Archive for February, 2008
Four years ago I was awarded $12,000 worth or restricted company shares. The stock shares vested over a four year period, which means every year the ownership of roughly 40 shares of company stock was transferred to me. The shares that had not vested continued to earn dividends and those dividends were paid out during the four year period. Four years later the stock is now fully vested but the shares are worth roughly 30% of their original value. So rather than owning $12,000 worth of company stock I own roughly $4,000.
Still I’ll take $4,000 worth of shares plus accumulated dividends over my worthless stock options any day. Stock options provide employees with the opportunity to buy company shares at a future point in time at a preset price. When the stock price rises the employee wins. When the stock price falls the employee loses. My stock options are beyond worthless.
Although I’m happy to receive something over nothing I will admit that $12,000 back in 2004 is a whole lot more impressive than $4,000 today. Will my company stock reach the 2004 price any time in the near future? Oh it’s very doubtful, but eventually it will recover at least some of it’s lost value.
Since my husband and I locked in on a 15 year refi in January mortgage rates have risen dramatically. Rates at the credit union, where are our loan is being processed, rose from 4.75% to 5.65% in less than four weeks.
According to bankrate.com rising fears of inflation are causing mortgage rates to skyrocket. With inflation looming, lender’s are leery of providing inexpensive mortgage rates for the lengthy thirty year period.
As fears rise so do mortgage rates:
- The 30-year fixed has risen more than three-quarters of a percentage point in four weeks.
- One year ago, the mortgage index was 6.29%; four weeks ago, it was 5.57%. Today it stands at 6.37%
- The benchmark 15-year fixed-rate mortgage rose 41 basis points, to 5.87%.
- The benchmark 5/1 adjustable-rate mortgage rose 27 basis points, to 5.77%.
- The 30-year fixed jumbo, for loans of more than $417,000, went up 39 basis points, to 7.55%.
Obviously, I’m ecstatic that my husband and I decided to refinance our home when we did. Four weeks ago, after reading that rates had reached near record lows, we decided to jump in. Jumping in allowed us to shrink our 30 mortgage down to 15 years!
I checked out Gaiam’s winter clearance sale tonight and decided to purchase two items.
- The Yoga for Beginners II DVD which is on sale for $4.99 regularly $15.00.
- The Stretch Workout Kit which is on sale for $6.99 regularly $13.00
I used coupon code CSDJ to save $10 off my purchase. The total bill came to $7.93. $.82 for the Yoga DVD and $1.16 for the Stretch Workout Kit plus $5.95 for shipping. They have a whole lot of items on sale, but I resisted the temptation to buy anything else.
Don’t forget to use Ebates when shopping. If you aren’t a member yet, sign up here. Purchases at Gaiam stores will earn you 5% cash back.
I’ve always wanted to give the Entertainment Book, (the book filled with hundreds of coupons to local restaurants and stores), a try. This year I might just take the plunge.
For a limited time Entertainment.com is offering $10 off the 2008 Entertainment book including free shipping, plus a free $25 Restaurant.com gift certificate just for ordering. If you combine this deal with a new Ebates account you’re looking at even more savings.
If you don’t already have an account through Ebates you can earn a $10 bonus just for signing up and making a qualifying purchase by March 31, 2008. If you purchase the book through Ebates you’ll also earn an additional $6 in cash back. (Simply search Ebates for the words Entertainment Book to find the coupon offer.)
You’ll spend $15 to $20 up front (depending on where you live), but you’ll receive $16 back from Ebates plus a $25 Restaurant.com coupon. Friends and family members who purchase this book each year swear by it. This year I might give it a try.
This month’s Money magazine had a great article by Jean Chatzky called “When Getting a Deal Just Isn’t Worth It.” In the article Chatzky discusses the extraordinary amount of time she spent searching for the best deal on a big screen TV. She started by reading consumer reports and a dozen reviews, then checked out Costco, Best Buy, and Sam’s Club. Only to realize the TV would never fit in her car anyway. She returned home and searched the Internet for consumer ratings. She then ran queries against the best search engines, but even after she found the TV she wanted she couldn’t click ‘buy.’ After spending the equivalent of an entire work week searching for the best bargain she was afraid she might be missing out on a better deal. After stepping back from the situation she also realized she had spent a week’s worth of time in the quest to save $200.
