g. 1/12, 1/52, etc.) from the low-risk investment to the diversified portfolio. A regular contribution would mean that you are investing money on a fixed schedule, such as weekly or monthly.

The goal of either method is simple. Each time you transfer or make an investment, you buy the maximum number of shares or investment units that you can for the amount invested. This ensures that you buy less shares when the price is high, and more shares when the price is low. Let's break this down with an example. Let's assume that you invest $200 per month for six months as follows:

As you can see, the average share price during the year was $11.72, however your average cost per share is only $10.98. Now, it doesn't always work this way, but more often than not, you will have a lower average cost per share, just by virtue of buying less shares at a high price and more shares at a low price.

This can be illustrated in other ways as well. Let's say that you own 2,000 shares of an issue that is worth $20 per share on January 1. That is $40,000 in your portfolio. If the market drops to $12.50 per share on February 15, you have lost almost 40% of your holdings in one fell swoop. Your first instinct would probably be to sell. That is almost always the wrong choice. You would just lock-in your loss at that point.

If you have faith in the company, your better decision would be to continue buying shares on the way back up. If you had been investing $500 per month previously, you should continue to invest the same amount. If you bought 40 shares at $12.50 the first month, and then continued to buy each month, you would be back to even, on a price-per-share basis, much earlier than if you just let your investment sit, and waited for the market. By the time the market fully recovered to $20 per share, you would be showing a gain, due to the many shares that you purchased when the price was down.

The nicest feature of Dollar Cost Averaging is the fact that you never have to worry about trying to time the market. Many people sit on the sidelines waiting for a price to fall, only to miss the opportunity to ride the price up. With Dollar Cost Averaging, you invest systematically, and you buy more shares at lower prices, which will make your average price per share lower.

I welcome your questions and comments. Invest regularly and wisely. Good luck!

Business Depreciation

2008-03-15T22:01:00.000-07:00

Since we are now nearing our annual day of reckoning (aka Income Tax Filing Day), it only seems appropriate that I take on a tax issue on which I often receive questions. Today, we will be discussing Business Depreciation, which is a tax mechanism that offers various ways for a business to apply the cost of capital assets against the earnings of that business.

This edition of "Personal Finance for Real People" sponsored by:

First things first, let's get the legal stuff out of the way. I am not a Certified Public Accountant. Therefore, I implore you to seek the services of a CPA or Enrolled Agent prior to making any decisions based on what you are about to read here. I make no guarantee, warranty, or representation for the information that appears herein. I do believe that everything here is accurate, but please seek the advice of a qualified, licensed professional before acting on this information. I provide this information only as a general guide to depreciation. This is not a complete detail of all the ways that depreciation applies, so please do not regard it as the end-all information-wise.

What is Depreciation (and for that matter, Amortization, Accretion, etc.)? According to Wikipedia, "depreciation is a term used to describe any method of attributing the historical or purchase cost of an asset, across its useful life...." Amortization relates to the depreciation of intangible assets, such as Goodwill, Patents, and the like. Accretion generally relates to changes in bond or stock prices that occur as the result of a particular transaction. This post will focus on depreciation.

Property that can be depreciated includes leasehold improvements to your business establishment, business equipment and machinery, vehicles and boats, structures owned by your business (i.e. buildings), and other fixed assets. You may not depreciate land, inventory, or equipment that is leased (i.e. rented), unless the equipment is intended to be purchased via lease and buyout. Capital assets purchased and disposed in the same tax year are also not subject to depreciation.

The US Internal Revenue Service allows several methods for computing depreciation. A complete source of information regarding depreciation may be found in IRS Publication 946. Step one is to determine the useful life of the asset. Each asset to be depreciated must have a useful life of more than one year. If not, you would simply expense the item and be done with it.

For those items that have a calculable useful life of more than one year, these would generally be depreciated, unless they are excepted items as mentioned above. There are other exceptions, so be sure to review IRS Publications and speak to your tax professional for advice specific to your situation.

Over the life of the asset, you will need to know three basic pieces of information: The date the item was placed in service, the cost basis of the item, and the estimated useful life of the item. From this information, you can calculate depreciation using one of several methods, including Straight Line, MACRS (General or Adjusted Depreciation Systems), Income Forecast, and Units of Production. It is not only possible, but probable that you will employ different methods of depreciation for your fixed assets (i.e. Some could be subject to MACRS, while some are Straight-Line).

