Did Congress Make the Homebuyer Tax Credit Retroactive?

I’ve received several comments/e-mails asking about whether Congress has decided to make the first time homebuyer tax credit retroactive. If you saw my previous article, you’ll know that Congress has extended the first time homebuyer credit and added a new $6500 credit for existing homeowners.

Is the homebuyer tax credit retroactive… or not?

From everything that I’ve heard, the answer is that it will not be made retroactive. While this might not seem fair, the undelrying logic makes sense… Since the goal is to stimulate sales going forward, it makes no sense to hand out credits to people who have already bought. The likely effective date of the new credit will be December 1, 2009.

The bigger question is whether not the $6500 tax credit will be enough to push existing homeowners into the market for homes and mortgages. Even if it does, I’m not convinced that it will have much of an impact for anyone other than realtors. After all, for every homeowner that goes looking for a house, there will be one more house on the market.

Can you use the $6500 credit to buy a second home?

The only exception to this one-for-one swap will be if people want to use the credit to buy a second home. The primary limitation here is that the new home has to serve as your primary residence. I’m not sure how they’ll enforce this, but it seems like you could buy and move into a new home while keeping your old one as a rental property.

Published on November 6th, 2009 - 7 Comments
Filed under: Taxes
 email this article - add to tip'd - stumble it - digg it - bookmark it

Congress Extends $8000 Homebuyer Tax Credit, Adds New $6500 Credit

This just in… The House of Representatives has voted to extend — and expand — the first time homebuyer tax credit.

Extending the $8000 credit, adding a $6500 credit

According to the NY Times:

The bill extends an $8,000 tax credit for first-time home buyers that was due to expire on Nov. 30, making it available to those who have a contract before May 1 on a primary residence priced at up to $800,000. The bill also creates a new credit of up to $6,500 for existing homeowners who buy a new residence if they have lived in their current one for at least five of the last eight years.

The income limits for the homebuyer tax credit are also going up, from $75k/$150k for individuals/couples to $125k/$225k. Beyond that, the credit phases out. This extension/expansion is projected to cost nearly $11B.

Extending unemployment benefits

This bill also extends unemployment benefits, as follows:

The measure [also] provides up to 14 weeks of additional assistance to unemployed people who have exhausted their state and federal benefits, but up to 20 additional weeks to those in about 26 states with unemployment rates exceeding 8.5 percent.

The President is expected to sign this bill into law as early as tomorrow (Friday). Also if you’re in the market for a mortgage, you can compare current mortgage rates here.

Thoughts?

Source: NY Times

Published on November 5th, 2009 - 18 Comments
Filed under: Taxes
 email this article - add to tip'd - stumble it - digg it - bookmark it

Lending Club Update – October 2009 Performance

As October came to a close, things were still going well with my Lending Club investments. The one loan that has gone bad has stayed bad, but everything else is being paid on time.

Even with that delinquency, however, my “High Risk” portfolio is back in the black, as I’ve earned more than enough in interest to cover the loan that I lost. Assuming things keep going as they are, that one bad loan will soon be a distant memory.

During October, a couple of borrowers paid off their loans early, so I’ve re-deployed that cash (along with some additional funds that I’ve added to my account). At the end of the month, I had 148 active loans with a net annualized return of 11.82%.

From here on out, I’m planning more of the same… I’ll be steadily adding money every month, and reinvesting the repayments as they come in. If you’ve been investing with Lending Club, I’d love for you to share your experiences in the comments section, below.

Published on November 5th, 2009 - 17 Comments
Filed under: Saving & Investing
 email this article - add to tip'd - stumble it - digg it - bookmark it

How Much to Budget for Car Maintenance?

If you don’t control your money, your money will control you. Today let’s focus on getting control over the cost of auto repair and maintenance.

