As home values continue to decline handing out a mortgage loan to just anyone becomes a big risk for a bank. Just a few year ago home values were rising faster than grandma’s yeast rolls. Banks were lending money to just about anyone because the value of the home was sure to increase and even if the loan fell through the bank wouldn’t lose a lot of money from foreclosure. Today home values continue to drop so banks require 10% and sometimes 20% equity in a home before they will finance or refinance the mortgage.

A second reason banks have decided to filter loan is because of other bank failures. I just visited the FDIC website and counted 63 banks that have failed since January 1, 2008! Banks are scared to make “bad loans” where they won’t get their money back. If they make too many bad loans they’re not going to have enough capital to keep the doors open. The last thing a bank want right now is to be placed on the FDIC website as a failed bank.

A final reason banks have tightened lending practices is for short-term and long-term business reasons. Banks want to keep some of the cash for short-term investments in order to recoup some of their tremendous losses.  Banks also want to stash away some of the bailout money to cover future losses.  No matter how careful banks are with their lending practices they are still going to make some bad loans. Things happen and people can’t make their payments. Banks want to ensure they have enough money saved themselves to cover these losses in the future.

Even though there are many new lending restrictions placed on home mortgages, it is still possible for the average middle class family to get a home loan. Keep an eye on your credit score and save money for a down payment. As the economy starts to progress lending restrictions will loosen up and banks will start lending money again!

It’s not only the fast food restaurants that have inflated prices for healthier eating. At the grocery store there are tons of food items that are dirt cheap but can hurt your overall health if you eat too much. Take for instance the popular food choice of college students, Roman noodles. Roman noodles only cost about $0.15 per pack and sometimes even cheaper if you buy in bulk, but how healthy are they? After a quick glance at the nutritional facts I found that 1 block of noodles is actually two servings and I always eat the whole block. There is 1420 mg of sodium in a pack of Roman noodles, that’s 60% of your recommended daily sodium intake! On top of that is 24 grams of fat or 24% of your recommended daily fat intake!

More examples of cheap food that is unhelathy is canned meats and canned soups. All of these items contain large amounts of sodium which can lead to high blood pressure and heart disease. Looking for cheap cereal? Most cereals that are cheap and always on sale are high in sugar and calories where their healthy counterparts can sometimes cost up to $4 and $5 per box.

The best solution to eating healthy is to have a diet filled with fresh fruits and vegetables. Add in fresh lean meats such as fish and chicken while eating very little sugar. The only problem is this greatly increases your monthly grocery bill. How can you balance a healthy diet with a healthy grocery bill? Stay tuned!

For most people the problem starts with the easy access to credit. Everyday I check the mail there is at least one and sometimes up to 5 new credit card offer from a different bank or financial institutions. Most of them offering 0% balance transfers for 12 months or a very low fixed rate for the life of the loan. They also offer no interest on purchases for up to one year, this is the worst. You can buy anything you want (up to your credit limit) and not pay any interest on the borrowed money. Sound like a great until the one year is up and you have racked up thousands of dollars in credit card charges that you no longer have to money to pay for. What do you do, open up one of the 0% interest balance transfers for one year credit cards and start the process over.

The next problem for overspending is temptations from friends, family and coworkers. Brother Jim just got a new HD television to hang on the wall over the fireplace. You start thinking about how hard you work everyday and don’t have a new HD television set, so what do you do? You get in your head that you can afford to go buy yourself a new tv, but you need a bigger one than Jim because you work harder. You do need to enjoy your life, but enjoy your life as much as you can afford, debt is not fun!

Finally, overspending is very similar to overeating. Some people buy a new pair of shoes just to feel better about themselves. If you’ve had a bad at work or had a fight with your spouse what can make you feel better than spending some money? We sometimes spend money and buy something that will please us to take our minds off something that is bothering us.

Don’t get caught up in these financial traps. Be sensible about spending your money. Think before you jump into any financial transaction. Ask yourself is this really what I need to do or am I doing this for a dumb reason? Stop overspending your hard earned money and get to the bottom of overspending!

There is nothing wrong with buying a bigger home if you can really afford the price tag as well as all the extra expenses. From personal experiences here are some extra expenses to consider before purchasing that new home.

• Larger home means a larger heating and cooling bill. No matter if your new home has electric or gas you’ll be guaranteed to pay some extra cash for the utility bills. The larger the home the more you will pay.
• More furniture or new furniture. Most of the time when you move into a different house you will want at least a couple of new pieces of furniture. If you are purchasing a larger home with more rooms to fill you will probably have to buy even more furniture and furniture isn’t cheap.
• Home maintenance will increase. From cleaning to yard work to structural upkeep you’ll pay more the bigger the home.
• Property taxes will increase. Property taxes are based on a percentage of the value of the home. Buying a bigger home will increase your annual property tax bill.
• Insurance costs will increase. Just like property taxes insurance costs are based on the value of the home. A bigger home will cost a little more to insure. Don’t forget you will also have to increase the value of the valuables inside the home, since you just bought more.

