The Key to Financial Planning - Your Financial Objective

The key to any investment planning is starting with a financial objective. What exactly is the financial goal?



All to often people care more about return or safety when considering investment options. What should be considered first and foremost is the needs of the investor. What is this money being saved for? How long will it be before the money is needed?

Potential returns and risks of individual investments are irrelevant until the investors objectives and goals have been clearly defined. For instance a S&P 500 index fund that will most likely avg 12% over the next 15 years sounds much better than a money market fund that will average 3% over that same period. This will hold true for many investors but not the high school student saving for college who will need the money in 18 months. That student may very well be disappointed when they withdrawal the entire account that has lost money because they bought in on a market down cycle. The student is better off with something safe because they can't risk a loss. On the other hand the recent college graduate who just found a job and wants to start saving for retirement will be better off in the stock market.

Determine Your Financial Objective

Understanding investor objectives can be tricky. Here are some great questions to answer when coming up with the objective of financial planning.

1. How much money is needed?
2. When is the money needed?
3. What is the likeliness that an emergency or other need will come up and the money will be needed early?

Debt Snowball - 2 Schools of Thought

The debt snowball is a debt reduction method and strategy used to pay off debt. It is widely preached by debt counselors all over the world and many consumer finance and debt help gurus such as Dave Ramsey absolutely swear by it.


How the Debt Snowball Works

It is really a rather simple concept. The one employing this method simply lists all their debt and budgets out the minimum payment owed monthly to each creditor. Then one creditor is selected and any remaining funds available after all minimum payments have been made is allotted the remaining balance. After that creditor is paid off that minimum payment as well as the remaining excess funds is targeted towards the next selected creditor. Thus the snowball grows. You pay of the next creditor at a faster rate then the previous. As creditors are eliminated the snowball grows bigger and bigger. Rinse and repeat.

There is an internal conflict in this method. Conflict arises in determining which creditor should be targeted first, second, and so on.

There are two schools of thought on this matter. The "motivational finance method" and the "logical finance method".

1. Motivational Finance Method - Here the creditor owed the least amount of money is always targeted first. In this way the one paying off debt is thought to be more motivated because they are awarded the satisfaction of seeing the fruits of their labour sooner. However this method pays no attention to interest rates. Thus in theory the consumer will most likely pay more then the one who utilizes the logical method.
2. Logical Finance Method - Here the highest interest bearing creditor is paid off first. In this way the consumer is paying off their debt the fastest and the cheapest. However experts tend to agree that the consumer will be more likely to quit than the same consumer who employs the motivational finance method.

So Which Debt Snowball Method is Best?

Technically it is kinda impossible to argue against the logical method. However, if the consumer in financial hardship is not motivated then perhaps the motivational method would work better. I would contend that if the consumer can't stay self motivated enough to see it through the logic method then neither would work anyway. But that is just my opinion. Personally I would rather get out of debt faster and cheaper.

David Sokol No Longer Replacing Buffett as Berkshire Hathaway CEO

David Sokol has been the primary guy in the running, and Warren Buffett's top pick, to replace the Oracle of Omaha as the CEO of Berkshire Hathaway. Well David is no longer available for the position.

Just ask him.

David Sokol recently withdrew himself and resigned from the expected job and responsibility of running what is perhaps the most successful holdings company ever to invest.

He has allegedly stepped down after information about some personal trades of a company he purchased stock in which has recently been bought by Berkshire Hathaway.

Buffett has said that the decision does not come as a derivative of that trade nor the surfacing of that news.

I my self have to wonder a bit as the media is hitting this thing pretty hard. But I have enough confidence in Buffett to take his word... for the most part.

So now the real question is this...

Who will hop in the driver seat now that David Sokol is out?


It is a big question that needs answering. Warren who is still in relatively good health is 80 years old. He is not senile yet and still seems to navigate his way around a prospectus and balance sheet pretty well but hey... he is old.

They say there are four internal potential candidates that are already being considered.


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Home Loan Approval - Your Best Financial Footing

This article describes some basic steps one can take to improve the chances of approval for a mortgage loan.




Have Stable Monthly Budgeting Habits

It is a good practice whether awaiting for a loan approval decision or not to always maintain a stable monthly budget that utilizes wise spending, saving,  and income earning habits.

Maintain Healthy Credit Scores

Your credit scores and your credit reports will have a big impact on the lenders decision to approve or deny you the funds you need to buy a home. You want to ensure that your credit score is as high as you possibly can get it. This means checking your reports and ensuring that all info and activity is accurate and that their are no mistakes that are hurting the appearance of your credit history.

