Archive | Personal Finance RSS feed for this section

Real Estate: What is a Short Sale?

16 Feb

Ray: I’m going to keep this short and sweet.

A Short Sail or Short Pay is a situation where a home owner decides to sell their home for an amount less than what they owe. For example: John pays $100,000 for his home in 2007. In 2010, John decides to sell his home but the current market value is now at $70,000. In order to sell his home, John must conduct a Short Sale.

The catch is, the bank that is owed the money must approve John’s short sale attempt. Depending on the bank, John would typically have to provide a letter of hardship explaining why he can no longer make payments on his home, an income statement, and various other documents depending on the lending institution.

To begin the short sale, a home owner should contact a local Realtor to determine what options are available. A good Realtor will explain the process in full detail in order to help you make the best decision. You should also definitely contact your accountant to determine what tax ramifications a Short Sale may have on your reported income.

If you live in the Los Angeles, San Fernando Valley, or Inland Empire areas, please contact me for assistance with conducting a Short Sale. For all other areas, I can refer you to great Realtor within the Coldwell Banker network.

– Ray Hogan

626-628-5272

Advertisements

Ray’s Top Side Hustles – A Few Ways to Earn Extra Money

24 Jul

Ray: If times are hard for a pimp, then it must be extra hard for the ordinary working person. Money is tight these days and everyone is looking for ways to stretch their dollars. But as the great poet Sean Carter once said, “Whenever there’s a drought, get your umbrellas out because that’s when I brain storm.” By all means, use your own imagination to find ideas to make more money but here are some of mine…

1. Become A Security Guard – If you have the time, size, and the energy for it, then taking a part-time job as a security guard can be a great way to add some extra income. The hours are extremely flexible and the pay is fairly reasonable. You can find these jobs by performing a Google search for security companies in your area. Or, you can also approach local bars and night clubs and ask the manager if they are in need of security. You can expect to earn about $12-20 dollars an hour. If this is indeed something you want to do, you will also want to strongly consider getting a guard card to solidify your chances of getting work.

2. Vending Machines – For some reason, people love the idea of owning vending machines. First, you will want to buy new machines or machines that have been in use for a less than 2 years. Make sure that the machines are in great operating condition and that the prices can be easily adjusted. The typical vending machines are for Snacks, Beverages, or a combination of both. However, there are many other new types of machines coming out all the time. Plan to spend anywhere from $1,500-4,000 per machine.

Next, you will need to secure a location. In fact, you may even want to secure a location before you make the initial investment for the machines. Make sure that the location you choose has great traffic. Corporate offices, junk yards, school yards, the dentist office, etc. All these are great locations to set up shop. Avoid splitting any income with whoever hosts your machines. You are providing a service and they should be happy to have your machine there! Keeping your machines fully stocked will be the biggest challenge but if you’re in the right location with the right machines, you can easily add a few hundred dollars per month to your net income with a couple machines.

3. Become a TV/Movie Extra – This typically applies to people living in New York or Los Angeles where most filming takes place, but surprisingly there are many opportunities all over the US. Becoming an extra is fairly easy. Find an agency, pay a small association fee (maybe $60-100), and keep your cell phone on. When you do get called to make an appearance, show up on time! Taping can last from 4-12 hours so make sure that your schedule is open for filming. One more major thing to remember is NEVER talk to the stars unless they talk to you first! That’s the fastest way to end your Hollywood career. Extras usually earn about $60-200 per taping. Plus you get to tell everyone to watch the television really hard and look for the guy thats walking around in the background. But be careful. If you blink, you might miss your performance.

4. Become a Writer – If you have a talent for writing, you may want to consider using that talent to make a few extra dollars. Small and large businesses are looking for writers all the time. You can write for blogs, newspapers, magazines, scripts, grants, or even go as far as writing a book and publishing it yourself. For freelance writing, a great place to find gigs is at Craigslist.com or Elance.com. Depending on how well you write and who you write for, writing can be a very lucrative business. Some blogs earn writers more than $100,000 a year. And if you write the next Harry Potter, you can even become a Billionaire.

