The growth of the dollar

Image Source: dailyreckoning.com

The U.S. dollar is at its strongest level since September 2008 compared to the yen. This was established after the dollar recently traded at 107.35 yen. And the six-year high has surprised many financial advisors who have been following the Federal Reserve’s stance that it would be keeping rates at a low level for quite some time. This was to assure investors of a safe investment arena amidst the financial recession. Analysts believe that the Reserve may retract or modify its statement that it never specified a time frame regarding this low rate.

Image Source: cnn.com

The fact that the Reserve has pursued a relatively aggressive move despite the economic slowdown may be a signal that the government is ready to take an assertive stand in the finance world as well. Also, with the recent issue of Scotland’s independence at hand, the strong dollar could assuage the fears some investors may have. This is because even without the final vote in, the pound has been seeing very low trading rates. It is forecasted that regardless of the decision, the pound would continue to decrease until it plateaus after a few months. If the greenback maintained its stable (but comparatively low) trading position, this would mean that two Western currencies would be facing financial challenges. This market high, therefore, is seen as a positive one by most financial investors.

Image Source: rferl.com

The U.S. Central Bank will be holding several more meetings to discuss and speculate the current market. The policies established by these discussions will determine how the economy will fare over the next few months.

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REPOST: When stock and real-estate bubbles collide

In the article below, Dan Barnabic of Market Watch discusses the possible outcome when the stock and real-estate bubbles collide.

If the stock bubble bursts, the exit strategy is probably not going to be real estate. | Image Source: marketwatch.com

As a series of articles on this website suggest, we’re not headed toward a bubble — we’re in one. But how is this bubble different from past bubbles and what will happen when it ultimately bursts?

MarketWatch recently interviewed former Federal Reserve Chairman Alan Greenspan who said that, “when bubbles emerge, they take on a life on their own. It is very difficult to stop them, short of a debilitating crunch in the marketplace.” That quotation alone is enough to send a fear to any investor in the market place. It applies to any sector of the economy, be it stock markets or real estate.

Judging by the recently voiced increased concern of some very reputable economists, we are presently living in an economic bubble that has a real potential of bursting.

To what degree will bursting the bubble affect the investors and the ordinary folk on the street, is anybody’s guess but the consequences of it may be severe. We’re living in an equity bubble and a highly advanced one. On the most historically reliable measures, it’s easily beyond 1972 and 1987, beyond 1929 and 2007 and is now within 15% of the 2000 extreme.

We may be in the third biggest stock bubble in U.S. history. U.S. stocks are now about 80% overvalued on certain key long-term measures, according to research by financial consultant, Andrew Smithers, the Chairman of Smithers & Co., and one of the few to warn of the bubble of the late 1990s at the time. The history shows that the bubbles form from time to time, and affect some, or in some instances, all segments of the economy. A major high-tech bubble occurred in 1990s, but back then, many investors reinvested their money in the real estate sector, which started to improve by 1997, following its disastrous collapse of 1989/2000.

This time may be different though. If the stock bubble bursts, the exit strategy is most probably not going to be reinvesting in real estate. By monitoring the housing starts in the U.S., a sad realization surfaces. They’re disappointing. The real-estate market isn’t recovering at the pace expected. Many of the millennial generation, burdened by their heavy student debts, cannot even afford renting apartments on their own, let alone invest in the still overheated real estate. Most retirees face the same problem, because of their limited incomes.

In my estimate, real estate is overvalued by at least 35% and maybe up to 50% in some congested urban areas. If real estate was to crash simultaneously with the stock market, the future doesn’t bode well for the North American economy. Such possibility may be especially painful to seniors whose livelihood depends on dividends invested in their stocks. When it comes to real estate, which I’m much closer to, I always warn people that it all comes down to housing affordability.

If one is able to either purchase or rent any kind of real estate by being able to pay for carrying costs of such investment with one-third of their annual income, they could be well off, notwithstanding the oscillations in the economy. In other words, if you buy the real estate with a fixed mortgage interest rate for 30 years, and carrying of such mortgage doesn’t exceed one-third of your annual income, you will be able to preserve the quality of your life. On the other hand, if you have to spend half or more of your annual earnings to carry the mortgage payments, as is the case right now with many American homeowners, then your quality of life may become bound for disaster with the possibility of losing the equity in your home by the time another market crash occurs.

The Feds announced that the quantitative easing which kept the economy breathing on artificial lungs for quite some time now, may come to an end by the end of this year. This means no more printing bonds to keep the economy going and much worse, introduction of higher interest ratesto combat possible inflation. Inflation is one the most feared economic conditions which drives consumer confidence down and historically speaking, brings housing appreciation to zero.

This time around, the stars seem to be aligned for the bubble to burst within almost all sectors of the economy. This may spell a serious hardship for an average American in times to come. Whether it’s going to happen later on this year, or in the next three years, isn’t anymore a question. The question is, how severe will it be and are Americans going to have enough resources to sustain it and recover from it?

