Monday, June 18, 2007
Credit repair is a definite need in today's market and knowing and understanding how credit works is even more important. Too many people today are misinformed about their credit score and don't know how to correct it on your credit report.
Here is what I propose. Allow me to do a free credit report review and I will put together a customized report for how you could increase your credit score. I will also sign you up for my complimentary Client Appreciation Program where you'll be updated with current mortgage market information, timely tax tips, and important monthly YOU! Magazine which give you several monthly tips to choose from!
Mortgage Market Forecast 2007 by Barry Habib
It’s that time of year again…and for the fifth year running, we’re ready to lay out our thoughts and forecast for the year ahead. They say “hindsight is 20/20”, and looking back, we’re quite proud of how well our past predictions have held up, especially in terms of interest rates. So crystal ball, Ouija board, and Tarot cards aside, let’s do our best to see into the future, and how 2007 might look on some specifics that could impact us. And most importantly, let’s understand how we, our clients and our referral partners can benefit from these insights.
The big picture
So we’ll start out by looking at the US economy at large. Things began to slow down in 2006, which was not only needed after its former torrid pace, but also exactly what the Fed wanted to see happen. A “soft landing” for an overheated economy is something you often hear the Fed wants, but rarely can achieve…yet so far, the cooling has indeed been gradual and orderly. We expect more of the same in 2007 – a gradual cooling, without the economy crashing.
Job growth will likely stabilize, and unemployment rates may click just very slightly higher as the economy cools. Overall, the labor market in the US remains quite strong. And this is good news for the housing market, since healthy job markets often help housing markets remain stable. The more susceptible areas for increasing unemployment and flat or declining job growth are where manufacturing plays a key role in the local job scene, since the manufacturing sector never fully recovered as strongly as other parts of the US economy.
Former Fed Governor, Dr. Edward Gramlich: “Central Bankers are paid to worry – every silver lining has a cloud.”
After nearly nineteen years in office, 2006 also saw the baton passed from former Fed Chairman Alan “The Maestro” Greenspan to the rookie, new Fed Chair Ben Bernanke. And both deserve credit for orchestrating favorable economic conditions, while reining in inflation. And that’s what the Fed is charged with doing…controlling inflation so that the economy can sustain ongoing financial health. This sometimes means short term pain, like the seventeen Fed Funds Rate hikes that both Greenspan and Bernanke oversaw. In the past, the Fed has often gone too far with hikes – and that’s easy to do, because it takes six to nine months for the effect of a hike to filter its way through the economy. But the Fed has been commendably patient, although not unanimously so, in allowing the seventeen hikes to slowly take the steam out of an overheated economy. We know the Fed wants core inflation to ride between 1 and 2% - and they are getting closer and closer to this target.
The Fed finally did pause in June of ‘06, with a Fed Funds Rate of 5.25%. This appears to be the top of the current hiking cycle – and in last years forecast, we had expected a pause slightly sooner at 5%. So what will the Fed do in 2007? The inflation-measuring Core Personal Consumption Expenditure (PCE) will need to be at 2% or less for two or three consecutive months, before the Fed starts to talk rate cuts. Always wanting to remain ahead of the curve, and fully cognizant of the delay between Fed action and economic impact – the Fed will be worrisome that the economic decline will go too far. So we anticipate a Fed rate cut cycle to start in 2007, but not until the summer or fall.
This will be some welcome news for individuals with Home Equity Lines of Credit. And while it will eventually benefit those with ARM’s, the damage has already been done for those expecting adjustments during the year. And with $1.5 Trillion dollars of mortgage loans set to adjust during 2007, to significantly higher interest rates – we have an incredible opportunity to help our clients, gain new business, and increase our own production significantly. But don’t expect to have your phone just ringing off the hook – you’ll have to be proactive in reviewing your database, personally contacting your customers to congratulate them on the interest saved by using an ARM, and determining if a different strategy may make sense for them at this time.
Also, you’d be smart to proactively reach out to consumers in your community, via doing presentations or using the media. Why? Because unlike the typical “refinance runs” we’ve seen in the past, where consumers grab at interest rates that were lower across the board, many consumers with ARM’s are embarrassed that they didn’t know what they were getting into…and perhaps embarrassed that their finances don’t look as put together as a result of unexpectedly increased mortgage payments. They also may feel skeptical of loan officers – since someone out there sold them the product they may currently be having trouble with – and they may feel somewhat distrustful. This is a place where your role as Trusted Advisor can shine, as you inform them on market conditions by using the Daily Update, and then laying out a new mortgage strategy more fitting to the current situation. A 2/1 buydown can be a great fit for a client wishing to “step” out of an ARM they have currently into a Fixed Rate mortgage, but is not quite ready to make the full Fixed Rate payment just yet. Make sure you are familiar with this product, as it is also a great fit for new buyers.
Stocks and Oil – they Rocked and Roiled
In our 2006 forecast, we thought stocks would be a bright spot…and that’s exactly how things turned out, with healthy gains in all the major averages. We also cited how earnings were very healthy, and how that trend should continue. We see more of the same for 2007, and although stocks may come in short of their 2006 performance, they will still yield a handsome return in the 8 -11% range.
A very slippery area for 2006 was the oil markets – and how the volatile swings affected what we paid at the pump, how much we had left to spend, and inflation in general, since oil is in everything. Last summer, an oil pipeline disruption in Alaska sent prices at the pump screaming up above $3 per gallon. Some felt the need for a cash out refi, just to fill up the tank! And not coincidentally, mortgage rates spiked to their highest levels of the year – near 7% – due to the threat of increased inflation. Thankfully, prices have moderated – but the lesson is how delicate and volatile this area is, as well as how wide an impact that oil can have. That makes forecasting oil prices very challenging, but we can see oil in a $55 – $65 per barrel range, keeping prices at the pump hovering a little above $2 per gallon.
“The rumors of my death have been greatly exaggerated.”
Mark Twain might have coined the phrase when his death was reported while he was still alive and well…but it is also a rather fitting phrase for the housing market of 2006. Many so-called “experts” had forecast a housing bubble bursting, a crash, big doom and gloom to grab headlines…the reality was an orderly slowdown, along with some price softening, which we see continuing in ’07. Last year, the softest areas included condos, investment properties and vacation homes, and as mentioned earlier, areas with weaker job markets. These areas will continue to soften, but markets that are predominantly owner-occupied with solid employment have and should continue to hold up well.
Reasonably priced homes continue to sell, although time on the market is longer than experienced a few years back – and this pace will continue this year. But look at the bright side of this. Remember how buyers complained that they could barely pull into the driveway of a house, let alone look around and think a few minutes, before having to write up an offer that was way above list price? The cooling off of an overheated market allows buyers to make more reasonable decisions, without rushing into something that may not be right for them, their family…or their budget.
And to help listing agents move their inventory, offer the strategy of a seller-paid 2/1 buydown. This offers a great way for a homebuyer to step into their house payment affordably, with the security of a Fixed Rate…and costs the seller less than a typical price reduction. This won’t be a “turnaround year” for housing, but it won’t be too bad, and we’ll expect to see a modest continuation of the slowdown. The bottom has probably not been reached quite yet, but we feel that we’re most of the way there.
Drum roll please…
And of perhaps the most interest – no pun intended – where do we see mortgage interest rates in 2007? Last years forecast was incredibly accurate, which called for rates to be above 6% and below 7%, with an average between 6.25% and 6.625%...which is exactly how the year played out. For 2007, we actually see interest rates slightly lower, within a range of 5.75% and 6.75%, with a sweet spot between 6.00% and 6.375%.
Opportunities for 2007
When Chairman Bernanke says there is a desperate “need for greater financial literacy” among consumers and home buyers, this should tell you that it’s time to get serious about being a mortgage planner. ARM’s adjusting, negative savings rates, insufficient life insurance, little to no estate planning, lack of college or retirement planning…all point to enormous opportunities for those who are prepared. If you haven’t done it already, get your CMPS designation (www.CMPSinstitute.org), because it will give you the knowledge and skills you need, and qualify you to form your own “wealth creation team”. The wealth creation team is your powerful network of financial professionals, including a financial planner, estate attorney, CPA, insurance agent…all in a position to help create wealth and security for your client and protect their financial future. Your clients need it – and so do your referral partners. Think of the powerful difference you can make in their lives. Developing a wealth creation team should be among the most important action items in your business plan for the coming year.
And finally, most importantly, we want you to take care of yourself first. So many originators are striving to help their clients create wealth and financial security – but haven’t yet taken the time to help themselves or their families first. Before you ask one more client about their will, their life insurance, their estate planning, their retirement planning, their debt management, or their college funds…ask yourself first, and take the necessary steps to get your own will, your own retirement planning on track, your own life insurance in place. Ask for help if you need it – what a great way to develop a terrific lasting bond with new referral partners – your own wealth creation team – then to go through the planning process yourself. Both Sue Woodard and I will be focusing on this in a brand new series of presentations we’ll be doing throughout the country in 2007…and we hope to see you there.
Not only should you understand the concepts of wealth creation better, and be able to advise your clients more clearly and professionally…you will have done the right thing for yourself and your family first. And really, who could wish for a better start to the New Year than that?
Sunday, June 10, 2007
Summertime Eating Tips: - How to Look & Feel Your Best
The desire to look good during the summer months hardly requires an explanation. Simply put, the weather gets warmer and the clothes get smaller. The bulky sweater that hid your midsection so well has been retired to the back of the closet, and your summer clothes aren't nearly as forgiving.