The cost of owning a car

Here’s a look at all the budget categories you may want consider when attempting to nail down your auto expenses:

1. Purchase price – payment (cash and/or financing and interest) to acquire the vehicle
2. Taxes – paid when you buy or sell the vehicle
3. Fuel – the gasoline/fuel you need to make the vehicle run
4. Insurance – all levels auto insurance including personal liability, collision, comprehensive, roadside assistance, etc
5. Tags and registration – state vehicle registration, license plates, and renewal tags
6. Repair and maintenance – tires, oil changes, and all other repairs and maintenance necessary to keep your vehicle operational

Today we’ll set aside the first five categories and focus solely on budgeting for repairs and maintenance.

Benefits of controlling these costs

Many of the benefits of controlling your auto maintenance costs are similar to those you experience when gaining control over any area of your money, so let’s focus on those that are specific to the topic. Proper budgeting for auto repair and maintenance will allow you to:

• Have a better relationship and better communication with your auto mechanic
• Prepare/plan better so you don’t have to race to get oil changes before your next trip
• Reduce your maintenance expenses going forward
• Relax in the knowledge that you’re prepared

You can achieve all of these things simply by setting aside enough money to cover your expenses. That way you won’t have to stress or worry about where the money is coming from — if it can be found at all.

A simple, average amount

Before we try to determine specific dollar amounts for your individual situation, let’s talk about a simple, average amount that people can start with. If you want a detailed break down of costs for your exact vehicle and situation… Scroll down to the next section.

Earlier this week, I spoke with my trusted auto mechanic — Sam — about how much the average person should budget for auto repair and maintenance. These are the numbers he gave me:

On average $1,200 per year per vehicle, is a great place to start. This means $100 per month for each vehicle.

Remember that these numbers are averages, so… While there will always be exceptions to the rule, this amount should cover “typical” maintenance expenses. Of course, it’s important to actually have this money set aside so you can spend it in a lump sum if necessary.

Robert Espe, a frequent DebtFreeAdventure, says the he budgets $2,000/car per year, and also reminds us that although there is no exact answer that will work for everyone.

Figure out your total cost of ownership

For all you fellow geeks out there who want to nail down costs to the exact penny… This section is for you! Rather than guessing at or estimating monthly amounts, use this information to figure out exactly how much it will cost you to purchase, own, operate, and maintain your vehicle over the entire life of ownership.

Here are a few tools to help you figure out exactly how much you are spending to help you get an idea of how much you need to budget:

• The Total Cost of Ownership Calculator from Edmunds
• The Car Operating Cost Calculator

The Edmunds tool is only for current car models, whereas the other one works regardless of your situation. Also note that these tools are very comprehensive, even taking into account depreciation. I recommend setting aside some time and playing around with these calculators so you can nail down the real cost of owning and maintaining each of your vehicles.

What about you?

Do you budget for automotive expenses? If so, how much do you set aside for these expenses each month?

Published on November 5th, 2009 - 17 Comments
Filed under: Automotive
 email this article - add to tip'd - stumble it - digg it - bookmark it

Series I Savings Bonds Now Paying 3.36%

This is just a quick note to say the new Series I U.S. Savings Bond interest rates have been released. I haven’t written much (anything?) about savings bonds in the past, but I’m planning on changing that in the near future.

In the mean time, I’ll just say this… The interest rate on Series I bonds is made up of a fixed rate component and an inflation component. Rates are updated twice a year, in May and November.

The latest update saw the fixed component increase from 0.10% to 0.3% and the inflation component went from 0% to 3.06%. In other words, they’re now offering a total return 3.36%, which compares favorably with prevailing CD rates.

For a bit of background, Series I bonds can be cashed in after a minimum of 1 year. If you break them between 1-5 years, there is a penalty of three months of interest. After five years, there is no penalty. More info here.

Source: TreasuryDirect and Bargaineering

Published on November 4th, 2009 - 6 Comments
Filed under: Saving & Investing
 email this article - add to tip'd - stumble it - digg it - bookmark it

Use Weight Loss Strategies to Get Out of Debt

This is a guest post from Adam Jusko, founder of IndexCreditCards.com, a credit card information site where you can compare credit card offers. Please consider following Adam on Twitter for quick credit tips and opinions.