It’s been reported that over 30% of real-estate buyers are foreigners. That’s another worrisome sign, as it points out that an average American experiences financial difficulties in buying real estate. In these times of uncertainty, “cash is king.” It may now be time to sell your stock and real estate and hold on to your cash. Later on, you can buy the stocks and real estate cheaper once the bubble bursts and devaluation takes place.

It may also be wise to sell your overpriced condominiums and stay away from them altogether as they’re extremely volatile to any economic slowdowns. Most condominium complexes are composed by unit owners of various financial strengths. The weak financial unit owners will be the first ones to go when the market tanks, causing vacancies in the condo complexes and putting the strain of maintaining the whole complex on the remaining unit holders, by way of higher maintenance fees and special assessments.

Remember these brand new condo complexes that were mostly vacant during the last crash, between 2006 and 2010? History has a funny way of repeating itself.

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REPOST: Former Disney estate sells for $74 million

The famous Disney estate has been bought, remodeled and resold to the highest bidder. Read this article from MSN.com to know more about the historical property.

Image Source: msn.com

The former Walt Disney estate in Los Angeles has sold for $74 million to an undisclosed international buyer, according to people familiar with the deal.

The Carolwood Drive property in Holmby Hills had been listed for $90 million with Jay Harris and Mauricio Umansky of the Agency.

The seller is investor Gabriel Brener, who co-owns the Houston Dynamo soccer club. Brener bought the property from the estate of Walt Disney’s wife in the late 1990s for nearly $8.5 million, tore down the house and acquired more land. He built a limestone mansion on the nearly 4-acre property. Brener couldn’t be reached to comment.

The roughly 35,000-square-foot mansion has eight bedrooms and 17 bathrooms, including a master suite on the main floor. There is a pool, a wine cellar, tennis court and putting green.

Disney purchased the property in 1949 and lived there until his death, according to Michael Campbell, president of the Carolwood Pacific Historical Society. Disney selected this property with the intention of building a one-eighth scale steam railroad around the house, Campbell said. The resulting “Carolwood Pacific Railroad” had a 90-foot long, S-shaped tunnel and a trestle that was nine feet in the air. The train was one of the inspirations that led to the Disneyland theme park.

The train and tracks have been removed, but the tunnel remains on the property, with a stone archway etched with the date “1950.”

 

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Why residential property developers are still confident about the 2014 housing market

Image Source: thedigeratilife.com

 

According to Freddie Mac’s report, U.S. Economic & Housing Marketing Outlook, June 2014: A Mid-year Assessment, the year has posed some interesting challenges for the residential property market. Salaries have risen, rents and property prices are going up, and there is an increased demand for multi-family homes which are currently not being met by landlords and bearish property developers.

While the housing market as a whole appears to have stalled, certain local markets are doing much better than others, with some at all-time highs since March 2014. Listed below are three of the country’s strongest housing markets.

1. Alaska

Housing prices have steadily increased from 2009 to the first quarter of 2014 and home sales are projected to stay strong, appreciating at an average of 3.8 percent over the next ten years. Anchorage is seeing the largest increase in average sales prices of new and existing condos in the stage and a substantial increase in single-family home sales, second only to Bethel.

 

Image Source: alaskadispatch.com

 

2. Colorado

Colorado has seen a 45.8 percent decrease in foreclosure rates and home prices are steadily increasing with a forecast 20 percent increase in the next four years. Home prices are currently at an average of 18 percent higher than in surrounding areas. Employment rates are also good, with Loveland and Fort Collins beginning to make their marks in the tech industry.

3. Georgia

Georgia has a forecast four-year price increase of 19.51 percent. An expansion of Fort Benning and the construction of a business park in the Columbus metro area are expected to create thousands of jobs.
Residential property owners and developers in those areas remain confident. Although 2014 may not have the booming growth that turned the real estate industry into the comeback kid of the 2013 economy, local markets are still healthy and pose a lot of opportunities for owners and developers.

 

Image Source: housingpredictor.com

 

Clarence Butt is a manager at CTV Capital LLC., a real estate development firm in California. For more articles on the real estate industry, subscribe to this blog.

REPOST: Bidding wars, cash heat up Eastside’s real-estate market

 This Seattle Times article lists several factors behind Eastside’s “red-hot” real estate market.

Kevin Jungmeisteris, left, listens to home inspector Darrell Hay at the Bellevue home that Jungmeisteris and his wife are buying for $775,000. Jungmeisteris said they weren’t in a hurry to buy. “But it is nice we found a place sooner rather than later.” | Image Source: seattletimes.com

Would-be buyers in Bellevue and other Eastside communities are going above list prices, waiving inspection and writing flowery letters to sellers. And if they can pay in cash, all the better.

Leslie Son receives an alert on her phone every time a house is listed for sale in the Somerset neighborhood in Bellevue.

Son and her husband have lost out on three houses since May in the hillside community with views of Mercer Island and Seattle. Renting now in downtown Bellevue, the couple wants to buy their first home and move in before their 14-year-old son starts the new school year.

Somerset homes sold for an average of almost $1 million in May. The last offer Son and her husband put down was for $985,000 with a 30 percent down payment, and they waived the home inspection. She said they are willing to pay that much for the neighborhood schools and the easy access to interstates 90 and 405 — for her husband’s commute to work at Real Networks in downtown Seattle.

