February 2012

Monday, February 27, 2012

Welcome Consumerism Commentary Readers!

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Welcome to My Personal Finance Journey! If you are new here, please read the "About" or "First-Time Visitor" pages to find out more about us. If you would like to receive free updates on articles like this by email, then sign up here or you can subscribe to the RSS feed. Also, check us out on Twitter or Facebook. Thanks for visiting! Keep on learning!
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guest posting, Permanent Portfolio, investing strategy, asset allocation, Harry Browne, gold, investing in gold

Click here to enter my free $141.20 giveaway for a chance to win 5% of My Personal Finance Journey blog income and give another 5% to a charity of your choosing! Deadline to enter is February 29th, 2012.

Welcome Consumerism Commentary readers! Thanks so much for stopping by my site by way of the my guest post today over at Flexo's blog listed below. As the picture to the right shows, I'm very happy to have you here! :)

Can You Use Harry Browne’s Permanent Portfolio in Your Own Investing Strategy to Beat the Market?

If you're stopping by my site for the first time, I just wanted to give a little guide towards what I offer here, since information overload can occur quickly and time is our most valuable asset.

To introduce myself, my name is Jacob. I started this site back in January of 2010, and since then, have poured my heart and soul in to the site to produce a product I am proud of and I think adds value to the world. You can read a little more on my background and even see a picture of me on the "About" or "First-Time Visitor" pages to find out more about us.

WHAT I WRITE ABOUT HERE AT MY PERSONAL FINANCE JOURNEY

In short, I like to offer actionable personal finance advice with the goal of achieving long-term success.

Specifically, I really enjoy writing about the following areas (I've also listed several posts related to each topic in case you're interested in reading more):

Long term investing and asset allocation strategy analysis

Deciding how to prioritize new funds as they come in to various spending requirement areas

How to develop a lifestyle of frugality and live according to your life dreams and life values

Balancing Frugality with Fun

ARTICLES SIMILAR TO MY GUEST POST TODAY AT Consumerism commentary

Additionally, if you liked the theme (investing strategy / asset allocation analysis) of the guest post I wrote for Consumerism Commentary today and are interested in similar posts I've written in the past, you might want to check out the ones below:

WAYS TO STAY IN TOUCH WITH NEW CONTENT

If after sampling some of the content above you think that my posts will add value to your life, there are many easy ways to stay in touch with new material when it goes up! See below for details:

If you would like to receive free updates on articles by email, then sign up here.
Or, you can subscribe to the RSS feed.
Also, follow/like our pages on Twitter or Facebook.

10% MONTHLY BLOG INCOME GIVEAWAY

Also, each month, I give away 10% of any income I make from this site, with 5% going to blog readers and the other 5% going to a charity selected by the grand prize winner. You can read about all of the details by clicking here.

So far, we've given away:

Current total given to charity = $334
Current total given to blog readers = $345

If you want to enter in to the February 2012 giveaway for $141.20, click here. It ends February 29th!

Thanks for visiting! Keep on learning!

***Photo courtesy of http://farm1.static.flickr.com/47/173590997_4f6930be15.jpg

Saturday, February 25, 2012

The Importance of a Good Credit Rating

identity theft, credit scores, credit report, credit history, credit card debt, unsecured loans

According to a new report by Avivia Family Finances, the average family owes £7,944 ($12,500 USD) in unsecured loans on credit cards, loans, overdrafts, store cards, etc. This figure represents a huge jump from the 2011 level of £5,360. It also equates to approximately 32% of the average per capita net annual income in the UK.

The Importance of Keeping Track of Your Credit Report/Score

Any loan you take out, no matter how small, is recorded on your credit history for a sizable amount of time. Furthermore, how and when you pay your debts off is also registered. Failure to make payments on time and in full results in a poor credit rating. But how do you know what your credit rating is? Have you ever even told yourself, ‘I need to check my credit’? The answer is probably no. Most of us don’t think about our credit rating until we are refused credit based on its result. However, by this point, it is too late for you to do anything about it, at least for the loan you are trying to acquire at the time.

Keeping up to date with your credit score, which will fluctuate over time, is essential if you want to be offered the best interest rates, loan deals, mortgage offers promotions and products. A poor score means you won’t get the loan you want and worse still you might be refused a mortgage so you can’t get that house of your dreams. You can check your credit score online from sources such as Credit Expert on the check my credit link. New customers get a 30-day free trial, which includes a report of your full credit history as well as text messages or emails if/when your credit rating changes.

