To List the House or Not List the House, That is the Question

We were sooooooooo close.

We were so close to listing the house.

We’d decided against a realtor and for a listing service, which would give us a realtor-quality listing that would stay up until we sold the house.

We’d started packing and put items in storage to make the rooms feel bigger.

We’d taken the photos of clean and de-cluttered rooms.

We’d snuck onto realtor.com looking at houses in Georgia.

We’ve even come up with a list of Twenty Things to Do Before We Buy a House.

We were one day away from listing the house when the floor – a.k.a. the economy, fell out from under us.

Banks aren’t lending money. Credit card companies are reducing credit limits, affecting credit scores for even those with excellent credit histories.

Car dealerships are closing because no one is spending money to buy cars, and banks won’t give car loans to those few who do.

Now we’re unsure what to do. If we find someone willing to buy our house they probably won’t be able to get a loan, at least until banks start lending money again.

And if we do sell the house Husband has to find a job in Georgia before we buy a new place. After all, no lender is going to give us a mortgage with no income. And in this economy advertising agencies are laying people off, not doing much in the way of hiring…

On the other hand, no one’s going to even want to buy our house if they don’t know it’s for sale. I’m also thinking that sitting on the market for awhile will not have the same stigma it has had in the past. Almost all houses are languishing, aren’t they?

So, what’s the smart decision? Do we list the house and take those risks? Do we put it on the market even though no one is buying and we’re uncertain about the future of everything?

Or do we wait, for our home value to decrease more, staying in a place we don’t want to be, and wait for things to get better while we sit here uncertain about the future of everything?

Stay tuned.

Financial Instability Aftershocks Affect Your Credit, Too

In the wake of the ridiculous goings on in the financial world you could see some aftershocks right there on your credit card statement.

Credit card companies are tightening their belts, and reining us in, too.  Doesn’t matter how long you’ve been with them, how good your credit is, how many payments you’ve made on time.  According to the Wall Street Journal they are starting to reduce credit limits across the board.

If you’re like me you’ve seen a credit limit of $3,000 balloon to a limit of $25,000.  I’ve never paid much attention, as my strategy of paying of my balance each month has meant that I don’t pay a whole lot of attention to my limits and interest rates.

Many people are seeing their credit limits slashed with little notice, and those like me who are not diligent about checking those parts of their statement may find themselves dangerously close to their credit limit, and dangerously close to those over-the-limit fees.   When’s the last time you looked at your credit limits?  That would be a very, very nasty surprise, wouldn’t it?

Not only that, because your buying power is reduced your debt to income ratio goes up.   According to CNNThe debt-to-limit ratio is calculated by dividing what consumers spend each month by their credit limit, and it’s a key component of credit scores. If your limit drops to $1,000 from $2,000 and you continue spending $500 a month, your debt-to-limit ratio immediately jumps from a favorable 25% to an unfavorable 50%.” That means it’s harder to buy that car or that house, making your life less comfortable and making it harder for our economy as a whole to recover.

This just keeps getting better and better, doesn’t it?

What can you do?  The Wall Street Journal article had some great suggestions:

1.  Reduce your outstanding debt. Bigger balances make consumers prime targets for credit-card companies looking to reduce credit lines, since the banks worry that you may not be able to pay your tab.

2. Watch the mail. When credit-card issuers lower credit limits, they must notify you. Typically, that will be done by mail (unless you’ve agreed to online-only notification). You should also review your monthly statement for changes, including a lower credit limit, interest-rate spikes and new penalties.

3 Check your report. Credit-card issuers review consumers’ credit reports for red flags, like late payments to other credit cards, a sudden buildup of debt or high credit-utilization rates. Check your credit report for free online at AnnualCreditReport.com. If it includes any errors, report them to the three major credit bureaus, Equifax, Experian and TransUnion.

4 Get online alerts. Ask your credit-card issuers if they offer online alerts that notify cardholders when they’re nearing their limit.

