Money Blue Book

I got a sudden phone call from my friend yesterday. His stunned voice said it all - he and his newlywed wife had just become victims of an attempted home burglary. The shocking part is that he and his wife were home at the time sitting at the kitchen table, eating breakfast. Their early morning meal was interrupted by a sudden loud banging noise from the direction of their back porch - sounds made by someone knocking on the door. The tapping sound was quickly followed by the chilling clang of breaking glass and creaking window latches. Within moments my friend dashed to the back door and caught the glimpse of the male intruder. Startled by the appearance of the home’s occupants, the stranger hastily retreated on foot, leaving behind broken glass and evidence of his attempted break in.

Home Invasion Robbery Is A Crime Of Opportunity and We Can Do Something About It

The good news is that there are common sense steps we can all take to drastically reduce our chances of having our houses, apartments, or condos burglarized. Looking back in greater depth with my friend, he and I both realized that he had committed a series of crucial home maintenance mistakes that made him a bullseye target for such activity. Since moving into the old Northwest Washington D.C. house a month ago after taking it over from his remaining parent who had just passed away, he failed and neglected to immediately fix up and repair the home’s exterior upkeep. The grass had grown high and newspaper deliveries were being piled outside and not picked up properly. The rickety fence gate was not properly latched shut and the house simply invited opportunism. Home burglaries are frequently crimes of opportunity and can occur when you’re away at work or on vacation. Someone who cased my friend’s house may have believe it was unoccupied. He was very fortunate that he was home that day to scare the attempted burglar away. However, we should all learn from his mistake and follow this list of ways to lesson our chances of becoming a home invasion victim.

Tips Homeowners Can Use to Keep Their Home Free and Safe From Invasion

1. Defend Your Home Like An Onion, Not An Egg - A great deal of home invasions occur during the day when you’re simply at work, and not just when you’re on vacation or away for extended periods of time. Because you can never fully burglar-proof your home completely, your goal should be to increase the path of resistance it takes to break in. One powerful level of defense (egg shell) is not enough to protect against burglars. Your goal should be to create multiple levels of security (onion layers) to thwart the attempts and scrutiny of potential burglars.
2. Make Your Home Look Lived In - Burglars are usually less likely to rob a home they think is currently occupied. On the whole, burglars want the path of least resistance and prefer targets where they know the residents are away. It’s best to generate live-in activity to give the impression that people are still coming and going from the home.
3. Put A Radio and Your Lights On A Programmable Timer - Lights that remain lit day and night is an indication that no one is home. You can easily buy a small programmable timer from Home Depot or Lowes, and set it so that lamps can automatically turn on in the evening and off in the mornings. You might also consider installing lighting controlled by motion sensor. Nothing makes an intruder’s heart jump more than lights that suddenly flicker on. Burglars also tend to avoid noisy homes since it’s an indication that someone may be home. Rather than play a static, fluid noise like music, I recommend putting a noisy talk radio station on timer to come on throughout the day to offer the illusion of occupancy.
4. Hang Your Blinds and Curtains Strategically - Some people think it’s better to keep them shut while others think it’s better to keep them wide open to give it a lived-in feel. Personally, I think it’s better to keep the first floor drapes and blinds shut to prevent people from peeking in. You may want to keep the upstairs curtains slightly drawn open to expose the lamp light that you’ve set with a timer.
5. Keep Your Home Exterior Properly Maintained - Don’t let shrubs or bushes hide your windows from view as they could be prime jimmy targets. Trim those hedges, cut your grass, and scrub the graffiti off your wooden fence to keep your place well groomed. If you will be gone for a long time, consider hiring someone trustworthy to mow your lawn periodically when you are away.
6. Put Your Mail On Hold When You Are Away For Vacation - Don’t let your mail pile sky high outside your door when you’re away. Accumulated mail as well as magazine and newspaper subscriptions are visible telltale signs that the occupants are not home. With a few quick clicks on the USPS Hold Mail Service website, you can temporarily suspend delivery of your mail while you’re away on vacation.
7. Close and Secure All Windows, Doors, and Gates - This one is just common sense. Please make sure your windows and corresponding latches are bolted on tight. Keep your doors firmly locked and make sure your lawn gate is latched properly.
8. Have A Neighbor Or Friend Check Up On Your Home and Pick Up Your Mail When You’re Away - Asking a trusted neighbor or friend to house sit is a great idea to maintain that lived in illusion. However, just having him or her occasionally stop by to check up on the house is a smart move as well. Remember, in the unfortunate event you are gone for a long time and your home is broke into, it’s better that your neighbor discovers this sooner than later. You don’t want your home further exposed with its broken front door wide open longer than it needs to be.
9. Park A Car In The Driveway When You’re Away For Vacation - Some debate whether leaving your car in the driveway is a good tactic or not, but I personally think it is. You want your home to appear lived in and a car in the driveway helps to give that impression. Another idea is to offer your driveway to a neighbor to use as his or her own parking spot. Remember to remove your garage door opener from your vehicle if you decide to leave the car outside.
10. Get a Dog That Likes To Bark - Dogs that bark at anyone who approaches the home is ideal. Burglars want to remain silent and a live dog alarm will help scare would-be intruders away. Remember to give the dog enough food or better yet, have someone come by regularly to feed it.
11. Consider Installing A Home Security System - If you can afford it, consider installing a home security system like an ADT or Brinks burglar alarm that alerts the police in the event of a break in. Be sure to plaster the alarm warning stickers and signs outside to make them very visible. Even buying and putting up fake alarm stickers and signs may help deter a few criminals.
12. Don’t Tell People You’ll Be Away On Vacation On Your Answering Machine - If you have a home phone number that can be easily traced and located through the phone book or even by a visible “for sale by owner” sign on your front lawn, don’t broadcast the fact you’ll be away on your answering machine. Just say that “you can’t come to the phone right now” and set it to pick up after 4-5 rings to make it really look like you can’t come to the phone at that precise moment.
13. Don’t Hide Your Spare Key Under The Doormat - Does anyone really hide their spare key under the doormat, mailbox, or in one of those silly fake rocks anymore? When I was little, my family buried a spare key in the back yard inside an empty prescription pill bottle more than one foot deep in the backyard under a few bricks among many. Such a method of stashing a spare key only works if it is buried deep in an area with plenty of possible burial locations.
14. Hide Your Valuables In Unsuspecting Places - If all else fails and your home is broken into, be sure your personal and expensive valuables are well hidden, particularly if you will be away for an extended period of time. Since most burglars usually go straight for the master bedroom, I recommend stashing your jewelry and cash in unconventional locations less likely to attract the attention of a home intruder, such as - the laundry room, bathroom, garage, or perhaps even inside your refrigerator - like what this guy did.