The Threat of Identity Theft

Your credit rating will change if you miss or under pay payments or conversely, if you pay off all of your debts. Therefore, you are the one in control of your credit report. However, identity theft is a growing problem throughout the globe, and identity criminals are using ever more advance methods of stealing your personal information and using it for their own financial gain. They have no qualms about running up huge debts under your name, and this will obvious have a detrimental effect on your credit rating.

However, on average it takes 15 months for a person to find out they have been a victim of identity theft. This is why regular checks of your credit history are such a good idea. The sooner you find out about identity theft, the sooner you can act on it and do something about it. You can find more information about identity theft on the Crime Stoppers website.

How about you all? How often do you check your credit report and/or score? What service do you use to check it? Do you have to pay a fee, or do you view it for free?

Are you actively doing anything now to protect yourself from identity theft?

Share your experiences by commenting below!

Jacob's Thoughts - Listed below are my random thoughts as I was reading this article.

Good post here. It's always worthwhile to get a reminder every once in a while about remembering to check my credit report/score occasionally.
Right now, I probably check my credit report less than I should (once a year is generally how often I check it). When I do check it, I do so for free using AnnualCreditReport.com. Unfortunately, you can only view your credit report (not score) for free once per year. So, if you want to check in more often, you have to find another paid service to help you. But, they are easy to find.
I was also recently exposed to a service that claims to let you check your credit score for free - Credit Karma. However, one of my fellow blogging friends (Wealth Informatics) pointed out that the score reported on Credit Karma is not your actual FICO score, but rather something called the Transunion TransRisk score. The problem with using this credit score as your sole source of information is that not all lenders will use this score when assessing your ability to lend/repay money.
Regarding identity theft, this is becoming more of a prevalent problem in today's society.

Previously on my site, I described a list of 4 things a person can do for very little money to help protect themselves from identity theft.
Two free and effective things included on this list were placing a free fraud alert on your credit report every 3 months and to Opt out Pre-Screen from receiving as much junk mail (which contains your personal identifying information on it).

***Photo courtesy of Image: David Castillo Dominici / FreeDigitalPhotos.net

Monday, February 20, 2012

Carnival of Retirement # 7 - Retirement Statistics - February 20th, 2012 Edition Edition

Welcome to the 7th Edition of the Carnival of Retirement. If you want to submit a post for next week’s edition, please use the submission form. Next week’s edition will be hosted by Money Reasons.

Retirement is a long-term game. There are so many things you need to do to prepare for retirement, and it’s not just saving and investing. Of course, having a great retirement portfolio is best, but to get there, we need to live within our means and build wealth along the way. This edition includes many retirement articles along with posts that will help us get there. Enjoy these great posts from around the Internet!

Also - since this is the Carnival of Retirement, I've added in several statistics that describe the current retirement landscape in the United States. Looking at the current picture, it seems that retirement is a topic that needs to be taken very seriously if people want to live well in their 'golden years.' So, it's definitely good to have a carnival that brings this topic in to the limelight.
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Retirement Statistic # 1 - Currently, 35% of people over the age of 65 rely in an almost full capacity on Social Security alone for retirement needs.
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Top 3 Editor's Picks

1. Kacie from Sense to Save published How much should you save with each paycheck to reach retirement goals?, saying, 'Will saving 10-15% for retirement be enough for you? Or, say you're maxing out retirement accounts, but got a later start. Will that be enough? Calculate how much you'll need to save with each paycheck to hit your nest egg target.'

2. MMD from MyMoneyDesign published Which is Better – Points or No Points on Your Mortgage?, saying, 'Will buying points when you get a mortgage or refinance save you a lot of money, or should you pass on them? I’ll show you how to calculate the difference and share my Excel worksheet to help you decide for yourself!'

3. A Blinkin from Funancials published Loyalty is for Losers, saying, 'Remember years ago, when you could walk into a bank or a bar and they would greet you by name? If you visited an establishment enough, you would be known as a regular. This is not a desired outcome and here is why.'