I completely related to this article. I recently noticed that I was spending way too much time searching for a good deal. It all began innocently enough when I started clipping coupons out of the Sunday paper. I soon became aware of drug stores like Rite-Aid and Walgreens that are always giving away freebies. I began spending Sunday morning circling the weekly ads for items to purchase. Everything felt great until I read a post online from a woman who had saved hundreds of dollars by shopping at CVS.
Suddenly I found myself reading article after article of CVS fanatics. I decided to try my hand at CVS savings and began clipping coupons for items I didn’t need but would use at some point. Shampoo, conditioner, you know the basics. The problem with ECBs is that the coupons are only valid for one month. Some months I couldn’t find products I wanted or needed, but I had to burn the ECBs to earn more ECBs. So I had to go to CVS and search through the ad for something I could purchase. I refused to buy items I didn’t need. Although I came across plenty of websites that suggested buying glucose monitors if you weren’t diabetic and weight loss items even if you weren’t overweight. (They suggested giving away the items they didn’t want, but to do that still requires going to the store, searching for the sale items, and waiting in line to purchase them.)
Like Chatzky I recently realized that all of this effort might not be worth the savings. I find myself with a coupon organizer filled to the brim with expired coupons and I’ve decided I need a new method to this madness. In part, I am giving up the CVS quest for ECBs.
Because my medical condition is unique I often have to pay providers outside of my network for medical care. Many of the providers do not accept insurance, which by the way, is one of the reasons I continue to visit them. This means patients, like myself, must pay for services out of pocket and then personally mail medical claims to the insurance company. My insurance usually pays between 60 – 75% of the overall cost for out of network providers. On a big medical bill that can be a lot of money out of pocket, but there are a few perks of visiting out-of-network doctors that often make the extra pay worth the price.
- I don’t spend wasted time waiting to be seen. The physical therapists I see charge and receive more per patient so they can afford to see fewer patients. Fewer patients means less time waiting to be seen.
- The therapists attend to me for a longer period of time. When I visit in-network therapists I always felt rushed to get in and rushed to get out. When I pay out of pocket the doctor schedules me for a full hour of time and I am able to use every single minute of that hour.
- I receive individual attention. At in-network facilities I was often 1 of 5 or 10 patients being treated at the same time. The therapist would give me my exercises and then turn their back while they assisted another patient. When I pay out of pocket I am always given individual attention.
Of course not everyone can afford to pay out of pocket for medical expenses, but if you can, and you don’t feel your receiving adequate care with in-network doctors definitely consider searching for a doctor on your own. Although I have by no means been cured, I have unfortunately found that to receive the best care I often have to spend a lot more money.
I’ve become slightly addicted to checking out bankrate.com’s mortgage rate trend index each Thursday. Each week bankrate provides expert predictions on the rise or fall of mortgage rates. A few weeks ago my husband and I finally agreed that rates were low enough to refinance the mortgage. We knew that rates could fall further, but historically they were close to the bottom, so we decided to jump in with both feet. In the end, we decided that rates may fall further but we also realized that the sooner we refinanced the sooner we would start saving ourselves from extraneous interest.
For now it seems our decision was a wise one. We locked in on a 4.75% 15 year fixed mortgage. Rates have been slowing rising since the day we locked and today our credit union is offering rates of 5.125%.
Bankrate.com’s expert panel is predicting a continued rise in rates over the next 35 to 45 days primarily due to economic stimulus. Here are a few comments explaining why rates may rise:
After enjoying a great run of mortgage rates coming down, it seems the past seven days have put an end to the party. The stock market is gaining momentum, and fueled by the announcement today that famed investor Warren Buffett of Berkshire Hathaway made an offer to reinsure $800 billion in municipal bonds, mortgage bonds (different than municipal bonds) are suffering. Result: Rates are higher. We will continue to watch the stock market for where rates are heading, but all indicators point higher as of today.
Ryan Kennelly, mortgage banker, Indymac Bank, Bedford, N.H.
Looks for rates to continue to drift higher in the face of economic stimulus and probable additional rate drops from the Federal Reserve.
Jim Sahnger, mortgage consultant, Palm Beach Financial Network, Stuart, Fla.