5 Shop around. If your credit limit gets slashed, don’t cancel your credit card. That will decrease your credit score. Instead, shop around for more attractive credit-card offers.

I’m going to add a few of my own:

6.  Check your account online at least twice a week. This  way you can have the latest updates, keep track of your balances and limits and catch errors early.

7.  Curb spending. Stay home, don’t shop.  Just buy what you absolutely need to so you have less to pay back.

8.  Pray. Whether you believe in a Higher Being, the power of positive thinking or your faith is in humanity, put your positive energy out there and pray.

Costco American Express Card Holders Can Get More Rebate Cash Back!

We got a lovely little piece of mail the other day that’s going to put money in my pocket, and money in yours if you took my advice and signed up for the TrueEarnings card from Costco and American Express.

Enroll in the program and spend $1,000 on non-Costco purchases and you will get an additional 1% cash back on every eligible purchase (up to $200 extra!) between September 1 and October 31st!

That means I’ll be getting 4% cash back on gas, 3% on travel and 2% for every other non-Costco purchase.

And you know what else? I don’t have to wait for my rebate check to receive the extra cash back. It comes as a statement credit to my account 6-8 weeks after the promotion ends.

You have to be invited to participate. If you’re worried that you may have mistakenly tossed your invitation go to http://www.americanexpress.com/costco1000 and you can enter your login and password to see if you’re invited.

There’s lots of fine print, so check that out, of course.

It’s a great deal for me. I hope you can take advantage, too!

The Most Financially Irresponsible Question Ever?

I was doing a search for a clarification on a homeowners insurance policy coverage issue and came across this question posted at Yahoo Answers:

Is there a homeowners insurance policy that covers every conceivable method of loss to everything?

Im looking for a homeowners insurance policy that will cover everything and with no deductable. We just bought a house, and im looking for a better policy. I live paycheck to paycheck and dont save a dime of money, it all goes to bills or payments. I would never be able to afford a deductable. Im looking for a policy that will cover every method of loss from flood to alien invasion to tornadoes to fire to war. If a storm hits and frys my $50 toaster, i want it completely covered with no out of pocket loss. If a tree hits our roof I want it completely covered with no deductable and no questions about how it happened. I am very tightly stretched with money and my entire lifestyle and state of life is riding on no unexpected emergency events that leave us with a loss. So now that you know what im looking for does anyone have any reccomendations?
Seriously?

Seriously?

I’m thinking someone posted this as a joke. I hope it’s a joke. I hope there isn’t someone out there who has literally no money for emergency expenses, who is stretched so thin yet still thought it a great idea to buy a house, and that couldn’t even replace their $50 toaster if broken.

Then again, with all of the stories going around lately I’m sure there are many people in the same circumstances as this person. A sinking ship indeed.

They want recommendations. I have plenty, but none of the important ones are about insurance.

I recommend you take a good, hard look at your lifestyle and cut it back.

I recommend you take the highest deductible possible on your insurance so you can have some money to build an emergency fund. No policy covers everything, and even if one were available buying it would be another bad financial decision.

I recommend that if your toaster breaks you replace it with a $10 K-Mart special.

I recommend that you declutter your life and make some money selling that clutter.

I recommend that you get a financial advisor that isn’t reading Yahoo Answers.

I recommend that you get a second job.

I recommend that you wake up and start acting fiscally responsible before you wind up either homeless or dead from the stress.

And I didn’t even mention the spelling and grammar. No use piling on…

Oy. Someone please tell me it was a joke.

Free Yourself

Last night was the first night of Passover, the Jewish holiday where we celebrate the exodus of the Jews from Egypt and their freedom from slavery.

As I was sitting at our Seder last night I started thinking about slavery and its many forms. There’s the type of slavery that the Jews experienced in Egypt and that African Americans experienced right here in the USA. Insidious and heinous, these types of slavery are not choices, not voluntary. The slaves had little or no control over their lives. A horrible way to live…

Then I started thinking about other types of slavery. Slavery to a job or career. Slavery to debt, or weight, or fashion. Slavery to keeping up with the Joneses, or philately, or being right. Slavery to perfectionism, or isolation or caffeine.

