Woe to the mortgage bankers

Just had a very interesting conversation with an old friend - a mortgage banker.

I think he's going to quit his job.

He talked to his other friends at other big banks, like BofA. His other mortgage broker friends are considering quiting too.

I asked him why - he says: "no business".

He complains that the underwriting standards and product guidelines keep changing. Getting someone approved is a multi-month ordeal - maybe five months in duration.

By the time they're ready to close the underwriting guidelines have changed too much.

My suspicion is that the underwriting criteria are much more conservative.

The mortgage brokers that grew up during easy money have far fewer clients to sell mortgages to.

I asked about other real estate opportunities. The perspective was equally negative.

Many mortgage brokers diversified into real estate ownership. He says short buying is too difficult to finance right now.

I'm quite amazed how things turned upside down.

Regards, makingourway

blogger buddy

Life has been crazy and hectic, so i've had little time to keep up. during a break i found blogger buddy, it's made by the same company that makes the xm vista sidebar client.
I'm testing it to see how it works.
Any common experience?
Regards, makingourway

cheap exercise vs expensive exercise

After leaving big company, I joined aspiring big company, which brought several new lifestyle changes:
1. I don't travel as much (yet)
2. There's a health club in the building
3. I spend 3 hours r/t commuting

On the advice of a friend I tried very gradually exercising at home. Simple plan to exercise briefly each day.

Day 1 pushups trying to worky my way up to 150 a day in 20 pushup sets. Followed by dips (against a table or chair)

Day 2 crunches and leg lifts with similar goal of 150 in arts of 20 or 40.

I've been doing thud for 2 months and have begun to see muscle definition in chest and arm muscles. Back stengthening, too.

Unfortunately belly still there although some minor definition in upper belly. Very minor.

Seems that there is strength resistance benefit but not enough aerobic to manage weight loss.

So I joined the $60 building gym. But with long commute am challeneged to find workout time. Am wondering if i'll be able to do it.

One question is whether to go to work in workout clothes, shower after workout and change there?

Would save time, but would I actually work out or just shower somewhere else?

Regards, makingourway

Brief notes on our 2008 Strategy Recap

2008 was a crazy and busy year.

I was traveling almost 100% for work, we still had (and have) the other house we could not sell and work was increasingly unstable (as it was for so many others). We also had some very sick children, which made matters more difficult.

Our goals for the year were simple, minimize expenses and try to bring our spending in line with our unfortunate overhead situation.

All in all, we had net savings and by the end of the year managed to rent out our old house.

I became increasingly disenchanted with my employer and began a gradual job search.

Our new house, we had decided to minimize expenditures, which we did, however, the cost of landscaping and home swimming pool maintenance were still quite large. Inconsistent weather and equipment breakdowns with the pool led us to decide to return to professional care. I hired a landscaping company on a fixed price basis, but overall was unpleased with the quality of their work.

Our house has many appliances and core plant equipment (hvac, water heaters, etc...) that are at or past their expected life span. Although we maintain them regularly, there's little certainty as to when they'll no longer work. we replaced our water heating system. We also shifted to CF light bulbs, which seem to have a $70 impact on electrical fees per month. Wow!

To save interest rate payments as stock market returns wavered, I liquidated much of our non-retirement holdings and used the to pay down our HELOC. This was a fortunate move, as it reduced our market exposure just as the collapse was starting. Though we certainly did not follow this strategy with an eye to timing the market. By the end of the year, I maxed out our HELOC upon hearing of a neighbor who's line had been frozen by his bank. The money now sits in on-line savings accounts. My cost for flexibility is the spread.

Overall for the year, our networth had dropped 71,504.10, mostly driven by substantial declines in our investment portfolio, which had declined about $170,000. This implies we did a good job saving and (most likely) deferring expenses.

We ended the year with a networth of $637k, down from the prior year, which was about $706k.

2008 set-up 2009 to be a year of substantial change and improvement.

