Four Rules Of Thumb That Are Thumbs Down

For many years I have seen articles galore in the major magazines giving consumers “rules of thumb” about making financial decisions.   In a society today where we want to get all of our information in sixty seconds or less, many of these magazines can talk one week about five dollar meals to make and then the next week discuss major financial decisions to make in your household.   I’ve never really been a big fan of “rules of thumb”, so here are four major financial “rules of thumb” that I am simply thumbs down on when it comes to making smart money moves.  Rule Of Thumb #1- 2% Difference In Interest Rate To Refinance –   Many popular magazine and newspaper articles will suggest that you generally shouldn’t consider refinancing unless the difference between the new interest rate and your old interest rate is 2%.    This “rule” makes very little sense to me. What you want to be considering are a handful ...

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How To Pick A Credit Card

We often pull out our credit cards during this holiday season much like a Ninja warrior would unleash their Samurai sword from its sheath.   Credits cards can be our friend or our foe depending on how we choose to use this weapon.  During this peak month of shopping, every store you purchase merchandise from will tempt you with a big discount at the cash register to get a store card Johnny on the spot.  I’m not a big personal fan of carrying revolving credit card debt, and I don’t recommend it is a habit you get into within your financial life.  Going to work every day to pay obligations can lead to a high amount of stress.  Credit cards, when used appropriately, can actually help you in the positive column by potentially rewarding you with extra cash back, frequent flier miles, or some type of point structure to redeem prizes behind door number three.   So, how do you actually pick ...

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Three Ways Credit Card Companies Can Trick You

When the Dodd-Frank Wall Street Reform and Consumer Protection Act was put into place, credit card holders were supposed to benefit from the new regulation.    Consumers would receive new notifications for rate fee increases, statements would inform consumers on how long it would take to pay off balances, and credit issuers were required to mail bills at least 21 days before the due date.     Now that some time has passed since the Dodd-Frank Act, consumers are still struggling with all time high levels of credit card debt and the fine print coming from credit card companies are smaller than ever.   Here are three things you should keep an eye on so you don’t get stung by the credit card companies. Late Fees– Late fees are a big source of ways that credit card companies earn money.  Since many of us pay our bills through automatic payment, you should make sure you pay your credit card bill a few days before ...

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Take The Lump Sum Or The Pension?

You have spent 20 or 30 years working for the same company and now it is time to retire.    You have put money away in your 401(k) and some other savings, but your really large asset is the pension plan where money has been put away for you all of these years.     Your human resources or benefits department sends you this large packet of information telling you what options you have with your pension.   Unbeknownst to you, they tell you that you can either get one check in a lump sum or they offer you various options if you choose a lifetime pension.  So, what is the best direction to take with your pension plan? Part I- Taking The Pension The first option you have is to take the pension.   One of the things to consider up front is that taking the pension allows you to remove the stress of ever having to manage the money.  Essentially, you are turning ...

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Should I Refinance My Mortgage?

These past couple of years many clients have asked about whether or not they should refinance their mortgage.    Along with people who have never refinanced, those that did even 18 months ago may be licking their chops to do the tango for another refinance in 2012.  For the week that ended December 23rd, the 30-year mortgage rate fell to 4.05% which was the lowest in 60 years according to HSH Associates which is a mortgage data firm.    The rates have gotten better in the jumbo market for those with a mortgage above $417,000 as well, but if you are below that number here are some considerations about whether a refinance is right for you. 1.) How long will you live in the home? –   One of the first questions you need to assess is how long you think you will stay at your current residence.  Or, if you leave the residence will you decide to use it as a rental ...

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There is a reason 20% down should be required!

For many years, the rule of thumb for first time homebuyers was to put 20% down when you bought your first house. Over the past decade we saw that rule pretty much fade away. Attracted by no money down loans, it was easy to qualify to get into a home that was likely to be several hundred thousand more in value than you could probably afford. ...

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Focus on the purchase price . . . not the payment.

The other day, my mom called me up from New Jersey and she was shopping for a car. She told me over the phone what she thought was she could afford on a monthly basis for a payment. That’s when I stopped her and said, “Never tell the dealership what you want your monthly payment to be when you negotiate a car price.” If you talk about monthly payments at the car dealer, that is when you get yourself in a trap. ...

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