We all know that the key to looking your best is to exercise regularly and eat right. But for many, eating right is a vague concept with no clear boundaries and countless variables. That's where YOU Magazine comes in. We're alleviating the guesswork by providing you with some... ahem, digestible tips on proper eating.
What you are about to receive is not a diet. Instead, it's a collection of sound concepts that will improve your eating habits and, in turn, snap you into swimsuit shape.
Control Your Portions
Throughout the years, the average American meal has grown in size. From frozen dinners that boast huge servings, to fast food establishments upping the portions for an extra 30 cents, the temptation to gorge is everywhere. It is important not to buy into this.
Minimally speaking, the more calories you ingest, the more calories you will need to burn. But even more crucial are the scientific findings on calorie intake. It's been shown that on average, people who consume fewer calories live both longer and healthier lives.
Summer is the perfect time to start reducing the amount of food you eat. Heat and humidity are natural appetite suppressants so allow them to work to your advantage. Start your day off with fresh fruit and juices. For lunch, you'll want to stick with salads and healthy sandwiches or wraps.
When it comes to dinner, reduce your portions by one third. One trick is to divide your dinner plate in half. Fresh vegetables should take up one side of the plate. The other half should house equal portions of a lean protein and a complex carbohydrate. Use this visual to establish reasonably-sized, well-balanced dinner portions.
Try to limit any unconscious snacking in between meals. However, if your body is telling you it needs fuel, you need to honor the request. A good trick is to stock your kitchen with healthier snacks. Pre-cut raw veggies, fresh fruit, and nuts are three great choices for bridging the gap between meals.
Consciously remind yourself to eat slowly. Doing the opposite is one of the major causes of overeating. Once you've cleaned your plate, wait 5-10 minutes before helping yourself to seconds. Chances are you'll realize that your stomach is already full.
Eat Whole Foods
Eating whole foods, as opposed to processed foods, serves two purposes for controlling weight. For starters, whole foods actually have the ability to fill you up. This is largely due to the presence of dietary fiber, the indigestible portion of plant foods that move nutrients through the digestive system. Dietary fiber not only gives you the sensation of being full, it is highly important for maintaining proper health.
Processed foods are actually designed for overeating. The exaggerated tastes of savory and sweet, along with the lack of dietary fiber, allows for mass consumption.
The second benefit to eating whole foods is their ability to aid digestion. Simply put, our bodies want to process, or digest the food we ingest. The problem occurs when we introduce food that has already been processed. The calories exist but the nutrition is gone. These are known as empty calories, and they're perfect for packing on weight.
Stick to eating foods that are fresh or, at the very least, minimally processed. This includes fresh fruits and vegetables (many are at their best during summer), meats and fish, nuts, eggs, legumes and whole grain products. If it sounds boring, read the list again. It actually includes a large variety of food. If you're at a loss for what to prepare, consult websites like www.foodnetwork.com for healthy recipes.
You Are What You Drink
While it is important to keep your body properly hydrated in warm weather, it is equally important to be mindful of the beverages you consume. Soda, bottled fruit juice, and any drinks sweetened with sugar are all loaded with calories. Drinking several 8 oz. glasses of these in one day can equal the calories one would consume in a substantial snack.
The good news is that the best beverage for properly hydrating your body is also one of the least expensive. You guessed it – water. Keeping plenty of drinking water on hand at both home and work is a great way to avoid making a bad choice when you're parched.
Fruit juices are a better choice than either sodas or sweetened drinks, but they still contain a fair amount of sugar. Limit your consumption of these and try to stick with fresh-squeezed or bottled varieties consisting of 100% juice with no sugar added. Don't be afraid to dilute your fruit juice with a little purified water.
For a refreshing twist on plain water, try adding slices of lemon and cucumber to a pitcher of cold drinking water. Allow the pitcher to sit in the refrigerator for an hour and pour into a glass filled with ice. Another idea is to brew a large pot of herbal tea and allow it to chill in the fridge. Poured over ice and flavored with a squeeze of lemon, it is a healthy alternative to sweetened and caffeinated iced tea.
Limit Eating at Restaurants
Generally speaking, restaurants serve large portions of high caloric food. If you decide to dine out, commit yourself to looking for healthier choices on the menu. Upon being served, divide your meal into two equal portions. Eat half at the restaurant, and take the rest to go.
Write It Down
One of the best practices for maintaining awareness of what you eat is to keep a food journal. The journal can be nothing more than a pad of paper. The point is to write down everything you eat during the course of the day. Before you go to bed, review your recordings. The accountability that comes with reading your journal is a powerful force in helping you to make the right choices.
As you can see, eating "healthy" in order to stay fit does not mean you have to deprive yourself of food. All it requires is taking responsibility for the food you eat. Along with responsibility comes reward. The more regularly you practice sound eating habits, the less guilty you should feel about treating yourself to something decadent every so often.
Diets that count each and every calorie or control nutrients like fat and carbohydrates will most likely result in weight loss, but they do not make great lifelong eating plans. Oftentimes they result in the eventual return of any weight that was lost. Sticking to a set of sound eating concepts, on the other hand, is much easier. It satisfies your appetite, maintains good health, and keeps you looking and feeling great when it counts the most. Have a healthy and satisfying summer!
Buying or Selling a Home This Summer? - Here's What You Need to Know
The summer months are traditionally a busy time for real estate. The school year has finally come to an end, giving families a perfect opportunity to relocate and start anew. This summer, however, promises different challenges than those of the recent past. With individual markets in a state of flux, the status of interest rates in question, and a bevy of loan products to choose from, the paradigm of how to buy or sell a home has definitely changed.
Regardless of which side of the transaction you may soon be facing, the staff at YOU Magazine thought that some expert advice would be helpful. So we went out and found two top real estate agents to share their insights. Agent one is representing the interest of the buyer. Agent two is acting on behalf of the seller. Together, they will give you a clear idea of what to expect this summer, as well as a game plan to make your real estate experience a positive one.
Home Buyer's Forecast
When it came to finding an agent to represent the buyer, one name kept popping up. Several real estate experts, as well as loan originators, suggested that we contact Chris Heller. He‘s an agent with Keller Williams in San Diego, California, and an 18-year veteran of the real estate industry.
Our first question to Mr. Heller was regarding the condition of this summer's market. Heller stated that he foresees a greater number of homes to choose from than ever before. From the perspective of a buyer's agent, this excites him for one reason – leverage during negotiations. He went on to say that a common misconception among buyers is that a market based on excess inventory means lower prices for homes. Heller claims that a house generally sells for what it's worth, despite the condition of the market at the time of the sale, although there are periodic bargains out there.
When it comes to interest rates, Mr. Heller expects them to be as good as, if not better than, they are right now. He claims the potential downside of purchasing a home this summer is that it could drop slightly in price when the New Year rolls around and sales tend to slow down. He advises that much of a consumer's decision as to whether to buy should hinge on how long they plan to stay in the home. In other words, if you see yourself in the home for a few years or more, there's no need to worry about a home's value 6 months from now.
Practical Tips for Buying
A positive real estate transaction starts with finding the right agent. Heller goes one step further by saying that it's very important to find an agent with experience, not just in the real estate industry, but also in negotiating within the type of market that you're looking to buy.
Speaking of negotiations, Heller says strength in this capacity is one of the most important attributes of a good agent. When obtaining referrals, be sure to ask about this facet of the agent's performance.
Look for an agent who is not only proactive, but also has the time and resources to give you what you need. When interviewing a buyer's agent, Heller suggests asking the following four questions:
1. How do you like working with homebuyers?
2. What do you do that's different from other agents?
3. What is your philosophy on negotiating?
4. Do you have references from recent transactions?
When talking to the agent's references, Heller suggests asking two questions:
1. Did the agent do what they said they would?
2. If you were buying again, would you choose the same agent?
Once you've decided on an agent, Mr. Heller says it's important to listen to what they have to say. You've hired them for a reason, now it's time to let them do their job. In turn, it's also important to be specific, telling your agent what you liked or didn't like about a home. Both of these practices will enable an agent to help narrow your search for the right home.
Mr. Heller also advises all of his clients to get pre-approved for a loan. This allows him to act from a position of strength during negotiations. He says that if obtaining pre-approval is a problem, then there's a good chance the buyer needs to focus on improving their credit. A good agent should be able to point you in the right direction for making that happen.
As we wrapped up our interview with Chris Heller, he offered a few closing tips. Prior to negotiating on a purchase, you'll want to decide the price you're willing to pay as well as the price that would cause you to walk away from a specific home. Heller also suggests, "If there's a house you really love, don't penny pinch." He says that settling on your second choice in order to save a few bucks will only lead to regrets.
The Seller's Forecast
Taking on the role of listing agent is long-time friend of YOU Magazine, Terry Moerler. With 27 years of experience in real estate, Moerler is a recognized international speaker as well as a bona fide expert on the subject of how to get homes to sell quickly.
We began Moerler's interview with the same question we posed to Chris Heller; what could sellers expect during this summer's real estate market? Moerler agrees with Heller's claim that more homes will be available than ever before. Ms. Moerler added that many of these homes will be sold due to some type of need and, unfortunately for the sellers, they could stay on the market longer than in years past.