Regards, makingourway

last minute thoughts before sending in your income tax returns

1. Always make sure you've matched and collected your 1098 and 1099-div/interest forms from your banks and other financial institutions. The IRS gets the same forms and if you've forgotten or missed one they'll find it via computer match and send you a letter requesting a correction.
2. Consider, if you can afford the change in free cash, an after tax IRA contribution, big earners, in 2010 will be able to convert these to roth IRA contributions without the previous earnings cap (which otherwise prohibits them).
3. Make sure you have letters or written receipts confirming your cash contributions to charities.
4. document your charitable contributions well. They can't exceed 50% of your income and contributions must be in good condition. I always create a spreadsheet detailing my contributions. information contained indicates: item, description, quantity, condition, estimated or actual market price (for new), and a link referring to a comparable item to justify the price itself. I also take photos of everything possible to prove they really exist. The charities I give to usually sign off on the sheet and give me a formal receipt.
5. If you're filing for an extension, try to estimate what you owe and send that payment with your extension, otherwise you will face penalties for a late payment.
6. Don't be afraid to use a tax professional if you have complex issues like multistate income, rental properties, family businesses and complex stock trades.
7. Always make sure you track post tax ira contributions in order to establish your cost basis - you'll need to have this documented in the future when you begin withdrawing money. You'll use form 8606.


Good luck. makingourway

check out the new carnival of personal finance

MOW is included in this week's carnival of personal finance. The topic is learn the basics of personal investing. I plan to flip through it myself.
Regards, makingourway

Why do i still need my blackberry?

It looks like my employer may be providing me with a company phone.
Which is certainly nice if I no longer have to file telephone expense reports.

However, what do I do with the BlackBerry I currently own?

It won't be connected to a Microsoft Exchange server for real time corporate e-mail, calendaring and contacts.

It does still connect to my other e-mail accounts, but that's about it.
No more calendar synchronization, though e-mail calendar invites do seem to show up on the BB calendar.

However, what benefit am I really receiving?

Why not go for an iPhone or something similar?

I'm thinking I pay for alot of corporate overhead that I'm not using in a BB and I miss out on the more convenient consumer features, like a much bigger screen, cool apps, etc....

What would you do?

Regards, makingourway

late night shopping for diaper rash ointment

I recently had to buy Desitin for one of our younger children. Desitin has the highest percentage of zinc oxide (about 40%) of all the products offered at walgreens.

Traditionally, we've slathered large amounts all over our children's nether regions. The zinc oxide seems to create a thick barrier that protects and "water proofs" there tender skin -- quickly dissipating emerging rashes and irritation.

We've tried many medicines, triple ointment, boudreaux's, etc... Desitin seems to be the hands down winner.

Although it was the least expensive by weight at Walgreens, it was still $15 for a 1 lb. jar. If I remember correctly, I was able to buy it for about $10 at Baby's R Us in the past.

I bought one jar for tonight, but i'll load up on several at baby's 'r us if the price is reasonable.

What struck me is that emergency creams, diapers, etc... available late night at the drug store are most likely to be priced like cold cereal or cigarettes at a convenience store.

I've always been one to plan ahead, but it strikes me as prudent to create a list of things you should always have stocked at home and buy them pre-emptively. Although this may be difficult in today's economy, the extra cost, might be an unaffordable penalty. What would you put on your list?

Regards, makingourway

a nice way to help others... make a meal

While helping a very sick family member, I was very impressed by the help their neighbors and community provided.

Often people wonder, how can I help? The family has someone ill, can we do something?

The first inclination is often transportation or errands - these are always excellent things to offer.

The second inclination is a question of money or resources, however, if the family is well insured or financially comfortable, money is not always a big need - at least right away.

The third offering, which I hadn't seen much before is help with meals. This is clearly one of the nicest and most helpful things friends and families can offer. Families caring for sick relatives find it difficult to prepare home cooked meals. The meals friends bring over restore a great degree of the normal every day routine that the family so desperately wishes to return to.

The fourth offering is money again. What can a fund raiser(s) do? If the family is financially comfortable, establishing a foundation to give money to others or to support medical research can be a great thing. Otherwise, money may be helpful in paying for expensive medical treatments that are not covered by insurance. Frequently, families know little about what is needed right away, but as things progress, treatment strategies become more clear, as do their associated expenses and insurance coverage.

Regards, makingourway

what a hilarious video "are you good friends"?

I was recently watching a you tube video when my eyes wandered to "are you good friends"? I followed the recommended link and low and behold it was hilarious!