Note from Jacob - This is a cool post because it definitely has been my experience that in the journey to retirement (whether it be working at a company, the bank/brokerage to accumulate retirement savings, or where to take out insurance policies), you almost seem to be indirectly penalized by staying in one place. For example, in my experience, one of the quickest ways I've seen to get a raise/promotion is to switch the company you work for. In addition, I've seen that if you stay with the same bank or insurance company, your rates tend to increase year to year (or you have fees tacked on). However, if you switch banks/insurance companies, you seem to get an immediate price decrease.

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Retirement Statistic # 2 - In today's society, each retired person's benefits are contributed to by 3.3 workers, down from 16 workers per retiree in 1950.
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And, listed below are the rest of this week's great submissions! Enjoy!

Dr Dean from The Millionaire Nurse published A Million Bucks? In My 401K? Ya Gotta Be Kiddin!, saying, 'It's not rocket science. It doesn't take a street smart investor. How do you get a million bucks in your 401K? Read on, brother.'

Evan from My Journey to Millions published Never Assume a Person Has a Completed Estate Plan, saying, 'Testamentary intent should be the most important goal but that is predicated on the fact that some form of estate planning is actually gets done!'

Marie from Money Spending Mommy published 6 Reasons to Update Your Will, saying, 'Perhaps you, like many others, believe that once your will has been drawn up, that’s the end of the process. While wills have never been anyone’s idea of fun, it’s important to review your will on a regular basis. There are many reasons to pull out your will and give it a thorough review. Here are some of the most common reasons:'

Peter from Bible Money Matters published Lending Club Returns Continue Upward Trend at 11.44%. Lending Club Passes 500 Million In Loan Originations, saying, 'I‘ve been investing with Lending Club for a couple of years now, and I’ve gone from a skeptic when I first started investing with the service, to someone who is convinced that Lending Club can be an integral piece in any person’s investing strategy.'

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Retirement Statistic # 3 - While the average retirement savings in the US is nearly $50,000, the median (so the amount which 50% of Americans have saved less than and 50% have saved more than, i.e, the 50th percentile value) is ONLY $2000. Wow!
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Kay Lynn from Bucksome Boomer published Save Money by Living a Simpler Life, saying, 'Doesn’t it just make sense to live simpler? The fewer things you own, the fewer maintenance costs you will have, and the more you will save in the long-run! Live a simpler life, and you will start seeing your bank account grow beyond your wildest dreams!'

Miss T. from Prairie Eco Thrifter published 10 Reasons You're Broke, saying, 'If you always have more month than cash and never seem to get ahead or even to even, it’s time to look at some reasons you may be broke.'

FG from Financial God published Harper's Plan to Cut Canada's Old Age Security OAS Program, saying, 'The Internet is afire with news that the Conservative government of Canada is planning to raise the minimum age for Old Age Security, as part of a comprehensive government-wide cost-cutting measure for the upcoming federal budget. '

Little House from Little House in the Valley published How Does Your Rainy Day Fund Stack Up?, saying, 'According to Mint.com, 50% of Americans claim that they would have difficulty coming up with $2,000 for unexpected expenses. Around here, that’s what an emergency fund is for. However, I guess this is still a novel idea to many Americans based on data Mint.com collected. Check out the infographic yourself (click on the link to see a larger version on Daily Infographic):'

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Retirement Statistic # 4 - 36% of Americans report that they do not contribute anything towards retirement currently.
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Don from MoneySmartGuides published Investing: What You Cannot Control, saying, 'This will be a two part posting on what you can and what you cannot control when it comes to investing. This first part will highlight four things you cannot control. Picking winning stocks, picking superior managers, timing markets, and one more...'

Jen from Master the Art of Saving published Tax Refunds- The Good, The Bad and Why We Get One Anyways, saying, 'Financial experts along with many personal finance bloggers frown upon getting tax refunds. Why? They actually have a valid point---why loan the government.....'

Aloysa from My Broken Coin published How Realism and Creativity Can Help You Get Out of Debt, saying, 'Sometimes I get frustrated with my life and myself because it seems that paying off debt is an endless process, a perpetual torture of saying no, a continuous refusal to spend on something that makes me happy. '

Dividend Ninja from The Dividend Ninja published It's Only Castles Burning, saying, 'Investor Seth Klarman, founder of the hedge fund Baupost Group, wrote a book on value investing, called Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor. Read an update on Klarman's activities'

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Retirement Statistic # 5 - When retiring at the age of 65, 62% of people have less than $25,000 in savings.
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LaTisha from Financial Success for Young Adults published First Rental Property: Find Investors or Go It Alone?, saying, 'Starting your first rental property? Deciding whether or not to take on investors has many advantages and disadvantages.'

