Paying Off Your Mortgage Early
Some financial “experts” say that you should have the biggest mortgage you can get, and for the longest time period you can get, and never pay any additional principle. The reason, because of the low interest rate in comparison to the yield that you could get by investing in the stock market. Are they insane? During the past 8 years, the stock market has declined in value and has had a negative return (see Dow Jones Inflation Adjusted). The drawback on paying extra on your mortgage is that you have no access to that equity unless either to take out another loan or sell your house. So pay extra on your mortgage is a long term investment.
Since interest on mortgages is calculated based on the current loan balance, if I pay extra towards principle on my mortgage, I get a guaranteed rate of return equal to that of my interest rate, tax free, for the remaining time on my loan.
For example, if I have a $100,000 loan at 6% for 30 years, I would normally pay $115,838 in interest for a total outlay of $215,838. However, if during my first mortgage payment put an extra $1,000 towards principle, it will give a savings of about $5,000 that I would not have to pay in interest.
If I make an extra $1,000 each year of this mortgage, then I will have the 30 year loan paid off in only 22 years, and have saved over $36,000 in interest.
However, if make bi-weekly payments (as described in Top 5 Companies in Utah to Avoid, which counters the Money Merge Account Scam), then I am essentially making an extra mortgage payment each year. I will have the 30 year loan paid off in only 25 years, and have saved over $25,000 in interest.
If I make put an additional $200 toward principle each month, then I will have the 30 year loan paid off in only 16 years, nearly half the time, and have saved over $58,000 in interest.
An extra $500 each month toward principle, and that 30 year loan will be paid off in only 10 years, one third the time! And I would save over $82,000 in interest.
Stupid Banks in the Housing Market
When you read an article like the following where a foreclosed home sold for only $1, you no longer have to wonder why banks are losing money.
In what might be considered a new low for the housing market, a home in Detroit sold for $1.
The home, located at 8111 Traverse Street, close to the Detroit City Airport, was foreclosed upon last summer, after it was purchased for $65,000 in 2006, according to an article in The Detroit News.
The bank was so eager to sell the foreclosed property, it lowered the price to $1 in a final attempt to find a buyer. According to the newspaper, 14 days after the property was listed for $1, a local woman purchased the house as “an investment property.” The property taxes will run the new owner $3,900, in 2009.
At the time of sale, the home had been stripped of its siding, fence, light fixtures, copper plumbing — even the kitchen sink had been taken. Boards that were used to board up the windows were also stolen and used to board up a house down the street, according to The Detroit News.
It’s not the fact that they are having to sell foreclosures, it is that they are stupid enough to sell a $65,000 house for only $1. At least they should be smart enough to try to get as much out of the sale as they can. And then they expect us to have confidence in the banking system???? After several banks have already shutdown, my confidence in them continues to weaken. Yet another reason to use only cash!
Are Plunging Oil Prices Good News or Bad News?
Oil prices have decreased daily over the past month, down by about 25%. I recently came across a “news” article by Henry Blodget that claims that the lower oil prices are bad news for our economy:
An important catalyst for the recent stock rally has been a sharp decline in the price of oil: Outrageous oil prices are killing the economy, the theory goes, so if oil prices drop, the economy will be off to the races again.
It’s true that a sustained fall in oil would ease some pressure on the economy, but the recent decline is hardly unalloyed good news. Oil prices are dropping because the global economy is weakening — and it’s hard to see how that’s positive for stocks.
What??? oil prices dropping because the global economy is weakening??? This is just another liberal media spin to make good news look bad. The author has no clue how economics work. The truth is, the US economy is becoming stronger, hence the reason why the rest of the world’s economy appears to be weakening in comparison to the United States.
When the US economy becomes stronger, the value of the dollar increases. Commodities, such as oil and gold, are inversely related to the value of the dollar. When the dollar increases in value, commodities decrease. The value of the US Dollar has had a rapid increase over the course of the past month. During the same time period, Oil has droped 22% and Gold has dropped 19%.
So to answer the question on whether plunging oil prices are good news or bad news, are you an optimist or a pessimist? Are you a conservative reporting facts, or are you a liberal spinning the news to fit your hidden agenda?
Effective Time Management
I found easist ways to get started in time management is time allocation.
Any good financial counselor will tell you the best way to control your finances is through money allocation. Dave Ramsey really endorses this principle. It works like this: for every dollar of income you allocate where that dollar will be spent (where spent can also mean savings or investments).
Likewise, with time allocation, you and everyone else are given the exact same 24 hours each and every day. Everyone is equally wealthy in regards to time. I hear people tell me occasionally that they don’t have time to do something. That is nonsense! It is because you don’t have your priorities straight and because you haven’t allocated your time.
Yes, this does take some planning initially, but you will find that when you allocated your time beforehand (AND STICK TO THE PLAN), that you will be able to accomplish many more tasks that you had before. Time is our most valuable resource. Some people squander it away, others know the value and become very productive and successful.