A young lady discusses her experience at clothing store where she felt compelled through verbal manipulation to buy a much more expensive gift for her friend.

How often do you have challenges with sales people when shopping?

My strong recommendation is to establish a clear understanding of what you want and what your looking to spend up front. It avoids confusion and might restrain the sales person from cross-selling and up-selling (well at least some times).

The most important tool is a strong sense of discipline - either that or shop on-line! No sales people there.

Here's a link to the video for your enjoyment.

Regards, makingourway

Thoughts on what it takes to be rich in Chicago

I recently read an old blog posting from US News by Rick Newman. He published a discussion and table of what the top 20% and top 5% earned in 40 of the largest metro areas.

The article was most likely spurred by Obama's tax initiatives aimed at those families who earn more than $250,000.

I was very impressed by the great disparity of what qualified as rich <$200,000 in El Paso for families without children and >$750,000 in NYC for families with children.

Although I'm strongly against increasing taxes in general, I'll avoid a polemic here.

One thing I found is that if being rich means being in the top 5% of income earners in the Chicago area, it means your family has income of greater than $578,000 a year. While it's substantial, I do know people who earn that much and virtually all of them do not consider themselves rich.

Fundamentally, very few high income earners succeed in holding or sustaining their living expenses as their income increases. Far too many people "live up" to their incomes. I myself am far too guilty of this, as well.

Part of the problem is the stage of life when these large incomes appear. I've noticed that the younger people are (under 50), the more these incomes are absorbed in every day expenses or luxurious upgrades of the same expenses.

For me, rich does not seem to be a measure of what you earn as much as the ability to live off your savings without diminishing them. That's a very different definition of rich than annual income.

Regards, makingourway

ps, here's the link to the article and table.

Financial models for catastrophic illness

I have a relative who is quite ill.
I was wondering what information would be out there to create a budget for all of the medical expenses that will occur.

I have to say there was very little if anything available.

Based on my understanding, insurance companies must have models for various illnesses - otherwise, how would they predict the costs in order to set premiums?

I find this conundrum perplexing.

Regards, makingourway

creeping socialism

What does it mean when the federal government takes over and owns our banking system? Will political entitlement, logrolling and general corruption displace profit oriented decisions?

The long term consequences of our current situation frighten me greatly.

The best example of what the public can do is a public bathroom. Sure it's there, but does anyone want to use it?

Regards, makingourway

a wonderful link to great financial listening

Subscribers to the economist can listen to word for word reading of the entire magazine. I find it better than NPR's marketplace, however, the link to the consolidated articles was always hard to find.

So, I'm sharing it with you here:

http://talkingissues.economist.com/.

It's free if you're a subscriber.

Regards,
makingourway

19 tax tips to help you save time, effort and money

1. If your income allows it, you can still make tax deductible contributions to a traditional IRA plan before 4/15/2009 for tax year 2008.
2. Start organizing your information to do your taxes or provide to your accountant
3. Scan tax related documents and e-mail them to your accountant
4. Add-up all of the charitable contributions you've made last year - if any amounts are larger than obvious or you have large amounts in general, use the internet to determine reasonable market price for your donations - you're accountant will appreciate the back-up.
5. Make sure you receive written confirmation from all charities of the amount you've given in cash
6. Have you received all of your w-2 and 1099 statements from your employers?
7. Have you received all of your 1099 statements for interest income?
8. Have you received all of your 1098 statements for mortgage interest paid?
9. Make sure you can document real estate taxes paid.
10. If you have complicated taxes, make sure you choose an accountant in the next few weeks
11. If you had substantial medical expenses - start adding them up. If I recall, they need to exceed 7.5% of your income to be deductible.
12. If you have rental properties, start working on depreciation calculations for your real estate, collect mortgage payments and collect maintenance and operating expenses.
13. If you drove for a charity or medical purposes, some of your mileage may be deductible.
14. 529 contributions are NOT IRA contributions - they are only tax deductible in the year actually made -- not 4/15 of the following year -- they are actually treated as gifts given.
15. Track your accounting expenses from last year, they are also tax deductible
16. Do you have any capital losses in excess of $3,000 from last year? If so, you may be able to roll them forward to this year and use them.
17. Make sure you receive your partnership income and tax expense k-forms from any partnerships you're in.
18. Review all tax related forms from other parties and aggressively make any corrections needed - these are reported to the IRS on your behalf by the other party - you want them to be accurate.
19. If you have more than one job or changed jobs and your social security with holdings exceeds the limit because both jobs collected it (possibly doubling your contribution), you're owed a refund of any contribution over the limit - make sure you document this.
20. If you refinanced and paid points - check into the deductible benefit of these expenses.