Ryan from Early Retirement Investments published Why Your Children Should Open a Roth IRA at Age 18, saying, 'These are the reasons why children should open at Roth IRA at 18 years old or earlier.'

Suba from Broke Professionals published The Definition of Broke: What Does It Mean?, saying, 'I often catch myself saying I'm broke... but is it true? Just because you have no money in the bank doesn't necessarily fit the definition of broke.'

Kanwal Sarai from Simply Investing published Top 3 Tips for Successful Investing, saying, 'The beginning of the new year is a great time to plan for the future. Plan on how you will be able to earn more passive income this year than last year. Here are 3 tips to help you earn more:'

Daniel from Sweating the Big Stuff published Lending Club Returns at 15.87% in February 2012, saying, 'I started investing in Lending Club in 2011, and so far my returns have been stellar. Using some smart criteria, I've been able to crush the average.'

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Retirement Statistic # 6 - For the next 19 years, 10,000 Baby Boomers will reach retirement age each day.
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Erika from Newlyweds on a Budget published So I think I need to reevaluate my goals, saying, 'I think I made my goals too easy for the year because we've already completed a huge chunk. 1. Pay off credit card debt. We're on track to pay this off by April 1. Hoping the move doesn't put a wrench in our plans. 2. Contribute full company match to 401K. Done! I contribute 3 percent, read my other accomplishments'

Andy from My Retirement Blog published The 6 Most Reliable Ways to Save For Retirement, saying, 'Many Americans are planning for retirement earlier than ever. While the reality is that tough economic conditions may force them to retire years later than they wanted, this is having the dual affect of encouraging more foresight and planning.'

Steve from Money Infant published Saving Money and Time Through Automation, saying, 'Automation is one of the keys to unlocking your financial freedom. Chances are you already automate some of your savings plans like 401k and emergency savings'

Jester from The Ultimate Juggle published How to Accept Advice from Others, saying, 'Who do you ask for financial advice. Find out who you should be asking for financial advice and learn how to accept it gracefully.'

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Retirement Statistic # 7 - 24% of US workers have postponed their target retirement age in the past year.
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PITR from Passive Income To Retire published Why Cash Flow is Important, saying, 'Find out why cash flow is important in an early retirement plan. The importance of cash flow rests the 2 ways it helps me fulfill my dream.'

krantcents from KrantCents published Invest Your Tax Refund or Send It to Me!, saying, 'Invest your tax refund or send it to me! It is all about choices. What are you going to do? I know some will pay down debt, add to savings or fund an IRA. If you are going to go out and spend it on dinner, clothes, electronic toys or something that will break, wear down, etc they you're better off sending it to me!'

Jeffrey from Money Spruce published Wealthy, Successful Bloggers: Don't Simply Follow Their Frugal
Advice, saying, 'I often wonder if I'm brainwashing myself with the stuff I just want to hear. Lately, I've been reading a lot of blogs, books, and other advice about self-employment and starting your own business. I've mostly convinced myself that working a 9-5 job isn't the key to happiness and success in my life.'

Nathan Kim from Everyday Money Info published Roth IRA or Emergency Savings? Yes!, saying, 'Instead of making the choice between funding your retirement or building up emergency savings, you can do both with a Roth IRA.'

Pat Huddleston from Investor's Watchblog published Is Your Nest Egg an Adviser’s Piggy Bank?, saying, 'Tips on how to protect your retirement investments'

Melissa from Fiscal Phoenix published Diversification to Reduce Risk, saying, 'When you first start investing, you may be scared that you will lose money. Putting your money at risk is never easy especially when you have fear that you will lose that money. Well, there are a few ways to reduce or minimize the risk of losing money.'