When asked about these longer durations, Moerler says that aside from surplus inventory, this year's buyers are more cautious than ever before. She says, "Buyers are confused," and much of the confusion comes from media inundation regarding issues such as subprime foreclosures. That angle, she claims, is being blown somewhat out of proportion.
Moerler believes that longer selling times are part of a backlash from the recent seller's market. She claims that many sellers got caught up in the hype and subsequently overpriced their homes. While the majority of these homes eventually reduced in price, the result was a longer wait to sell.
Practical Tips for Selling
When looking for a quality listing agent, Moerler says there are three areas of importance. First and foremost is the agent's ability to properly price the home. Second, and in accordance with Heller's assertion, Moerler claims that the ability to negotiate is crucial. Lastly, she says that a good agent will correctly oversee the transaction, safeguarding the client from worry as well as unprotected risk.
Moerler says if you are truly serious about selling your home, then you need to prepare accordingly. She suggests that you begin by obtaining an early home inspection. This step is normally handled during the sales transaction but, by taking a proactive approach, sellers give themselves an advantage. Decisions can be made about whether to fix any problems prior to listing the home, or the seller may choose to simply disclose them to the buyer up front. Either way, it sends a positive message to the buyer and their agent.
For any homes that Moerler lists, she creates something known as a "House Book". Kept in a 3-ring binder, it is a collection of information about the home for sale as well as its surrounding community. Inspection papers, disclosures, HOA information, samples of utility bills, details about local schools and businesses, as well as a list of local attractions are all part of the information inside. This book is made available to any prospective buyers for viewing and is eventually given to the person who buys the home.
Another technique Moerler employs is to create a special finance package for the home. One such package is known as the "2-1 Buydown". This is where the sellers agree to use a small portion of the sale proceeds from their home to reduce the interest rate on the buyer's loan. The money in question can also be used to pay the buyer's closing costs. Moerler says this is an incredible way to set your home apart from other homes that are for sale at the same time.
When it comes to making a home's appearance more attractive, Moerler has no shortage of great advice. She suggests increasing your home's curb appeal by having a well-manicured front yard. Ms. Moerler also says that a fresh coat of paint, a clean front door, and pristine walkways and driveways are super-important. As she puts it, "A buyer decides if they like your home the second they step out of their car."
Stepping inside the home, Moerler says a cost-efficient way to increase its appeal is through the practice of staging. She defines staging as a de-personalization of a home, allowing prospective buyers to see it as their own. Moerler suggests starting with a reduction in your home's clutter. Aside from removing objects from countertops, she says a good rule of thumb is to remove one quarter of the belongings inside the home and storing them somewhere else. This will automatically make the home seem more open and airy.
Once the home has been de-cluttered, Moerler advises her clients to have their home professionally cleaned, including any carpets. The home not only needs to look clean but needs to smell clean as well. She says if the carpets are in bad shape, have them replaced as opposed to offering an allowance to the buyer. The appearance of new carpet far outweighs any monetary offer.
In terms of improvements that cost a little more money but provide more bang for the buck, Moerler likes the idea of painting the home's interior. She suggests sticking to neutral colors like beige or taupe. Also at the top of her list is the removal of acoustic (popcorn) ceilings, the addition of recessed lighting, and the replacement of old windows. Moerler says that sellers underestimate the importance of windows and reminds us that they are the only view to the outside of your home.
Like Mr. Heller, Moerler advises sellers to adopt the proper mindset. Simply speaking, your home could take longer to sell than you initially thought, despite what anyone has told you. That's not to say, however, that feedback as to why it may not be selling isn't important. Moerler likes prospective buyers to fill out questionnaires as to what they liked and didn't like about a specific home. She shows the unfiltered information to the seller so that the proper adjustments, if any, can be made. Moerler also reminds her sellers not to take any negative information too personally.
Lastly, Ms. Moerler likes to revisit her selling strategy with a homeowner on a monthly basis. In between those sessions, she advises the seller to look at other homes for sale in their neighborhood and find out what people are saying. Then ask yourself one question. Are these houses more or less attractive than yours? The goal here is to make your home the most attractive one on the market.
Chris Heller has been ranked as one of the top ten Keller Williams agents (among over 77,000 agents nationally) for the last 3 years. He can be reached at Chris@HellertheHomeSeller.com.
Terry Moerler ranks in the top 1% of real estate agents in the nation. She is currently a broker and consultant, as well as the operating principal at Keller Williams in Westlake Village, California. She can be contacted at Terry@TheMoerlerTeam.com.
Read Between the Lines: - What Your Handwriting Says About You
Everyone's handwriting is different. Some of us write using flowing cursive while others print in large, block letters. Where one person's handwriting may be completely legible, another's may resemble a Rorschach® ink blot. But what do these differences really tell us? According to Bart Baggett, a professional handwriting analyst and a teacher on the subject, handwriting can reveal a lot about the personality of the author.
Bart's career as a handwriting analyst began during a car trip to summer camp when he was 14 years old. At the time, Bart's father (also a handwriting analyst) was taking his first course in the subject of graphology. During the car ride, he asked Bart to provide him with a writing sample. Bart obliged, and what happened next would change his life forever.
Bart says, "It really scared me," referring to the accuracy of his father's analysis. Bart recalls that his father was able to tell him about aspects of his inner thinking that they had never discussed before. In Bart's words, "He really nailed it!"
Bart was so impressed that he asked to borrow one of his father's textbooks during his time away at summer camp. Bart not only read the book, he used the information to analyze the handwriting of his fellow campers. He says the results were nothing short of amazing.
"I found myself connecting and empathizing with fellow campers." He went on to say, "Everyone from bullies to the popular girls became my friends." He recalls how his relationships with these people changed because of the things (both positive and negative) he was able to tell them about themselves. "I won the trophy for best camper that year," Bart says proudly.
Fast-forward several decades to the present and both Bart and his father are renowned experts on the subject of graphology or handwriting analysis. Both of them speak publicly on the subject and are recognized as expert legal witnesses for authenticating signatures and handwriting. The father/son team has also gone on to start an online school for aspiring analysts as well as author several textbooks that are used in classrooms around the world.
A Little History
According to Baggett, the first teachings on the subject of handwriting analysis date back to a Spanish manuscript from 1662. He says that a lot has transpired since then, with much of the research being done by the French. To this day, France is still the biggest proponent of graphology. Baggett says, "You can't even get a job in France without submitting a handwriting sample."
The origin of the French's enthusiasm can be traced to a book written in 1912 by countryman, Paul de Sainte Colombe, titled Grapho-Therapeutics. Colombe not only believed that specific pen strokes correlated to personality traits, but also that you could change your behavior by simply changing your handwriting.
Although Baggett is commonly hired to help victims of fraud obtain justice, he is sincerely devoted to teaching others how to understand personality through handwriting analysis. He says it allows you to better relate to your spouse, your children and your business associates. When you hear Baggett speak about the science of handwriting analysis, you can hear the joy in his voice as he truly sees this as a way to connect to people. That's not to say, however, that he doesn't enjoy the attention he receives socially for having mastered this skill.
Baggett believes that handwriting analysis is the most succinct personality test available, claiming, "Handwriting sheds light on anything you would describe as a personality trait." This includes everything from whether an individual is an introvert or extrovert to whether they are generally truthful or dishonest. While he says there are 140 different pen strokes that correlate to individual personality traits, he reminds us that interpreting the data successfully depends on the skill of the analyst.
When asked if someone's handwriting has ever turned up anything truly disturbing, he relayed the following story:
Baggett was working with a star pupil in Dallas when he decided to put the student's acumen to an unbiased test. Mr. Baggett, along with his personal assistant, accompanied the student to a bar where the trio struck up a conversation with some fellow patrons on the subject of graphology.
A young couple who had just begun dating volunteered to have their handwriting analyzed. The couple gave writing samples, and what Baggett and his pupil observed was shocking. Baggett says that when he looked at the handwriting of the male, there were several indications of severe personality issues. Baggett says, "In one writing sample, he displayed tendencies of dishonesty, paranoia, ill-temper, anger towards women, and pure aggression."
Baggett says he and his pupil were somewhat at a loss as to what to do or say. The young female then excused herself to the restroom. She hadn't been gone 10 seconds when the male looked at Baggett and threatened that if he told the girl anything bad, he was going to have a big problem. Baggett says on one hand, his analysis seemed to be quite accurate. On the other hand, he was now stuck in a very awkward situation.
Luckily, Baggett was able to non-verbally communicate with his female assistant who met up with the girl before returning from the restroom, warning her of what had just happened.
Baggett says that this story is a bit of an anomaly and, for the most part, handwriting analysis is less about diagnosing psychosis than it is about helping your relationships. He says when it comes to communicating with people in a way they're receptive to, it is an incredible tool.
In terms of his courtroom testimony as an expert witness, Baggett states that there are two types of cases he sees all the time. The first involve trusts that have been amended by a relative of the benefactor. Many times he is brought in to analyze the signatures of the deceased to determine whether the amendment is either legitimate or a fraud. Baggett advises anyone who is in the process of amending a trust to videotape the benefactor as they sign the document. Otherwise it could be your word against his testimony.
Another type of case he frequently sees has to do with real estate transactions where there are many documents requiring signatures from the client. He says there are times when the client will instruct the agent to sign their name on a document as opposed to coming in to the office to do it themselves. Baggett says that the problem occurs if the transaction goes bad and the client claims he or she never signed a particular document. He advises all real estate professionals to have their clients sign everything themselves.