A simple way to determine how you are using your time is to break it up into 30 minute intervals. You can then keep a log of what you did and see how effectively (or not so effectively) you have utilizing your time.
Then prepare your To Do List, prioritize the your tasks or projects, and allocate them using a chart showing where each half hour will be spent.
Here are 5 additional tips to ponder:
1. Make sure that you have not over-committed yourself, which will probably cause you feel rushed and tense as well as fall behind schedule.
2. Generously add about 25% more time than you allocated. This will give you breathing room. In addition, if you find that you didn’t use all the allocated time, move on to the next item in your list. You will be able to accomplish much more.
3. Prioritize your list of tasks and events. When you put first things first, other things easily fall into place. People tend to procrastinate the one or two items on their list that they least like to do or are less enjoyable or more difficult. However, those one or two items may be the most important! When you have them done (and finished ahead of schedule), you will remove a lot of stress.
4. Delegate as much as is reasonably possible. We are limited to 24 hours a day. You can’t do everything yourself. You may be the only one that can do the task the way you want it done, but it doesn’t allow others the opportunity to learn and grow.
5. Allocate time exclusively for planning, pondering, and recording your daily activities, even if only for 30 minutes a day. You must have an active plan in place; if you don’t use it, you will not achieve effective time management.
Starting a Business Takes Time
Starting an effective money producing business (solid residual income stream) takes time. People often ask me what I do. I work from from home; I’m an entrepreneur. I start up small businesses and build residual streams of income. I have been an entrepreneur for many years. I recall one business that I had started only had a net income of $100 to $300 per month. This may not seem like much, but the business grew. Typically around year 2 or 3 you start seeing a lot progress. This particluar business was bringing in a net income of over $30,000 per month by the end of its 4th year when I sold it off.
Is this something that you can do? Absolutely. It takes time, perseverence, and discipline; that’s the reason why so many people decide not to start businesses or become wealthy. There is no easy way towards it. It is a lot of hard work, but it will eventually pay off.
I do not do any get rich quick schemes or MLM, as those are simply a waste of time and money. (Check out Jon M. Taylor’s The Truth about MLM). I may not be as rich as Bill Gates or Warren Buffet, but at least I know that I have multiple streams of income and my working hours are only a fraction of what a typical employee does.
Nevada Corporations
Ever hear those radio ads for incorporating in “tax free Nevada.” I hear them all the time. At first it sounds like something that might be beneficial to running a business, but they aren’t telling you everything. It is true that Nevada is tax-friendly to business with no franchise tax, no personal income tax, no corporate income tax, no filing of meeting minutes, et cetera. However, Corporations in Nevada are NOT setup as a tax avoidance tool, except in the state of Nevada ONLY.
Nevada, like Delaware, has favorable corporate laws that offer maximum protection from director liability. Nevada has no state income tax. However, if you are doing business in another state, you will have to register as a foreign corporation with that state’s secretary of state and file income tax returns in that state. In essence, if you are doing business only in the state of Nevada, then it is good. Otherwise, you will still have to pay franchsie taxes, income taxes, et cetera according to the state in which you do business.
So, the only remaining benefit of a Nevada corporation is director liability; and if the company is made up of just one owner, that results in the owner protecting himself in case he sues himself (not gonna happen). I personally choose a Limited Liability Company (LLC) and feel that this is among the best choices for a small business.
Perhaps you should consult with a certified public accountant (CPA) or certified financial planner (CFP) to determine what entity best meets your needs and financial goals.
Are You a Risk Taker
In the financial world, the greater the risk, the greater the return on investment. Likewise, the more you could lose. More risk has more volatility. Where there is no risk, there is no gain. Sure, I could put money into a savings account at my bank (extremely low risk), and the return isn’t even enough to keep up with inflation. There are many types of business investments available (not just the stock market) that have high risk and potentially high rates of return. The more information you have, the better leverage you have to work in your favor. Reminds me of an old poem:
To laugh is to risk appearing the fool.
To weep is to risk appearing sentimental.
To reach for another is to risk involvement.
To expose your ideas, your dreams,
before a crowd is to risk their loss.
To love is to risk not being loved in return.
To live is to risk dying.
To believe is to risk despair.
To try is to risk failure.But risks must be taken, because the
greatest hazard in life is to risk nothing.
The people who risk nothing, do nothing,
have nothing, are nothing.
They may avoid suffering and sorrow,
but they cannot learn, feel, change,
grow, love, live.
Chained by their attitudes they are slaves;
they have forfeited their freedom.