“We thought the house prices would keep going down after the market collapse” in 2008, she said. “But now prices are going back up and we want to get a house before they get any higher.”

When a house hits the market on a Thursday, the open house is on Saturday and dozens of offers are in by Monday, buyers and their agents must move quickly, presenting their “highest and best” offer, said Daria Krukjy, an Eastside broker for Seattle-based Redfin.

Bellevue homes averaged seven days on the market in May, according to Redfin.

When Kirk Neibert and his wife finally found a house in the Woodridge neighborhood of Bellevue that they liked, after actively looking for a month, their agent advised them against making a bid — not competitive.

The house already had multiple offers, and they needed to sell their condo in Texas first.

“It worked out because the house ended up going for $100,000 over listing, and we couldn’t have afforded that,” said Neibert, who is a product manager at T-Mobile with two kids and two dogs.

Brokers on the Eastside say 15 or 20 offers on a house have become typical. Georgia Wall of Re/Max on the Lake said she has not sold a house without a bidding war since February.

What’s driving flurry

Several factors are at play in the red-hot real-estate market:

• Prices are rising. The median price of a home — house or condo — sold on the Eastside last month was $535,000, 7.2 percent more than a year ago, according to the Northwest Multiple Listing Service (NWMLS). The Eastside market hit a median low of $360,000 in February 2012 and has not seen a median price this high since January 2009.

• More houses and condos are sold in April, May and June than any other three-month period of the year, according to the NWMLS, as families time their moves with the school year.

• Mortgage rates have gone up. Wannabe buyers missed the historic low 3.25 percent interest rate on a 30-year loan available last year. But they can lock in somewhere around 4.25 percent now.

• Low inventory. For whatever reason — homeowners may still owe more than their home can fetch, they can’t afford to move up to a bigger house, can’t find a new home or don’t want to move at all — people are hanging on to their homes.

• The Great Recession is over. Has been for years, but the jobless rate for the Seattle metropolitan area dropped to 5 percent in April.

Dozens of offers

Tomas Vetrovsky and his wife offered $650,000 for a Lake Hills one-story house listed for $580,000. The couple paid for a preinspection, as did five other couples on the same day, he said.

After seeing more than 100 brokers’ business cards on the kitchen table at the open house over the weekend, Vetrovsky said he knew the house was popular, but he did not expect to be up against 46 other offers.

Even with an escalation clause up to $715,000 — $135,000 above listing — the Vetrovskys lost the house to a higher, all-cash offer, he said the listing agent told him.

Vetrovsky said he and his wife are emotionally drained by it all.

“We are going to take a break from looking for a couple weeks. Viewing houses takes a lot of time and energy, and time away from the kids,” Vetrovsky said.

In the first three months of this year, 39 percent of Eastside homes sales were all-cash, according to market researcher RealtyTrac.

“Those hurt because you do everything right, but when there are 17 offers and there is cash … there is nothing you can do,” said Michael Link, an Eastside broker with Windermere Real Estate.

Nidhi Doshi and her husband closed on their new Redmond home on May 11 — their 10th wedding anniversary. It was the first house the couple made an offer on, but they did everything they could to set their offer apart from the rest.

The couple offered the $665,000 list price with an escalation clause of up to $700,000.

“Initially we were not comfortable with that … we felt like because we already told them our max that the price would go up to that,” she said. “But we knew they had to show us the matching bid, and they did.”

The seller told her what set them apart was the letter Doshi and her husband wrote, complimenting the sellers on their choice of décor, and describing how they could see themselves living in the home with their two young boys.

“The wife really felt connected to us; she said she was sure she wanted to sell it to us,” Doshi said.

One other tactic the couple used was to allow the sellers to live in the house rent-free for two weeks after closing, while the sellers waited for their new house to become available, Doshi said.

Sometimes, buyers just get lucky.

After multiple home tours, Kevin Jungmeisteris and his wife found a house in the Eaglesmere community of Bellevue listed for $775,000. The couple has a 6-month-old baby and likes the area for its schools and easy commute to their jobs at Groupon in Seattle. They offered the listing price with no preinspection or cover letter, and they got it.

When they met with an inspector on Wednesday, Jungmeisteris said as long as there was no massive structural damage, they would close in early July.

“We were really not in any hurry,” he said about buying their first home. “But it is nice we found a place sooner rather than later.”

Leslie Son, who is looking for a home in Somerset, said she’s now willing to try writing a cover letter with her next offer.

“I wasn’t sure how much difference it would make,” she said. “But now I think I have to try anything I can.”

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REPOST: Existing Home Sales Fall Slightly In March, To Lowest Level Since July 2012

 

Sales of new U.S. homes hit slowest pace since 2012.  Read more in this Forbes.com article.

Existing-home sales dipped just slightly in March, bringing their volume to the lowest level since July 2012, data released by the National Association of Realtors Tuesday shows.

Sales of existing, or previously owned, homes fell by two tenths of 1% to a rate of 4.59 million (seasonally adjusted) in March, down from 4.6 million in February. That pace is 7.5% below the 4.96 million pace one year earlier. Sales have not been this slow since July 2012, when the pace was 4.59 million (seasonally adjusted).