Tips to Get You Started
Before concluding our interview, we asked Mr. Baggett if he had any specific handwriting tips he could easily share with us. Here's what he told us:
1. People who write in very large script tend to be very friendly as well as social.
2. How you cross your Ts is an indicator of self-esteem. People who cross lower on the vertical line tend to have a fear of risk and likewise underachieve. People who cross higher on the vertical line tend to be more ambitious and driven.
3. The length on the lower loop of Ps, Ys and Gs relates to one's physicality. People who make longer loops tend to be more physically fit. On the contrary, people with shorter loops oftentimes are physically compromised in one way or another.
(View Example 1, Example 2)
4. Os are the easiest way to tell honesty and candor. People who tend to be blunt and straightforward write perfect Os. People who are less straightforward tend to leave a loop at the top of the O. (View Example)
5. People who write in block print tend to be very masculine. Many times these people are guarded emotionally and can be hard to get to know.
6. People who write larger loops in lower-case, cursive Ds have a tendency to be defensive. These people also tend to be overly responsive to compliments and approval. (View Example)
7. People who write pointier Ms and Ns tend to make faster decisions and are less patient with those who are indecisive. People who round these letters are generally more methodical. (View Example)
To learn more about Bart Baggett, log on to www.myhandwriting.com/media. For more information about Bart's online classes log on to www.handwritinguniversity.com or www.handwritinganalysis.org. Bart can also be emailed directly at email@example.com.
Grilling Steaks: - A Step-By-Step Guide to Achieving Barbecue Prowess - By Kirk Leins
I have to be honest about something. When my editors initially asked me to write an article on grilling steaks, I was slightly hesitant to say yes. My apprehension at the time had nothing to do with my opinion on the subject. It did, however, have a lot to do with one question that kept running through my mind. Where do I begin?
Lucky for all of us, I've managed to organize my thoughts on the topic. In doing so, I've attempted to lay out a comprehensive, yet digestible dossier on steaks and the practice of grilling them outdoors. But, before we go any further, I'd like to share with you a little steak-grilling philosophy.
Like everything else in this world, there are upsides and downsides to grilling steaks outdoors, whether it's over charcoal, wood, or an open flame. Let's start with the positives.
The primary reason to grill outdoors is flavor, especially when using either charcoal or wood as your fuel of choice. The smoke they create permeates anything sitting atop the grill, giving your food a quality that cannot be described with words.
But steaks also taste great when they're cooked on a gas grill. This is due in large part to the flavor that's created when the heat of the flame comes into contact with the flavor left behind on the grill from previous grilling sessions.
Outdoor grills also make it much easier to prepare a steak dinner for a large group. They not only handle a bigger payload, but they also simplify the impending clean up.
In terms of the not-so-positive, it really comes down to two points for me. First, there are some steaks that arguably do better in a pan than on a grill, filet mignon and hangar steak to name two. The point here is that much of your grilling success has to do with the type of steak you choose. We'll get to some of my favorite cuts in a bit.
The second downside has to do with the temperamental nature of the grill. As opposed to the predictability of cooking in a pan on top of your stove, an outdoor grill involves many "X factors". Everything – from your choice of fuel to hot spots on the grill – will have an effect on how your meat cooks. And when you're attempting to cook a steak to a specific degree of doneness, nothing wreaks more havoc on the final outcome than these types of variables. I'll show you how to deal with some of them later in this article.
Where to Buy
When it comes to buying great steak, there are typically four options available. My favorite is visiting a local, privately-owned butcher shop. If you look hard enough, every city has at least one such establishment. If you're not familiar with the private butcher shops in your neighborhood, start asking around. You can even look through the phonebook or do an online search. Your diligence will be rewarded as these establishments typically offer great, hand-cut steaks at lower prices than many of the larger stores.
Another location for procuring really good steak is at one of your community's higher-end grocery stores. These stores are sometimes privately owned, but can also be part of a small chain. They typically offer outstanding produce, full-service bakeries and delis, harder-to-find grocery items, and top-notch meat and fish counters. The only problem is that you generally pay for this convenience in the form of higher prices throughout the store.
A more cost-effective way to purchase steak is from a warehouse store like Costco. You may be forced into purchasing 4 to 6 steaks at a time, but the quality of the meat is typically very good, and the savings are awesome. This is a great choice if you're entertaining a large group or if you have room in the freezer to stock any unused steaks.
Another cost-effective way to buy steaks involves your computer. Thanks to modern technology, there are countless online meat purveyors ready to ship great steaks right to your front door. One such website is www.omahasteaks.com. By logging on to their website, you'll be inundated with countless options as well as some really good deals. Two other websites I really like are www.lobels.com and www.nimanranch.com. With both companies, the quality of the steak is top-notch. The prices, however, are higher than those found at Omaha Steaks.
What to Buy
When it comes to buying steak, I rarely purchase anything that's tagged lower than USDA Prime. In a nutshell, Prime beef is the most tender and juicy available. The reason for this is the extensive marbling of fat within the lean. This fat literally dissolves into the meat during the cooking process, creating unmatched succulence. If cost is a factor, you can consider purchasing steaks marked USDA Choice. Buying anything lower than Choice, however, isn't a very good option.
In terms of cuts of steak that are good for the grill, you have several choices. Two that come to mind instantly are T-bone and Porterhouse steaks. T-bone steaks are made up of two cuts, filet and New York strip, set apart by a bone resembling the shape of the letter T. This bone, along with an ample amount of fat, keeps both cuts juicy and tender, even when cooking over the high heat of an outdoor grill. FYI Porterhouse steaks are nothing more than T-bone steaks with larger portions of both filet and strip.
Probably my favorite steak to cook on the grill is a cut known as the Rib Eye. Taken from the small end of the rib roast, the Rib Eye is as juicy and flavorful as beef can be. Traditional Rib Eyes are boneless, but they can also be found with the bone still attached. This version is known as a Cowboy Steak. A USDA Prime Rib Eye steak is not cheap, but trust me when I say that you cannot go wrong when cooking one. Whether you're using a cast iron pan or your outdoor grill, it's very hard to dry out this steak, no matter what degree of doneness you're trying to achieve. It is as forgiving as a steak can be.
The New York Strip is also a nice cut for the grill as its outside edge is lined end-to-end with roughly 1/3 inch of fat. This strip of fat not only adds flavor to the steak but also keeps its edge very juicy. The problem with New York Strips is that they have a tendency to dry out the farther you get away from that fat. That's why I always suggest going with a New York Strip that's no thinner than 1 1/4 inches. The added thickness allows you the ability to get a nice char on the outside of the steak without over cooking the inside.
If you're looking for a tender and flavorful cut of steak that is also budget friendly, look no further than Skirt Steak. If you read last month's article on preparing Fajitas for Cinco de Mayo, you're well aware of my love of good Skirt Steak. Not only is Skirt economical, it is unbelievably tasty and juicy, not to mention highly versatile.
How to Cook Your Steak
Every cut of steak has its own cooking quirks, and trying to address all of them in this article is downright impossible. What I can do, however, is give you a list of steak-grilling principles.
* Cook Steaks at room temperature.
Many people pull a steak from the fridge and plop it directly on a hot grill. This practice will alter your cooking times and make it very hard to achieve the desired interior doneness. I suggest removing your steaks from the fridge no less than an hour before cooking. Place them on a clean plate, cover with plastic wrap, and set in a cool place.
* Don't under-season your steak
When it comes to the use of salt and pepper, don't be shy. Steaks are large pieces of meat that require a substantial amount of seasoning. The first step in correctly seasoning a steak is using a coarse-grain salt (i.e. Kosher salt, sea salt) and freshly ground pepper, as opposed to table salt and pre-ground pepper. The flavors are better, stronger, and the coarse grinds make it easier to tell how much seasoning you've used.
* Think twice about marinating
There is really no need to marinate a high-quality steak. You're paying to obtain the deliciousness of its natural beef flavor. To me, stepping on that flavor with a marinade makes no sense. However, this does make the previous tip regarding sufficient seasoning even more important.
* Get to know the grill
Every outdoor grill heats differently. Understanding the grill you're cooking on is important to a successful outcome. After your barbecue has been lit and is at full temperature, hold your hand 3 inches above the grill, and run it over the entire surface area. Take notice of which areas are hotter than others, and store this information in the back of your mind. This will allow you to place the food properly and move it around appropriately during the cooking process.
While your grill is at its hottest, use your steel-bristled barbecue brush to clean it thoroughly. The more you brush a hot grill, the more of a non-stick surface you will create.
* The rules of thumb (and forefinger)
When it comes to steak, the general rule is for every 1-inch of meat, ten minutes of cooking time (5 minutes per side) is needed to achieve a medium degree of doneness. Cooking times are adjusted in either direction to achieve varying degrees of doneness.
These cooking times may be a great starting point, but they are merely an approximation. The best practice also involves cooking by feel. By pressing down on the steak with your forefinger, you can better estimate the interior doneness of the meat. This may sound strange, but press your forefinger to the tip of your nose. That feeling is similar to a steak cooked to medium. A steak that's more yielding will be more rare and, in turn, a steak that's less yielding will be more cooked. Do this a few times, and you'll get very good at predicting interior doneness without cutting into the steak.
* Get your grill marks
The first step in achieving perfect grill marks is the practice of flipping your steak only once. Continual flipping of the meat will destroy any chances of diamond-shaped grill marks.