***Photo courtesy of http://s0.geograph.org.uk/geophotos/02/25/21/2252194_77b5e5a4.jpg
***Retirement statistics courtesy of http://endoftheamericandream.com/archives/10-incredible-statistics-about-americas-coming-retirement-crisis-that-will-blow-your-mind and http://www.smartmoneyadvice.com/retirement-statistics.html and http://www.businessinsider.com/facts-about-retirement-crisis-2010-12#the-50-states-are-collectively-facing-517-trillion-in-pension-obligations-but-they-only-have-194-trillion-set-aside-in-state-pension-funds-11

Sunday, February 19, 2012

What Factors Contribute to the Increasing Cost of Car Insurance?

car insurance automobile prices saving money

What Factors Contribute to the Increasing Cost of Car Insurance?

Many households are becoming increasingly cash-strapped, and one factor that is not helping many is the rising cost of insuring their vehicle. Car insurance premiums have continued to soar over the past twelve months, and a report from the motoring organization, AA, has suggested that motor insurance has risen by as much as 40%.

With no corresponding rise in road traffic accident claims, it can be difficult for drivers to comprehend why they are being forced to pay so much. The insurance industry says that despite the spike in insurance premiums, very few firms manage to make much profit on their policies because of a number of other factors, which are having an adverse influence.

Contributing Factor # 1 - Fraud

Fraud is a real problem for car insurers, and the incidence of deliberately staged collisions is on the increase. During 2010, 30,000 staged collisions were recorded by the Insurance Fraud Bureau, with each incident averaging around £17,000. As the cost of fraud has to be absorbed by honest policyholders, the net result is an increase even for drivers who have made no claims.

Contributing Factor # 2 - Rising Number of Motorists Without Insurance

Another reason for the rise that may rankle with honest drivers is the number of motorists who are on the roads without insurance. The Department of Transportation figures suggest that approximately two million drivers do not have insurance, and 23,000 people are hurt by uninsured motorists each year. The vast majority of insurance policies cover damage and expenses caused by uninsured and untraceable drivers, a cost which once again trickles down to policyholders.

Contributing Factor # 3 - Rising Number of Personal Injury Claims

Personal injury claims also have a small effect and the Association of British Insurers estimates that approximately 10% is added to each premium to pay for the costs of claims. Many insurers have to pay hefty legal expenses when dealing with personal injury claims, a reason why there are calls for more structure to be brought to the charges.

Contributing Factor # 4 - New Legislation for Male vs. Female Insurance Premium Rates

One factor that has not yet fully been felt but will have a significant impact on premiums is the recent ruling from the European Court of Justice. The court ruled that using gender to differentiate premium rates was discriminatory, so from December 2012, no insurer will be allowed to offer separate rates for men and women.

Rates for women, particularly amongst younger drivers, are currently lower than those offered to men, as statistics show they are less likely to be involved in an accident. The change in law means that insurance for women will become more expensive to take into account the higher incidence of claims amongst men, whilst insurance for males is likely to drop slightly but not significantly.

Contributing Factor # 5 - Increase in the Cost of Fire and Theft Insurance

In the past, third party fire and theft insurance was a far cheaper option than comprehensive insurance, but now, the average quote for this is £1,533. This is an increase of 82% and much higher than the rise seen in fully comprehensive cover. The AA says that one of the reasons why third party fire and theft has become more expensive is because not all insurers now offer this and also because it is the type of cover usually taken out by higher risk drivers.

The Office of Fair Trading is investigating the reasons behind the recent sharp rises in insurance and, and everyone waits to find out the outcome. Although it is possible to get a cheaper premium by shopping around, car insurance remains a vastly inflated expense for the majority of drivers.

How about you all? Do you feel you are currently paying a fair price for car insurance? Have your premiums increased very much recently?

How do you feel about the issue of different genders being charged different prices across the board for various types of insurance? Do you think this is justified and fair or is discriminatory?

Share your experiences by commenting below!

Jacob's Thoughts - Listed below are my random thoughts as I was reading this article.

Good article here! To me, it's always interesting to examine the reasons (and possible reasons) behind pricing differentials and changes for commonly purchased things, like car insurance.

In fact, in a post that I wrote several months ago, I looked at how car insurance rates varied based on age, gender, and geographic location.