“There really should be stronger levels of home sales given our population growth,” said Lawrence Yun, NAR’s chief economist, via a statement. The sales pace is under-performing historic norms, Yun noted. “In contrast, price growth is rising faster than historical norms because of inventory shortages.”

Blame it on the long winter, rising prices and mortgage rates, and the continuing problem of first-time homebuyers not being able to get into the market, frequently thanks to high student debt loads.

The National Association of Realtors tracks completed sales of existing single-family homes, townhomes, condominiums and co-ops. The median existing-home price for all housing types in March was $198,500, 7.9% higher than one year earlier. First-time buyers accounted for 30% of March purchases, up from 28% in February. One year ago they were also at 30%.

NAR President Steve Brown, of Irongate, Inc., Realtors in Dayton, Ohio, noted via a statement that first-time buyers have been held back by market conditions. “There are indications that the stringent mortgage underwriting standards are beginning to ease a bit, particularly regarding credit score requirements, but they remain a headwind for entry-level and single-income home buyers,” he said.

The national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.34% in March from 4.3% in February, according to Freddie Mac. That’s well up from the 3.57% rate in March 2013.

On a bright note, the short supply of inventory is easing a bit. Total inventory rose 4.7% at the end of March to a supply of 1.99 million existing homes available for sale. That’s about a 5.2-month supply at the current sales pace. (A six-month supply is considered a healthy market.)

“We also have tight inventory in the lower price ranges where many starter homes are found, but rising new-home construction means some owners will be trading up and more existing homes will be added to the inventory. Hopefully, this will create more opportunities for first-time buyers,” Brown said.

Foreclosures and short sales made up 14% of March sales, lower than their 16% share February and their 21% share one year prior, in March 2013. All-cash sales comprised 33% of transactions in March, compared with 35% in February and 30% in March 2013. “With rising home equity, we expect distressed homes to decline to a single-digit market share later this year,” Yun said.

The pace of sales–as well as median home price–varies widely by region. Existing-home sales in the Northeast rose 9.1% to an annual rate of 600,000 in March (4.8% below March 2013). The median price in that region was $244,700, up 3.2% year-over-year. Existing-home sales in the Midwest rose by 4.0% in March, to a pace of 1.04 million. Still, that’s 10.3% below a year ago. The median price for the Midwest region was $149,600, 5.9% higher than in March 2013.

In the South, existing-home sales fell 3% to an annual rate of 1.92 million in March, 3% below March 2013. The median price rose 6.7% year-over-year to a level of $173,000 in March 2013. In the West, existing-home sales dropped 3.7% to 1.03 million in March, 13.4% below a year ago. The median price in the West was $289,300, 12.6% higher than in March 2013.

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REPOST: Top 10 Tips for Mortgage Borrowers in 2014

Looking into buying a property? Do it wisely with these tips from FoxBusiness.com.

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The clock is ticking for buyers and homeowners who want to grab a low mortgage rate in 2014. But if you stay on top of your game, keep your finances in order and act quickly, you can still grab attractive mortgage deals.

These 10 mortgage tips can help you with your mortgage decisions in 2014.

1. Document your finances.

Lenders will be extra diligent when underwriting home loans in 2014, as new mortgage regulations go into effect in January. The rules put pressure on lenders to verify that borrowers have the ability to repay their loans.

Keep good records of your finances, including bank statements, tax returns, W-2s, investment accounts and any other assets you own. Be ready to explain any unusual deposits to your accounts. Yes, the $500 that Grandma deposited in your account for Christmas could delay your loan closing if you can’t prove where the money came from.

2. Lock a rate as soon as you can.

Rates will likely climb in 2014 as the Federal Reserve is expected to reduce the pace of the economic stimulus program that has long helped keep rates low. If you are planning to get a mortgage, lock in a rate as soon as you are comfortable with the numbers.

Compare Mortgage Rates in Your Area

3. Refinance now — if you still can.

Many homeowners lost the opportunity to refinance at a lower rate when rates jumped in 2013. But those who are still paying more than 5% interest on their home loans might still have an opportunity.

If you think you may be able to save with a refinance, but you are not sure, it doesn’t hurt to try. Speak to a loan officer and take a look at the numbers to see if refinancing still makes financial sense for you after you consider how long it will take to break even with the closing costs.

4. Buyers, use your bargaining power.

As mortgage rates climbed, lenders lost a big chunk of their refinance business. In 2014, they will turn their attention to homebuyers and will fiercely compete for their business. Buyers should take advantage of bargaining power they gain with that increased competition. Shop around for the best deal and look beyond the interest rate on the loan.

5. Learn your rights as a borrower.

Mortgage borrowers will get many new rights as consumers this year when new mortgage rules created by the Consumer Financial Protection Bureau go into effect in 2014. If you run into issues with your mortgage servicer in 2014 or fall behind on your payments, make sure you are aware of your rights and put them to use.

Find the best mortgage rates at Bankrate.com.