As the founder of a website about credit cards, I’m sometimes asked by financial reporters what advice I’d give to people trying to get out of debt. This used to stump me a bit, because the only true answer is “spend less than you earn and pay down your debt.” But of course, it’s not that easy.

Just as weight loss requires a certain psychological change that goes beyond “burn more calories than you eat,” so too does debt reduction. In fact, when climbing out of debt, you can adapt many of the same strategies used for successful weight loss. Let’s look at a few to see how you can put yourself on a financial diet that will lead to debt loss:

• Take it slow to build new habits – If you’ve ever heard the term “yo-yo dieting,” you know that it’s common for people to lose weight quickly, then put all that weight back on again once the “diet” is over. Why? Because it was a short-term fix, not a permanent change in behavior. The same is true of debt. You can put yourself on a complete financial sacrifice program to pay down your debt quickly, but once the debt is paid, you’ll feel deprived and you won’t have new habits to sustain you over the long haul. So, take it slow. Create a debt reduction program that requires real change in financial behavior but not a program that is such a shock to the system that you’ll never be able to maintain it.
• Make it public (at least somewhat) – A common goal-setting tactic for weight loss (and other goals as well) is to tell someone about the goal you’ve set. Doing so achieves a few worthy objectives: (1) friends & family understand changes in your behavior, (2) they encourage you toward your goal, and (3) you feel more committed because you want the praise that comes with success (or want to avoid admitting failure, depending on what motivates you). It may not be fun to tell of your debt, but people that care about you want to help you reach your goals. So tell ‘em.
• Cut down on sweets – Weight loss isn’t without sacrifice, and neither is debt reduction. If you want to lose weight, you have to lay off the cupcakes (or at least cut down on them). If you want to get out of debt, you have to lay off the new purse or new cell phone or new whatever-it-is-that-you-LOVE-to-spend-money-on (or at least cut down on them). Obvious, but still worth mentioning.
• Exercise – Obviously it’s good for losing weight, but getting out of debt? Yep. You’re more likely to be overweight if you’re in debt, and vice versa. Why? We could talk about endorphins and depression and all sorts of possible reasons, but in the end it doesn’t matter. Exercise is good for everything. Don’t believe me? Here’s at least one study that backs up the positive effects of dieting, which include increasing wealth.
• Use small rewards – Whether it’s losing weight or getting out of debt, it’s hard to wait until you reach your ultimate goal to celebrate. So, don’t wait. Set small goals along the way and reward yourself for staying on the right path. Just don’t make your reward a big money splurge that defeats earlier efforts. One suggestion: coffee with a friend who supports your efforts and will give you the pat on the back you need.

Like weight loss, debt reduction ain’t easy. It takes sacrifice, there’s no way around it. But using small strategies to support your larger goal will help you through the slog and to the other side — where you know a happier life is waiting for you.

Published on November 4th, 2009 - 5 Comments
Filed under: Credit Cards, Debt Reduction
 email this article - add to tip'd - stumble it - digg it - bookmark it

Weekly Roundup – Disney Shanghai Edition

I just ran across an interesting article about Disney receiving the go-ahead from China’s central government to build a new theme park in Shanghai. Current estimates are that the new park will cost close to $4B and will open in five to six years. I can only imagine how thrilled Disney is at being given access to such a huge market.

And now… Eight recent articles that caught my eye…

• Conduct a Financial Fire Drill
• Seven Zen Principles to Guide Your Money and Your Life
• The Good, the Bad, and the Ugly of Annuities
• Our Journey to Debt Freedom: Cresting the Hill
• Create a Home Inventory and Save Your Stuff
• Can You Buy Your Way Out of the Rat Race?
• Ten Tricks for Staying Warm This Winter Without Huge Energy Bills
• How to Budget for Lump Sum Payments

That’s it for now. Have a great week.