These types of slavery are different because we’re slaves by choice. We started it. Only we can take back the control we’ve always had and choose to make better, healthier choices.

There’s a difference between enjoying something and being a slave to it.

Is there anything you’re a slave to? Well, this is Passover. Whether you’re Jewish or not you can still choose to be free from something that has control over you. Free from this moment on. Make your own emancipation proclamation.

Free yourself today. I am.

Twenty Things to Do Before We Buy a House

I’ve spent lots of time thinking about selling our home here and moving to another state. The market is worse here than almost anywhere else in the country (we also boast having the highest foreclosure rate – don’t be jealous!), so it doesn’t look like it’s happening anytime too soon.

Still, it’s good to have a plan, and I have plenty of time to come up with one.

When Husband and I are finally ready to start looking for a house in our new home state there are a few things we will be sure to do, some of which we didn’t do in out first home buying process.

Before We Start Looking

These are things we will do before we actually go see any houses.

1. Familiarize ourselves with the area. We are still debating on whether or not to rent for at least six months first. I know it’s a good idea, but the thought of moving and doing it all again six months or a year later is so unsavory. On the other hand, it would give us time to really know the area, and not have to rely on the recommendations of friends and family whose preferences may not be the same as ours.

2. Know our credit score. We’ll be making sure our credit reports are accurate. We’re not planning on getting pre-approvals, as we don’t want anyone pulling our credit (and thus lowering our credit score) until we’ve chosen a lender. By knowing our score and income, and given our complete lack of debt at that point (our only debt is the mortgage on our house here), we can get a good idea of what interest rate we will realistically qualify for, and what kind of mortgages are available to us.

3. Know how much house we want to buy. We are huge proponents of living below our means, and just because a lender is willing to lend us $300,000 doesn’t mean that’s how much we want to borrow. Our goal is to take the equity (falling every day) we have in our current house and try to keep our mortgage payments about the same as they are now. Our mortgage is currently 12% of Husband’s income, but we know we’ll be taking a pretty big salary cut when we move. We’d like to keep the mortgage at 25% of his income or less. We won’t know our exact numbers until we sell this house and Husband gets a new job.

4. Compile a list of requirements. Our list is broken down into Must Have, Preferred and Wishes. We Must Have at least 3 bedrooms, but a 4th is Preferred. A Den or other Bonus room is one of our Wishes. So is having a laundry room on the second floor. You get the idea.

5. Hire a buyers agent. This is one of the most important things we’ll do this time that we didn’t do last time. There are seller’s agents, buyer’s agents and dual agents (represent both sellers and buyers). When buying a home I’m going to have a buyer’s agent. A buyer’s agent is ethically required to do what’s in our best interest in the real estate transaction. They represent us and only us, and cannot be in collusion with the seller and/or his or her agent. We won’t be afraid to sign a non-exclusive contract, but we’ll be sure to read and understand it first. An experienced buyer’s agent is going to understand the market, know where the bargains are and know how to whittle 1000 possible listings down to the five to ten that most meet our requirements. They won’t try to push their own listings on us; no trying to fit a square peg into a round hole. That will save us tons of time, tons of money, and tons of stress.

6. Do our own research. We’ll look on the internet for information about the neighborhood, schools, crime. Sites like Homefair are chock full of useful information. We’ll also check the property appraisers website to get an idea of property taxes in the area we’re looking. Some areas (like the one in which we live) give homestead exemptions and longevity discounts that can make the current owner’s taxes artificially low, so we’ll want to make sure we’re getting an accurate picture of the taxes we’ll have to pay.

7. Get insurance quotes. They won’t be accurate, but if we can get an agent to give us an idea of the rates for the area we’re considering and the types of policies we’ll need (i.e. is it a special flood hazard area, necessitating flood insurance?) we can use the information as a factor in our decision.