Make sure you understand credit score basics so that you are able to do what you need to do if something is out of place. If you don't understand what your looking at than how will you know if it is OK?

Pay Off Unsecured Consumer and High Interest Debt

If you have credit card debt, owe money on store credit accounts, personal bank loans, or any sort of high interest debt than you really should pay it off.

Lenders are not going to want to lend money to folks that owe on a lot of rip off high interest credit cards or other sorts of unsecured debt.

At the very least you need to consider a debt consolidation loan with more favorable terms.


Be Upfront with The Bank or Lender - Tackle Obvious Approval Issues First

If there are some obvious weaknesses on your loan application it is a good idea to bring them up first. This allows you to offer an explanation instead of coming up with an excuse for when they find out about it anyways. Plus you will be able to avoid applying for the loan if the weakness is a automatic disapproval trigger for the lender.

If nothing else this will make you appear and feel more responsible as a borrower.


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Four Highly Effective Habits of the Financially Healthy and Wealthy

Debt Settlement Risk Factors

Debt Settlement Risk - Three Key Fundamental Risks

Debt Settlement has some fundamental risks that come with the decision to pursue efforts of settling debt for a discounted price with your creditors.

This article provides an outline of three existing debt settlement risk.



3 Financial Risks

No Guarantee

• There is never a guarantee that you will be able to settle debt with a lender. Just because you want to settle and make an offer does not mean that they will take it.

Taxes

• You will most likely have to pay taxes on any debt forgiven by your lender.
• The government and the IRS count those funds as income. So you will get a 1099 for the discounted amount of debt in most cases.

Credit

• Your credit score is not going to be in good shape. there is no doubt that you will have to become delinquent in order to have any real chance of settling any debt with your lenders. Those missed payments and default statuses go on your credit history and payment history records.
• Also just because you settle a debt successfully does not mean that other potential creditors are going to view that as a good thing. Think about it. You borrowed money and did not pay the full amount back.

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California Hardest Hit Fund Foreclosure Assistance - Strategic Focus

The California State Housing Authority has taken targeted measures to provide assistance to homeowners in financial hardship through the Hardest Hit Fund.

Like all states receiving help from HHF they have worked hard at developing innovative mortgage assistance programs targeted to the specific needs of their homeowners foreclosure assistance needs.

In addition to developing new programs they have adopted the approach of improving and expanding existing efforts and foreclosure prevention programs already in place.

California has decided to hyper focus borrower assistance resources towards aiding low to moderate income homeowners.

A core theme in the development and design of their approach is to ensure that their programs and the operations of their assistance efforts remain flexible and agile. This is in response to the success that the Obama home affordable mortgage assistance programs have had with the same approach.

To get the most bang out of their buck California foreclosure assistance efforts has put significant measures in place to have lenders, loan servicers, and PMI insurers to match their efforts dollar to dollar.


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California Foreclosure Prevention Programs - Hardest Hit Fund Program

California Mortgage Foreclosure Crisis - Hardest Hit Fund Assistance

The Hardest hit Fund has contributed approximately 700 million dollars to aid California's fight to stop foreclosure.

California homeowners have endured comparatively high levels of financial hardship. Many borrowers in California have lost the ability to make mortgage payments due to a loss of income, divorce, medical issues and other typical causes of unpreventable hardship. The difference in California is that a large population of homeowners have been adversely affected by the unwinding housing, mortgage, and foreclosure crisis. Factors such as rising monthly mortgage payments and unprecedented statewide declining home values have created a compounding effect compared to other states.  These horrific economic conditions have triggered an even worst and unforeseen trend in which homeowners are now strategically defaulting on their mortgage because of the overwhelming drop in home values and thus home equity.

The housing slump and economic hardships experienced in California are dramatically worst in comparison to other states. This difference appears both in the size and severity of the declining trends of the housing and mortgage slump as well as the rising rates of foreclosures. The typical mortgage solutions and foreclosure alternatives that work in other states do not prove as effective in California because of the limited dollars available to help this large segment of California homeowners suffering through financial hardship and mortgage default.

These circumstances have led to the decision to financially assist the state of California in it's fight to stop foreclosure and provide homeowners assistance through available resources of the Hardest Hit Fund which was created trough the Making Home Affordable Plan.

California Mortgage Help from Hardest Hit Fund Program

California Housing Finance Agency has taken measures to offset the consequences of elevated levels of foreclosure and mortgage default by developing government mortgage assistance programs through the Hardest Hit fund. The California Foreclosure Assistance Plan provides debt help and mortgage assistance for homeowners in financial hardship. 