The next step involves turning the steak. Let's say your steak's cooking time is approximately 10 minutes. This means the steak would get flipped at the 5-minute mark. It also means that at the 2 1/2- and 7 1/2-minute marks, the steak needs to be rotated 90 degrees on the grill. Doing so will result in perfect grill marks on each side of the steak. When serving, display the side with best grill marks facing up.
Now that you've got the skinny on what it takes to make a great steak, it's time to show you one of my favorite preparations.
Grilled Rib Eye Steaks with Blue Cheese Butter (Serves 2)
2, 10-oz. boneless Rib Eye steaks, approximately 1 to 1 1/4 inch thick
Extra virgin olive oil
Kosher salt and freshly ground black pepper
1 stick of high quality unsalted butter, softened
1/3 to 1/2 C blue cheese, crumbled
In a bowl, use a fork to mix butter and blue cheese until fully combined. Place the butter mixture on top of a sheet of plastic wrap. Using your hands, form the butter into the shape of a small log, 1 1/2 inches in diameter. Wrap tightly in plastic wrap, and set in the fridge for 2 hours.
Heat your outdoor grill. Meanwhile, lightly brush each side of both steaks with a small amount of olive oil. This allows for better contact between the steak and the grill. Season all sides liberally with salt and pepper, and set aside on a plate.
Once your grill is ready for cooking, place steaks on a very hot part of the grill and cook for approximately 8 minutes (four minutes per side) for medium-rare. Remove steaks to a plate. Unwrap blue cheese butter, and cut off four, 1/4-inch slices. Top each steak with two slices of blue cheese butter and serve.
This is an awesome steak as the combination of beef and blue cheese is a perfect one. Serve this Rib Eye with roasted potatoes, mixed greens with balsamic vinaigrette, and a great glass of red wine. Bon Appétit and happy grilling!
Kirk Leins has been cooking his entire life. No stranger to professional kitchens, he currently devotes most of his time to cooking instruction, food writing, and producing television. Kirk also provides his services as a personal chef in and around the Los Angeles area. He has made several TV appearances on both the national and local level, and is the Executive Chef for YOU Magazine. His free newsletter, The Everyday Gourmet, is available by contacting Kirk at EGcuisine@gmail.com.
Caution: Children Swimming - Protecting Your Family from Summer Tragedy
Learn more about self-closing pool gates by visiting Guardian Pool Fence Systems, Inc.
Locate a CPR certification course in your area by visiting the official website of the Red Cross.
Last summer, a member of the YOU family shared a very personal story. Jim Sahnger, a contributing editor for the magazine, almost lost his 13-month old son, Sterling, when he nearly drowned in their backyard pool. Jim and his family were lucky. Sterling survived, with no lingering effects.
The unfortunate truth is that this summer many families will not be as lucky as the Sahngers. According to Safe Kids Worldwide, drowning is the second leading cause of accidental death for children ages 1 to 14, surpassed only by car accidents. For children ages 1 to 4, it is the leading cause of accidental death.
If you are a parent, or know anyone who has children, we ask that you please read Jim’s account of that almost tragic day. If you read the story when we originally printed it last July, please read it again.
This request is not an attempt at sensationalism or the melodramatic. We believe that this topic is a highly important one. By reading and forwarding this article, you may just save a life and, at the same time, spare countless people from the pain that one family nearly experienced. Here is their story...
While on the phone with my 10-year old son, Paul, I heard a scream and then nothing. Concerned for the safety of my family, I called back only to hear Paul answer the phone, crying inconsolably. The only words I could make out were "Sterling", "dead", and "pool". After a few moments, he said, "Dad, I have to call 911!" The line went dead.
My name is Jim Sahnger, and I am one of the editors for YOU Magazine. In March of 2006, my youngest son Sterling, 13-months old at the time, nearly drowned in my family's backyard swimming pool.
I had left my home not 30 minutes prior. Surely I had misunderstood Paul. Surely this was a mistake. The drive home was one of my longest ever. Thoughts ranging from "How could this happen?" to "I can't believe my son just died," went through my head.
While pulling up to the house, I began looking for confirmation that what I'd heard on the phone was a mistake. The pit that developed in my stomach was indescribable as I saw over ten emergency vehicles parked in front. They all had one purpose, to save my son's life.
Sterling had crawled through an open door to a pool deck where the barrier gate had been left opened. He inevitably made it to the pool and fell in.
I have a responsible, very attentive family and thought that we were always aware of Sterling's whereabouts. If this could happen to us, it could happen to you or someone you know and love.
We were lucky. Paul had seen Sterling floating in the pool after he'd been in an estimated two and a half minutes. In just 30 more seconds, Sterling could have experienced irreparable brain damage; and after a few more minutes, we could have lost him forever.
Sterling was released from the hospital after seven hours and multiple tests to determine if he'd suffered any harm from the lack of oxygen. To see Sterling today, you would never know what took place that day in March.
The U.S. Consumer Product Safety Commission states that every year 300 children drown in a swimming pool, usually owned by their family. The commission also states that 2,000 children are treated annually for submersion injuries. Several things can be done to prevent those you care about from becoming a part of these statistics. The tips you're about to read apply to everyone with young children, but they're especially relevant to those who own a pool of any size.
* Install a self-closing pool gate. This is first and foremost for any pool owner. For a little one, it can act as a final barrier between the house and your pool. Considering its modest price, this may be the single best investment a family with a pool can make. A rigid pool cover is also a great tool, but it should always be used in conjunction with the self-closing gate.
* Prepare yourself for emergencies by having every family member who's reached the appropriate age certified in CPR.
* Keep a phone by the pool in case someone needs to call 911. This will save a lot of time during a worst-case scenario.
* Clear the pool and surrounding area of any toys that may attract toddlers. Be sure to include pool cleaners that look like toys on your list.
* Equip your home's back door and pool gate with a buzzer that sounds when opened. You can also buy alarms that float in the pool and sound any time the water is disturbed.
* Be extremely wary of any plastic or inflatable pools as well. These, for the most part, are un-gated and carry a huge risk. The tendency is to fill them up and keep them filled. It is assumed that if the child can stand up in the water, they'll be OK. This doesn't take into account what may happen if a child panics. It’s best to drain these types of pools after every use. It only takes several inches of water for a child to drown.
If your family does not own a pool, your child's water safety still requires due diligence. It's not enough to simply know where children are at all times. Whether you're at the beach, lake, or a pool, keep your child within arm's reach. Do not rely on babysitters to do this, or anyone else for that matter. Keep your child close to you.
It is also a good idea to choose your swimming locations carefully. On-duty lifeguards are a plus but should not be relied upon completely. Keep a close eye on waves and current conditions as they can easily pull a child under water.
Swimming lessons are a good idea but can provide a false sense of security for those with younger children. Revisit lessons every summer until you are 100% sure your child is a competent swimmer.
While it's popular to forward jokes, funny videos, and other information to family and friends, we encourage you to forward this story for a different reason. The purpose is not to make someone laugh but rather to potentially help save lives.
The Waiting Game: Is it Time to Invest in Real Estate?
It's said that history repeats itself; that distinct patterns and regular cycles are apparent and even predictable to those who can correctly analyze and interpret the data. When it comes to economic markets, the same holds true. Stocks, bonds, and real estate markets each go through basic cycles of highs, corrections, lows, and recoveries of various lengths and intensities. The trick, then, is timing: when to get in, when to get out, and when to sit on the sidelines and wait.
This month, YOU Magazine looks at how the current real estate market compares to those of the past, while also examining what homeowners and potential home buyers need to do now to make the most of the post-subprime real estate market. We'll show you the numbers, what they mean, and how you and the right mortgage professional can make the most of the biggest investment you will likely ever make: your home.
It has been reported that national home prices have fallen recently, a trend not seen since 1991 – and one that has kept many potential home buyers on the fence and playing the waiting game. This decrease in prices, however, is not surprising in the least to the experts who study the market. In fact, between the growth in the number of speculators during the housing boom – when home prices reached record highs – and the increase in overall housing inventory, falling prices are a typical result within the basic model of a cyclical market.
Interestingly, while total existing home sales fell at a seasonally adjusted rate of 2.6% in April, new-home sales actually increased 16.2%, according to statistics from the Bureau of Labor. That's the largest jump in new-home sales in 14 years! The report also demonstrates that increases in new-home sales were widespread as well: 27.8% in the South, 8.5% in the West, and 3.8% in the Northeast. Only the Midwest region saw a 4.0% decrease. Again, while these numbers were higher than expected, experts who study employment figures were not all that surprised.
What does this mean? Well, for new home buyers, this is great news! This report demonstrates that home builders are taking extraordinary steps to move their inventory. In fact, home builders reportedly cut new-home prices more in April than in any month since 1970. This means that, in April, many home buyers had no problem finding a great deal on a brand new home. In fact, while total existing home inventory levels have increased 10.4%, which represent 85% of the real estate market, new-home inventories have actually fallen nearly 20% thanks in part to these amazing bargains.
The Subprime Effect
Ironically, while many builders and home sellers are more than willing to negotiate with qualified buyers (that is pre-approved, not pre-qualified buyers), many potential buyers may not even qualify for these same great deals in the near future. Since the recent collapse of subprime lending, an intense tightening of credit standards and lending guidelines is thought to have extended the downturn in the real estate market cycle. Not only do potential borrowers with credit issues now have fewer options, many current borrowers with credit issues may not be able to refinance if they continue to play the waiting game for too long in today's lending environment.
