At last the responsible tax payers, sincere homeowners and law abiding people are finally getting their due. Having spent thepast few months watching leaders of large business flying in their private jets to ask for bailout of their companies and board members of defunct financial groups having paid themselves huge bonuses, I started wondering why common people like us always get a raw deal. But now I guess it is pay-back time for being good citizens.

I am referring to the mortgage refinancing package announced by President Obama last week. Unlike the stimulus packages for large business houses which I feel benefit the heads of corporate houses more than the employees at the bottom rung, the mortgage refinancing package is aimed at the responsible homeowners, who have been regular in their mortgage repayment.

The package, which you all must be knowing by now, has two parts. The first, called “Home Affordable Refinance,” is for homeowners whose property has dropped in value. It would not reduce the principal of the loan, but allow the borrower to refinance the principal up to 105% of the home’s current value.

The second program, called ‘Home Affordable Modification,’ is aimed at borrowers whose payments have become unaffordable, because of either a job loss, illness or increase in interest rate. Here the lender will lower the monthly payment to as much as 31% of the borrower’s gross monthly income. The government would compensate the sum accordingly with the lender in terms of cash payments and financial subsidies.

And this one is the icing on the cake. In many cases, the lender would reduce the interest rate to as low as 2% for five years. Now, mortgage repayment at 2% is quite a steal. Fellow blogger Refinancing Condo makes an interesting observation by saying that refinancing at 2% interest rate will almost instantly raise home values.

But then again to qualify you have to be regular in your mortgage repayment and also your loans should be backed by Fannie Mae and Freddie Mac. NY Times has more details on what you need to know about this housing plan.

Economists have time and again being pointing out that foreclosure of homes is one reason for the economic crisis facing the country today. This effort by the Obama administration will go a great length in reducing instances of foreclosure. Allfinancialmatters has a totally different take on foreclosures and states that it is not that bad after all.

Just hoping that this mortgage refinancing package brings in the much needed liquidity into the financial system.

 

Disaster proofing our homes is an integral part of personal finance planning. The images of the small Jewish boy who was orphansed when his parents were killed in the terror attacks in Mumbai in November last year, is still fresh in my mind. It was like watching a rerun of the 9/11 attacks sans the airplane.

Being a mother myself of a fifteen-month-old, I could well imagine my child in the same situation and cannot but be scared. These are uncertain times and if not a terror attack, an earthquake or a hurricane or even a road accident is sufficient to throw our peaceful lives out of gear and life may never be the same again.

What occured to me then was that I have to make few arrangements to ensure that, even if something happens to me, my child is not left helpless to fend all for himself. So the whole of last week my husband and I took some time off our work to disaster proof our home.

We first made a list of all our bank accounts, stock market investments and term deposits. We made  3 copies of the list, kept one at our house, one in our bank locker and one at my mother’s place, just in case. We then checked the personal details that had provided in our financial/bank accounts and we realised that some of the details like address and contact details that we had provided were old and the nominee detail was missing in few accounts. We completed those details as well, so that in case there is a need for that information in case of an emergency, the updated information is available.

Only few weeks back my hubby was cribbing about the annual insurance premium payment which he thinks is useless and was eating up most of his money. But this time I did not have to persuade him to pay the premium so that the policy does not lapse. He did it by himself.

Thankfully we have the habit of keeping a sum of 3-6 times our monthly income as an emergency fund, untouched. We decided to continue with that habit of ours. We had already shot pictures of our valuables like jewellery, appliances and cars for our home owners insurance policy. We have now made  few copies of those CD’s and stored them in bank lockers and at my parent’s place.  We already have a fire alarm in our place. We still thought it wise to buy a fire extinguisher and keep in a place that is  easily accessible.

My mother thought we were being very pessimistic. My friends called it a knee-jerk reaction. But we never realise the importance of certain things unless they happen to us. And it is better to be safe than to be sorry.

 

Filling long and endless forms when applying for a credit card or an insurance policy can be a very boring task. We may have moved on to online banking and online financial management, but paperwork still remains an important part of investment and financial planning. One careless step or wrong information might lead to a lot of trouble. Let me explain how.