Published on November 3rd, 2009 - One Comment
Filed under: Link Love
 email this article - add to tip'd - stumble it - digg it - bookmark it

How to Save Money on Vacations

In December, we’ll be celebrating our 3 year anniversary. Our little tradition so far has been taking a vacation. Since we’re getting a townhouse a month before our vacation, however, we’re scaling back a bit this year. After talking with some friends about saving money on travel, I have some more tips to share.

Planning ahead and looking at the total costs of going on vacation can help you control your spending. Some people spend frivolously on vacation and then wonder where their money went. Like everything, prioritize your spending.

My husband and I like to have memorable trips, and love taking pictures as our main mementos. Some people like grabbing gifts and other like to spend money on food. Pick one or two areas where you want to splurge and cut back on the rest. It is possible to have a good time on vacation and not spend a lot of money.

While I share some things that have worked well for us and our friends, see if you can add some more tips in the comments. I’d love for everyone’s next vacation to be both fun and frugal.

Getting a car rental for the trip

We usually have a rental car for the trip. We’d like to avoid wear and tear on our cars since we usually drive some distance. We also like the option of turning in the rental car if there is a problem and exchanging it for another. It’s less hassle than finding a shop while out of town and getting a repair made.

Last year we tried renting a car through Priceline, and it worked well for us. We started low with a bid of$11/day. We then slowly raised that number until we got an offer. We ended up getting a mid-size car for $14/day plus tax.

Before going to pick up the rental I checked with my car insurance company to see if they provide rental car coverage. Our policy, like many others, will transfer all our liability and collision coverage to a rental driven in place of our own car.

If you’ve ever priced insurance at the rental counter, you know free insurance coverage is a huge savings. If you’re planning on renting with a credit card, you should also check to see if the card issuer offers any sort of insurance coverage.

Eating on road trips

If you’re driving to destination, I suggest packing plenty of snacks and drinks for the trip. This will save you from impulsively buying expensive snacks at gas stations and also cut down on stopping for breaks on the road. We also estimate our trip time and plan for a longer lunch stop to eat and relax. Using Google Maps, we can usually find a nice local spot that’s affordable.

Saving money on airfare

Friends of mine recommend using Kayak to compare airfares. It saves them time aggregating the best fares from several top sites at once. One friend is currently out in Oregon visiting family and friends — she got two cross-country tickets for $149 total! Her tip is to plan ahead and check repeatedly as prices change constantly.

If you’re also considering smaller, budget airlines, Nora Dunn (a world traveler) suggests using Which Budget to see if you can find better rates.

Packing for a vacation

If you’re flying, pack light to avoid luggage fees from the airlines. Call your airline ahead of time to find out about their baggage policy and fees. Travel expert Anne McAlpin’s “Pack it Up” has some wonderful tips on packing your carry on bag and for airport security.

• Keep your clothes basic and choose outfits that work interchangeably with your shoes and accessories. If you’re traveling during the winter season, bring items to layer. If you’re traveling during warmer weather, McAlpin suggests getting some clothes made of natural fabrics.
• Take inexpensive jewelry with you when you travel. Leave your nice pieces at home. The exception, of course, is your wedding ring.
• Go easy on shoes. Make sure you have comfortable walking shoes, dress shoes for nice dinner, and possibly sandals.
• Bring dryer sheets to de-static your knit items and help keep your luggage smelling fresh.
• Take a photo of what you’ve packed in case the airline loses your luggage. It can be hard to remember who’s bag had what.
• If you like to pack lots of clothes, consider getting compression bags. They can save you space and reduce your luggage count (but not weight).
• Don’t stress out over getting luggage insurance. You may already be covered by the airline, your credit card (if you bought the tickets with it), or your homeowner’s insurance.