For the most part, borrowers and potential borrowers with good-to-great credit have nothing to worry about when it comes to potential fallout from the subprime market. There are plenty of conventional mortgage products available to suit the needs of these borrowers. Borrowers with Adjustable Rate Mortgages (ARMs) due to reset at a higher rate, however, can no longer afford to play the waiting game. ARMs borrowers should consider seeking advice from a professional mortgage specialist right away before their current monthly payments reset up to 50% or even 100% higher! Even with a pre-payment penalty, there are fixed-rate products that could help many ARMs borrowers avoid becoming part of the estimated $650 billion in subprime mortgages expected to default or foreclose in the coming years.
For potential borrowers with some credit problems, there are still opportunities to take advantage of the current buyer's market. Many lenders have started to reintroduce special mortgage programs that were eliminated just three to five months ago. Credit requirements are much tighter than they once were, of course, but high LTV/CLTV programs can still be found, and 100% financing is still available for both purchase and refinance loans. Despite the horror stories advanced by the media, it's important to investigate all options before assuming anything. Remember, available credit is also cyclical in nature, and the current tightening of lending standards is a direct response to the tremendous willingness of lenders to give credit during the real estate market's previous boom cycle.
Understanding the various nuances of the real estate market is challenging to say the least, even for the experts. And when market cycles reach pivotal points of change, like today's real estate market, it becomes even more challenging as economists split hairs and debate the finest details of the market's behavior. The good news is, you don't need to figure it all out yourself. Let your mortgage professional work out the details. As a home buyer, there's really only one concept to embrace, and that's the idea that the real estate market is cyclical; that, no matter how painful it gets to watch the news every day, the market will eventually turn and continue on its natural course.
There are, however, some basic indicators that savvy home buyers can pay attention to in order to obtain an edge over other investors: employment statistics and the production and availability of real estate and investment capital. These statistics each relate to the simple concept of supply and demand. When more people have jobs and more banks are willing to lend money, housing demand increases. Available inventory, i.e. supply, then sets prices at whatever consumers are willing to pay. We clearly saw this concept play out during the real estate market boom over the past few years when the national economy created jobs for 44 straight months.
So, what's changed? In June of 2006, unemployment rates reached 4.8%, the highest level in 13 months according to a Department of Labor report. Shortly after, the subprime collapse forced lenders to change their habits, and suddenly less money was available to borrowers. Inventories jumped, increasing supply, and many jobs – especially in construction and real estate-related fields – were lost. In other words, the relationship between supply and demand changed, clearly marking the end of the real estate boom.
In April 2007, however, unemployment dropped to 4.5% and new-home sales jumped, as builders offered great deals on current inventories and began construction on fewer new homes. Suddenly, with interest rates near historic lows, buyers on the fence were willing to pay for these discounted new homes.
Did these "early-bird" buyers make a good deal? Should they have waited for prices to fall even more? What about further changes in interests rates?
Well, let's look at an example. Let's say that a buyer is pre-approved to purchase a $300,000 home at 95% financing but decides to ignore possible interest rate hikes and wait for further price reductions on this particular home. With the economy showing strength in both employment and the stock market, it wouldn’t be outrageous to see interest rates increase just .75% in a very short period of time. Therefore, if rates were to increase while the price of the home did not drop any lower, the buyer's monthly payment would jump approximately $75 a month, or nearly $900 a year!
But, let's look at this from a different angle and a different cycle. On June 8th, 2004, the S&P 500 Index was at 1142. By August 12th, it fell to a low of 1063, a little more than 7% in two months. Since then, it has risen over 32%. As this article is being written, the S&P 500 Index closed at 1530, a record-closing high which some say nearly marks the end of its current boom cycle. Using the same $300,000 home from our example, this would equate to a home selling for nearly $400,000 only three years from now.
Are we saying that housing will duplicate this growth in its next boom cycle? No, certainly not. The point is this: by playing the waiting game – without good advice from a trusted source with their best interests in mind – and ignoring the basic concepts of historical market patterns, buyers can miss out on nice gains later on. In the end, homeownership, despite slumps and lulls in its cycle, is a great investment historically. After all, you can't live and raise a family in a stock. You can't refinance a bond when your kids go to college. And you can't retire into a mutual fund.
Stay ahead of the curve by making an appointment with your real estate and mortgage professionals. Put together a game plan that can't lose.
Should You Buy or Lease?
By Mark K. Solheim
To hear the critics wail, you'd think leasing a car is as bad for your finances as smoking cigarettes is for your health. Does that mean you're a closet wastrel if you've ever been tempted by ads that trumpet affordable monthly payments for a new car? Or, worse, that you are hurtling down the highway to financial ruin if you've already given in?
Relax. Leasing is not a mortal sin of money management. For some drivers, in fact, it makes sound fiscal sense. Leasing's not for everyone, but there's no reason to scorn the 15% of our fellow travelers who choose leasing over buying.
A Closer Look
Leasing often gets a bum rap because the lingo can make your head spin. It's difficult to compare one lease with another, not to mention to compare leasing with buying. And it can be tough to get a handle on leasing because the decision to lease or buy often depends on your mindset. "A lot of people are freaked out by having to turn in their car at the end of the lease," says Phil Reed, author of Edmunds.com's Strategies for Smart Car Buyers. "What they fail to realize is that they got the first years of a brand-new car's life."
One of the biggest criticisms of leasing is that in a buck-for-buck comparison of leasing and buying, leasers usually shell out more money. That's because, after the loan payments are done, buyers get to keep the vehicle (pay cash and you come out further ahead). If your modus operandi is to buy a car and run it till it sputters and dies, leasing isn't right for you. But you're a good candidate, Reed says, if you've decided that you're always going to have a car payment – as many drivers do, now that six- and even seven-year loans are gaining popularity. It's a good bet that you can drive more car for less money if you lease. You'll never actually own the car, but who really owns a car when the bank holds the title until the loan is paid off?
A few other advantages: A lease usually ends about the same time as the warranty, so you probably won't pay for any repairs. You won't have to worry about whether you'll get a fair deal on a trade-in. In most states, you pay sales tax only on the monthly payments rather than on the full value of the car. Plus, many of today's leases include gap insurance to cover the difference between the lease payoff and an insurance settlement if the car is totaled or stolen.
Yes, there are early-termination fees if you change your mind. But if you finance a car and bail out before the loan is paid off, you could easily owe more on the loan than the car is worth. And it's true that you pay extra for exceeding the 10,000- to 15,000-mile yearly limit typically written into a contract. But buyers who rack up high mileage also pay a penalty: lower trade-in value.
Design Your Own Lease
If you choose a manufacturer-subsidized lease, you'll probably be locked in to the terms. But if the car you want isn't being pushed by the carmaker, there's plenty of room for bargaining. Either way, contact several dealers to see who's willing to cut you the best deal. Reed of Edmunds.com recommends a term of three years because that's often the turning point in a car's life (when the warranty expires, for instance, or you may need new tires).
Ask the dealer to compare leasing offers on the car from the manufacturer's financing arm as well as a few banks. That may produce a lower "money factor" (basically the interest rate) or higher residual, either of which translates into lower payments.
Next, target the capitalized cost – leasing lingo for the price of the car written into the lease. Gross cap cost includes the price of the vehicle, fees, extended service plans, gap-insurance premiums and any other add-ons. Adjusted cap cost is the gross cap cost minus reductions for trade-in, down payment, and rebates. That adjusted cost is the amount you actually finance. Don't pay sticker unless you have to. Both Kelley Blue Book (www.kbb.com) and Edmunds.com list actual transaction prices to give you an idea of what others are paying.
If you expect to drive more than the number of miles included in the standard contract, try to negotiate a higher limit. Or you may be able to buy extra miles up front for an extra 10 or 15 cents per mile, versus the usual 15- to 30-cent-per-mile penalty charged at the end of the lease.
You usually have the option of buying the car at the end of the lease instead of turning it in. The purchase amount, typically the residual value, is written into the lease. Buying may not be a good idea, though, if the residual was set artificially high.
Not up for haggling? Kiplinger's has teamed with CarBargains, a buying service from the nonprofit Consumers' Checkbook organization. Its LeaseWise service will negotiate with five local dealers for you. The cost is $335. Visit www.kiplinger.com/links/carbargains or call 800-475-7283.
Reprinted with permission. All contents © 2007 The Kiplinger Washington Editors, Inc.
Wednesday, June 6, 2007
Where Can My Kids Learn About Money?
Also: What should I do with a $400,000 inheritance?
By John W. Schoen
Updated: 7:18 a.m. PT June 4, 2007
This week, a Minnesota mom is worried that her kids aren't getting the education they'll need to manage their finances as adults. Though there are a number of organizations that can help, kids still learn most of what they know about money from their parents — the earlier, the better.
I have three children, 15, 13 and 10. I am concerned because they are not going to be introduced to managing finances in school until 11th or 12th grade. Way too late. Are there organizations available to educate them on this subject outside of school?
—Shari S. Roseville, Minn.
Unfortunately, personal finance is not part of the mainstream curriculum at most schools. Despite the increasingly complex financial products and services available to Americans, only a handful of states have moved to reverse the gaping hole in public education and financial literacy for young people.
