FAN: Mortgage Schmortgage Obama

This is awesome.

I think the stupid percentage that you used to be able to go up to on your mortgage was something like 30 or 33% of your monthly gross wages as a household. I think I have a pretty big house. It's not even 18 years old. I've lived in it for 4 years. When we bought the house, the mortgage payment was about 17% of our monthly gross wages. Now, four years later, it's 14.5%. Am I in any danger of losing my house? Not even close. What if one of us loses our job? Still not even close. Why? We bought comfortably within our means. We drop our daughter off to play at some houses that two of ours would fit into...and ours isn't small by any means. Had we stayed in the first house we bought, our mortgage right now would be 8% of our monthly gross. When we bought that first house in 1996, the mortgage was about 21% of our monthly gross. I refinanced the first house twice in 8 years bringing down the payment substantially. I bought less house so I could save for retirement and my daughter's college fund. If the government is spending money wisely I don't complain too much about taxes and I understand the logic that the economy could do even worse if these knuckleheads are forced out onto the streets.....but for fuck's sake.....if we are going to bail people out to the tune of what they are talking about concerning mortgages....then there should be rules attached. You smoke? Not any more, dickhead. We're not giving you a dime of government money if you continue to smoke two packs a day or $14 that could be going to your mortgage. Your car cost what? Yea, I'm sorry asshole, but you'll be trading in your Acura for a Ford Focus....tomorrow. We'll pay your mortgage, but the 52" Sony Bravia XBR4 is going right the fuck back to Best Buy where you can pick up your new 27" tube job. Eating out? Nope. Not, if we're paying your mortgage, dillweed. See, the government is going to make a new ID card you need if your rate got dropped due to your stupidity. You'll be leaving Legal Seafood and moving down to the Ground Round y'all. Ya Hear? Snowflake is in Private School? Not anymore she's not. Now she might end up behind the stairs making out with somebody of whom you don't approve. I am royally pissed off about this. I can't wait to hear the Dog's take on it. From my count, the Dog owns 5 houses...yes 5. Is he in any danger of losing any of them? Hell No, I wouldn't be surprised if 3 or 4 of them are paid off. Stupid people suck. There are people who bought under their limit and are doing all the right things and are having trouble keeping their heads above water and I respect the shit out of them. They are not the object of my scorn so don't think me heartless. My scorn is well placed and well deserved. I could rant on this all night and have before in the past. This is almost 3 years old.

Are People Really That Stupid?

Every once-in-a-while, I'm trapped in a room and the only reading material is a girly type magazine. I'm not going to mention the magazine, but it rhymes with "Wetter Gnomes a Farten". There is an article this month on living beyond your means. If you read this blog at all, you know that's my pet peeve subject and everyone struggles with it a little. If you search over the blog for "personal finance" or click the tag at the bottom of the piece - you'll see some of my rants on the subject. It's partially the subject matter of my other website www.wealthblocks.com. I welcome any article on the subject that shows insight or gives realistic tips. The article in said magazine is a turd. A big turd. A big smelly turd with.....well, you get my point. It goes on to talk about Jack & Diane (I can't remember their names and iTunes is on shuffle and I just heard the song). They were living fairly well on their 80k combined salary and Jack managed the finances. They had an SUV, went to the movies and ate out. By the time the shit hit and the fan and they were late on all their bills and the wife figured out was was wrong, they were spending $4,000 more a month than they made. Let that sink in a while. Not $400. $4,000. I might be able to understand if you don't track your finances that you spend a few pesos over what you make every once-in-a-while. $4 grand? Are retarded people even allowed to get married? I'm not insulting the mentally challenged, I'm insulting these two boneheads. He borrowed money against the house when things got tight...not to pay off his debt, but to continue living the way they were. When she saw late notices laying around, he told her they had plenty of money coming in. Let that sink in. She took over the bills and made a plan to get out of debt and get their credit rating back up after it dropped 150 points. What? I worked my ass off to be near perfect in credit history. They spend $k a month more than they make and they only dropped 150 points? Isn't 810 or something perfect? If they started at 650 they only dropped to 500? I would think they would be...oh I don't know.....minus 37?
It infuriates me that people like this can claim bankruptcy. I think if you claim it, you should be in the daily paper. Look at me! I'm a dumbass! Now, what really got my goat was the poor tips section that the author added to the story in a neat little box. I think her IQ is in question as well. "Sell your SUV and buy a small car". I bet she wears sandals and eats granola. It didn't say they drive an Escalade. What if they drive a Kia SUV or a Hyundai? SHould they sell that and buy a small Volvo? She associates SUV with expensive. She is also wrong if she assumes all SUVs are gas hogs. There are plenty of 4 bangers out there in SUVs. Dolt. In another moment of lucidity, she added this bullet to the box "Write down all your sources of income in a given month and try not to spend more than that". Really? F me lady, we just found our Nobel Prize Winning writer this year. How does this stuff get past the editor? It's written on a 3rd grade level. The dumbing down of America. It's sad, man, just sad. I'm going to go flip iTunes to the Blues.