5. Buy and Hold Stocks -Out of all of these options, this is the only one geared towards a long-term perspective. Long-term investing is usually far better than short-term investing. With the economy in a down cycle, the rich man sees a great opportunity to buy stocks at bargain prices. Name your favorite company. Chances are, their stock price is much lower than is was 4 years ago. Now is a great time to buy stock in proven companies while their prices are relatively low. Plan to hold these stocks for at least 5 years. I strongly recommend that people begin their stock purchasing programs at Sharebuilder.com. I have used it for several years and it has helped me build a stock portfolio that will some day allow me to retire and move to Brazil to live my last days in the Amazon. But that’s another story for another time…

Consolidate Your Loans Now!!!

6 Jul

Note: None of the following should be taken to be professional advice on the subject matter. Before choosing any course of action, be sure to consult your school’s financial aid office, loan issuing agency, or the Department of Education’s website. This article contains information that the author has taken care to verify. However, be sure to do your own research and make the choice that’s right for you.

Seth
: Now that we’ve gotten that out of the way, Consolidate your loans NOW!!! In all seriousness, if you meet the requirements of the program, now is a great time to consolidate your federal student loans, including Stafford, Perkins, Grad PLUS and the Federal Family Education Loan. In addition to having federal student loans, they must be variable interest rate loans, generally, those are loans taken out before July 1, 2006. And this is why: as of July 1, 2008, interest rates have decreased for those loans that have not been consolidated by 3.01%. If you choose to consolidate, you will lock in a rate of 3.61% if you are in deferment, your grace period, or still in school (although if you are still in school you can not consolidate until your graduate). That’s down from 6.62% if you are in school, grace period or deferment, and 7.22% if you are in repayment or forbearance. Those rates are even higher if your loan was taken out (originated) before July 1998 (up to more than 8%!). Most importantly, private loans can not be consolidated in the federal program.

For those of you like myself who have already consolidated your loans, those loans are now at a fixed rate. If you consolidate in the future with other loans, the interest rate will equal the average of all the interest rates of your individual loans.

You should know that this rate is tied to the 91 day treasury bill so in the future it can either decrease or increase. From where I sit, now is a great time to consolidate. While the rate has been lower in the past, I figure if the economy starts to improve between now and next year, the rate should also go up. The cap for the rate is 8.25%, so the difference is pretty remarkable.

There’s a lot of information to digest, so let me direct you to the Federal Direct Consolidation Services. Good luck!

A New Kind of Slavery

16 Jun

Ray: From 1654 to 1865, America practiced legalized slavery. We are all very familiar with the history of African natives being forced into slavery in America. In fact, it is a fact in history that slave labor was the biggest determining factor of America’s economic success in those early years. But today, there is a new type of slavery that has allowed America to thrive economically by enslaving another group of people. The group this time however, is the American people.

The new form of slavery primarily thrives because of our willingness to be in debt. Because of debt, we often work at jobs that we don’t want to have in order to pay our debts. We turn down opportunities to travel and be free because of our obligations to our jobs. For many of us, employment is often a form of high-paid slavery.

Our worldly possessions can also enslave us. That new car note is actually a contract of indentured servitude (an indentured servant is required to work for a period of time specified in a particular contract). The house, your credit cards, and all of your other bills provide several ways in which you can enslave yourself. But these are all essential components to a quality life right?

Well, maybe.

Your quality of life depends on what you value. For most of us, if we choose to buy expensive toys on credit, then we are guaranteeing that we will work in order to pay for those items purchased. As previously stated, the work that we do isn’t always the work that we want to do. Thus, our freedom of choice becomes limited because of the debt we incur.

On the other hand, if we value our time and our freedom to use our time as we see fit, then is imperative that we learn to free ourselves from those things that require us to spend our time in an undesirable circumstance of employment.

To put this in perspective, I will reminded you of the great soul Mohondas Karamchand Gandhi. In an extreme case of gaining back one’s freedom from worldly things, Gandhi adopted a philosophy of “Simplicity”.

Gandhi was a very successful lawyer in India and in South Africa and sometimes purchased things of great value. Fortunately for mankind, Gandhi discovered that a person looking to be effective in social service should live a simple lifestyle. This meant giving up unnecessary expenditures (he cut his own hair, grew much of his own food, made his own clothes, and did many other self-sustaining works). By doing so, he maintained a level of freedom that allowed him to do the type of work that he wanted to do; not the work that he had to do.