In the past several years, dozens of states have considered bills requiring some form of financial education in public schools. But only nine states include personal finance as part of their high school graduation requirements: Alabama, Georgia, Idaho, Illinois, Kentucky, Louisiana, New York, Texas and Utah, according to a 2006 report from the National Association of State Boards of Education.
Meanwhile, nearly half of American kids leave high school without understanding how to save and invest for retirement, handle credit cards, or understand the difference between inflation and recession, according to a survey by the National Council on Economic Education, one of several groups working to improve financial literacy. Others include the National Endowment for Financial Education, Jump$tart and Junior Achievement.
These groups also provide materials to schools and community groups that are interested in setting up personal finance courses for kids. You might consider getting together with other like-minded parents or contacting your local parent-teacher association and approaching your school about teaching personal finance.
In the meantime, you can be a very important teacher and role model for your kids. They won’t admit it, but most kids are influenced heavily by their parents — even long after they’ve made it clear they won’t be caught dead with you at the mall.
If they’re not on an allowance, get them started. How soon? If they’re old enough to understand the impulse to buy candy at the checkout line, they’re old enough to understand an allowance. Make them responsible for as much as you feel comfortable. Have them set aside money for savings and regular donations to a charity or service group of their choice.
The more spending they’re responsible for, the sooner they’ll learn how to stick to a budget. It’s not unreasonable for a 15-year-old to handle most expenses, based on a monthly number you work out, beyond basics like food, clothing, shelter and medical costs. As an added bonus, you may find you have an easier time with your own budget. (No more “Mom, can you buy me these $100 jeans?”)
Expect them to make a mistake now and then; that’s how they learn. Avoid the urge to bail them out. If they must have something that’s beyond their budget, work out a loan — with a strict repayment schedule — to teach what it feels like to be in debt. Better in debt for a few hundred dollars — to you — that to hit adulthood and go on an “easy credit” borrowing spree that lands them in debt beyond repair. Based on the mail we get every week, the problem is widespread.
As they get older, show your kids how you pay the bills. Explain what a mortgage is. Help them find part-time work. The sooner they get a job, the sooner they have a personal stake in their budgeting. At the end of the year, walk them through the basics of a tax return.
If they plan to go to college, make it clear that they’ll have a stake in those costs too — either an on-campus job or some level of student loans that will give them a first-hand feel for debt — without burying them in loans when they graduate.
Most of all, teach them early about the predatory lending practices of the financial services industry, which is reaching younger into adolescence for new customers. Many college freshmen now pass a booth on their first day on campus, set up with the school’s blessing, offering credit card accounts — complete with a $50 “starter credit” just to them hooked on the habit of using the card. If your child is approaching adulthood and hasn’t figured out how to manage credit, make sure you get to them before the card companies do.
What should my husband and I do with a $400,000 inheritance? We are 56 years old. We need to do something that will allow us to have a substantial amount at retirement, and yet pay off student loans and fix up the house. What would you do?
-- Name and address withheld
I’d put it in Treasury securities while I got used to the idea of having $400,000 that I didn’t have the day before.
Then I’d ask around and find a financial adviser I liked and trusted. If you trust the lawyer who handled the estate that generated this windfall, you might get some names there. It’s like finding a doctor: Get referrals, set up a get-to-know-you appointment, ask lots of questions —and if it doesn’t feel right, by all means move on to the next name on the list. Rinse. Repeat.
In the process of shopping for an adviser, I’d also read up on investment basics. Maybe take a local continuing education course, but be wary of ”free seminars” taught by brokers passing themselves off as “personal finance experts.” Ditto any cold calls you get offering a "free investment review."
The reason you have to do your homework is that you’re going to need to start off by asking this person a lot of questions. You need to figure out what those questions are. And if you go in knowing a few answers, you stand a better chance of finding out how truthful this person is early on.
You also need to think of buying financial services the way we all think of buying a car or a new TV. People will read up forever and scour the Web for information and reviews ahead of a $2,000 electronics purchase — and then hand over $400,000 to someone they’ve barely met without asking the questions they really want to ask.
The reason for this is that the financial services industry has cowed us all into thinking that what they do is so complicated that there’s no way you or I could understand it. That’s why these folks speak in jargon; it’s designed to remind you how dumb you are in their presence. (Which is one reason we started writing this column.)
The biggest sleight of hand usually takes place when you get to the issue of what this advice is going to cost you. Over the life of the typical retirement savings horizon, a difference of 1 percent in management fees can mean the difference between an annual vacation in the Caribbean and a bus trip to stay with friends. These fees are tucked away everywhere. Think of them as the “rust proofing” car dealers used to try to sell you.
There are some very fine, honest financial advisers out there. Unfortunately, the modern financial services industry is set up to make a profit for itself, not you. Making money for clients is also good, but losing other people’s money never got a broker or adviser fired. The way the law is written, you have to show evidence of deliberate fraud. And most of the contracts governing brokerage accounts prevent you from taking your complaint to court anyway; you’re required to go to arbitration in front of a panel that includes representatives from the financial services industry.
No matter what you do with your windfall, go slow. If you don’t like the risk of stocks, that’s fine. Some very smart people have all their money in municipal bonds and they sleep very well at night.
It’s true that you probably need to put some money in stocks to beat inflation over the long run. But you can do so very cheaply with index funds, and eliminate the risk of a stock-picking manager picking the wrong stocks.
In other words, no matter how much good advice you get, you’re on your own. The sooner you realize this, the better your chances of making investment decisions in your best interest — and not in the interest of the financial institution you’re working with.
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Where do my income tax dollars go?
Also: How come we all get two extra days to file our taxes this year?
By John W. Schoen
Updated: 3:12 p.m. PT April 15, 2007
You worked hard for that money you just sent off to the IRS. So like many tax filers, including Mark in Colorado, you're probably asking yourself: Just where, exactly, does my money go when the government gets its hands on it? Let's see who gets what.
Don't forget, you have two extra days this year to send in your check — one because April 15th falls on a Sunday and another day because of two holidays that aren't on most people's calendars. Which got Lloyd in Louisiana wondering: what's up with these late deadlines?
What does all our income tax money go to pay for?
— Mark, Greeley, Colo.
If you have trouble balancing your checkbook, imagine trying to keep track of where $2.7 trillion goes every year. Even with armies of government accountants and auditors, it’s hard to know with certainty exactly where your income taxes end up. But you can get some idea from the government’s accounting of where it went last year.
For the complete, gory details, you can check the latest estimates from the official budget on the Government Printing Office Website, where you’ll find the government’s finances sliced and diced — by agency, department, function and source — with historical data back to the 1940s and beyond.
What you’ll also find is a lot of big numbers. So to give you some sense of proportion, here’s — roughly — how the federal budget compares to your budget and mine.
Let’s assume you make $52,000 a year — or $1,000 a week — which is about the median household income in the U.S. The real number was $46,326 in 2005, but give us a break with the math, okay? Remember, that $1,000 a week is tax free. (Hey, you’re the government.)
Here's where it went (we used 2006 figures from Table 3.2, "Outlays by Function and Subfunction"):
Last year, the three biggest federal budget items were Social Security, health care and defense spending — each of which ate up about $200 of your $1,000 weekly paycheck.
Even though you may not have health insurance, about $219.40 of every $1,000 of your taxes went to pay for health care last year. On an annual salary of $52,000, that works out to $11,408.80 a year. The biggest chunk of that ($124.20 per thousand) went to pay for Medicare, which provides health coverage for people over 65. The rest ($95.20) went for Medicaid, which covers low-income families and individual, and state administered health coverage for children.
While most households are having a hard time setting aside a few bucks a month for their IRAs, your government is busy stashing away retirement cash for a rainy day; some $206.60 of the weekly paycheck went to the Social Security fund — most of which is officially “off budget.” (But let’s not get started on that whole lock-box thing.)
Next up is military spending. This includes a variety of defense costs, including salaries for the troops ($48.00); operating and maintenance costs ($76.70); “procurement” — which means stuff you bought ($33.80) — and research, development, test and evaluation of all those things you bought ($25.80). Throw in $12 or so for things like “atomic energy defense activities” and housing the troops, and you paid $196.50 to keep the world safe. (Or $10,218 for the year.)
Unfortunately, Uncle Sam — like many Americans — has been living beyond his means and spending more than he takes in. To make up the difference, the Treasury steps up by selling more debt — roughly the same as you or me using our credit cards. And like most credit card users, Uncle Sam isn’t paying back that debt, he’s just making the minimum monthly payment. So interest on the Treasury’s credit card eats up $122.20 of Uncle Sam’s $1,000 paycheck. That bill is cut by $36.80, thanks to the interest that the government pays itself for Treasury debt that it keeps “off-budget.” (Again, let’s not go there.) Your net interest payment amounts to $85.30.
There’s also a line in Uncle Sam’s budget for $132.70 for “income security” which includes things like unemployment insurance ($12.70); food and nutrition programs ($20.30), and housing assistance ($14.40). Also tucked into this line item is the cost of retirement for federal workers ($37.00).
After that the bills start to look pretty manageable — but then you’ve only got about $160 left. You’ve got to keep up in a fast-changing, competitive global world, so Uncle Sam spends $44.60 per thousand on education, including $19.00 on colleges and universities and $15.00 on elementary and secondary schools. Workers training programs cost $2.70 and social services related to education and training cost another $6.20.