Before you decide to buy your next home make sure you consider all these expenses. Many times people calculate exactly how much money they can spend on their monthly mortgage payment and these extra unplanned expenses can push you over you budget.

Background information: My wife and I have always wanted to own about 1 acre of land to build our home, but with living in the “city” land doesn’t come at a cheap price. We live in Kentucky so the cost of living is low compared to major cities such as New York, LA, and San Francisco, but for an acre of land here you’ll pay about $100,000. With that said we purchased our first home just before we were married about 6 years ago, a starter home for about $112,000. Two years later we sold that home for a profit and purchased a slightly bigger home in a little nicer neighborhood for about $150,000. Two years later we sold that home for a little profit and buit our current home for just over $200,000. The only problem is that it sets on less than .125 acres of land, not much of a yard for a backwoods Kentucky boy.

We started looking around for some land to build another home in the futre and found the perfect plot of land just a few minutes from our current home. Only problem…. it was listed at $80,000 for 1 acre, not a bad deal for the area but still out of our price range with already owning a home. We talked to the selling realtor but pretty much wrote off the land.

About a week later the realtor called us back and said they had dropped the price of the land $10,000 and told us the land was a forclosed property owned by a bank that was struggling. He suggested we make an offer on the land for what we could afford and see what happens. Remember the land was still listed at $70,000 but we sent him off with an offer for $54,000. The next day the realtor called us and told us our offer had been accepted! The land is appraised at $92,000 so I know we got a great deal, but I’m still not 100% sure we did the right financial move.

We recently paid off a car freeing up $400 per month, about what the payment on the land will cost us, but should we have used that extra $400 per month to pay off our mini van we just purchased a few months ago? Or did we do the right move by buying this land at a big discount and having almost $40,000 in a piece of property that we just bought? My financial instinct tells me it was a great investment, but in the back of my head I hear Dave Ramsey saying we should have passed, any thoughts????

First, you’ll need to do a little research into your budget. If you’ve kept a good budget then this shouldn’t be too difficult. Break down your budget into three categories:

1. Completely Mandatory – This category contains all the necessary bills such as home, auto loans, electric, water, credit cards, etc. This does not include cable, phone or internet.
2. Somewhat Mandatory – This category will include bills such as cable, phone, and internet services. It will also include grocery money, clothing money, etc. Things that you need but you could probably reduct the cost somewhat.
3. Not Necessary – Finally the not necessary category includes entertainment money, and blow money. Money that if you didn’t have for a month you could live without. You really don’t need to go to the movies or spend $60 on dinner!

Now here is where the contest comes in and your reward. Total up the amounts from each category based on your last months bills. For example:

1. Necessary: Electric $150, Water $35, Home $1000, Auto $400 total of $1585.
2. Somewhat: Cable $40, Phone $35, Internet $40, Grocery : $400, Clothing $250, total of $765.
3. Not: Entertainment $400, Blow $100, total of $500.

Now our goal is to reduce each category by a small amount each month paying down debt and rewarding ourselves in the process. Reducing all three categories may leave a good deal of leftover money. Use half of this money on paying down debt and the other half to spend on some type of reward. Something fun you normally wouldn’t buy yourself.

First, those necessary bills you can reduce your electric and water bills by simply being aware of the resources you are using. Turning off lights when you leave rooms, take showers instead of a baths, take shorter showers than usual, use lamps instead of overhead lights, don’t leave the water on while brushing your teeth or shaving, etc. As for that auto payment you may want to do something extreme like sell the car and buy something with cash you have on hand or finance something for half of your current payment. You can find decent cars for $5,000 or even less!

Second, those somewhat necessary bills can save us some major cash! Drop any premium channels from your cable service. You may be able to reduce your internet service by switching from cable to DSL or from DLS to cable. Drop that lan line phone service if everybody has a cell phone with enough minutes. Clothing is necessary, but name brand clothing is not necessary. Watch for sales and check out consignment shops for cheaper clothes. Groceries can also be a good money saver. Use those coupons you always toss out with the trash. Buy generic foods when possible. I’ve read multiple articles on saving hundreds of dollars per month on your grocery bill! It’s possible to save some good money in this category.

Finally, the enertainment/blow category can be your biggest savings area. Eating out is just not necessary and although enertainment is necessary it doesn’t always have to cost money. Limit eating out to a minimum. If you must eat out order water or get takeout and bring it home. Go to the park instead of the movies. Go on picnics and hikes instead of amusement parks. There are hundreds of ways to save money on enertainment.

Here is a revised sample budget and what can be done with the extra money.

