Prime Time Money

Do You Feel Sorry For Ed McMahon?

*mild rant warning*

Did anyone else catch Ed McMahon and his wife on Larry King last night?  Apparently Ed McMahon’s mansion is going into foreclosure.  Ed is $644,000 behind in payments on the $4.8 million mortgage.

So how did Ed get in this position?  Here’s his take from last night:  ‘’If you spend more money than you make, you know what happens,’’ McMahon said […] ‘’You know, a couple of divorces thrown in, a few things like that. And, you know, things happen.’’

Okay, not bad Ed, you at least acknowledge what happened.  But why are you going on Larry King and making a big deal of this?

Ed said: “There’s a lot of people [who] have problems and I’m hoping that this will help them help themselves. That’s what my plan is.”

Really?  If I was someone really struggling with potential foreclosure, an adjustable rate mortgage, and crooked lenders, I would be offended that Ed is comparing himself to me. 

In my opinion, a millionaire, who could get any type of mortgage he wanted, has no business being the spokesperson for the foreclosure issues facing the few who really got dupped.

I’m calling B.S. on Ed and his “troubles.”  I’m convinced he’s simply hyping this to get the house sold.

Oh, and did you catch the selling price of the home?  It’s listed at $6.25 Million.  So, if I calculate this correctly, Ed stands to take away over 1 million in equity when it sells.  Hey Ed.  Here’s a tip to get your house sold.  Lower your price, buddy.

His lawyer has apparently mentioned that they might start a donation fund for Ed and his situation.  So sad if this happens with all of the legit needs out there.

The Media Hype - The New York Times called Ed a “Housing Crisis Casualty.”  Really, NYT?  If he’s a “casualty” isn’t it a self-inflicted wound?

Do you feel sorry for Ed?  Share your thoughts in the comments below.

Photo by Alan Light

Posted in Real Estate | 15 Comments »

My Company ESPP Has Become My New Property Tax Escrow

You, Me, and ESPP

For a few weeks now my company has been touting their Employee Stock Purchase Plan (ESPP).  I’m new to the company and have never participated in one of these before, so I really didn’t know what to think.  I already have some company stock (via options) from when I was hired.  In my opinion owning those options has been enough.  You never want to own too much of one stock, right?  Definitely not your own company.  After all, being that I’m employed here, I’m already heavily invested in them.

15% Return?  I’ll take it.

Well, a co-worker (who knows I love talking saving money) started talking to me about this plan and told me she was going to do it.  She shared with me the basic concept.  You make automatic contributions (between 1% and 10%) every pay period to a fund, that after six months is used to purchase company shares of stock at a 15% discount.  You are then free to do whatever you want to with this stock.  If you sell it that same day (called ESPP “flipping”), you simply make the 15% discount.  Not bad for six months, right?  That’s an annualized return of 30% less taxes.  Nice.  I’m not going to be getting that anywhere else.  It’s actually more of a return if you look at it like this.

Can We Do This?

My thoughts quickly turned to my property tax self-escrow with ING DIRECT.  Why not use the ESPP in place of the ING DIRECT account (currently earning 3%)?  For the record, we have our emergency fund with ING DIRECT as well, so I wouldn’t be pulling ALL our money out of savings, just the property tax portion that I had set up in an extra account (contributing $350/mo.)

My next step was to do some actual, in-depth research on ESPPs and my company’s plan to be sure this was right move for Mrs. PT and I.  You didn’t think I’d just blindly sign-up based on a few co-worker’s suggestions did you?  I’ll share what I learned about ESPPs next week.

Other Thoughts on ESPPs

Here’s a very pro-ESPP post, ”the wonderful world of employee stocks” (@ Punny Money), which basically says at the 15% discount I’m getting, I’d be silly not to do it.

This article, “Cash in the Cubicle“ (@Market Watch) is also very positive in it’s overview of the ESPP.

A write-up (@Fairmark.com) called “Flipping ESPP Shares” discussed the ethics of doing ESPP flipping, which is what I’d be doing.  Do you think this would be an “abuse of the benefit”?  I really don’t.

Lastly, check out this read (@The Finance Buff) on employee stock purchase plans and how “ESPPs are a Fantastic Deal“.