You may have also heard your elected representatives talk about their commitment to keeping American in the forefront of science and technology. Last year, they’ve devoted $3.40 to general science and basic research. Another $5.50 went to pay for the space program.
Like anyone else, Uncle Sam has to get around. Transportation costs ate up $26.50 per thousand in federal spending, including $17.00 for ground transportation; $6.80 for air travel and $2.50 for water transport. Imagine spending just $17 bucks a week on your car and $2.50 for a boat.
The government also spent a few of your tax dollars on agriculture ($9.80) and the environment ($12.40). So call it $22.20 for landscaping and gardening.
While our military is working to keep the peace overseas, keeping the peace at home was a relative bargain. Total spending for the administration of justice came to $15.40, including federal law enforcement ($7.50), and maintaining the federal courts ($3.80) and federal prisons ($2.30).
Despite all the headlines about billions spent for helping victims of natural calamities like hurricane Katrina, federal disaster relief and insurance spending amounted to just $17.40 per thousand last year. Another $3.20 went to community and regional development.
And while some readers complain about seeing their tax dollars going to fund aid to other countries, it’s not a big number. Last year, $6.30 went to pay for international development and humanitarian assistance. Housing ambassadors around the world and other expenses related to conducting international affairs set you back $3.20. Another $2.90 went to help beef up security outside our borders.
Finally, spending all this money and managing all these activities also cost money. So figure $6.90 for general government costs.
So there you have it. Not all of that money came from your incomes taxes, by the way. This year individuals will pay about $1.2 trillion of the $2.7 trillion federal spending, while corporations will pay $342 billion. The rest comes form Social Security taxes ($873 billion); excises taxes ($57 billion) and other taxes and fees ($98 billion.)
For everything else, there’s U.S. Treasury debt.
What is the reason for having a extra day to file federal income taxes?
-- Lloyd F., Monroe, La.
In fact, this year we all get a two-day extension. The first extra day was simple enough: because April 15 falls on a Sunday – not a business day – you would otherwise get until midnight Monday, the 16th to file your return.
The reason for the second extra day is a little more complicated. At first, the extra day only applied to taxpayers who live six Northeast states and the District of Columbia, whose returns are processed the IRS’s Andover, Mass. office. That’s because people in the great Commonwealth of Massachusetts – including the federal workers at the IRS - celebrate Monday as Patriots’ Day, a legal holiday.
So far so good. It wasn’t after the IRS printed up its forms – giving an extra two days just to those folks whose returns go to Andover – that someone noticed that April 16 is also holiday in the District of Columbia. Though not a federal holiday, Monday is Emancipation Day, a legal holiday for people who live in our nation’s capitol - including federal workers at the IRS.
Originally celebrated every year from 1866 to 1901, Emancipation Day marks Abraham Lincoln's 1862 signing of the act that ended slavery in the District. This year, thousands of people are expected to march to Congress to press for legislation giving D.C. a seat in the U.S. House of Representatives.
Meanwhile, up in Massachusetts, they’ll still be celebrating Patriots’ Day. For those of you who don’t remember, the holiday commemorates the Revolutionary War battle of Lexington and Concord, which was fought on April 19, 1775. (In the 1960s, the date was changed to the third Monday in April.)
On Monday, they’ll hold a re-enactment of the battle, a Red Sox game at Fenway Park (this year, against the LA Angels) and the annual running of the Boston Marathon.
At this writing, the forecast was for rain and temperatures in the 30s. So don’t forget to bring your slicker.
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How can I fix my credit score?
Some simple steps you can take - without paying for "credit repair"
By John W. Schoen
Updated: 8:16 a.m. PT May 29, 2007
Maybe it's the rising tide of spam offering "credit repair" but a number of readers have been asking lately how they can increase their credit scores. Before you go pay someone to give you advice you can get for free, check out these simple steps you can take to build better credit.
How would a person go about repairing their credit score when it is low?
— M.P., Bryan, Tex.
I'm trying to raise my credit score. Is it better to pay off credit cards and close them or leave them open with credit available showing?
— Tea C. Newark, Del.
Unfortunately, it's a lot easier to lower your score than it is it raise it.
But there are a number of things you can do to try to raise your so-called FICO score, named for Fair Isaac and Co., the company that created this credit rating system now widely used by lenders of all stripes for a quick read on your creditworthiness.
While the system is widely used, it’s far from perfect. Good lenders use it as a starting point, and each one has their own ideas about how high your score should be. They may also base their decision on other information not contained in the score — like how long you’ve lived at your current address or held your current job.
In general, you’ll pay higher interest rates the lower your score. In theory, the lower your score, the higher the risk to the lender that you won't pay the loan back. FICO scores range from 300 to 850; the median score is 723. To get the best rates, you’ll usually have to have a score of at least low- to mid-700s.
Your credit score is compiled from information collected by the three major consumer credit agencies and each one calculates scores a little differently. So you probably have slightly different scores with each agency.
So the first step in raising your score is to make sure the information used to calculate it is correct and up-to-date. For that, you’ll need to get copies from each credit agency; you can get one free every year by going to AnnualCreditReport.com — a Web site set up under a federal law requiring the credit agencies who collect all this information on you to give you access to a free copy of your reports once a year. You’ll see a number of other pitches out there for "free" reports; when you get to the fine print, you have to supply a credit card, sign up for a "credit monitoring" service and then cancel after they've charged your account.
Once you get your report, look it over carefully. Are there records of past due payments you can show you made on time? Are there accounts still listed that have been closed? Worse, is someone else’s account or address listed under your name? One reason to check your report if to see if identity thieves have been opening accounts in your name. If you find any mistakes, write to the reporting agency and ask to have the information corrected. You should get a response within a few weeks; if not, give them a call.
OK, so now you know what your report says about you. Unfortunately, while the law gives you free access to your credit reports, you’ll have to pay to get your FICO score. Some lenders will provide your score when you apply for a loan. But if you want to know beforehand, you have to go to MyFico.com and pay $15.95. (You can sign up for a free 30-day trial once.)
While the exact formula for calculating your score is not public, the basics are available on the Fair Isaac & Co. Web site, along with guidance on how to raise your score. And while there are companies out there selling “credit repair,” you don’t need to pay to have someone else raise your score for you. Here are the types of information the formula takes into account, how much weight it gives each category, and what you can do on your own to raise your score:
Payment history: 35 percent
The single most important thing you can do is the simplest: Pay your bills on time. More than a third if your FICO score is based on your payment history: how often you’re late paying credit cards, car loans, mortgages and student loans. The later you are, the more you hurt your score. And closing an account with late payments after you’ve paid it off doesn’t get rid of the damage to your score any faster than leaving it open.
How much you owe: 30 percent
The next biggest chunk of the score is based on how much you owe. The simplest solution: Pay down your credit cards and other installment loans. Moving money from one card to another won’t help: you have to reduce the overall balance.
Credit issuers also look at how much of your borrowing power you’re using. Even though you’re keeping up with monthly minimum payments, if you’re at your limit on one or more cards, you’re at greater risk of getting in over your head — which will likely be reflected in your score. On the other hand, if you can get your bank to raise your limit, the extra headroom on your account should help your score.
Length of credit history: 15 percent
This one is hard to speed up; lenders want to see a track record of timely payments. Even if you have had credit for along time, a lot of newer accounts will lower your score. That’s why closing old accounts may reduce your score: it may shortens the average length of your credit history.
If you’re just getting started, stick with one or two accounts and gradually add more. If you can get yourself added to an account of a relative with good credit, that may help. And if you have no credit history, you may want to start with a secured loan or credit card. By keeping money in a savings account with the same lender — and using it to back your loan — you’ll lower the risk to the lender, get a better rate and start building a good payment history.
New credit: 10 percent
Opening up a lot of accounts all at once can also hurt your score — even if you pay all your bills on time and don’t carry big balances.
You may also hurt your score if you’re constantly changing cards and chasing a lower rate. Your score can also take into account how many inquiries lenders make to credit agencies asking about your credit. Too many request for information may mean you’re embarking on a borrowing binge. On the other hand, Fair Isaac says it doesn’t count inquiries form lenders who want to pre-approve you — without your approval. And shopping among several lenders all at once – without opening more than one account — also shouldn’t have an impact, according to the company’s Web site.
Types of credit: 10 percent
Most people have different kids of credit — credit cards, mortgage, car loan, student loan, etc. Open-ended credit — like a credit card is called revolving credit because it doesn’t have a fixed number of payments. A car loan or mortgage, which does, is known as an installment loan because when you finish the payments the loan is closed. Lenders want to see how you handle both kinds of credit. But opening more accounts won’t necessarily help offset a spotty track record of payments on existing loans.
I do not believe in credit cards and every online site I have gone to asks for credit card info. I don't have a credit card, don't want a credit card. So how can I get my credit scores for free?
— Connie S., Citrus Springs, Fl.
If you’ve never borrowed money from a bank or other commercial lender, you may not have a credit history. Which means you won’t need to check your score because you won’t have one.
But credit agencies keep track of more than just credit cards. You can still check to see if you have a credit history — for free — without a credit card. The sites that ask for credit card numbers are trying to trade on confusion about the process by signing you up for “credit monitoring” services for as much as $90 a year. You don’t need that.
The only thing you’ll need to provide AnnualCreditReport.com is your name, current address, Social Security number and date of birth. You’ll then be forwarded to the credit agencies Web sites one by one, where you can view your report online and print it out.
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