6. Take good care of your credit.

It’s nearly impossible to get a mortgage without decent credit these days. That will continue to be the case in 2014. If you are planning to get a mortgage, monitor your credit history and score until your loan closes. The best mortgage rates usually go to borrowers with credit scores of 720 or higher. You may still get a mortgage with a score of 680, but lower scores will mean higher rates or higher closing costs.

7. Don’t overspend.

Lenders don’t want to give out loans to borrowers who will have little money left each month after they pay their mortgages and other debt obligations such as credit cards and student loans. If that becomes the case, the lender will tell you that your DTI, or debt-to-income ratio, is too high and you don’t qualify for a loan. Try to keep your monthly debt obligations, including your mortgage and property taxes, below 43% of your income.

8. Consider alternative mortgage options.

Mortgage rates are rising, but there are alternatives to grab a lower rate, depending on your plans.

A homeowner planning to keep a house for seven to 10 years could take advantage of lower mortgage rates by choosing a seven- or 10-year ARM instead of the 30-year traditional fixed-rate mortgage. Rates on adjustable-rate mortgages can be as much as 1 percentage point lower than on fixed-rate loans.

If you are not sure how long you plan to keep the house, a fixed-rate loan is probably the better choice.

9. Considering an FHA loan? Reconsider.

FHA loans have long been popular among first-time homebuyers because they require low down payments and have somewhat less strict underwriting standards than conventional loans. But they come at a price. Mortgage insurance premiums on FHA loans are likely to continue to rise in 2014, and after recent changes, the borrower is now required to pay for mortgage insurance for the life of the loan. Try to qualify for a conventional loan before you apply for an FHA mortgage.

10. Don’t panic.

Yes, mortgage rates likely will climb in 2014. But don’t panic, thinking you have to buy a home now to grab a low rate. If you are shopping for a home, do your best to move quickly, but remember that this is one of the biggest financial decisions of your life. Get your mortgage and buy your home when you feel ready.

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REPOST: 5 Counterintuitive Financial Tips That Work

A structured lifestyle is the formula to recover from negative financial events. Read what this means from this Yahoo! Finance article.

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Russell Holcombe, a certified financial planner based in Atlanta, says he’s tired of constantly warning clients against making bad money choices. Part of the problem, he says, is that popular financial advice is often wrong. That’s why he finds himself urging people to rethink purchasing houses that would max out their budgets, or putting so much money into retirement accounts that they’re unprepared for emergencies.

“I had a certain level of exhaustion from having to protect people from a bad decision-making process,” he says. Through his work with clients, he says he realized that their ability to recover from negative financial events depended more on how they had structured their lifestyle than on any investment strategy. That’s why in his book, “You Should Only Have to Get Rich Once,” he offers counterintuitive advice that’s centered more on life decisions than stock market ones.

Image Source: Yahoo.com

Holcombe offers these five under-the-radar strategies to help you avoid what he calls “financial suicide”:

Buy a smaller house.

“During the housing boom of ’04 and ’05, you would hear people go out with real estate agents who said, ‘Your income lets you buy an $800,000 house,'” Holcombe recalls. Most people would go ahead and buy a house at the highest end of what they could afford, while just a fraction would hold back and say, “We’re only going to buy a house based on one income,” Holcombe says. The people who made that choice ended up coming out ahead during the turbulent economy, when many people lost jobs, he adds.

Don’t save for retirement.

Okay, save for retirement, but don’t tie up so much of your savings in post-tax retirement accounts like 401(k)s that you can’t weather financial storms when they hit, Holcombe advises. “The ability to survive is based on the ability to adapt,” Holcombe says, and tying up money in certain types of restrictive savings accounts, such as retirement and college savings accounts, means you have less flexibility to invest in other things or pay bills.

Many people end up paying fees and penalties when they have to withdraw from retirement accounts early, Holcombe points out. So yes, save for retirement, but don’t forget to prioritize shorter-term savings accounts, too. If you’re an entrepreneur, you might want to consider investing in your business instead of your retirement account, he adds.

Forget about stocks.

“For financial advisors, all roads lead to stocks,” Holcombe says, adding that such a one-track mindset is a problem. “For the people that I know who are successful and endure financial traumas, the market is irrelevant to them. It’s not the reason for their success, it’s a tool,” he adds. So while investing in stocks might be part of a larger financial strategy, Holcombe recommends against getting too preoccupied with investment strategy.

Instead, focus on a “perpetual income stream.”

Holcombe says everyone should consider how they can build their own “perpetual income stream,” which consistently pays out cash over time. A doctor might buy a medical building that generates rent, a writer might generate royalties off of a book, a retiree might invest in a dividend-paying portfolio. “Perpetual income streams are the holy grail in business, from Comcast to Netflix. Everybody is trying to move to that model because they get paid whether you tune in or not. Some people have the talent to create them and some don’t,” he says. “There’s no one size fits all,” he adds.

Holcombe urges people to avoid traditional investments that generate income, like annuities, because he says “they are super expensive and you can’t change your mind.”

Calculate your “lifestyle cash flow.”