For me, this has proven to be a very valuable lesson. I now think long and hard before I sign up for more debt. Some debt is necessary (especially if it is for the purpose of obtaining a useful education), but most debt is anti-freedom. Just imagine not having to pay any bills and keeping all of the money that you earn. What type of work would you really want to do? Where would you like to travel? What else would you do between the hours of 8AM and 6PM every day for 40 years?

Start freeing yourself from the bondage of debt today and fight as hard as you can to maintain your freedom. Gandhi did and used his freedom to liberate an entire nation. Imagine how much we could change the world if we were all really free?

Note: There are hundreds of books written about Gandhi. You should definitely pick up at least one of them. In my opinion, his thoughts and ideas are essential to human progress.

Taxes Part 2 – Can a Flat Rate Actually Work?

11 Jun

Ray: As Seth and many other people know, I am very passionate when it comes to the subject of taxes. It’s not that I hate taxes; I just want to be taxed fairly and efficiently. I don’t understand high taxes and extremely large government. I just don’t. Anyhow, here’s a clip from Hannity and Colmes of the Fox News Network. Please check it out and form your own opinion:

The Basics of Creating Wealth – Passive Income

10 Jun

Ray: The Bible says that, “A fool and his gold are soon separated.” That’s very true. All of us have done some foolish things with our money which have caused us to permanently separate from it. I know this because we all make mistakes. So I’ve decided to share a bit of knowledge about the power of wealth and how wealth can be obtained so that you won’t have to repeat the same mistakes again.

I would like to start by defining wealth and the reasons why so many seek to obtain it. Merriam-Webster defines wealth as an “abundance of valuable material possessions or resources.” To the average Joe, wealth usually means the possession of a great sum of money which can eliminate many problems associated with being broke or living from paycheck to paycheck.

But, allow me to introduce a different definition of wealth that many people agree with. Wealth, as I understand it, is being able to maintain a comfortable lifestyle using income that is generated with little or no work. Someone might say that’s obvious because if you were a millionaire then you wouldn’t have to work in order to sustain a comfortable lifestyle. Well, maybe.

I propose that you don’t have to be a millionaire in order to be wealthy. You simply have to have enough passive income to cover your living expenses. Passive Income is income derived from business investments in which the individual is not actively involved. This means that you are generating money whether you work or not.

There are countless ways to develop passive income. One of the more popular ways is to receive rental income from owning real state. You invest your money by purchasing a property and passively receive income from someone you rent it to. People also receive passive income from buying securities and owning businesses. I’ll get into more detail about those things at another time.

For now, it’s just important that you understand the power of passive income because this is probably the biggest component to establishing wealth. Build your understanding of passive income by thinking about different people who receive it as well as the different ways that you can receive it yourself.

While understanding that developing passive income is crucial to establishing wealth, it’s also equally important to understand the danger of passive expenses. Passive Expenses are expenses that derive from purchases or acquisitions that accumulate even when the individual is not actively involved. Common examples of passive expenses are house notes, car payments, cell phone bills, and cable bills. While some passive expenses must be obtained in order to buy investments, you should always be careful to avoid accumulating necessary passive expenses whenever possible. By doing so, you will be able to save and invest more money which will add to your accumulation of wealth.

At the end of the day, your goal is have far more money coming in than the amount of money going out. When your passive income becomes enough to pay for all of your expenses and still still leave you with money to save, then you have created wealth. How wealthy you become depends on how much money you are able to generate.

I read somewhere that Oprah Winfrey collects about 222 checks every month. How many streams of income can you create? Challenge yourself and grow wealthy.

Learn to Manage Your Credit Score

13 May

Seth: After months of harassment from my girlfriend, last week I took advantage of www.annualcreditreport.com and got my credit report. I paid the extra $7.95 for my credit score, and it was well worth it. To my shock and dismay, my credit score is in the “Not Good” bracket. That’s just above “Bad;” I suppose not being in the lowest category is a good thing. My FICO score is better than 19% of U.S. consumers. That sucks.