Items to Bring When Looking At Houses

1. A Scorecard. We’ll use our Required/Preferred/Wish lists to make a scorecard for each house to help us keep track of the houses we’ve seen and for comparison purposes later.

2. A digital camera, an extra data card and extra batteries. We’ll take pictures of the neighborhood, the outside, views from the front and back doors, interior features we like, interior features we don’t like.

3. A cell phone charger. We can use this small electrical appliance to test electrical outlets. Oh, yes.

4. A tape measure. Will our furniture fit? How much wall space is there? How big of a refrigerator can I buy for the space? All good things to know.

5. Bottled Water. I don’t want to waste time having to stop for drinks.

6. Hand Sanitizer. I’m allergic to cats. And if a house looks dirty I’ll definitely want to use some. Blech.

Before We Put An Offer In

We hope to narrow it down to three houses, depending on the market and what’s going on with it. In some cases we may do these things after we put in the offer, but only if we have sufficient “outs” built into the contract.

1. Visit the neighborhood at different times of day. A neighborhood that seems quiet at 11am might transform into a noisy, motorcycle club and roving-teen-filled mecca at night. We’ll check out the neighborhood at random times of day -and week – to make sure it fits with our preferences. Another thing we’ll do is look for all of the ways to access the neighborhood so we can see the surrounding areas and any potential problem areas.

2. Talk to our prospective neighbors. We’ll go up and knock on the door. It’s not a time to be shy. These people will be living next to us for many years to come, and if they open the door and clouds of marijuana pour out we may want to reconsider our choice. You may not. Different strokes. We’ll ask about crime, difficult neighbors, renters, worrisome animals (a friend lives next door to a menagerie of very stinky, more-comfortable-on-a-farm-than-in-a-subdivision-type animals). What do they like best about the neighborhood? Worst?

3. Do more of our own research. We’ll check out the property appraiser’s website to get information about taxes and home sale prices. We can find out how many times the house has changed hands and how much was paid, and lots of other useful information that’s all available for free. Knowing how much someone paid for a home can be extremely useful when negotiating price.

4. Check with the city to see if there are any pending land use changes. A good friend bought a large home on a very nice piece of land, only to have a huge chunk taken away under eminent domain for a sewage system. The pending plan would have been useful to know before buying, methinks. The forty acres of woods behind our dream home could wind up being razed to make way for a WalMart. Zone changes happen, but we at least can protect ourselves as much as possible.

5. Check to make sure any renovations have received the proper permits and inspections. I know several people who were fined and/or had to rip out renovations, wiring and plumbing that were done without proper permits and were not up to code. If the homeowner can’t provide proof we’ll contact the city. If not permits were obtained that will affect our offer.

6. Check to see if there is a Homeowners Association. If there are, what are the fees? What services are provided for the fees? We’ll get a copy of the community rules, and decide if we can live with them. Is participation compulsory? My sister’s community has several homeowners refusing to pay their share, and the last treasurer embezzled funds. Oy.

7. Bring in the expert. Before I bought my current house I brought my stepmother (the most critical person I know) and my best friend (the most observant person I know) to get their opinions. It was my first house and I was nervous about taking such a big step. Next time we’ll bring a friend who is a building contractor to see the house, just to get an opinion on the construction and any issues we might have that way.

I hope there’s time to do all of these things. The market and other factors will dictate if we’ll get to each step, but I hope we do. Once the offer is accepted and we have a deal we’ll of course have lots more to do, which will be the subject of another post.

Waking Up Is Hard To Do

Gather Little By Little has invited bloggers to share their moment of financial epiphany. I hope you enjoy it much more than I enjoyed living it.

I’ve never been in serious debt. It’s always scared me waaaaaaaaaay too much.

My parents divorced when I was six, and while my Dad went on to make a very comfortable living my mother…didn’t. My Dad was very good at paying his alimony and child support, but my mother couldn’t hold onto money if it was glued and duct taped to her hands. That’s not unusual when you’re bipolar, as she is.