When people try to get on top of their money, Holcombe says they often start tracking all of their expenditures, from gas to food, or their net worth. He calls such calculations “totally meaningless.” Instead, he says, people should focus on the expenses that can’t be changed quickly, including a mortgage or debt payments. “It shows how quickly you can adapt to a traumatic event [like a job loss],” he says. He uses the term “lifestyle cash flow” to describe the cash flow required each year to pay the bills.

As long as you’re earning enough money to cover those expenses, then you can feel relatively financially secure, Holcombe says, adding, “If you’re spending money on something that’s not making you happy, then kill it quickly.”

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REPOST: Suze Orman’s 10 Tips for a Fresh Financial Start

Have a better financial standing this year by reading tips on how to have fresh financial start from this Oprah.com article:

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1. No Blame, No Shame

The foundation of a financial fresh start actually has nothing to do with money or specific financial dos and don’ts. The first, and most difficult, step is to absolve yourself and your spouse or partner of any guilt. So you need to make a promise to me. I need you to agree that the past is past, and we are going to focus on the future. Whatever mistakes you feel you have made with money, whatever moves you wish you had or hadn’t made, are irrelevant. We are free to move forward only when we remove the emotional shackles of regret. This cleansing step is especially important for couples. You are in this together, so no finger-pointing or arguing about any past decisions. Do we have a deal? Deep breath, everyone. Exhale. Now you are ready to put your financial house in order.

2. Take a Snapshot of Your Finances

It’s impossible to map out a route to your destination if you don’t know where you’re starting from. So let’s take a “before” picture of your finances. You’ve heard me say this a million times, but I want you to open every single financial statement—bank, credit card, mortgage, 401(k), brokerage account—and take a look. Only when you have everything in front of you can you set priorities about what to do next. If you’re vexed by your checking account (you swear you should have more money; you can never figure out why your checks bounce), start fresh by opening a new one. Leave enough in your existing account to cover any checks that haven’t yet been processed, then transfer the rest to the new account and close the old one. Next, sign up for online banking. It should be free, and as long as you use your home computer, it’s also safe. The advantage of online banking is that you can pay bills superfast, and your account is automatically credited or debited for each deposit and payment, making it easier to stay on track.

3. Adopt a Foolproof Credit Card Strategy

Make this the year you tackle that credit card debt once and for all. Doing so will make you and your family stronger and happier—forever. What happens to the stock market and the housing market is completely beyond your control. Credit card debt, however, is completely within your control. Every time you pay off a card with a 15 percent interest rate, you get a 15 percent return on your money.

See if you can qualify for a balance transfer card that offers a low or 0 percent introductory interest rate for the first six to 12 months. If you can get a good deal, move your high-rate debt to that new card. Do not use the card for any new charges, and push yourself hard to pay off the balance as soon as possible. If you don’t qualify, no worries. Always pay the minimum due on each card, on time, every month. Whenever possible, send in some extra money on the card that charges the highest interest rate. Your goal is to get the costliest balance paid off first. When the first card is cleared, direct your payments to the card with the next highest interest rate. Keep doing this until you’ve zeroed out the balances on all your cards.

4. Try Harder to Save

When I suggest that people send in more money to pay off credit card balances or increase the amount they save each month for retirement, I hear the same sad story: “Oh, Suze, I would if I could, but I can’t because there’s no extra money left at the end of the month.” I beg to differ. There’s no money left because you haven’t evaluated your spending habits. You need to dig deep and be willing to change those habits; to set goals and use those goals as the motivation for lifestyle changes that will allow you to save and invest. Take a clear-eyed look at your credit card statements for the past six months. Can you really tell me that there isn’t at least $50 or $100 showing up that you could easily do without? I didn’t think so. I call this “hidden money,” and here’s how you can find it.

I challenge you to reduce every one of your monthly utility bills by 10 percent. Change your calling plan or get rid of the landline account unless you absolutely need it. Dial back the platinum cable package to silver. I bet you can seriously trim your utilities by spending one afternoon increasing your home’s energy efficiency: Attach a draft-blocking guard to the bottom of any external doors; add caulk or weatherproofing material around drafty windows; put low-flow aerators on your showerheads and faucets; and replace burned-out bulbs with compact fluorescent energy savers (they’re pricier than conventional bulbs but last much longer, saving you money over the long term).

Cars are another great place to save. Plan on driving yours for at least seven to ten years (regular tune-ups will help keep it running longer). Consider buying a used or certified pre-owned car rather than a brand new one. If you get a three-year loan, you have plenty of life left in your car, and money that once went to car payments is freed up for other financial needs. And please, avoid leasing. Since you don’t own the car, you never have a time when you are driving your car free and clear. Also, raising your deductible or designating one car to be used for low-mileage driving (under 15,000 miles a year) can reduce your insurance premiums by 15 percent or more.

5. Separate Savings from Investments

Now we’re ready to move on to how you put your money to work for you and your family. There is a vitally important difference between money you need to save and money you need to invest, yet it’s a distinction many people don’t grasp. Money you know you need or want to spend in the next few years is savings. Money you keep handy for an emergency belongs in savings. Money you hope to use soon for a down payment on a house belongs in savings. And all savings belong in a low-risk bank savings account or money market account. The goal is to keep your money safe so that when you go to use it, it will be there.