Credit is very important, Raysean wrote about that in an earlier entry. Knowing your credit score and what is in your report is helpful for several reasons. First, and most obvious, you know where you stand. Second, you will know how to improve your score. In the report I got from Equifax, I was told key factors that affect my score. They were:

Evidence of being seriously late or having derogatory indicators/remarks on your credit obligations is being reported on your credit file

The time since your most recent past due payment is too recent or unknown

The length of time your accounts have been established is relatively short

The proportion of balances to credit limits (high credit) on your revolving/charge accounts is too high

The only thing I could have prevented is the first two items. I do have a credit card from several years ago (September 06) that I never paid off. So that’s a bad thing. Other than that there aren’t any negative items on the report. So now I’m working on repairing my credit. In order to do so, you first have to know what your credit score is based on. Here’s what I found:

· 35% is based on Payment History – This means late payments and charge-offs. They look at the recency (how recent was this issues), the frequency (how often did you pay late payments) and the severity (how many days late). You see this is a huge part of your report. Typically, any payments 30 days or more late will show up on your report.

· 30% is based on How much you owe vs. How much is available to you – We all have different amounts of credit. According to my credit report I am over my limit on my installment accounts (student loans). I can’t do anything about this but pay down my balance, which is the best way to effect this item and improve my score.

· 15% is based on Length of History – Typically the longer you had credit the better. I have 5+ years of credit history. I guess this isn’t good enough.

· 10% is based Last Application for Credit –  Many new accounts in a recent period of time can hurt your score. I don’t have any new accounts since my last student loan from 2007 so that doesn’t hurt me. However, my combination of a short credit history and negative items dictates that I have some good credit as well.

· 10% is based on Type of credit you use. Variety (auto loan, personal loans, credit cards) is best, but remember the last bullet. Further, the more credit lines you have open, the better your chance to hurt your score so be careful. For the highest score, your report should include revolving and installment debt. Major credit bards are better than department store cards.

(Ray’s Note: Equifax, Experion, and TransUnion use slightly different algorithms when calculating your FICO score which is why you’ll see a difference between the reports.  Unknown to most people, each reporting agency is dominant in a particular region. For example, when auto dealerships check your credit, they usually check with only one provider because it’s cheaper than using all three. On the West Coast, that provider is usually Equifax.)

This is it. Knowing what my problem areas are, and what a score is composed of, I can go about rebuilding my credit and assuring a bright financial future for myself.

**************************************************************************************

Ray: What Seth did is something that we all have to do as soon as possible. Taking responsibility for your financial well-being is perhaps that greatest thing that you can do to avoid financial ruin in your lifetime. The benefits of having great credit are far too many to ignore.

Personally, I use www.myfico.com because they have a great dashboard and other features that make repairing credit very easy. When I was ignorant of my credit report and score, I used MyFico to eliminate several negative marks and boost my score by about 100 points basically overnight. It’s rare that someone would be able to do this, but by challenging all the negative marks and making phone calls directly to companies who had posted negative marks on my credit report, I was able to eliminate them all!

Like most people my age (24) the biggest problem that I can’t fix right away is the length of credit history that I have. That comes with time. I am more concerned with not missing ANY payments at all or being late on a payment by even one day. You can absolutely destroy your credit rating in one month but repairing it will take years.

Having a great credit score will lower your interest payments, get you qualified for mortgages and car loans, lower your auto insurance, and generally will present you with more opportunities to grow financially. Having a bad credit score will leave you with a debit card and a bunch of dreams. Start managing your credit TODAY. Make the calls, write the letters, and do whatever it takes to improve your score.

If you think that you’ll be late on a payment, call your vendor! Work something out. You’ll be surprised (as I was) to see how willing people are to work with you so that you can avoid negative reporting. Also, you don’t need to pay anyone hundreds or thousands of dollars to repair your credit. They don’t have any more negotiating power than you do. You’ll only be getting ripped off for these types of “quick-fix” credit services.

Email me if you want more advice on tips to improve your credit. Otherwise, check back in the ‘Personal Finance’ section of this blog for more tips in the future.