She gave away literally tens of thousands of dollars over the years, and there were times when our electricity and water were turned off. Eventually she did make a good living, but her debts mounted until she was forced to seek bankruptcy. Today she has about two nickels, and her golden years are lived on Social Security and the love of my sister and me.

Just because I didn’t have debt doesn’t mean I was good with money. I had credit cards because college students are always inundated with offers. I was even pretty responsible with them, never keeping a balance of more than a couple of hundred dollars. I had a car and my first ever loan, and things were okay.

Then I got my first well-paying job, and it was in New York City, no less! I left my car with my Mom with the agreement that she would make the loan payments ( is that you smacking me upside the head?). I worked sixty hour weeks and got lazy about paying my bills. It wasn’t that I didn’t have the money, I just kept procrastinating paying them.

By the time I quit that job I was exhausted, emotionally shattered (due to a different-yet-related family emotional blow), unemployed and had racked up a large number of late payments. My credit was a mess. My credit card companies no longer wanted me, but I did manage to pay off my car. I went through a year of really rough times, working an icky job and watching my mother sink into the mother of all depressions while fighting my first ever real one myself.

My financial plan during that time and the following couple of years was to simply pay cash for everything. It’s not like I had much of a choice.

Then, about a month before my twenty-ninth birthday, I woke up and thought to myself, “Holy s&*t!! I’m about to turn twenty-nine and I have nothing to show for it! Where did my twenties go???”  No boyfriend, no home of my own (I was renting a room), no non-college furniture (papasan, anyone?), and no good credit.

I was still waiting for my real life to happen, but it had been happening without me.

It was time to grow up.

So I did. I got responsible. I opened a secured credit card and paid the balance every month, faithfully. The only time I carried a balance was if I had a major purchase (airline tickets, tires), and that balance needed to be paid within three months or the purchase did not get made.

JC Penney had not abandoned me (then again I think they’d give a credit card to a corpse), and I rewarded them by shopping there and using their card. And paying the balance, faithfully.

Within a year I had improved my credit, gotten several raises, rented my own place, furnished it with new, adult furniture and found a boyfriend. Eventually the secured credit card offered to un-secure itself, and at that point I applied for a standard card and got it.

I’ve not carried a balance on a credit card in over ten years now. My credit score is in the highest range. I own my own home, have a wonderful husband and son (with whom I stay home) and no debt other than my mortgage.

Life is good.

Costco’s American Express Rebates Get Even Better

I’ve never applied for an American Express card. I refuse, on principle, to pay for the privilege of having a credit card. My agreement to carry a card means the issuer gets to charge the merchant a percentage of my total purchases. They don’t need – and won’t get – $50 a year from me, thankyouverymuch.

Husband, though, had no such principle. He already had a card when we got married, and after I explained my principle to him he agreed that we would cancel that card before renewal.

That isn’t what happened. Instead, American Express teamed up with Costco to offer a no-fee Costco American Express. As long as you were a Costco member you could switch your standard AMEX card over, get your annual AMEX fee waived and get up to 1.5% (it starts at .25% and increases in steps based on total purchases) back. Additionally, you no longer had to pay the card off every month (which is irrelevant to us, as another principle of mine is to never carry a balance). I can’t tell you the interest rate or how it compares to other cards (see never carry a balance principle).

It also gave me an opportunity to use a credit card at Costco, since the only card they accept is AMEX.

Switch the card over we did. We also added me as a user, and believe me when I tell you that mine sees much more action than Husband’s. Since we put everything (including cars) on our credit cards to take advantage of rewards, it’s a nice sum at the end of the year. The rebate is in the form of a check that you must use at Costco, but if you don’t use the entire amount they give you the cash back. Last Christmas’ purchase of Husband’s $4000 Mac gave us a nice bonus this year, which went directly into savings (well, after I bought us some nice steaks).