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I went ahead and signed up for the ESPP today, as it’s the last day to sign up.  I’m pretty excited about this benefit and I’m super glad my company rolled it out.  Is anyone else using an ESPP to flip for a quick profit?

Posted in Investing, Make Money, Real Estate, Save Money | 6 Comments »

How to Reduce Your Property Taxes

The following is a guest post by Heather Johnson.

Check Your Property’s Value

New property values have been made public and you may be surprised by a leap in your home’s estimated value. This is great if you want to sell your house soon. Otherwise, this increase only means higher property taxes! Even if your home hasn’t increased in value, you may want to lower your existing property taxes. Below are a few ways you might be able to bring the amount down by contesting your tax appraisal.

Correct Any Errors - Look closely at your tax appraisal, as it was probably assessed from a drive-by inspection. Are any of the measurements wrong? Believe it or not, mistakes like this are fairly common. Sometimes, the square footage might be inflated or the appraiser might have been under the impression that you had more rooms or a finished out basement. In any case, those mistakes are easy to prove.

Look at Surrounding Home Values - If your next-door neighbors have houses that are comparable in size and their property is valued much lower, that could be grounds for the county lowering your house’s appraised value. Conduct some thorough research on all the nearby houses in order to back up your claim. Property tax records may be available online in some states.

Contest The Value - It’s Your Right

It is your legal right to contest your house’s appraisal, though very few people do it. This is a shame, as many homeowners would have a valid case and could potentially save a lot of money each year. If you feel you have adequate proof that your house was overvalued or that the appraiser made a mistake, visit your local assessor’s office or Website. There, you will find the official forms you need to contest your house’s value. One caveat: there is a deadline for filing a protest, so conduct your research as soon as property values are posted each year.

Heather Johnson is a regular commentator on the subject of small business. She welcomes your feedback and potential job inquiries at heatherjohnson2323 at gmail dot com.

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I recently recieved my County’s Propery Tax Statement.  My property’s value estimate was slightly below what it was appraised for when we purchased our home 6 months ago.  How about you…Did your value go down or up this year?

Posted in Personal Finance Links, Real Estate, Tax | 4 Comments »

Get Rid of Your Escrow Account like Becky from FamilyandFinances.com

One of the most popular posts on Prime Time Money has been my post entitled, “Earn an Extra Few Hundred This Year by Saving for and Paying Your Own Property Taxes.”  I hope to make some extra cash this year by using this method.

Motivated by my post, Becky from FamilyandFinances.com contacted her mortgage company and got rid of her escrow account.  Here’s an excerpt from Becky’s post:

“I was a little skeptical about my mortgage company, Wells Fargo, being willing to give up what was for them an easy money-maker. Nonetheless, I sent them an email asking about removing our escrow account. They sent a message back saying that we could do it if we qualified…”

Becky will actually be getting more money back than they actually owe on their taxes because the mortgage company was keeping a $500 reserve.  She’s using the money to meet some of her financial goals.  Way to go Becky.  Thanks for sharing your story.

Posted in Make Money, Personal Finance Links, Real Estate | No Comments »

12 Ways to Make Yourself Recession-Proof

In the latest issue of Money magazine, Stephen Gandel presents a special report on “Survival Strategies“:

“The economy and the markets may be in for a hard fall.  Here’s how you and your family can land safely.”

I thought I’d share the 12 points that the article makes as well as my comments on each.  All this after the markets have their best one-day gain in 5 years.  Oh well, I think these points are applicable regardless of the outcome.

1. Recessions: Learn the Facts

Apparently, the last time we were in this type of economic downturn was in the early nineties.  The article states that it took about 3 to 6 months for the economy to turn around once it hit full recession. I have no idea what this current down-turn entails, but if history repeats itself, and we do go into a recession, we’ll be up and out of this thing before too long.  I’m not going to panic, but I still think it’s a good idea to brace yourself a bit.  That’s what the other 11 points are all about.

Shore Up Your Balance Sheet:
2. Stock Up on Emergency Funds

In the article, it’s suggested that you move from a three months expenses e-fund to the six month variety.  I think more emergency cash is always better, so I’m all in favor of this move.  If you can move towards more short-term savings then do so.  If you don’t have an emergency fund you should start today.  Need incentive?  Get $25 free for using one of my referral bonuses.