The stimulus package will create inflationary pressures. Mortgage rates will move higher as a result.
Dan Green, mortgage planner, Mobium Mortgage, Chicago
Persistent economic worries will be offset by inflation concerns and the amount of stimulus — both monetary and fiscal — currently in the pipeline.
Greg McBride, CFA, senior financial analyst, Bankrate.com
To read all of the panel’s comments click here.
It seems you may need an emergency fund after all. A HELOC, (home equity line of credit), may not be available to you in case of emergency.
Countrywide Home Loans sent letters to at least 122,000 homeowners nationwide informing them they can no longer draw on their home-equity lines of credit. Many homeowners rely on these pay-as-you-use-them loans to finance things like remodeling or college tuition, or to use for emergency expenses.
As home prices continue to decline it seems lenders are hedging their bets against further loss by freezing the HELOCs of maxed out borrowers. In the past, lenders provided borrowers with credit lines equal to 100% of the value of their homes. But the past is the past and today is a very different economic environment than yesterday. Suddenly lenders do not want to be to be left holding the stick for borrowers who have pulled all of the value out of their homes. As home prices continue to fall and credit markets are crunched, lenders will provide money much less freely. Lenders are returning to previous credit rules by forcing borrowers to keep at least 20% of the value in their homes. Yesterday you could get a HELOC for 100% of the value of your home. Today your credit line may be capped at 80% of your home’s value. If you’ve already been granted a HELOC that goes above this margin it may be frozen.
Those homeowners who took out credit lines for home repairs or other long term, large scale financial transactions may be in big trouble. You may be half-way through home repairs when your credit line is frozen. Leaving you with half a kitchen, half a bathroom, etc.
And what about those homeowners who utilize HELOCs as an emergency fund? With the new lending policies, if you have sub-par credit or own less than 80% of your home’s value, you may not be able to access the money. This may force a lot of homeowners to reconsider their financial strategies. Do you maintain an emergency fund or do you rely on the value of your home in case of an emergency?
To learn more about the freezing of HELOCs go here.
I know that a lot of people do not believe in paying off a mortgage early. I am not one of those people. Since the day we bought the house I have been dreaming of owning it outright. My father paid off his mortgage 7 years early. With his house paid off and a decent pension from his first job he was able to retire early. In early retirement he has time to spend with his grandchildren, my brother’s children, time he relishes.
So after long discussions over many months my husband and I began to realize we could refinance our 30 year mortgage down to a 15 year if rates fell. Due to the sub-prime meltdown we have to squeeze our mortgage down to the conventional size. (Conventional interest rates have fallen much faster than rates for jumbo mortgages.) In our case, we would have to pay off $45,000 in principal in order to reach the $417,000 conventional cut-off point.
We are taking a bit of a risk in paying down the mortgage with such a large chunk of money. That $45,000 is our emergency fund. As we head into a recession I sometimes wonder if it makes sense to stash our money into our house, but sometimes you have to work out the numbers and take a leap of faith.
It’s a little complicated to figure out how much interest we’d be saving by paying off the loan early, because we’ve already paid extra towards the principal, and we’ve held the mortgage for a number of years. So you’ll have to trust me… the savings is $266,000+
Now let’s say we don’t pay off the $45,000 and keep our current loan. If we invested the money at 8% interest we’d have roughly $452,000 in 30 years. Sounds like we’re missing out by refinancing right?
Not at all. If we refinance the mortgage with that same chunk of money we save over $266,000 in interest (a sure bet) and own our house outright at a relatively young age. Not only that… but if we invest the monthly mortgage payment of $3200 starting at year 15, assuming 8% returns, we’ll earn an extra $1,000,000.
Still undecided about the upcoming primary election? Not sure which presidential candidate to vote for? If so… check out bankrate.com’s interactive site to help you decide. The site provides a fairly detailed view of the candidates’ positions on a variety of financial issues. Topics include health care, taxes, social security, subprime/credit crisis, education and employment. You can view details of the candidate’s fiscal plans including previous voting records when applicable.
You can also compare the candidates’ views side-by-side to see how their ideas on fiscal planning differ. You can compare any candidate against another. So you can first compare Clinton against McCain and then compare Clinton against Obama. If you aren’t sure where the candidates stand on key financial issues definitely check out this site.