Making the most of your hotel

We again used Priceline to bid on a comfortable hotel near Disney World and ended up paying 1/3 of their regular prices. When we placed our bid, we requested a three star or higher property, and low-balled our price. We got accepted on our first bid (maybe we should’ve bid lower!) and wound up near both Universal Studios and a friend who lives just outside of Orlando — knowing a local person can be an invaluable resource.

When you get to the hotel, be pleasant with the staff and ask them for some local recommendations for places to eat. I use to work as a front desk clerk while in college, and I loved to help tourists discover local spots. Doing this can both save money and help you find a memorable place to eat. I would also ask the concierge (if they have one) for some smaller events that are happening around town.

Cutting your expenses home

If nobody will be in your house when you’re away, go ahead and unplug some appliances such as your microwave, toaster oven, computer, and stereo. Our electric company, Progress Energy, notes that “up to 75 percent of the energy used in home offices is consumed when the electronics are plugged in, but not in use.” You might also want to change your thermostat you’re out of town.

Your thoughts

Do you have any further suggestions for planning a fun and fugal vacation?

Published on November 3rd, 2009 - 15 Comments
Filed under: Frugality, Travel
 email this article - add to tip'd - stumble it - digg it - bookmark it

Most and Least Reliable Cars – 2009 Edition

Consumer Reports recently released their 2009 listing of the most and least reliable cars. Whenever these rankings come out, I look at them with a bit of morbid curiosity. I’m mostly interested in seeing how far down the list the domestic carmakers

Looking at overall brand reliability, Japanese imports clearly rule the roost, whereas domestic brands are generally well down the list. Here’s the rundown:

• Scion
• Honda
• Toyota
• Infiniti
• Acura
• Mitsubishi
• Lexus
• Hyundai
• Porsche
• Mercury
• Saab
• Subaru
• Suzuki
• Kia
• Mazda
• Ford
• Nissan
• Volvo
• Buick
• Lincoln
• Volkswagen
• Pontiac
• Mercedes-Benz
• Audi
• Chevrolet
• BMW
• Mini
• GMC
• Saturn
• Jeep
• Dodge
• Cadillac
• Chrysler

Of course, these rankings are based on the average predicted reliability ratings of all models for each brand. It’s thus important to keep a couple of things in mind here…

First, the reliability ratings might not be entirely accurate, as there isn’t a whole lot to go on when making predictions for new models. In some cases, these predictions are based on data from just a single year.

Second, companies at the high end aren’t immune from producing a dud, whereas some at the low end actually have a decent model or two. For example, the Toyota Tundra is (slightly) below average despite coming from the 3rd best maker, whereas the Dodge Caliber is (again, slightly) above average despite coming from the 3rd worst maker.

CR points out that, “as a group, inexpensive small cars and midsized family sedans are the most reliable.” They also made clear that the difference between the best and worst models is dramatic. In fact, the Volkswagen Touareg (worst) is 27 times more likely to have problems than the top-ranked Honda Insight.

Interestingly, five of the top eight most reliable family cars were hybrids. The NY Times “Wheels” blog inquired about this surprising (at least to some) result, but CR held their ground.

Published on November 2nd, 2009 - 12 Comments
Filed under: Automotive
 email this article - add to tip'd - stumble it - digg it - bookmark it

Get 100 Free Trades from OptionsHouse Brokerage

Are you in the market for a discount broker? If so, you might want to check out OptionsHouse. They’re currently offering 100 free trades for new customers.

Here’s the scoop:

New customers are eligible for this special offer after opening a new OptionsHouse account with a minimum of $3,000. You must apply for the commission-free trade offer by inputting promotion code FREE100 when opening the account. New accounts receive 100 commission-free trades for each stock or option trade executed within 60 days of funding the new account.

Pretty easy… New customers, $3000 minimum, use promo code FREE100. Once you use up your free trades, you can make stock trades for just $2.95/each and options trades for $9.95/each.

Published on October 31st, 2009 - Leave a Comment
Filed under: Saving & Investing
 email this article - add to tip'd - stumble it - digg it - bookmark it