Wah! I Can't Manage My Own Money!

Ok, this really annoys me. I don't know about you, but I just sucked down a bottle of Black-N-Blue wine from Glades Pike Winery made of blackberries and blueberries, no grapes. And that's not why I'm in a sour mood. I'm pissy because of articles like the above. How dare these people? I mean, how dare they? When something is your fault, you do not go on the offensive. You sit back, wait, and act appreciative when somebody gives you a handout - not demand more and more. I can't stand it that so many people want to blame the companies that gave them mortgages. You know what? Had those companies not given the loans, some would have cried discrimination of some sort...racial, sexual, religious....something. These saps don't want the government to intervene in any aspect of their lives until they need bailed out. Then they can't wait. Can you imagine going to a CEO's house and throwing plastic sharks on his lawn? He didn't come to your house and throw a plastic dunce's hat on your lawn. And yeah, maybe I'm being too simplistic here, but I'm a little tipsy. I read in Money magazine yesterday that when the bailouts go through, the average homeowner who either stays in their house with the bailout or gets out from under their house with it, will only lose between $5000 - $7000 dollars. I got news for ya, how about us poor bastards that buy a house we can afford with a real down payment and a real fixed mortgage? How about us poor bastards that manage to save money and invest it in our Roth IRAs and our 401(k) plans? How about us poor bastards that started saving for our children's college fund before they could talk? You know how much money I lost in the Stock Market in the last year? Who the bleep is helping me out? $7K? I'd give my left nut to have only lost $7K in the last year (not really....I just said that for emphasis....maybe I would give up my iPod, I've grown fond of my left nut and I'd like to keep it). You know what else? The market is tanking BECAUSE of consumer confidence.....you know why? Because of all the freaking foreclosures! I'm indirectly losing money because these idiots don't understand the loans they are purchasing and now they are getting help and I'm left with looking at charts of my finances that look like the Cliffs of Dover. What the french toast is that all about? Seriously? What the French Toast?

Life Lessons

So my daughter likes to watch Deal Or No Deal every once in a while. When she does, I don't mind watching it. I'm fascinated by the greed and stupidity that some people display. As soon as a player crosses the line that I deem rational for them (yes, I am judge and jury) I root against them with all my person. Why? I'm teaching my daughter a valuable lesson. If you were watching earlier this week, a complete nimrod who was either in his late 20's or early 30's was on. He delivered pizza. He lived at home. Looked and acted like a total slacker. He didn't have 2 nickels to rub together. He got down to where he had (and the specifics are a little fuzzy) $250,000, $25,000 and 2-3 smaller numbers. The offer to quit was $126,000. God must have really given this turd a big fat brain because he decided to push ahead and at that moment I was begging for the quarter mil to show up. He deserved it. Here he was, a "man" with nothing, and he was going to tempt fate? How dare he! Now, if said contestant was a lawyer or doctor or successful businessman, maybe $126 large was gambling money - but to Skippy - it could have been a good (late) start on life or he could have paid his mother off for all the free Pop-Tarts and laundry he was scraping. Of course, he got nailed and the offer went down to $15K and change. Apparently that was funny money to him as well because he tempted fate yet again and again fate said "F you, ass clown" as the $25K came up. Does it say something about me that I enjoyed his failure so much? I hope not. I'm sure most people at home root against the people who make poor decisions. It is not by accident that this particular human finds himself in the situation he is in today. I bet his mom threw up a little bit in her mouth when he said "No Deal!" to the delight of the Romans. Poor woman. She deserves better.