The California mortgage assistance programs have been developed by working with lenders, loan servicers, borrowers, housing counselors, and private mortgage insurers to create, develop, and utilize targeted mortgage solutions that will reduce the growing amount of foreclosures and help financially troubled homeowners keep their home.

Four California Homeowner Assistance Programs

The California Foreclosure Assistance Plan is composed of four mortgage help programs. Three of the four programs focus on creating an opportunity for homeowners to keep their home. The fourth program provides homeowners with foreclosure relocation assistance in the form of financial aid.

• Monthly Mortgage Payment Assistance for Unemployed Homeowners - Provides homeowners with financial  aid to help pay the monthly mortgage payments.
• Home Loan Reinstatement - Helps homeowners bring their loan current by providing financial assistance to pay of part of the past due balance.
• Mortgage Balance and Principle Cuts - Gives borrowers with upside down home loans financial aid to pay off part of the principle balance on the mortgage loan.
• Moving Assistance and Financial Aid - Provides borrowers who are losing their home due to a short sale or deed in lieu up to 5,000 dollars in foreclosure relocation assistance. This cash for keys like program provide financial assistance to homeowners who will incur moving expenses due to foreclosure.

Though the foreclosure and home assistance programs will help a great deal of homeowners in financial hardship they will only put a dent in the entire California foreclosure crisis. These programs that are funded through the Making Home Affordable Plan's Hardest Hit Fund will act as an effective compliment to the Federal mortgage assistance programs such as the Home Affordable Modification Program and the Home Affordable Refinance Program.

The US Economy Fires Up to End 2010

The GDP growth rose considerably to a annual rate of 3.2% up from the previous 2.6%

The market seems to be doing pretty well and those GDP numbers are pretty solid. Just the same I have some worries.


Housing is not looking any better and I think it is or at least could get a little worst. That scares me a bit. I think we are going to see a lot of foreclosures in the future and a lot of banks are going be taking on properties that they can not sell and I think that will be most of them.

Homeowners of course will do their best to stop foreclosure through a mortgage solution such as loan modification or even refinancing. But many will not be able to afford their mortgage payment or rather the home.

I suppose only time will tell. I would just hate to see things take a turn for the worst as I am not sure the economy has what it takes to pull itself back up from a double dip.

Cash for Keys

Lenders give thousands of dollars to homeowners who lose their home because of foreclosure. This foreclosure relocation assistance help homeowners cover the cost of moving out of their home and into another residence.


The amount paid to the homeowner or renter may vary from the amount of a thousand dollars to five thousand dollars. The program is also offered to real estate agents who gain a commission. They do so by lowering the amount paid out and keep the difference for themselves. It is wise to talk to the lender yourself to get the best amount available.

This financial aid for homeowners who lose home in foreclosure through cash for keys like programs are supposed to create good will, but is that the real motivation for the lenders?

Perhaps the reasons behind cash for keys and foreclosure relocation assistance is actually two fold.

• One reason is to get the renter or homeowner to depart quickly. No one wants to sell a home that has old owners refusing to leave.
• Secondly to create an incentive to for the former occupants to resist damaging or destroying property out of spite against the lender. 

HAFA - Foreclosure Alternative Help

HAFA is the Home Affordable Foreclosure Alternative program created for homeowners who can not afford to keep their home.


President Barrack Obama helped establish the program through his Making Homes Affordable Plan and it is for the homeowners who are not capable of making a payment even if those payments are reduced through the Home Affordable Modification Program.

Obama Foreclosure Alternatives

In that case the homeowner is offered other mortgage solutions that do not let the homeowner keep the home but allow them to walk away with no mortgage debt. This is done with a short sale or perhaps a deed in lieu.

Obama Cash for Keys Program

Along with the foreclosure alternative the homeowner is able to receive a few thousand dollars of foreclosure relocation assistance through the Obama cash for keys program. Typically the cash for keys program available through HAFA allows homeowners to obtain 3,000 dollars of financial aid.

Home Affordable Mortgage

There is a huge need for mortgage assistance amidst a growing population of homeowners in financial hardship. This need has not been over looked.

There are many government mortgage assistance programs and these efforts only seem to be growing in both number and level of effectiveness.

Below you will find a list of homeowner assistance programs developed to provide homeowners the opportunity to obtain beneficial debt help that enables them to make home affordable.