Money you won’t need to use for at least seven years is money for investing. The goal here is to have your account grow over time to help you finance a distant goal, such as building a retirement fund. Since your goal is in the future, money for investing belongs in stocks. As I’ll explain later, the potential inflation-beating returns that only stocks can deliver make them the right choice for a successful long-term investment strategy.

6. Know Your Credit Score

The big takeaway from the meltdown of 2008 is that banks are going to be a lot less eager to lend money to you. You will need a sparkling financial personality: a FICO score above 700, solid verifiable income, a manageable amount of existing debt—to get good offers for credit cards, auto loans, mortgages, and refinancings. And you can expect lenders to continue to tighten the screws on your existing credit lines; all the credit they loved to give you before 2008 now makes them nervous. Get your credit score by going to MyFico.com. If your score is below 700, two of the best ways to improve it are to pay your bills on time and push yourself to reduce your credit card balances.

7. Evaluate Your Retirement Plan

If your 401(k) and Roth IRA lost value in 2008, that’s a good sign. It means you were invested in stocks, and that’s exactly where you should be invested—assuming your retirement is at least a decade away. Only stocks offer the chance of high returns that outpace the annual 3 to 4 percent inflation rate. In your 20s and 30s, aim to keep 80 percent in stocks and just 20 percent in bonds; you have time to ride out stock swings. As you age, slowly ramp up the percentage in bonds; in your 50s and 60s, consider keeping 40 percent or more in bonds to help buoy your portfolio when stocks are slumping. The biggest mistake you can make is to stop investing in your retirement accounts or to shift money from stocks into “safe” money market accounts.

Instead of worrying that your account is down, remember that your money buys more shares of your retirement funds. The more shares you own now, the more you will make when the market recovers. Buy and hold is the way to go.

Here’s some perspective: The 2008 market slide is the tenth bear market (commonly accepted as a decline of at least 20 percent) since 1950. If you’d put your money in stocks in 1950 and stayed invested through the ups and downs, your average annual return through 2007 would have been more than 10 percent. That’s not to say you can count on an average of 10 percent over the next 50 or so years (7 to 8 percent is probably more realistic), but it illustrates how keeping focused on the long term pays off.

8. Diversify Your Assests

Try to reduce any company stock you own in your 401(k) to less than 10 percent of your total retirement assets. Just ask employees of Enron, Bear Stearns, Merrill Lynch, and Washington Mutual how smart it was to make big bets on their own stock. Mutual funds and exchange-traded funds (ETFs) are ideal for retirement savings because they own dozens of stocks in their portfolios.

If you’re flummoxed by all the investing options in your 401(k), look for a “target retirement” or “life cycle” fund. Then pick the specific portfolio that dovetails with your expected retirement age and you’re all set; you will be invested in a mix of stock and bond funds appropriate for your age. You can also invest your Roth IRA in these types of funds; Fidelity, T. Rowe Price, and Vanguard all offer these one-and-done options.

9. Don’t Obsess Over Your Home’s Value

If you own a house and can afford the mortgage, consider yourself lucky. Try to love your home for what it is: a haven for you and your family, not a path to riches. Unless you bought at the height of the market in a super-popular region that has gone Ice Age–cold, you’re going to be fine. And even if you did buy at the peak, if you plan on staying put for five to 10 years, the real estate market will recover with time. But let’s be clear: A home is not an investment that will fund your retirement or vacations. The 10 or 20 percent annual gains during the housing boom were temporary insanity. Buy a house you can really afford, and over time it will rise in value. But its main value is as a home. Period.

If you got caught buying into the housing bubble and are now in mortgage trouble, talk to the lender about your options. Don’t raid your retirement accounts to keep up with the payments. What happens when the retirement accounts run dry? You still won’t be able to cover the mortgage, and you will have lost all your future security.

10. Protect Your Family—and Your Nest Egg

If there is anyone dependent on your income—parents, children, relatives—you need life insurance. For the vast majority of us, term life insurance is all we need, because it protects you for the “term” of the policy (from five to 30 years) and is incredibly inexpensive. As always, it’s important to buy a policy from a firm with a strong financial rating, but even if an insurance company runs into trouble, your state insurance department has funds set aside to help protect you. I also want you to get your estate papers in order. You should have a living revocable trust (this document spells out how your assets should be distributed) with an incapacity clause, as well as a will. Also, have an “advance medical directive” in place that tells your doctors the type of care you want if you become unable to speak for yourself.

Finally, every family should have an emergency savings account that can cover at least eight months of living expenses. And I also want every woman to have her own personal savings account that could support her for at least three months, because you never know. The best place for your savings is an FDIC-insured bank (or a credit union backed by the National Credit Union Share Insurance Fund). If you keep less than $100,000 at an FDIC bank, no matter what happens to the bank, the Federal Deposit Insurance Corporation (part of the U.S. government) will make sure you get every penny back. Online banks that are FDIC insured are just as safe as the bank downtown. (Please note: The emergency federal legislation passed last October increased the FDIC insurance limit to $250,000 through December 2009. But to be extra safe, keep no more than $100,000 in any single bank.)