@ My hypotheses for why car insurance premiums may be increasing -

Personally, I have several hypotheses for why car insurance premiums could be on the rise, assuming that the total number of road accident claims has not increased (as mentioned in the study mentioned above).
Hypothesis # 1 - With the unfavorable world economy, many people that are running low on money possibly elect to stop their insurance coverage in order to pay for other living requirements. Since there is a smaller pool of insurers to spread the overall risk among, insurance premiums for the remaining insurance clients could be increased.
Hypothesis # 2 - One of the primary ways that insurance companies work is that they take the small monthly premium payments from customers and invest the money in long and short term securities in order to make money. Since the interest rates on savings accounts are pretty abysmally low these days, the insurance money pool doesn't grow as much, causing the company to tend to charge more in premiums from customers in order to make a profit and pay their expenses.

@ The occurrence of fraudulent staged accidents - Personally, I have never heard of this happening. Do people really stage fake accidents in order to collect insurance? Anyone out there have experience with hearing of people doing this?
@ Rising number of motorists without insurance - This factor makes a lot of sense to me. If someone else hits you who doesn't have liability insurance, you and your insurance are stuck with paying the bill. This increases the amount that the car insurance company has to pay out, thus potentially increasing premiums for everyone.
@ Offering similar auto insurance rates for men and women - The issue of whether or not men and women paying different insurance rates is justified is rather fascinating to me.

As I found in the post mentioned above about how car insurance rates varied based on age, gender, and geographic location, it is clearly allowed by law in the United States to charge different rates based on gender.
In doing some research while writing these comments, I found out that legally discriminating based on gender and age seems to be allowable in the insurance realm (includes health insurance, where women sometimes pay 50% more than men), while discrimination based on race, color, religion, or national origin are not allowed in the field.
What is interesting to me is that discrimination based on age (well, as long as a person is of legal age) and gender is NOT allowed in most other realms of law - such as renting an apartment to a tenant or hiring for a job.
Looking at this current landscape, it begs the question of WHY age and gender discrimination is allowed in the insurance realm?

Of course, there is no one simple answer to this question, and I believe that this topic will continue to be debated for many years. But, it is interesting to think about nonetheless.
So, I'll leave this question up to you all. Do you have any thoughts for why this is?

***Photo courtesy of http://images.cdn.fotopedia.com/flickr-201099447-hd.jpg

Thursday, February 16, 2012

What Are Your Options For Borrowing Money in Today's Economy?

options for borrowing money, business loans, home loans, personal loans, secured loans, unsecured loans

What Are Your Options For Borrowing Money in Today's Economy?

Even in the current economic climate, there are still numerous ways of borrowing money when you need it. Your bank or other financial institution usually provides a range of personal lending options, such as an overdraft facility, loan, credit card, or mortgage, depending on your needs and financial situation.

Overdrafts

There are two main types of current accounts - a basic bank account or a standard bank account. Your bank will not allow an overdraft facility if you only have a basic bank account, as it is normally only offered to people with a bad credit rating. If you have a standard current account, then you can apply for an overdraft facility. Your bank, if it agrees to provide you with an overdraft facility, will allow you to go overdrawn up to a maximum level, either for a specific purpose or for use in case of need.

An overdraft is usually used for short-term borrowing requirements because the interest rate can be quite high. And, if you remained overdrawn for an extended period of time, the interest payments could be considerable.

An example of when an overdraft could be suitable is when you need to pay for a holiday as soon as possible to secure a good deal and you are due a bonus in a few weeks time (i.e. you are certain that you can pay off the overdrawn money in a very short time period). To pay for the holiday, you could use your overdraft facility, and once your bonus is received, the money would be used to clear the overdraft. You would only pay a small amount of interest for the period that you were overdrawn.

Secured and/or Unsecured Personal Loans

If you wish to buy a car but do not have the funds to do so, you could take out a loan and repay it monthly over several years from your income at a monthly repayment figure that is affordable. Normally, you can expect the interest rate on a loan to be lower than that of an overdraft facility/account feature.

Credit Cards

A credit card is often used to buy an item that you do not have the money to pay for in one lump sum. The credit-card company will give you a spending limit that you can have on the card. You will be expected to make at least the minimum monthly repayments, which are based on a percentage of the amount outstanding.

Interest rates on credit cards tend to be higher than those for overdrafts and personal loans. If, however, you were to clear the full balance outstanding on your credit card by the due date, then no interest would be payable, which would make it cheaper than using your overdraft facility. If you make a cash withdrawal with a credit card, the interest rate is normally significantly higher than if you used your card at the retailer to buy an item. You also pay a cash handling charge to the credit-card company, which would not be the case if you took cash out of your bank account.