Home Affordable Mortgage Program List


Home Affordable Refinance

This is the Obama refinance program that allows homeowners to refinance their current mortgage to a home loan with a more favorable and affordable monthly payment

FHA Short Refinance

Allows underwater homeowners to reduce their principle by at least 10% by refinancing.

Second Mortgage Modification

Gives lenders incentives to eliminate second lien mortgage debt.

Home Affordable Modification

This is the Obama loan modification program that allows homeowners in financial hardship to lower their monthly mortgage payment by restructuring the payment terms of their home loan and thus make home affordable. This program allows homeowners to stop foreclosure and overcome mortgage default.

Unemployment Assistance and Modification Program

This government mortgage assistance program allows homeowners who are unemployed to obtain mortgage relief via forbearance and than modification

Obama Foreclosure Alternatives

Provides homeowners who have long term financial hardships that prevent them from being able to keep their home the opportunity to stop foreclosure and walk away with no mortgage debt. Foreclosure alternatives such as a deed in lieu of foreclosure or a short sale are utilized to help these homeowners. Participants are also granted up to 3,000 dollars of foreclosure relocation assistance through the Obama cash for keys program.

Hardest Hit Fund

This program provides billions of dollars to the local housing authorities of states that have been hit the hardest by financial hardship caused by the turmoils of the down economy.

How to Get an Affordable Loan Modification

If you are a homeowner who wants to reduce their mortgage payment via the Obama mortgage modification program known as HAMP the Home Affordable Modification Program than you need to follow the step by step process listed below.


Qualify Yourself

The first step is to determine if you meet the basic qualifications for affordable mortgage modification program.

Preliminary HAMP Application

Next you need to obtain, complete, and submit the preliminary modification request application. This is what the government refers to as the Request for Modification Affidavit. This application is what starts the ball rolling and will get you into a HAMP trial modification.

Prepare Financial Package

With the initial application you should send a financial package that includes the following documents listed below.

• Tax Form 4506-EZ. This form allows your lender access to past tax returns you submitted to the IRS.
• Income documentation such as pay stubs and bank statements. Submit at least three months worth.
• Document certifying that you have not been convicted of felony larceny, fraud, forgery, money laundering, tax evasion, or the like in the past 10 years.

Successfully Complete HAMP Trial Modification

You must make all your trial payments on time and respond to the packages and inquires your lender will send in the mail. Play it safe and utilize the envelopes and payment coupons provided.

Get Approval (or Unmentionable) Decision

Wait for lender to evaluate debt, income, financial hardship, and the like.

Typical Reverse Mortgage Borrower

Are you considering a reverse mortgage loan?




If you are you may be wondering if you are a right fit for this particular type of mortgage product. As an effort to help folks dig into this question and find the correct answer for their unique situation I have given a brief and accurate description of the typical reverse mortgage borrower.

The typical reverse mortgage borrower is an elderly homeowner whom is in need of some cash and or cash flows. The borrower will initially own the home out right or owe very little. The borrower will live in the property secured by the reverse mortgage loan. Usually the borrower is single, widowed or divorced and lives alone.

What is a Reverse Mortgage Loan?

The reverse mortgage was created to help elderly homeowners who need to increase their income.


A reverse home loan is a backward operated mortgage product that pays the homeowner in exchange for the right to the equity value in the home has to offer up to the amount owed at the end of the loans life or term.

A reverse mortgage loan is a loan that can be either obtained in a lump sum, line of credit, or the traditional reverse mortgage installments. The equity in a home is reduced in accordance to the money borrowed an the costs incurred.

A reverse mortgage loan is a mortgage product that offers elderly borrowers a cash flow solution in the form of a secured loan.

A reverse mortgage is a non-recourse loan and debt. This means that only the value of the home may pursued as a source of repayment.

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Reverse Mortgage History

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FHA Reverse Mortgage Equity Conversion Loan

FHA Reverse Mortgage

The FHA reverse mortgage loan is known as HECM – Home Equity Conversion Mortgage.

A FHA reverse mortgage is of course guaranteed by the FHA.


There are some general requirements that a borrower must meet in order to qualify for a FHA reverse mortgage loan. Below I have listed just the very basic FHA reverse mortgage qualifications for borrowers interested in utilizing this financial tool.

Qualifications for FHA Reverse Mortgage

• At least 62  years or older
• One - Four Unit dwellings
• Own the home, or the existing traditional forward mortgage is close to be paid off more specifically it can be paid with the proceeds obtained from the reverse mortgage loan.

