Budget 101

Budget 101

I was recently standing in line at my Credit Union where my wife and I have been members for some 25 plus years.  I started paying attention to the television monitor on the wall behind the counter where the cashiers are seated.  There are mostly news articles but every so often they make a mention about other services that are offered by the Credit Union.  The one ad that I am about to address is going to save my wife and myself and at this point at least 10 other families untold amounts of money. What I am about to tell you will most likely surprise you.  Paying attention to the monitor reading the article and following up on it will save my wife and me over $120,000.00 over the next 30 years. I know I still can’t believe it either.  You hear all this talk about home refinancing, but half the time you can’t believe the hype. 

A large percentage of home mortgages end up owned by Fannie Mae, or Freddie Mac (government agencies). The way it works:  banking institutions like Wells Fargo, Bank of America, Home Street, Credit unions, etc., promote their mortgage departments, and once they have a customer, they package a bunch of loans and offer them to Fannie Mae or Freddie Mac for sale.  There is a lot of money to be made over the term of the contract, just by looking at my savings and you know they are making more off of me than I am saving.  The problem for the smaller institutions is that they have to hold on to the mortgage for the length of the contract to realize the big profit.
By selling to the government agencies, they can make a quick sum for the sale and free their own money to keep financing homes.  What you need to know is that at present the interest rate is hovering right around 3.5%, so if you have a rate higher than say 5 or 6% you would save as much or more than I did.

There is a catch, you do have to qualify; make sure your mortgage is financed by one of the government agencies mentioned above (even if you are making your payments to Bank of America for example), and your income to debt ratio has to meet the requirement.  You don’t have to have positive equity but if you do it still works, this program is for people that are in trouble with their mortgage, but even if you are not you can qualify.  It’s worth checking out.
Just to tie this post to the blog theme, I will share something from the past.  The first home I ever bought was in Eastern Washington in 1971 and I bought it for $21,500.00.  The following are statistics for life in in the US (1971):

Cost of Living 1971

How Much things cost in 1971

Yearly Inflation Rate USA 4.3%, Year End Close Dow Jones Industrial Average 890 Average                                                         Cost of new house $25,250.00, Average Income per year$10,600.00 Average Monthly Rent $150.00 Cost of a gallon of Gas 40 cents Datsun 1200 Sports Coupe $1,866.00 United States postage Stamp 8 cents Ladies 2 piece knit suites$9.98 Movie Ticket $1.50

As we use to say back then put that in your pipe and smoke it.  Remember the best is yet to come….

On Being Wealthy

On Being Wealthy

I was born to a very loving and giving couple.  If I had a choice and could pick my own parents, I would pick the same ones.  My father worked hard and smart to provide for his family (he was and educated man).  My mother came from more humble beginnings, but you would be hard pressed to find a more caring person.  I know that my mother loved me from before I was born, to her last day on this earth.  I can say the same about my father, but he just didn’t show it like my mother did.  Matter of fact, I remember it like it was yesterday, I was 42 years old and had already crossed the security check at the airport in Ontario California on my way to board my return flight home, when my father said the words, “I love you son.”

I’d like to think that it wasn’t a big deal, but it must have been if I still remember the exact moment to this day. There again, this is material for another posting.

From my early years I knew what it was like to enjoy the better things in life.  Before there was pre-school as we know it today, or even Head Start, my parents made a decision that was beneficial to my future.  I was enrolled at the age of four into a prestigious private (pre) school.  That experience and exposure gave me a boost that benefitted me for the rest of my life.  I remember being treated very special, and even lovingly if that’s possible, while at the same time being taught discipline.  By the time I was enrolled in public school I was at least two years ahead of the other students.

Having had a taste of good or decent life has a tendency to drive you to maintain a certain level of comfort.  Life throws a curve at you once in a while that may knock you of course.  The trick is to get back on course as quickly as possible to maintain the momentum.  After my parents divorced (that’s what a curve is) my mother remained single for 3 years before she remarried.  That remarriage landed me in a farm style environment.  I turned lemons into lemonade, and learned all I could from the farm environment and came out stronger (getting back on course).  We are the sum of all of our experiences.

On being wealthy:  it doesn’t matter if you are worth, one thousand or one million dollars.  If you appreciate what you have, you are wealthy.  If you don’t appreciate what you have you will never be wealthy because you’ll never know when you have arrived!  Another word of wisdom is that budgeting successfully is keeping the three legged stool balanced.  One leg is incoming cash, second leg is how much you need to live on, and third leg is outgoing cash.  If you are running low on cash by payday you either don’t make enough (get a part time job or get a better paying job), or lower your living standard (you can’t afford your life style), perhaps you are spending too much on entertainment, or unnecessary luxuries, even helping others may be a luxury you can’t afford.  Bottom line is we are all wealthy within our means; we just need to appreciate what we have.  The best is yet to come…….