Why The Spreads are Getting Wider

On Friday, the 10 year Treasury note fell to its lowest level since September 2005, 4.01%.  Typically 30 year fixed mortgages are tightly associated with the 10 year note.  As the 10 year Treasury moves, so does the mortgage rate.  But the gap between these two rates have widened substantially in June the difference between the 10 year and 30 year fixed mortgage was 2.22% last week as opposed to just 1.52% in June.
Why Did They Move Together To Begin With?
The reason they move together is because of perceived risk.  Treasury Notes are considered very safe investments.  The Federal government has never defaulted on its bonds.  Investors in mortgage backed securities assumed the same.  They thought people basing a security on individuals paying their mortgage in a timely fashion was a very secure investment. 
 

Why Is The Spread Getting Wider?
Uh…well…not so much.  With a foreclosure nightmare occurring right now, these mortgage backed securities are nowhere nearly as safe as the 10 year Treasury.  As a result the spread has widened siginificantly!  Risk = reward.
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Dollars & Sense Education – Raising Your Financial IQ!
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nicole@daseducation.com
215-499-3834

Interview By Nina Smith at BlogHer

Nina Smith published a 10 Money Questions Interview with me on Friday at www.blogher.org.  Enjoy!

Please contact Dollars & Sense Education to bring our seminars to your company or organization!

Dollars & Sense Education – Raising Your Financial IQ!
www.daseducation.com
nicole@daseducation.com
215-499-3834

Subprime Mess Only Getting Worse

So over the past year the subprime mortgage industry has gone straight down the tubes.  So what is on the horizon?  Much worse. 

This weekend’s WSJ had an excellent artice about the subject. Even more mortgage resets are coming due in 2008.  Bank of America estimes $85 million in subprime mortgages will reset in the first quarter of 2008, $101 million in the second quarter.  Falling home prices and tighter lending standards mean borrowers who can’t afford the increase have few options when it comes to getting out to the debt obligation.  The Mortgage Bankers Association estimates that 1.44 million homes will enter foreclosure in 2008, that up from 705,000 in 2005. 

The housing slowdown is emerging as a major issue in both the presidential and congressional races as this issue could push our economy into a housing fueled recession.  What will happen?  Only time will tell.   

Please contact Dollars & Sense Education to bring our seminars to your company or organization!

Dollars & Sense Education – Raising Your Financial IQ!
www.daseducation.com
nicole@daseducation.com
215-499-3834

Landing a Loan for Women Owned Businesses

A recent Entreprenuer magazine talks about women owned businesses and landing loans.  Dana Spain-Smith, a Philadelphia businesswoman, made some excellent suggestions.  Spain-Smith recently took an interesting approach when seeking a 3.5 million dollar loan.  She bid 3 banks against each other.  You must remember, banks are in competition for your business.  Everything is negotiable.  She ended up with a line of credit against accounts receivable and a loan against personal property.  She landed a lower than average rate with no prepayment penalty and no required deposit balance.

There is no fundamental difference between what works for women and men but sometimes out demeanor and sociological norms can create differences.  Women be aggressive and fight for the best terms.

Please contact Dollars & Sense Education to bring our seminars to your company or organization!

Dollars & Sense Education – Raising Your Financial IQ!
www.daseducation.com
nicole@daseducation.com
215-499-3834

Money Magazine: What Should You Tip?

Money Magazine did a poll in the December 07 issue of what you should tip for the holidays to the people who serve you throughout the year.  They sound fair to me…I would be curious to see what others think.

 Here were the results:

Mail Carrier $20
Hairdresser $20
Cleaning Person $75
Occasional Babysitter $25
Full Time Nanny $270
Gardener/Yard Worker $50
Newspaper Carrier $15
Garbage Collector $20

Please contact Dollars & Sense Education to bring our seminars to your company or organization!

Dollars & Sense Education – Raising Your Financial IQ!
www.daseducation.com
nicole@daseducation.com
215-499-3834

Last Week’s Roundup

Some great articles!

How To Put Your Personal Finances On Autopilot
http://www.bargaineering.com/articles/how-to-put-your-personal-finances-on-autopilot.html

Beating The High Cost of Weddings
http://www.getrichslowly.org/blog/2007/11/08/beating-the-high-cost-of-weddings-how-we-did-it-and-how-you-can-too/

Kiddie Tax Loophole Soon To Dissappear
http://www.freemoneyfinance.com/2007/11/kiddie-tax-loop.html

12 Ways to Save on Insurance
http://www.freemoneyfinance.com/2007/11/12-ways-to-save.html

Napoleon Hill: Six Ways to Turn Desire Into Gold
http://allfinancialmatters.com/2007/11/06/napoleon-hill-six-ways-to-turn-desire-into-gold/

How to Get Rich on 20K a Year
http://www.freemoneyfinance.com/2007/11/how-to-get-rich.html

Use the Rule of 72 to Figure Out Compound Interest
http://genxfinance.com/2007/11/07/use-the-rule-of-72-to-understand-compound-interest/

Your Secret Credit Scores
http://www.fivecentnickel.com/2007/11/06/your-secret-credit-scores/

Please contact Dollars & Sense Education to bring our seminars to your company or organization! 