Regards, makingourway

using a level to ensure your pictures are straight

How often do you wonder whether your pictures are hanging on the wall parallel to the ground (i.e. straight)?

We've stood side by side and debated it several times.

All arguments usually end when you place a level on the top edge of your artwork and adjust until the bubble is in the center.

If the painting does not seem straight after the level indicates that it is, you have a much larger problem - your wall is not straight! This happens due to settling and poor construction - more so in older homes.

For those who have not used a level before, he's a link.

The level is a very powerful and useful tool, especially for it's simplicity of use.

Regards, makingourway

Picture hanging - does scotch tape really prevent paint from splitting?

Every few months my family experiences an explosion of redecoration.

We do not have a large amount of wall art, but enough to spend lots of time moving things around.

Picture hanging becomes an active skill in our house and I'm glad we have our standard picture hanging kit - though I do wish we could find an inexpensive source of brass picture hanging hooks and nails.

Over the last year we've begun to question the traditional wisdom that placing a piece of scotch tape over the x before you insert the nail will prevent cracks in paint while hammering.

What we've learned is that paint my not fall off, however, when you remove the tape, a larger hole often appears.

Regards,
makingourway

2009 Standard Mileage Rate (IRS allowable reimbursement for cars driven on business)

The 2009 standard mileage reimbursement rate is $0.55 per mile.

The 2009 standard mileage reimbursement rate was divided between the latter half of the year:
7/1/2008 - 12/31/2008 at $0.585 per mile
1/1/2008 - 6/30/2008 at $0.505 per mile

Different rates apply for mileage driven for relocation and medical related driving as well as for charitable contribution.

You can find the details here at the IRS web-site.

Regards, makingourway

PS Please note that I'm not an accountant or tax professional, but a business person like many of you. I post this information for convenient access throughout the year. Please consult your tax adviser before making decisions based on this topic.

2008 Exclusion on Long Term Care Insurance per diem benefits

The 2008 exclusion for per diem long term care (LTC) payments is $270 per day. This should cover most ongoing care expenses. You can read more about it here at the IRS website.

I have long term care insurance provided as an employment benefit.

It's fairly unusual for someone so young (usually people in their 50s get it), but as long as I could attach an annual increase rider to the policy, I felt the monthly premium would not be prohibitive.

Long Term Care Insurance does just that, it pays for your long term care should you be in a situation where you need long term care either in a nursing home or with help at home. Not all policies provide the same coverage at home and in a facility, so you should check to see what your options or policy says.

I look at it as a form of protection for disability insurance income. If I were disabled, I could easily spend much if not all of my disability income on care services and have little left over for my mortgage, etc....

regards, makingourway

PS Keep in mind that I'm not an accountant, but an investor and business person like many of you. Please consult your tax and insurance adviser before making any decisions on these topics.

In 2009 IRS increases ceiling for children's investment income tax before taxation at parent's income tax rate

The IRS has increased the maximum income a child may earn from investments before they are taxed at their parents' tax rate.

The amount a child may earn at their income tax rate has been increased from $1,700 to $1,800. Investment income earned over $1,800 will be taxed at the parents income tax rate.

Children are subject to this tax until the following:

1. They are 18 and their earned income exceeds half of their child support costs
2. They are a student between 18 and 24 and their earned income exceeds half of their child support costs.

A student is defined as someone who takes 5 or more months of school full time.

This is just my summary, and by no means official, you can read the details here at the IRS website.

To me, this increases the value of 529 plans, as the investment income for your child is not taxed if it's spend on qualified educational expenses.

I also wonder if setting up irrevocable trusts for children become more attractive with the option of being taxed at the parent's tax rate.

Regards, makingourway