My Friends At CitiBank

I had the family out for Thanksgiving and let the mail accumulate over the weekend. Today when I went through it, there were two pieces of mail from CitiBank, the corporate giant that recently purchased my mortgage. Not knowing if one was the bill was or not, I opened each instead of tearing them up because they looked like junk mail. The first was an offer to save me roughly $60,000 by having me send mortgage payments every 2 weeks instead of monthly. Well, isn't that nice? They note that it will help me pay off my mortgage 5 years faster than only sending in money every month. The idea is that you actually send in the equivalent of 13 monthly payments over 52 weeks. Hey, that's nice of them, they want me to pay off my mortgage early. That's OK, I'd rather not do it their way. I'll send in extra every time I make a payment as opposed to being locked into making their scheduled payments. Ok, let's see what's in envelope number two. Hmmm, they want me to be able to pay all my bills and they have a way to save me $300-$500 a month. How? By extending my mortgage out to 40 years. Yes, I'm serious. How can the mortgage industry approve of this? Do you know what this is going to lead to? Much like people driving around in cars they really can't afford, this is just going to allow people to buy more house, even those who can't afford it. Hopefully the rule will be that you have to qualify for a 30-year mortgage, pay for it for a few years, and then you will be allowed to convert it to 40 if you want. Maybe they need a better CRM product that won't market to me to both shorten and prolong my mortgage at the same time. Idiots.

What A Giant Moron This Guy Is!

Thanks again to another contributor for sending me this video clip. This, ladies and gentlemen, is why people are broke and have to file for chapter 11 on a personal level. This idiot, along with his trophy wife, seem to be consumed with image. Granted I don't know them, but a picture tells a thousand words - or more. The piece is about lenders now allowing home buyers to stretch mortgages out to 50 years. That's right. 5-0. Fifty. They may as well do away with checking your credit and making sure your mortgage payment will only be a certain percentage of your household income. Five years ago this jackass bought a house for $270,000. He said homes in his neighborhood are now selling for over $500k. Very believable. We more than doubled our first house price when we sold after 8 years. You typically get approved for a mortgage that is 3 times your household income so assuming they put 5-10% down (I wouldn't be surprised if they financed 105%) the household income at the time was roughly $85k. National average is around $45k these days but for some zip codes the average is easily double,triple or quadruple that amount. So, the fact that they are double the national average isn't really that impressive to me. They said they needed to have more money at their disposable DUE TO THEIR 3 YEAR OLD SON. Blaming the kid? Blaming the KID? OK, the video clip of the house was about 10 seconds, but I noticed a few things. Leather furniture in the family room. A nice big 'ole flat screen TV in the background. Did you notice in the backyard they had a hottub with a WATERFALL!!!! In the driveway when they did the first shot, there was a huge late model SUV and a hot rod to the right of it which I couldn't make out either. The second shot showed a white Hummer in front, but in all fairness to them, that may have been the interviewer and the film crew's wheels. Then again, maybe it wasn't. All I'm trying to stress are the choices these folks made. I just know in my bones they aren't saving a dime and out of the money this deal is going to save them in the short term, you just get the feeling they're going to blow it - not use it wisely. Listen, people can spend their money however they want. If you can save 10% of your disposable income - great. If you can save 10% of your gross income - SUPERB! After that, buy a $10,000 waterfall and anything else that will make you feel better as you can afford it! However, if you have to refinance a 30-year mortgage to a 50-year mortgage and blame it on your SON as you're driving around in a $65,000 car and own a $5000 couch....you're a financial idiot. And yes, the guy is assuming he'll sell after 5 years and make a huge profit and continue his pattern of living above his means by buying another house - this is exactly the type of guy who can't control his spending and will end up with nothing when he is 55. It's the game of Life. Ever play it as a kid? If this guy wants to continue his current lifestyle after he retires he needs 80% of that from his investment income. If his current household income is $100k and he never gets another raise, he'll need a nest egg of $1,000,000 to produce $80k annually at 8%. If he/they continue to get raises and the household income ends up at $150, the egg will have to be about $1,600,000. I have a sneaking suspicion if we added up all his 401(k)s and IRAs we wouldn't really be surprised although he may think he's saving enough. Stash it, don't flash it. I'm not counting on SS being there for me and it's worthless anyway even if it is there. SS was not meant to support people who were making 6 figures plus before retiring. The max SS check isn't even going to be a week's pay for that tax bracket. Stash it till it hurts a little. Retire early. Exit the rat race when the rest of the country has 5-10 years left to work. You aren't an idiot if you buy expensive and nice things. You're an idiot if you buy expensive and nice things that you can't really afford. Yes, you can buy a few things you can't really afford to treat yourself here and there - but if you make a pattern out of it and constantly live above your means - you are in a downward spiral and sooner or later - you're gonna crash.