Mortgages

Normally a mortgage is used to buy a house, and you would then repay it over many years, usually 15-30. Interest rates on mortgages tend to be lower than other forms of lending (because of the security that home ownership represents and the payback probability), but because of the lengthy repayment term, the interest over 15-30 years can add up to a considerable sum.

However, some lenders will provide a further advance (probably in the form of a home equity loan) on a mortgage, for example to buy a car. The interest rate will be much lower than those for personal loans, so it can be a good alternative if you can repay it within a few years.

How about you all? What options do you currently or have you used in the past to borrow money? How was your experience with it? Did you have trouble paying off the balance in a timely fashion, or did it go pretty smoothly?

In your experience, has paying off debt been a bigger priority so far in life than saving for retirement?

Share your experiences by commenting below!

Jacob's Thoughts - Listed below are my random thoughts as I was reading this article.

Overall, even though I am not the biggest fan of borrowing money/being in debt, I am also a realist and believe that since many people are short on money these days with no emergency reserves, it's important to fully understand your options of where to obtain money if you truly need it.
Personally, here's my "mantra" on borrowing money that I feel people should shoot for in their personal finances: only borrow money (and pay interest on that money) in order to invest in and/or build appreciating assets.

What this means is that in general, I believe that people should only borrow money to either:

Invest in a businesses, and
Invest in other assets that are able to increase in value over time.
I would also say that borrowing money to go to a public university (NOT an unnecessarily expensive private college, which, in my opinion, doesn't provide enough of a return on your money to make it worth the cost).

All other expenditures should be handled through periodic savings, not through debt. Several examples of things that should not be funded through high interest rate debt are as follows:

Vacations/holidays.
Cars (It's now more complex to fully explain why car financing isn't a perfect solution since many auto dealers are now offering 0% interest rate loans. As such, this will be the topic of a future post).
Furniture.

So, described above is how I believe people should shoot for operating their personal finances and borrowing activities long term.
However, I've learned in my dealings these past two years with blog readers and my friends that a lot of people in today's economy either a) are already saddled with credit card and student debt and/or b) simply do not make enough money to save periodically in order to buy cars, furniture, or take vacations. Essentially, they feel that taking on more debt is their only choice.

As you can imagine, in this case, things become more complicated.
For some non-essential items like taking a vacation or buying furniture, there are options for spending much less money (taking a cheap vacation near-by or buying used furniture come to mind).
However, for things like medical care or having an automobile to drive to work, these are essential items that are very difficult to do without in today's society.

So, all of this is to say that even though borrowing money is not ideal, it is important to know your options so that you can find the best deal. Just keep in mind that borrowing money should not be considered as "normal" in your life. It is only something to use in specific circumstances or when absolutely needed.

***Photo courtesy of http://images.cdn.fotopedia.com/flickr-3274955487-hd.jpg

Saturday, February 11, 2012

$141.20 Giveaway - Community and Charity 10% Monthly Blog Income Give Back # 5 - February 2012 Edition

10% blog income give back, blog reader give back, health insurance, social media, health care reform

The 10% give back giveaway fun rolls on for the month of February!

In case you missed the first (October), second (November), third (December), and fourth (January) 10% Blog Income Give Back, after doing some thinking at the beginning of October 2011 about what direction I want this blog to grow and evolve towards in the future, I decided that any income made from this blog would have more significance to me at a personal life values level if I knew that a portion were being given back to the following places:

1) The readers - Obviously, without you here to read my articles and interact with my ideas, there would be no blog in the first place (let alone blog income). As such, it is only fitting that you receive a portion of any blog income.
2) Charitable organizations - If you've read my blog before, you know that I'm a big believer in donating a portion of my money to charity. Each year, I donate between 5-10% of my income to the National Multiple Sclerosis Society as part of the Bike for MS fundraiser that I do. Beyond the good that is done by donating your money, getting used to contributing to charity is also a good practice to emulate the actions of affluent individuals (T. Harv Eker discusses this in his book, Secrets of the Millionaire Mind, which I would definitely recommend reading if you have a few hours).

