Saturday, January 17, 2009

Leverage = The Enemy

This whole financial crisis is the result of only one problem really. Too much leverage in the system. People borrowed money on the assumption it would always be available and they could delay paying it back indefinitely. That is never true. My advice to the extent you can follow it is to reduce leverage as quickly as possible over your lifetime. Pay down your house if you can. Pay down those student loans. Never carry a balance on your credit card. Don't have a car loan. Only buy what you can afford. I have always followed these rules, but I must admit on the house I did wonder if I was doing the right thing by paying down as much as I could (not fully there yet). The government does incentivize me to NOT do that by making the interest tax deductible. But, it is still the right thing to do. Even now, when you can borrow as cheap as ever and house prices are no longer absurd, I would still advise paying it down. The piece of mind of owning your home is worth it (or at least I hope it is) and once you have paid it off you can build wealth with a safety net under you.

Friday, January 9, 2009

Responsible Homeowers: Your Bailout Has Arrived

Mortgage rates have never been so low (5% 30 Yr. Fixed or Better). If you are one of the millions of responsible Americans with good credit scores who are able to pay their mortgages and still have jobs, your bailout has finally arrived in the form of record low mortgage rates. If you are paying anything over 5.75% and plan to stay in your house for several years it is definitely time to refinance with a fixed rate mortgage to lock in these cheap rates. Check out to find someone offering a low rate in your state. You can also use their refinance calculator to determine if refinancing is a good deal for you.

Saturday, January 3, 2009

CostCo Convert!

After a very serious hiatus, the Armchair Fiduciary is back in the saddle. I have been kept quite busy by these crazy markets and more importantly a beautiful little girl who had colic (over now, thank goodness!). Let me just say if you have the miracle cure for colic you can be a gazillionaire because the shell shocked parents of babies with colic would buy with reckless abandon. Anyway, while I was away I "discovered" Costco. We had previously been Sam's Club shoppers, but Costco after inspection is far better. I love their gas... its super cheap (I haven't found cheaper around me) and it seems they have it with their stores more consistently than Sam's. Also, they sent us about $1000 worth of coupons of which my wife found more than $50 we will definitely use. That alone pays for our membership. By the way, if you review their financials you will find that their profit basically adds up to their membership fees which means they really charge the bare minimum they can get away with on their merchandise. If they didn't charge a memberhship fee they would lose money, isn't that nuts? Bottom-line, I really think there is no better deal than Costco and I've been converted.