Related Resources

How to Refinance and Lower Your Mortgage Payment

Reverse Mortgage History

History of the Reverse Mortgage

The reverse mortgage loan is a government inspired mortgage product designed to help elderly homeowners tap into their home equity with out the risk of losing their home.


HUD administered the program starting in the late 1980's. This was done through the Housing and Community Development Act of 1987

Initially a test run was approved in which 2500 mortgage insurance policies were authorized for issue. Three years later in 1990 which was actually closer to 1991 the Omnibus Budget Reconciliation Act of 1990 expanded and set in motion the modern day system used to insure reverse mortgage loans with FHA mortgage insurance.

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Thoughts on Mortgage Loans

Refinance - Lower Mortgage Payment

Thoughts on Sales and Sales People

A high performance sales person is one of the most valuable assets a company can have.


The purchase opportunity a consumer will pass up if left to their own isolated mind and will, the consumer will buy and pay twice the price if helped by a good sales person.

To better explore this notion let's take a look and explore some thoughts on home loan lending and the loan agent.

The loan agent for the modern day private lender is there for one reason. They are there to hold the borrowers hand, keep them happy, and most importantly to see them through the entire closing process. This is important because the borrower and home buyer has a lot to deal with. The never ending list of closing costs can be overwhelming and borrowers often want to back away as they become overwhelmed with all the financial obligations and contracts.

Because good sales people are hard to find and historically impossible to control, the typical employee to employer arrangement has proved a poor performance strategy.

Salary is a commitment and if the employer is wrong about the hired employee than they are out quite a bit of money. Sales people have a reputation of taking their own interest to the extreme. If they are guaranteed money this is gonna make managing them even worst. Why go the extra mile if there is no perceived self benefit?

Thus the commission has proven to be a great fit for the marketing and sales side of business operations.

Sales people are also good at extracting the highest price tolerable by any one given borrower. Thus loan origination points are a great match for originating loans. The sales guy is able to pull huge commissions and thus make a fruitful living and the lender carries zero risk.

By giving sales people a optional margin and commission take depending on the price obtained for any given product a company is able to give their sales reps greater opportunity for tremendously less risk. The price and risk is passed on to the consumer. If the consumer or borrower negotiates the price down to the bare minimum than they have avoided the extra cost of the reps allowable premium. The rep in this scenario still gets a commission. The commission is not as high as it could have been if they were able to get the consumer to purchase the product for a higher premium.

Sales people learn to live and cope with this uncertainty.

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Simple Thoughts On Mortgage Lending

When you take out a home loan you are literally buying a dollar for three dollars. By the time you are done paying the mortgage you will have paid the lender three times the money they lent you. This is how most businesses work.


Businesses purchase inputs, transform them into an output that is worth more. Business operations create value through this transformation process.

Lenders find people who need more money than they could possibly come up with themselves by the time they need it. This person is the borrower. They also find people who have more money than need during this same short term window. The lender than connects these two. They act as a broker.

Lending money is easy. Managing the risk of losing money in a way that consistently yields more return than loss is the trick.

Thus the real trick that lenders typically and historically do so well is to find opportunities to loan money to those who will do their best to pay back that money plus interest over a period time. One payment at a time. They do this by finding folks with steady consistent income that have a history of paying their bills and following through with their past financial obligations.

Middle class consumers who are the typical mortgage borrowers are by themselves to risky to be trusted with such a sizable loan over such a long period of time. A lot can happen in thirty years.

The asset being purchased with the loan is what creates the security for the lender and allows the American dream to be more than a dream. The fact that the lender is able to obtain the right to force a sale of the property secured by the mortgage loan is what allows the American dream to become an American reality.


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Business Basics - Understanding the Certainty of Uncertainty

Ivy League College Level Education with out Leveling Your Personal Finances

There are many reason we don't all graduate from those prestigious Ivy League Schools such as Harvard, Stanford, or MIT. These great educational institutions are very expensive. They are insanely competitive.


The admission offices only have room for so many, and they want the very best.

So for the vast majority of Americans it is simply not possible to get into these schools. Most US students won't be able to hear and be a part of these wonderful lectures and academic experiences.

Most of us will never have the opportunity to see what goes on behind those institutional walls of academic excellence.

Right?

Wrong.

Everyone is able to be a part of these institutions and classes. You can take whatever class you want. You can take these classes when ever you want. All the high caliber schools around the world are available free. They are free to all via the Internet and a special website called AcademicEarth.Org

If you would like to get a free Ivy League Eduction that will not break your finances via Academic Earth simply follow the step by step instructions I detail in that article titled...

How to Get a Ivy League Education Free