3. Slim Down the Debts

It’s always a good time to do this, but apparently even more so in a potential recession.  When you’re stocks are flying high you can afford paying a little debt interest, but not now.  Check out how I paid off my high-interest credit cards.

Shore Up Your Portfolio:
4. Regain Your Balance

It’s easy to set your retirement savings on auto pilot and just forget about it.  Have you checked your 401K lately?  What funds are you invested in?  Are they properly balanced for someone your age?  In my opinion, target date funds are a good way to make this happen.

5. Venture, Carefully, Beyond Our Shores

A quarter to a third of your equity holding should be in foreign stocks says the author.  That seems high to me.  Again, I let my target date fund do the work for me here.

6. Scared? Then Embrace Bonds

If you think we’re still headed downward then you may consider moving more of your portfolio into Bonds.  The author says to do this instead of trying to time the market with stocks.

Work Harder and Smarter:
7. Get to Your Company’s Core

Working on key projects for you company will apparently make you less likely to lose your job if times get tougher.  Make sure you are generating revenue for your company.  Any position can add value.  Be proactive and find the little things that add up to big savings for your boss.

8. Get to the Office and Stay There

Make sure you are getting plenty of “face time” with your boss.  If you work from home often, consider stopping that practice for a while.  Also, you might want to be the guy or gal who is first in and last out.  Can’t hurt.

9. Cozy Up to a Headhunter

Get on Facebook or Linked In now and connect with recruiters in your field.  Believe me, they’d love to hear from you.  While you don’t necessarily have to begin your job search, make sure you have a few connections.  The few unwanted interruptions I do get from these recruiters I don’t mind because of how they’ve helped me out in the past.

10. Get Ready for Next Time

The author mentions laying the groundwork for an industry switch.  Health care, is now, and for a long time will be, a very hot field.  Consider a career switch and begin investigating the path needed to get there.

Focus on the Home Front:
11. Be a Picky Buyer

The author mentions offering “10% below asking price” if you are in the market for a new home, and offering your home for “slightly less than comparable homes” if you are selling.  I don’t know much about real estate so I won’t comment but to say I think there are plenty of deals out there right now.  I wish I had a lot more cash in order to take advantage of some of the deals available.

12. …And a Savvy Borrower

If interest rates continue to fall, then you may be able to justify refinancing your mortgage.  Apparently, the biggest savings may come on jumbo mortgages above $417,000.  That’s a big mortgage.  One of the things my Father taught me is that the US Government has long since learned that the housing market is what drives our economy.  Therefore, they will do anything to keep it propped up.  Look for plenty of bailouts to lenders and borrowers.

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Like I said above, while I think it’s great to look at this stuff now, most of these points are things you should consider all the time with your finances, not just in a downturn.

Photo: by soldiersmediacenter

Posted in Debt Reduction, Investing, Real Estate, Save Money | 4 Comments »

10 Things that Bring Success in Personal Finance: #9 Buy Your Home the Right Way

Our Reasons for Wanting to Buy a Home

Hard to believe, but over the last 10 years I’ve rented at 10 different places.  The cheapest rent being $150 at a really old house with two friends (post college); the most expensive being $1,295 at the townhouse my wife and I lived in for a year just after getting married.  Most of those moves were justified for some reason.  Mainly, I just couldn’t settle down into a career.  Also, I wasn’t married nor did I have any other responsibilities tying me down.

Reason #1 for buying a house: I finally settled down.  By settling down I mean I got married and found a career that I am content with.  This career happens to have many job opportunities in the local market, so even if I grow tired of my company, I can always just hop to the next.  These two things provided the stability to my life I needed to buy a home the right way.

Reason #2 was financially driven.  Once my wife and I were married we wanted to start building equity in real estate by buying a home. In effect, creating savings from the money we were then paying out in rent.  We also wanted our financial portfolio to be diversified.  At the time, all we had was cash and retirement savings.  Of course we could have just started investing in real estate stocks or mutual funds and been just as diversified…but that leads me to the third reason.

Reason #3 was simply that we wanted to have “our” home.  We wanted a home we could call our own, not just another place.

What’s the point?  There is a right and wrong time to buy a house.  Success comes to those who wait.