For tax purposes, in addition to the depreciation methods listed above, under Section 179 of the Internal Revenue code, a business may write-off up to $125,000 under this section (for 2007), with some exceptions. If the business is located in an Enterprise Zone, this deduction may be increased, and some property is only partially eligible for Section 179 treatment (such as an SUV).

Depending on the type of property, the recovery period may be as short as three to as long as 25 years, with real property recovery periods being 27.5 or 39 years. Some property can be lumped together with similar property, with only the lump sums reported to the IRS each year, but other types of property must be listed (itemized) on your tax forms. Examples of listed property include passenger automobiles, specified commercial vehicles (including aircraft), computers and peripherals, and certain other property.

It is important to keep accurate records of the business use of all property, but especially with respect to vehicles and business property that could also be used for non-business purposes, such as a laptop computer in an employee's possession or a cell phone intended for business use.

If your business has capital assets, be sure to treat them properly with respect to the IRS' rules for Depreciation and Amortization. If you have questions about the proper treatment of assets on your books as well as on your tax return, be sure to consult a qualified, licensed tax professional in your area. If you prepare your own taxes, using TurboTax or another program, be sure to carefully follow the instructions included with the program, and carefully enter the information for each asset.

That's all for this week. Happy filing!

First-Time Credit

2008-03-08T11:23:00.000-08:00

People often ask me, "Randall, I don't know how to get started with credit. I know it causes problems for most people, but in this society, you have to have credit to exist. No one will issue me any kind of credit card. How do I get started?" Many people also ask me about how to re-establish credit, after they have already mucked it up before.

First of all, I caution everyone to be careful with credit. This is one of those, "Do as I say, and not as I do" kind of propositions, because I have had credit issues in my life at various times also. I will tell you how to go about setting-up stellar credit for the first time (or the next time), so that you can establish or re-establish a decent credit rating.

This article will focus on the personal side of credit, which I suggest you fix before you get to the business side of credit, which I will discuss in a future article (or many). Credit issues can get complex, and this blog will deal with a lot of credit issues, including setting up personal or business credit, managing and maximizing your credit score, repairing credit, protecting your identity, and exercising your legal rights as a consumer. This posting focuses on an easy way to establish or re-establish your credit. Ready? Here we go!

Step One: Find $500 to $1,000. I know, you don't have that much money. Everyone tells me that.

Rule #1: If you can't save money, you have no business borrowing money! Remember this, because it is the theme for every credit-related issue I will discuss from now until I stop breathing (or blogging, whichever comes first).

If you don't have the cash, open a savings account, and put 10% of your paycheck (or more) into it every payday. Do this before you pay any other expense, including your rent. If you pay your expenses first, you will never be able to save any money. You might question me on this, but you have always paid your expenses first, and you don't have any money, right? Trust me, I know what I am saying. You will automatically adjust your budget, so that you don't starve. If you lose some weight, you will be healthier anyway.

Once you have accumulated $500 to $1,000 cash in your savings account (I highly recommend $1,000 or more), you will set-up a meeting with the New Accounts Officer at your bank. I always recommend getting to know the manager, so if you can get your appointment with him/her, even better. At this meeting, you will explain to the officer that you have been consistently putting money into your savings account for the past (however many) months. You are happy that you have been able to save this money, but you need to access some of it, but you don't want to take it from savings. Tell them that you would like to borrow against your account on a 12-month basis. You would like to borrow $1,000 of the money you have in the account.

The officer should set you up with a Secured Loan against your Savings Account. You may have to relinquish your passbook, or they may just put a hold on $1,000 in funds. Since this is a Secured Account, your interest rate should be lower than a standard loan. Perhaps in the low double digits (i.e. 11.5%). Yes, you are paying interest to borrow your own money. You could pay a whole lot more for setting up your credit. Compare this to the hundreds of dollars you would spend in fees and interest opening up a new secured charge card or loan online. This is better, trust me!

You will take the $1,000 that you receive from the bank, and you will take it to a second bank. Note: Please deal with major banks, because they all report your loans to the Credit Reporting Agencies. At the second bank, you will deposit this money into a new savings account. About one week later, you will go back to the bank, and tell them the same story you told at the first bank about wanting to borrow against your savings. After they agree, take the $1,000 to a third bank, and repeat the process.