 

Dollars & Sense Education – Raising Your Financial IQ!
www.daseducation.com
nicole@daseducation.com
215-499-3834

Know Thyself – What is Your Money Personality Type?

I have written a couple articles such as this one and this one on the psychology of money.  There is the MBA finance chick side of me who looks at sheer numbers, then there is the realist who says wealth building isn’t all about the numbers it is even more about personality and psychology. 

 SO what are the money personality types as I see them:

Slow and Steady Wins the Race - These folks are the ones that follow all of the rules.  They max out their 401Ks, IRAs, have 529s for their children, an emergency fund, pay their credit card bills in full.

Get Rich Quick - These folks really want to be rich but don’t have the discipline for long term wealth building.  So instead they typically try to build wealth with the “investment of the moment”.  Sometimes this strategy works, but most of the time it doesn’t.

I Could Be Hit By a Bus Tomorrow – These people are the folks that aren’t so focused on wealth building period.  Its just not on their radar.  They can range from simple to extravagant folks, the common thread being they are way more interested in living life than thinking about money.  Fortunately, most of them never get hit by a bus.  Unfortunately, this means they never planned financially for not getting hit by a bus.

Nervous Nellie - Nervous Nellie is a hybrid of Slow and Steady Wins the Race and Get Rich Quick.  Nervous Nellie is the type of individual who knows what the rules are: invest in Retirement Accounts, 529s, etc.  But gets really nervous when the market is unstable.  This is the investor the buys high and sells low because they think that the world is ending when the DJIA loses 5%. 

Broke as a Joke – This person is broke they don’t think about money because they are barely covering expenses.

I would love to hear your thoughts on this subject and see if any of you have identified other money personality types.  In a subsequent entry I will talk about how these folks should invest differently!

Please contact Dollars & Sense Education to bring our seminars to your company or organization! 

 

Dollars & Sense Education – Raising Your Financial IQ!
www.daseducation.com
nicole@daseducation.com
215-499-3834

WSJ: Is It Time to Consolidate Student Loans?

The Wall Street Journal wrote an excellent article today talking about why it is probably a good idea to hold off on consolidating your federal student loans until July 1, 2008.

Why Wait? 

Current Stafford loan repayment rates are 7.22%.  Alot of borrowers are eager to consolidate before their grace period is up to lock in the lower in-school interest rate in order to save .6%.  This translates to a rate of 6.625%.  But if the borrowers wait until July 1 of next year, borrowers would likely be able to lock in a consolidated rate of 6.5% or lower.

What Determines Federal Consolidation Rates?

The Education Department resets the interest rate on its Stafford and PLUS programs annually on July 1 using a formula based on the 91 day Treasury Bill.  Since rates on the 91-day T-bill tend to closely reflect the fed funds rate, the Fed’s recent moves to trim short termrates a total of 3/4 of a point should result in a lower interest rate.  Of course, you also risk rates rising.  But given the housing and credit crisis, that doesn’t look likely.  Though, you never know!

Please contact Dollars & Sense Education to bring our seminars to your company or organization! 

 

Dollars & Sense Education – Raising Your Financial IQ!
www.daseducation.com
nicole@daseducation.com
215-499-3834

Last Week’s Roundup!!

Here are some great links from last week!

JLP at All Financial Matters talks about: 

Index Mutual Funds or Exchange-Traded Funds? How About Both!

http://allfinancialmatters.com/2007/11/01/index-mutual-funds-or-exchange-traded-funds-how-about-both/

and 

A Question From a Reader: How to Calculate Taxes

http://allfinancialmatters.com/2007/10/31/a-question-from-a-reader-how-to-calculate-taxes/ 

At Money, Matter and More Musings folks were chirping about:

Things You Should Know About Percentage Traps

http://www.thetaoofmakingmoney.com/2007/10/31/536.html 

J.D. over at Get Rich Slowly discussed: 

A Brief Overview of Estate Planning Software

http://www.getrichslowly.org/blog/2007/10/31/a-brief-overview-of-estate-planning-software/ 

Jeremy at Gen X Finance breaks down:

When Owning a Home Isn’t Always All It’s Cracked Up to Be

http://genxfinance.com/2007/10/30/when-owning-a-home-isnt-always-all-its-cracked-up-to-be/

Meg at All Financial Matters explains:Millionaires Focus on Freedom 
http://allfinancialmatters.com/2007/10/29/millionaires-focus-on-freedom-2/ 

Please contact Dollars & Sense Education to bring our seminars to your company or organization! 

 

Dollars & Sense Education – Raising Your Financial IQ!
www.daseducation.com
nicole@daseducation.com
215-499-3834

The Golden Rule of Personal Finance

The Golden Rule is a fundamental moral principle which simply means, “Treat others as they would treat you.”  It is arguably the essential basis for human rights.  Similarly, in my mind there is a Golden Rule for Personal Finance.  Like the moral Golden Rule, it doesn’t encompass everything you need to know but unless you tackle it, the rest is moot. 

Golden Rule of Personal Finance:  You must earn more income than what you spend.

Sounds simple enough but so many folks don’t follow this rule.  Check out this link to an awesome skit on SNL.