Only a person who risks is free.– Anonymous
Thief of Time
There are many types of thieves, but seldom do we consider the thief of time. Time is our most valuable asset, and usually the least protected. Because we don’t see time as essential to our physical survival, we tend to neglect it. Some examples of time thieves and how to overcome them:
Poor Planning and Procrastination. Nobody plans to fail, they just fail to plan. Planning is essential to all aspects of life, whether it be financial plans, emergency preparedness, vacation plans, et cetera. Without a plan of action to direct you, you are often drawn to the things that are easier or to the most urgent items that may not be the most important use of your time. You should always be investing 3-5% of your time and 3-5% of your money in skills and knowledge that you’ll need in 3-5 years. Set aside time each night for Daily Planning, a time for you to take control of your most important asset, the next twenty-four hours. Create a To Do list with all the things you “have to” do and, more importantly, all the things you “want to” do. You’ll be amazed at how much more efficient your day is through planning. Prior Planning Prevents Poor Performance.
Committing to non-essential activities. Even if the commitments are “good,” doesn’t necessarily mean that it is the best use of your time. Think about what you are committing to; will it matter tomorrow? five years from now? Try to stay away from the non-important and non-urgent activities. Determine if the activity or meeting is necessary, and then if your presence is necessary.
Interruptions. Write down or log interruptions as they occur over a few days. Put down who brings them to you, how long each interruption lasts, and whether or not they were valuable or of no value. Once you accumulate your data, get the most frequent interrupters who bring the interruptions with no value to change their actions and agree to not bring as many low value interruptions to you in the future.
Media. Television, Internet, and movies, although they can be informative, steal a great deal of time. M. Russell Ballard gave a great talk in April 1989 General Conference about The Effects of Television. Determine what media is necessary and put it in your plan. Perhaps you watch a movie for family night, or you listen to the news on television while you get ready in the morning. But make sure it’s in your plan.
Wrong Priorities. Too often we put “wants” above “needs.” Adjusting inappropriate priorities will free up time spent shopping, over grooming, cleaning, et cetera. When you put first things first, second things easily fall into place. When you are planning your day, consider each item and ask, “is this the best use of my time?” If it is not, but is still necessary, delegate it to free up your time for something more valuable.
5 Tips for Starting a Mail Order Business
Starting a mail-order business is a great way to become more self-sufficient instead of relying on an employer. You can also earn more income by being in business for yourself. It is also a very cost-effective way to start a business. A few points on products to sell:
1) The best selling products are usually those you develop yourself, based on a need you see for the product — either by consumers or by businesses of any type.
2) You will earn more money from a product you develop yourself than you will from a product you buy from a supplier who’s making a profit on the sale to you.
3) The largest profit is usually made on a product you make yourself — that is, manufacture, print, carve, etc.
4) Products using lots of your time and labor are unlikely to make money for you in mail order because you must price them at too high a level.
5) Lightweight products are cheaper to ship, easier to package, and require less labor for handling. What’s more, you can get a strong marketing advantage by offering free shipping to the customer and paying for shipping yourself.
Tool Tester Questionaire
Ever buy a gadget or tool only to find out that it wasn’t worth the cost or hassle? For example, recently I had bought a pair of jumber cables (a cheap set from one of those big box discount stores). Only to find out when in the heat of the moment, it did not fulfill my need. It couldn’t transfer enough juice to jump a head set battery. It was a headache of 30-45 minutes of claimping and adjusting and motor revving. With a good set, it would’ve been magic — in ten seconds that dead car is resurrected, and away it goes!
All those tools we’ve bought, thought of buying, or had given to us … wouldn’t it be great if we had a little meter to run them past, to let us know: Useful or Questionable, Keeper or Caster, Asset or Liability? Well, here is a simple evaluation you can run on your tools and gadgets (rate the item on a scale from 1 to 10 with 1 being poor and 10 being excellent):
Affordability - How much of a strain will it be to buy it right now?
Versatility - How versatile is it, how many things can it be used for?
Seasonability - Can you use it year round? Do you need it year round?
Fuelability - Will fuel, energy, batteries, etc., always be available and accessible? How expensive are they?
Maintainability - What will it take to keep it working, and how often will it have to be done? (Cleaning, adjusting, tuning, oiling, etc.)
Durability - How long is it likely to hold up?
Breakability - How easy is it for you or others to hurt or ruin it?
Reapairability - If it dies or gets wounded, how easily can it be fixed, how hard will it be to get parts, how much will the fixing cost?
Storability - How much room does it take up, and how easy is it to hang, store, or park?
Availability - When and where you need it, will it be there?
Crippleability - Is it safe for you and others to use and be around? Will using it do anything bad to you, physically or mentally?
Portability - Can you use it here, there, and anywhere, or just here?
Loseability - What are the chances of it being lost or mislaid?
Borrowability - Will you be able to keep it on the premises?
Stealability - Is it attractive enough to “walk away”?
Extinctability - How soon will it be obsolete?
Depreciability - How long and well will it hold its value?
Responsibility - How does it affect the environment and/or society?
Disposability - When you’re through with it, will you be able to sell it or otherwise diespose of it?
Inevitability - How badly do you need it? How often will you use it? Will its lifetime usefulness to you be worth what it costs?