After the third bank gives you the $1,000, go back to the first bank, and open a checking account with the money. This should now be about two weeks since you opened the first credit line. The next week, pay $100 on each of the three loans. Two weeks later, pay another $100 on each of the three loans.

At this point, you have savings accounts (all encumbered) at three banks, which total $3,000. You have three credit lines, which now total $2,400 (plus a little bit of interest). You have $400 in a new checking account. Notice that if you add everything up, your net worth is still about $1,000.

Remember how you were saving money to build-up your initial savings. Now, instead of depositing this money into your savings account every week, you will use this money to pay your loans. Pay the loans down so that they are at $300 each by the end of six months. Pay $50 per month each from that point, until you can pay-off all three loans.

Yes, this process takes six months to one year. At the end of the process, you should now have three savings accounts with at least $1,000 in each. Hopefully, you have increased your income at work during this time through a promotion, raise, or job change as well. Wait 45 days after you pay-off all three accounts. Then, go back to each bank, and borrow the $1,000 again from each. Deposit this money into the first checking account. In two weeks, pay $250 against each loan. Two weeks later, pay another $150 against each loan.

Pay $100 per loan after this, until paid. Be sure that you keep each loan open a minimum of six months before you pay it off, or it won't help you as much.

It is now 18-24 months since you began the process. You have six trade lines of credit history, all for $1,000 or more, and all paid in full. Hopefully, you do not have any other debt. You also should have at least $4,000 to $6,000 in total savings (you didn't stop saving, did you?).

At this point (and you probably could have done it sooner), you should have no problem opening unsecured credit accounts with Visa, Mastercard, American Express, or anyone else you like. If you had bad credit, these new accounts should help make up for some of that.

This whole process probably did not cost you more than about $100 in interest payments, it caused you to save a few thousand dollars, which you had been unable or unwilling to do before, and it has helped you establish or re-establish a good credit rating. Hopefully, you have learned some discipline as well with regard to building savings and managing your expenses along the way.

By the way, be sure that you continue to deposit money into your first savings account during this process. Just because you are only paying $150 - $300 per month on the credit lines does not mean that you should stop putting the excess from your 10% paycheck contribution into savings. Even though the account is encumbered, you can still make deposits to it.

Look for future articles on credit repair, and read them before paying any money to a collection account or other aged balance that is negatively reporting on your credit report. Other credit-related articles on the way will be dealing with debt management, staying out of debt, proper uses of debt, and a whole slew of articles regarding business credit, mortgages, and investment financing. Stay tuned!

Have a great day!

About Me

2008-03-01T15:27:00.000-08:00

Hello and Welcome:

My name is Randall Parker. If you just happened to find my blog by accident, you may wish to know a little bit about me. Well, here goes:

I was born at an early age and raised in Southern California. My parents were kind enough to enroll me in preschool when I was two, and they sprung for a parochial education for me through the eighth grade. Thanks to their efforts, I received a great education. By my own choosing, I attended public high school.

In high school, I was a lousy student my Freshman year, but I turned things around pretty well over the next three years. My major involvements included Junior Achievement and Future Business Leaders of America. I achieved good things in both organizations, most notably placing third in the nation in JA's VP/Finance Officer of the Year Competition in 1983. I also won two school Achievement Awards, as I was chosen the school's Top Business Student and Top Work Experience Student.

I attended El Camino College, where I was involved in Student Government and Phi Beta Lambda (college version of FBLA). Major achievements here included being elected Student Body President of the School, being chosen California State President of PBL, and placing fourth in the nation in Accounting I for PBL in 1985. I also represented ECC on the Los Angeles Collegiate Council for two years.

From about 1980 onward, I was involved in the Entertainment Industry. I got my start as a mobile disc jockey, and at various times also did live radio, syndicated radio, and nightclub DJ work. Eventually, I owned one of the top mobile DJ companies in the South Bay. I also began building nightclubs, selling pro audio, lighting, and video equipment, ran a record pool, and did some consulting work on the side. In 1988, I moved to Bakersfield.

Once arriving in Bakersfield, I eventually started a new mobile DJ company, continued consulting nightclubs while branching into consulting work for other industries, and sold pro audio and lighting equipment nationwide via mail order and two retail stores. By 1997, I'd had enough of the Entertainment business, and I decided to try something different.