Feel better? Follow these steps and no matter what the future brings, you will be in control of your financial destiny. And there’s nothing more valuable.

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Hello, it’s Clarence Butt! Want more reads like this? Get hold some interesting links from my Linkedin page.

REPOST: Over-the-top amenities help luxury homes stand out

Designers and builders use exclusive amenities to capture the imaginations of wealthy buyers. Read more in this LosAngelesTimes article.

 

Image Source: latimes.com

 

If you thought Southern California mansions could hardly get more outlandish, consider the latest must-have feature: A moat encircling the property.

Other exclusive amenities include dental chairs, botox stations and wine “cellars” that somehow made their way into the kitchen. It’s all part of growing competition among designers, architects and developers for the attention of ultra-wealthy buyers.

Moats are making their biggest splash since medieval times.

At Jennifer Lopez’s former home in Bel-Air, which recently resold for $10 million, an arched footbridge and a cobblestone driveway cross a stone-lined waterway that encircles the French-style villa.

In Brentwood, supermodel Gisele Bundchen and New England Patriots quarterback Tom Brady included the water element at their newly completed European-style estate. Luckily for the neighbors, the couple’s moat looks more like a winding stream than a means of defense.

And at a Beverly Hills contemporary built on a promontory, a narrow one serves a practical purpose. The moat around the $36-million property takes the place of a guardrail, which would have obstructed the stellar city views.
While some over-the-top home features offer function, others are just for fun. But tastes and trends are evolving more quickly since the advent of the Internet, designers say, making it harder to keep up with the proverbial Joneses.

“You could basically take the ’70s, and the whole decade looks more or less the same,” designer Steve Hermann said of home amenities. “Now things are changing very quickly.”

To stay in step with the times, a botox station and a dental chair are incorporated into a $65-million spec house in Beverly Crest. Should they fail to entice a buyer unwilling to brave the hoi polloi, perhaps the his and her bars will.

“The developer is trying to come up with something to set his house apart,” Hermann said. “It remains to be seen if the buyer will actually use the amenities.”

Hermann, a Beverly Hills designer who has worked on homes for such notables as singer Christina Aguilera and fashion designer Vera Wang, sometimes tries his ideas out in his own living space. At his Glass Pavilion in Montecito, which sold in October for $12.9 million, he moved the wine “cellar” into the kitchen and stretched the glass-fronted, temperature-controlled space along one wall.

“People spend an infinite amount of money on wine,” Hermann said. “Why would you want it two floors underneath where you are?”

Instead, he viewed a wine display as part of the entertainment during parties. “It seemed like a fun idea,” he said of the 3,000-bottle wine storage area.
For clients, he has transformed closets into the equivalent of luxurious showrooms, wrapping every surface in hand-stitched leather.

“They become like actual display rooms,” Hermann said. “Guests will come over and you’ll show off your closets.”
Extravagant features enable spec builders hemmed in by lot size and regulations to push the asking price per square foot, Hermann said. “You are limited by how much you can build.”
Because of building height restrictions in Malibu, for example, luxury builders will often put basements in homes to increase the living space. Then it’s up to local architects such as Doug Burdge to come up with ideas on how best to use the square footage.

Burdge has designed homes along Malibu’s celebrity-row beaches with Italian-style wellness suites where hairdressers, fitness trainers and masseuses can come to the homeowner out of sight of the paparazzi. Light wells and garden rooms make the stylized spaces feel anything but subterranean.
For car collectors, Burdge creates a garage space that resembles a paneled and carpeted showroom.
For the bejeweled, his designs have included walk-in safes where the owner’s valuables are displayed on shelves. “The safe room can be small,” he said, “yet it creates a nice amenity that can be used for important papers or other things.”

What’s mind-blowing to local luxury home buyers, however, may seem somewhat provincial to what’s being built elsewhere.

Kenneth Bordewick, who heads a design group bearing his name and is chief executive of Beverly Hills Luxury Interiors, has created such distinct spaces as a $17-million hand-carved bathroom and a poker room complete with a jewel-inlaid table.

Raising the bar even further may be bedrooms he has worked on in homes at undisclosed locations east of the Mississippi River. With a push of a button, secret panels move aside to reveal a fully equipped intensive-care unit.

“If the owner goes to the hospital, the stock market could crash and a company may flounder,” Bordewick said. Instead, the person can be diagnosed and treated on site as a doctor advises remotely.

But not everyone buys the idea that packing a house with outrageous amenities sells real estate. Spec builder Stefano Marciano of Estate Four is nearing completion on a $50-million mansion on 3.6 acres in Holmby Hills envisioned for a billionaire art collector. The contemporary, which he likens to “a Richard Neutra on steroids,” features 14- and 20-foot ceilings throughout and expansive gallery space.

“The buyer will usually have their own vision, and this allows for some personalization,” he said of the 20,000-square-foot house, which includes a media room, a wine cellar and a meditation and massage room. “This is more like a blank canvas.”

 

Clarence Butt is interested in financial planning. Follow this Twitter page for more updates.