How We Found Our Home

Once we decided we wanted to settle down and get our own house, we needed to find it.  I’d be lying if I said we did a huge, exhaustive home search with the help of a top notch realtor.  We actually determined we loved the neighborhood of townhouse we were currently renting in and decided to buy one of the townhouse being built in the next phase.  The neighborhood is close to both of our jobs and the low-maintenance lifestyle if perfect for us right now.  After deciding this, however, we did do a few things that gave me comfort we weren’t making a poor decision:

1. A Home We Could Really Afford

Our first move was to think carefully about how much home we could afford.  There are plenty of online calculators and formulas out there that will give you a target home price you can reasonably afford based on your income and expenses.  While we did use those, we didn’t strictly rely on them.  Other factors we considered, which I think are important for deciding what house is affordable:

• We wanted to be able to put 20% downto avoid private mortgage insurance and have a decent amount of equity in the home up front.
• We wanted a home we could afford using a 30 year fixed rate mortgage.
• We wanted to be able to afford the payment based on either of our incomes alone.
• We wanted to leave enough money in our monthly budget to travel well and enjoy life outside of our home without the feelings of “working for our mortgage”.

2. Met with a Trusted Realtor

Since this was our first home, we decided we’d feel more comfortable throughout the offer and loan closing process if we had a professional with us.  Something I’d recommend to someone who doesn’t already know a Realtor is to go out to Dave Ramsey’s Endorsed Local Providers page and find one.  This is what we did and While we didn’t need them for our home search, they really came in handy come offer time and even made the offer for us (which we got!).  We would have felt out of our league without them.

3. Did Our Own Research

Another thing we did was do our own research about the neighborhood.  I set up a Google Alert to track any news or sales and rentals listings in our neighborhood.  After about a month of searches, I had a spreadsheet filled with sale and rental prices of comparable properties in our neighborhood.  I was then able to see that the offer we were making was in fact a great deal for us, and we weren’t paying too much.  Let me know if you’d like to see this spreadsheet and I’ll forward it to you. 

I also did some research on townhouses and their resale value and came to the conclusion that we were making the right choice based on location and association fees.  Lastly, it didn’t hurt that we were currently living in one of the townhouses that we would be buying.  We knew and felt comfortable with the builder’s product and the warranty service.

I ended up reading several books on the home buying process, but probably got the most use from the book Home Buying for Dummies (affiliate link).

How We Picked the Right Mortgage

This was pretty easy for us, as we feel strongly about the use of fixed rate 80% loans over other products.  We’ve seen recently the dangers of going with other products.  Our main concern was deciding between a 15 and 30 year loan term.  We ended up going with a 30 year loan and hope to make extra payments to get rid of the debt quicker.  Finally, we needed to decide on a lender.  I detailed how we selected a lender in a December 2007 post.  Please check that out.

Final Thoughts

Well, that’s really all I have for now on the topic.  You learn a lot from buying your first home and most of it, for me, was an enjoyable experience.  While it can be scary at times, you can ease your fears by knowing your stuff and staying within the limits I’ve mentioned above.  When all is said and done, please make sure the time is right for you to buy, you buy the house you can afford, and you select an appropriate mortgage product.

Have any home buying tips? Leave them in the comments below.

The Rest of the Series…

Photos: by mcmorr and omarrun

Posted in 10 Things, Real Estate | 3 Comments »

The Losers Going Into Foreclosure

I saw something last night on my local news that got me pretty fired up. A story ran showing there has been an increase in abandoned pets during this time of rising foreclosures. Apparently, some people who are leaving their homes due to foreclosure are simply leaving their pets in the abandoned house. This is what’s being found in the abandoned houses:

“The first people to enter an abandoned house, such as property inspectors and real estate brokers, have discovered dogs tied to trees in backyards, cats in garages, and turtles, rabbits and lizards in children’s bedrooms.”

How sorry are these people?! I’m not even really a big “pet guy”, but this upsets me. I guess that’s why the news ran it…they knew it’d fire me up.

So, what’s the point here? I guess it’s that there are some pretty sorry and irresponsible people in life and there’s currently a lot of them going into foreclosure.

Leave your opinion in the comments below.

Posted in Real Estate | 1 Comment »