In 1998, I obtained licenses to sell insurance and securities. Working in the financial services field was new to me, but I'd always had an affinity for money, so it felt natural. In short order, I rose to a leadership position in the company for which I worked, and I found that I was making good money on a part-time basis. This allowed me to go back to school to finish the degrees that I had started so long before.

I attended Cal-State University, Bakersfield, where I obtained two BSBA degrees. One in Finance (emphasis: Financial Planning) with an Economics minor, and the other in Sports Management with a Statistics minor. The Business School at CSUB chose me as the Top Sports Management Graduate for 2004. I also completed the Four-Year Honors Program and graduated Magna cum Laude.

The next year, I enrolled in the University of Southern California's MBA program, where I completed an MBA in General Management in two years. During my time at USC, the football program won a National Championship and only lost one game. Go Trojans, Fight On!

In 2003, one of my many business consulting clients hired me to travel to the Philippines in order to negotiate a government contract on their behalf. Now, two and one-half years and a few clients later, I live in the Philippines. I am now President of DJ Network, Inc., which operates a call center that markets various financial products to clients in the United States.

While I admit that this description is quite abridged, I hope that it serves as a worthy introduction. Many with whom I have worked and whom I've trained over the past ten years have offered much support to my endeavors, and have encouraged me to continue sharing the information and techniques that I have learned, regarding business and financial planning. This blog is one such method by which I hope to do just that.

Please continue to visit, as I will be making many postings and sharing much information here over the coming weeks, months, years, and if God permits, decades. I welcome you, and I hope that you will bookmark my site, patronize my sponsors, and sign-up for my RSS Feeds.

Welcome!

2008-03-01T13:44:00.000-08:00

Hello World and Reader:

I have finally relented to pressure from family, friends, colleagues, and others, and I am making my vast body of knowledge available to the rest of the world.

First, allow me to welcome you to "Personal Finance for Real People." This blog will attempt to provide useful financial planning tips that almost anyone can employ immediately, in order to improve their financial future.

Some of the topics planned for discussion include:

Income Generation (Ways to increase income, reduce taxes, and supplement income)
Debt Management (Consolidation techniques, credit enhancement and repair, ways to avoid debt)
Personal Savings (Emergency Funds, Goal Setting, Priorities)
Long-Term Savings (College Funds, Retirement, Major Purchases)
Risk Management (Proper Insurance Protection, Scam Avoidance)
Estate Planning (Wealth Transfer, Minimization of Death Taxes, Probate)
Real Estate (Your First Home, Income Property, Commercial Investments)
Mortgages (Saving Money, Choosing the Right Mortgage)
Business Topics (Incorporation, Funding, Managing, Planning, Business Credit)
Other Topics (Chosen by Readers or Dictated by Current Events)

Of course, each of these subjects has sub-topics, and each sub-topic provides many areas for discussion. Over the next few weeks, I will be posting a large number of informational articles touching on these points. These articles will provide a starting point for discussion, and I want your comments, so please feel free to contribute.

Once I get the core topics posted on this blog, I plan to submit at least one weekly post that deals with current issues. As of this writing, the sub-prime dilemma has touched almost everyone in the world, either directly or indirectly. Many people wonder how to take advantage of the situation for their own planning, while some just wonder how to get back to zero. Topics such as these will be fodder for this blog.

My goal is to set this up as a resource that will provide ideas for you to improve your financial life for the long haul. Having said that, I must request some things from you. Your willingness to read and participate in this blog are subject to the following disclosures, acceptances, and restrictions:

Anything that I have written on this site is copyrighted by me, unless stated otherwise. Rights to my content are mine alone, but I will authorize limited usage of this information:

By currently-enrolled students at no charge, as long as they provide proper credit to me.
If a student posts their work online, they must include a link back to the source of the material in addition to giving proper credit.
Teachers must request permission to use specific materials before use (usually granted at no charge)
To those who request and pay for a license to use the materials.

Furthermore, you agree to indemnify and hold me harmless for any use of the information that you read here, as it is offered for entertainment purposes only, and carries no guarantee, warranty, or other representation.

Having said all of this, I hope that you will bookmark this page, subscribe to my RSS feeds, click on my sponsors' links, and enjoy this blogsite for years to come.

I sincerely thank you for your visit and your support!

Randall Parker, MBA