1. Necessary: Electric $145 (old $150), Water $31(old $35), Home $1000 (old $1000), Auto $175 (old $400) total of $1351 (old $1585). SAVINGS OF $234.
2. Somewhat: Cable $40 (old $40), Phone $0 (old $35), Internet $35 DSL (old $40), Grocery : $360 (old $400), Clothing $225 (old $250), total of $660 (old $765), SAVINGS OF $105.
3. Not: Entertainment $350 (old $400), Blow $80 (old $100), total of $430, SAVINGS OF $70. 

In our sample budget we saved a total of $409!!! We didn’t make huge sacrafices just small sacrafices in each category. Now take the $409 and pay $200 toward one of your high interest rate debts and take the other $209 and spend it on something nice for yourself. You may even want to save the $209 for next month and pick up something much nicer. Reward yourself for saving money and it will be much more fun!

I’m not writing this article to tell you I regret purchasing the home, I’m writing to tell you I could have made an even better financial move than purchasing the home. We lived in the home for just over 2 years and sold it for a profit of about $8,000, not great but not bad for newly weds just out of college.

If you are ready to purchase your first house or home then you are entering the market at a great time. Right now home prices are down all across the nation, bad for those of us who already own a home, but great for those just entering the market. Also interest rates are still pretty low even for a fixed rate loan. Getting a great deal on real estate is pretty easy right now and it could be one of the most important moves you can make financially.

If I could make a suggestion to those of you looking to purchase that starter home, don’t. Think about purchasing a duplex instead of the traditional home. We could have purchased a nice duplex for about $175,000 instead of our home for $112,000. It might sound like a lot more money but you live in one side fo the duplex and rent out the other side. Remember I told you our rent would be about the same for a nice apartment as a new home? Same deal here, that duplex was being rented for $1,000 per month I know because that’s where my wife was living before we got married. The payment, tax and insurance on $175,000 loan would have been about $1,200 per month, you can do the math here.

Now, of course there are many risks associated with renting especially if you depend on that income to make your payment so consider this before jumping to purchase the duplex. I’ll write another article soon about all the risks and rewards associated with renting.

No, not much money saved here. First, lets just pick a vehicle, the 2008 Dodge Caliber. The Caliber gets an estimated 24 miles to the gallon in the city and 28 miles per gallon on the highway. Why do we need to know these numbers? Because Dodge only covers the first 12,000 miles per year for three years. That means the $2.99 deal only covers 36,000 miles.

If you get the minimum miles per gallon of 24 then then you will use about 1,500 gallons of gasoline during the three year period. Now, from here there are two ways to look at the deal. The first way to view the deal is even if gas goes up to $5.00 per gallon you will save $2 per gallon or $3,000. Do you know how easy it is to get a dealer to take $3,000 off the sticker price of a new car? Pretty easy from my experience and I’m guessing that with this promotion you are less likely to get such a deal on a new vehicle.

Second way to view the promotion is you have to buy a new car. We all know that purchasing a new vehicle is a big waste of money and not a smart financial move. Purcahse a used car that is a few years older from a private individual and I guarentee you will save more than $3,000!

Always look at any financial decision from different viewpoints. Consider all the outcomes of your decisions before you make a major purchase.

I’m the first to be guilty of overspending when it comes to friends. It could be that we spend $50 or $60 on a dinner because your friends wanted to eat an expensive restaurant. Maybe it could be that your buddies wanted to go play golf at an expensive course. Could be that your girlfriends wanted to go shopping at an overpriced clothing store and you just have to have that $100 pair of jeans.

Think of those areas where you are overspending, is it because you really need or want those things or is it because you want to impress someone else? Is that $60 meal really that much better than a nice $20 meal? Is that expensive golf course that much better than the normal cheaper course? Does that $100 pair of jeans really feel that much better or last that much longer than a nice $30 pair of jeans?

If you really think about the reasons why we buy things you will probably realize it’s not because we really need them it’s because we are trying to impress someone else or just going along with the crowd. Really think about the reasons you spend your money and the consequences related to your actions and you might just save hundreds of dollars!

Many of you already agree that we are in a recession and the money is going to come a little too late to avoid predicted recession. A lot of people said they wouldn’t spend the money on a new good or service anyway, the money would be used to pay off some debt or put away for a rainy day. I was one of those people a month ago but recently decided to spend some of it on a durable good.

Our kitchen table recently went from 4 chairs to 3 chairs as one was broken by accident by my brother-in-law. Actually, since we just had a baby and will soon be pulling a high chair up to the table it seems logical to me to keep the table because that chair will have to be moved anyway to make room for the high chair. My wife however disagrees, she thinks it’s a perfect opportunity to purchase a new kitchen table that better matches the rest of the furniture in the house…

After some discussion we’ve decided to spend some of the money on a new table and chairs for the kitchen and try to sell the one we have to get back some of the lost cash. Anyone looking for a slightly used three chaired table?

The rest of our money will be used to finish paying off one of our cars, freeing up $400 per month. This comes just in time to help pay the new daycare bill for the new addition to the family. Oh well, at least we have the money with little sacrafice.

What do you plan to do with your recession stimulius package tax rebate money?