The video clip lives here <----------- Check Out Mr. Stupid

Pay Yourself First

I just don't understand people. In 1985 the average American saved 10.1% of disposable income. Disposable income is defined as all aftertax employment income minus all basic needs. Some might argue with that definition but it is hard to wrap your arms around this term because of the nuances you can create from playing with expenses. Some simply see it as "money I can spend or save after my bills are paid". Well, people today are doing a lot more spending rather than saving. The percentage of disposable income saved this year? Negative one-half of one percent! That's right. We've finally hit the point where folks are spending more than they're making. How? By racking up huge credit card debt and paying for other high priced items in installments. Look, some people just aren't going to save money - it's that easy - but others who want to don't know how. The first thing they should do is read "The Automatic Millionaire". The book goes into great discussion about "The Latte Factor". People in the author's class said they didn't have money to save. He had each person make a list of all their cash expenses for the entire week. He noted how much was spent on frivolous items and noted that if $5 per day ($150 monthly) could be saved and invested at 10% (the historical average of the stock market), over 30 years if left untouched it would grow to roughly $300,000. He called it the latte factor because of the number of designer beverages on everyone's cash expenditures.
Here's where the usage of "disposable" gets sticky to me. Car payments are included in monthly expenses. I'm not saying everyone should be driving around in the cheapest car on the market - but is your car costing you tens of thousands of dollars in retirement? Or better yet, is your car choice going to cause you great pain when it comes time to send little Johnny to college? Let's take a look. Let's assume your family needs 2 cars to survive. Let's also assume you just had a baby and you have 18 years to save for college. Even if you don't intend to pay the entire tuition, you would like to contribute. Who knows where tuition costs will be in 18 years? Would you think I'm crazy if I said the cars you decide to drive over the next 18 years could cost you $120,000 in tuition or retirement money? Let's say you have $700 per month to throw at your cars. I'll try to break these 3 examples down quickly but you can work out the math if you don't believe the numbers. If you choose to spend the full $700 per month every year (either by leasing or trading up/in every time a car is paid off) you will have saved $0 over 18 years. Many people choose to lease these days because you get to rid yourself of the car before problems start, you always have a newer car and it allows you to drive a more expensive car than you probably would have purchased. If instead the same $700 went towards buying 2 lower priced cars so that they could be kept another 2 years after payoff (while banking the $700 per month) and then repeating that cycle twice while little Johnny grows up - the saved money would accrue to roughly $74,000 over 18 years. And that's with not starting to save a dime until year 6 when the first set of cars are paid off. It's $33,600 of your money with your good friend compounded interest at work. Sure, you would have some repairs to pay for, but you would still come out way ahead. For a real eye-opener, let's say we stick with leasing but instead of leasing 2 $350 cars we lease 2 $250 cars. That will save you $200 per month over 18 years at 10% for a grand total of $120,000. Think about it! That's the difference between leasing a high-end Passat or a Honda Civic. It's the difference between a Lexus and a Ford Taurus. Sure, you can afford to drive a Lexus, anyone can...it's all about priorities. Also, I don't want to sound like I'm begrudging anyone that drives an expensive car. Some people make enough money to live in a nice house in a nice neighborhood, save more than enough money for retirement, save enough money for Johnny's college fund AND drive nice wheels. I'm just saying if you currently don't have enough money to have everything you want - why put the better part of your budget into your car? I used to have a neighbor who drove a brand new Toyota 4Runner and a brand new high-end Acura coupe. Nothing wrong with that...except they had lawn furniture in their house and slept on a mattress on the floor. I'm not kidding. It cracks me up when people try to guess what you make based on what you drive. I'm guessing Bill Gates doesn't tool around in a Hummer, but i bet there are thousands of guys that have $700 a month of disposable income and spend $600 of it leasing a Hummer. The sad part is, by the time you realize you better start saving money - it's usually too late.
You don't make $1 million dollars overnight. Most millionaires make it over the long haul by constantly saving their money. Also, I just used cars as an example. What if you drive a leased car that costs you $450 per month but you never go out to eat. Your neighbor may own a Ford Focus which costs him $225 per month but he spends $300 per month eating out every chance he gets. My thing is that most people would argue what their "real" disposable income is. I pay $80 a month for Direct TV and some people might think that's insane. That same person may smoke 2 packs a day at a cost of $240 a month. What is necessary? Who knows....but if you see what you are missing by not compounding these small monthly amounts - you may change your mind as to what you think is really necessary. When you get to be 50 or so and the kids start college or you want to retire because you're sick to death of your job - think back to all the money you could have saved had you driven that one car for 2 extra years, or not spent $100 a month on Starbucks, or not had the best cable or cell phone package or the 97" plasma TV. Don't feel too good about what you can afford...feel good about what you can save. Minus...point... five..... percent! Think about it. Sheesh.