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.

 

Back to blogging after a really long holiday break. Christmas was fabulous with an extended family reunion, exotic food, few good and few not so great gifts. The best gift surely was the pair of Prada sunglasses that my hubby gifted. New year eve was one helluva party night that extended well beyond the day.

We are well into 2009 with our waistlines up by a few inches and wallet lighter by a few hundred dollars. We badly want to reverse the status of the two now. So here we go with our cost saving and waist(e) reduction plan for 2009.

First look at the household expenses since these usually form the largest part of our monthly spending. Grocery is one huge expense. I obviously can’t stop eating. But I sure can resist getting tempted by those yummy looking cookies, tarts and cheese dips attractively displayed in the stores. They sure know how to seduce people like me.

Having a shopping list in hand and trying to stick to it, while going out for shopping should help. This should help me have a watch on my waistline (hope I also try and fit into jeans one size smaller, something i’ve been trying for years now). Comparing prices in 2 or 3 stores to see who offers the best deal should also help; since stores usually offer good deals at the end of the month to clear stocks. Eating out is a sure no-no for the next few weeks atleast. Whether to work or travel, packed lunches are my best friend, now on.

The next big money sucker is my power bills. If the air conditioner or room heater is switched on all through the year then there is no choice but to foot hefty power bills. I read somewhere that when using room heaters or coolers, the room has to be properly insulated. Otherwise all the cool air might just slip through the small gaps in the window and door frames. So my important task this weekend would be to check my entire house for leakage.

Also, when using a PC, most of the power is used up by the monitor. So I guess when I’m not using my PC for more than half an hour or using it just to listen to music, it makes sense to switch off the monitor. The yellow heat generating incandescent bulbs generate 70% more heat and use up 75% more energy than compact fluorescent lamps (CFL). So there goes another weekend task of mine. Changing my conventional bulbs with a CFL. This way, I also do my own small bit in saving the environment. Small little things like switching off the lights and other power utilities when not in use, leaving the windows open during summers to let the sunlight through should also help.

When discussing fuel bills one of my colleagues suggested filling gas in the car early in the mornings as much as possible. As the day progresses, with the increase in heat, the gas stored below the earth in the gas stations would be in a vaporized form during the day, which would mean a lot of vapor will also go into my fuel instead of gas. By filling it in the mornings the vehicle will be able to absorb almost all the gas that I pay for.

Weekend entertainment is also a huge part of the monthly expense. Instead of cutting down on entertainment, maybe I should reschedule it. Most movie halls, multiplexes, fine dining restaurants and entertainment parks charge heavily during the weekends. Let me try rescheduling my weekly entertainment to a movie on Wednesday nights or a nice dinner on Thursday nights. This way I pay less for almost the same service, avoid the weekend crowds and also beat the mid-week blues away.

So that is largely my plan for 2009. Will keep posting on the progress.