Today I went to Costco and discovered that now Costco and AMEX have an even better deal. Their TrueEarnings card, previously available only to business members, is now open to all. What’s so great about it? Well, it bumps up the rebate percentages on gas, restaurants and travel.

We’re all trying to save money at the pump. The new TrueEarnings card increases the cash back to 3% back on gas, adding even more value to a very good deal. Today’s Costco gas price was $3.09, a full ten cents cheaper per gallon than the other stations in my neighborhood. That 3% cash back means my true price per gallon will be $3.00. Horrible, but not as horrible as $3.19 …

They are also offering discounts of 3% for restaurant dining and 2% for travel. Another great difference: with the TrueEarnings card you get the maximum rebate from dollar one. That makes a big difference right there.

So, if you have a Costco American Express, or any American Express, call now to get switched over to TrueEarnings. If you don’t already have an American Express, call and get one.

And if you are one of the unlucky ones to not have a Costco within a reasonable driving distance (sorry, PaidTwice!), you might consider moving.

Update 8/29/08:  Check out my post about how you can possibly save even more through the end of October: Costco American Express Card Holders Can Get More Rebate Cash Back!

Saving and Spending and Everyone Wins

My husband is a production director/art director/graphic designer. He has a full-time position and does occasional freelance jobs on the side. We live fairly frugally well on his salary, but those freelance jobs allow us to have some extras, take frugal vacations and let us do some saving. Living on his income alone just doesn’t leave room for too many extravagances, or for saving. I love that we have that source of potential income – there certainly weren’t any freelance opportunities for me when I was an insurance agent.

The freelancing made our purchase of his new computer possible, and sensible. The original plan was to have him earn the money ($4000!) freelancing before the purchase. He’d earned nearly half when I decided to take money out of savings and get it for him for Christmas. He still needed to find the freelance jobs to pay back savings, but at least he’d have the machine in the meantime. Besides, he works hard for us. He deserved it.

I suspected that once he had the computer that his previously dogged search for new clients would falter, and I was right. The only dent he’s made since Christmas in the outstanding balance that he “owes” savings is the $200 credit we got from Apple after he called to complain about the better (and less expensive) system they released just a few weeks after I bought his. I’ve not been upset about his lack of motivation, but I’ve noticed it.

I started bringing in a few jobs myself. A few weeks ago I reconnected with an old friend, and he’s asked us to do his website. Another ex-client of mine called this week looking for a logo for a new company she’s forming. It doesn’t matter who brings in the business, as long as it gets brung. Neither are huge jobs, but they will chip away at that total all the same.

Then, yesterday, it looks like he landed a very lucrative video contract. This would pay off more than twice the balance, plus it has the potential to become a semi-regular gig. This is great news for us, if it pans out. Still, I’m not counting my chickens before they’re hatched.

Tonight we were discussing the possible new job, and we had a little disagreement about what to do with the extra money. He wants to spend it. He works hard for us, and he really doesn’t ask for a lot (but he always gets it, even if he has to wait a bit). Also, he never asks me for an accounting of what I spend money on (though he does get the highlights, and we always discuss any purchase over $100).

I want to save it. Even though we have no debt besides our mortgage, we had a few big expenses late last year that chipped away some of our savings. Additionally, we’re looking to move, and I’d like to be able to pay cash for our next car the way we did with our last two.

We decided that we’re both right. So, he’ll take some of the money to do whatever he wants with (please, no Slurpee machine!), and the rest would go into savings.

Even though I’d rather put it all in savings, I understand that it’s important for him to see some fruit for his labors. Even though he’d like to go on a man-toy shopping spree, he understands that it’s important for me to feel secure in our financial future. We found a way for us both to win.

Hot dog!

Special Mid-Day Deal of the Day

This is a special Deal of The Day, posted in the middle of the day because it’s only good today…

Until 8pm (eastern) today only, download a free copy of the Suze Orman “Women & Money” book from the Oprah website. Those familiar with Orman know her as the self-help guru of getting out of debt and setting a path to financial freedom. Available 02/14/2008 only.

Free is good!

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