Research is part and parcel of my new job and as I was researching in the world wide web, I stumbled upon this article on the Wall Street Journal website where there was an article on the improvement of the US economy. In that, the Federal Reserve Bank of Atlanta President Dennis Lockhart said that in overall, the U.S. economy is improving but still fragile. He also said that the he was confident that we (America) will return to a sustainable fiscal path but it would be unwise to be “Panglossian” or naively optimistic about the whole financial state.

In another article I found that the Federal Reserve Chairman Ben Bernanke, in his prepared testimony for Congress’ Joint Economic Committee had said that among the enormous costs of the downturn is the loss of some 5 million payroll jobs over the past 15 months. However experts predict that job losses and the unemployment rates will come to a sustainable level. Obama’s government is undergoing a tough, challenging phase and they are working on this, so let us give them some credit for their planned bail-outs.

So my question to Mr. Lockart is “Why not?�

Why not we stay Panglossian?

With a slow and steady resurgence in various sectors like manufacturing, real estate and every thing else, this the time when we can actually breathe a bit easy. America is a great country with the largest economy in the world and also by PPP. To top it all, we have the second highest income per hour worked in the world. Everything is close to perfect so why are we being so frugal?

The world is not coming to an end. This is the time of economic re-birth world wide.  I am beginning feel that the recession is becoming more of a mind thing than of a money thing. Let’s cut the recession drama down a bit and try and stay a bit more optimistic. Panglossian, maybe.

PS: The word Panglossian derives from Pangloss, the optimistic tutor in Voltaire’s Candide.

 

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.