I knew this person Jack Hawley (name changed to protect identity), a senior citizen with over $20,000 in an account with a popular bank. The account was started when Jack was young and he maintained the account for many years. While filling the form at the time of starting the bank account, the relatively young Jack overlooked the ‘Nominee’ column. Years later, after his death, his wife an equally old Stacy approached the bank to withdraw the sum in her husband’s account. But she was not allowed to do so since her name did not appear as the nominee for the account. She did get a reprieve finally and the bank allowed her to retrieve the amount, but only after much running around, paper work and other formalities to prove that she was indeed Jack’s wife and a legitimate recipient of the amount.

Many financial advisors I speak to say that while not revealing details cause trouble, in some cases concealing information may also lead to problems. Like in the case of another acquaintance, Steve who had applied for a medical insurance policy. In his hurry to finish the formalities, Steve left the task of filling the form to his insurance agent, who hastily gathered information from Steve and placed tick marks across the ‘No’ option for the list of all diseases in the form, including diabetes which he suffered from. Months later, when Steve hurt his large toe and a surgery had to be done to amputate the toe; it was revealed that he was suffering from diabetes for a while. The insurance company rejected the claim on the ground that the ailment was concealed.

DIfferences in ones name or signature properly may also cause problems. Nicholas’ grandfather in his will had bequeathed his large mansion to his grandson. What his grandfather did not know was that his grandson Nicholas had shortened his name to Nick and has been using the same for all transactions. It required a lot of effort and running around for Nick to prove that Nicholas and Nick are one and the same.

While insuring gold, diamonds and other valuables for theft, it is important to know the exact weight of the jewels, experts in the insurance business say. Stating just the value of the goods insured does not help much during claim settlement. It is advisable to retain the original invoice of the valuables that will be of great help to settle claims in case of theft or damage by fire.

A little more attention to detail while making a financial transaction will go a long way in making life easy. Let not a small mistake erode a lifetime’s earnings.

 

One of my many New Year resolutions has been to write down my daily expenses. The effort which I grudgingly took up has been a sort of enlightenment for me in that, I have realized that fuel expenses have started becoming one of the largest expenses for me every month, apart from food. In fact it has constituted almost one-third of my total expenses till date this month. This has made me more determined than before to reduce my gas bills. I read up a bit on the ways and tips to keep a check on and reduce fuel bills. I have been sharing those tips with my friends now. Here are some of them.

1. Driving the car at moderate speed to save fuel. Steering the car at over 70mph will only lead to an aerodynamic drag resulting in increased fuel consumption. Contrary to popular myth, keeping the air conditioner on while driving does not actually increase fuel consumption. In fact keeping the windows open while driving at high speeds only increases fuel consumption. Driving at lower speeds also consumes a lot of fuel. So moderation is the way to be.

2. Switch off the ignition if you know for sure that you are going to wait for more than a minute. It consumes less fuel to restart the engine than to keep the engine running idle for a long time during traffic jams, or while doing some quick shopping.

3. Service the car regularly to check the battery, spark plugs and tyre pressure. A well maintained car with clean air filters and the right tyre pressure always gives better mileage than the ones that rarely visit the garage.

4. What car you own, plays a big role in how much you spend on fuel. If you are yet to buy a car you can check out some of the latest hatchbacks in town. Small cars are known to be much more fuel efficient than large gas guzzling sedans. Beginners will find it much easy to park and handle hatchbacks as compared to sedans. Browse through car review sites to find the more fuel efficient models.

5. Do not hesitate to form car pools with those traveling to your college or office. Using messengers or community sites you can find out the list of those people who travel through the same route at the same time and form car pools. It is not shameful to form car pools and save fuel, certainly not when you have a look at your fuel bills at the end of the month.

6. Websites like www.fueleconomy.gov provide the list of locations where gas prices are lower compared to other places. You can check such sites by location, before filling the fuel tank.

7. Trying to fit into those slim fit jeans for a long time now? Drop those car keys at home and take a walk. You not only save fuel but will also end up shedding the extra flab which you have wanted to lose for a long time.