Because of these considerations, I've decided that each month going forward, I'm going to give away 10% of my net (after-tax) blogging income/profit to My Personal Finance Journey readers (5%) and to charity (5%). Listed below is how the process will work:

After each calendar month passes, I'll tally up my net blog income and determine what Dollar value correlates to 10%.
I'll post the giveaway (similar to this post you're reading now), and you'll have approximately 2-3+ weeks to enter.
Once the giveaway is over, a grand prize winner will be announced, and that winner will then select what charity they'd like to have 5% of my blog income sent to. Once the giveaway entry window ends, I'll send out the money to the blog reader winner(s) and personally drop off the charity donation.
So far, I've been very happy with the success of the October, November, and December 2011, and the January 2012 10% income give backs.

In October, $205 total was given away, with $100 being donated to the charity, GreenPeace.
In November, $201.40 total was given away, with $100 being donated to the charity, The Blue Ridge Area Food Bank. If you're interested, you can view the details of me going to drop off the check at the Food Bank by clicking here.
In December, $74.52 total was given away, with $38 given to Big Brothers Big Sisters of Central Blue Ridge. You can view the details of the donation drop by clicking here.
In January, $196 total was given away, with $96 given to the Sexual Assault Resource Agency. You can view the details of the donation drop by clicking here.

So, that's the overall flow of things and a brief recap of what's happened so far with the give back initiative. Now, let's get in to the specific details for this month's (February 2012) giveaway.

Details of February 2012 10% Blog Income Giveaway

$141.20 total blog income to give away - $71.20 to a My Personal Finance Journey reader and $70 to the charity selected by the giveaway grand prize winner (see bullet point below for additional details on how the charity selection will work this month).

$71.20 in the form of one prize available to one reader as follows -

1) Grand Prize = $71.20 Amazon Gift Card or $71.20 cash via PayPal.

The personal finance topic I want to place in the spotlight for discussion in the giveaway comments this month is if and/or how people are carrying health insurance coverage these days.

Recently, I wrote a post about the various options for obtaining health insurance coverage aimed at helping the millions of Americans who are having trouble affording regular health insurance, but yet do not make a small enough income to qualify for federal assistance programs for families below the "official" poverty level. This post was inspired by me hearing about several of my own friends who are facing this very dilemma, and I felt very strongly about trying to help figure out what options they had available.
As such, I'm requesting that entrants leave a comment below this post about either #1 or #2 listed below:

1) If you currently have health insurance coverage, what type of coverage do you have/where is it provided from (independent plan, employer plan, etc), and whether or not it is affordable.
2) If you do not currently have health insurance, what are your barriers from obtaining it? What options have you looked in to for getting coverage that either worked or didn't work?

Because of the success experienced in the November-January give backs with building relationships with local charitable organizations, I've decided that for February, we'll keep how we select the charity that receives the 5% blog income donation the same as last month. Continue reading below for more details:

Instead of having each entrant specify any charity in the world, the goal for this month will be for My Personal Finance Journey to develop a relationship with one of the 7 charities listed below. The Grand Prize winner will select which of these 7 organizations receives the donation on behalf of the blog.

All of these charities were selected because 1) they are high quality organizations who do very good things and 2) they all have a significant presence/office in the area in which I live and operate this website (Central Virginia).
I have contacted the local offices of these organizations and told them that they are part of the 10% blog income give back in February. After the Grand Prize winner is selected and the selected charity announced, I hope to be able to visit the local office of the organization, meet their staff, and present them with the money personally.
It's been very fulfilling developing a relationship with the local chapter of the National Multiple Sclerosis Society through the MS150 fundraising bike ride I do each year, and I'm hoping that this experience will be just as awesome! I look forward to seeing which organization is selected.

How to Enter the Giveaway - Deadline to Enter is Midnight, February 29th, 2012

Like last month, I've decided to use the RaffleCopter giveaway management tool to handle sign-up facilitation for the February giveaway, so simply go through the steps listed in the widget below to enter the running for the prize and accumulate entry points.

There is no limit to the amount of points you can earn. If you refer 10 subscribers – your name will have accumulated 170 entry points! Or, if you link to the giveaway more than once, you can accumulate those 7 entry points multiple times. You can also retweet the giveaway and/or share other My Personal Finance Journey articles via social media sites once per day. In the event of a tie, I will be using a random number generator to select the winner.

Important instructions: After you complete an entry method, make sure to click and fill out the "I Did This" or "Enter" button in the widget so that I have a record of your points.

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