One of the biggest problems and common complaints of using rebate credit cards is the reward program’s propensity to encourage overspending. Finding a reward credit card is easy and particularly with cash back cards, redeeming rebates is a breeze. But the problem is - are you putting your cash back earnings towards the right type of expenditures? Credit cards that offer airline miles or redeemable gift cards are certainly wonderful, but they don’t do much to encourage the right type of spending or the development of responsible money habits. Citibank’s Home Rebate Platinum Select Mastercard is a unique card that tries to change all that by helping you automatically put those rebates towards something important and worthwhile - the mortgage loan you have on your house or condominium.

Automatically Pay Down Your Home Mortgage Principal Using the Citibank Home Rebate Card

If your current card reward program is only going to encourage you to spend beyond your means on things you don’t need, you should definitely take a look at the Citibank Home Rebate Card as a serious alternative. It’s not the sexiest or fanciest of rebate cards, but it’s uniquely practical and well suited for home owners and those who want to be more responsible with how they spend their rebate dollars. The card automatically reallocates all earned rebates towards paying off your home loan principal. Paying down principal is better than paying ahead on your mortgage because by paying down the principal, you lower the total amount of interest you pay, and may be able to shorten the duration of your mortgage by months or even years on a standard 30 year mortgage.

With the Citi Home Rebate Platinum Select Card, cardholders earn a 1% rebate on all eligible purchases. Once a year, the rebate you’ve accrued is automatically sent to your mortgage company and applied to your loan principal. This is the reason why the Citi Home Rebate Card is so popular - it helps people bypass the temptation to redeem rewards and rebates for things they don’t really need, and it also helps to rein in their overspending habits. The card is a useful tool for those trying to adopt a more frugal and responsible lifestyle.

Although not nearly as versatile or universally available for all applicants, similar programs can be found for specific mortgage companies, including the Countrywide Credit Card - Rewards Platinum Visa - ($50 payment to mortgage principal for every 2,500 points earned), and the GMAC Mortgage Equity Rewards MasterCard ($25 payment to principal for every 2,500 points).

Charge Your Monthly Home Mortgage Payment Using An American Express Credit Card And Earn Rebates

In a significant but fairly recent development, at least one credit card company has joined forces with members of the mortgage loan industry to give card holders the ability to pay monthly home mortgage payments using their credit cards, including ones that even offer cash back and reward rebates. American Express started the trend earlier in May 2007 by inking partnership deals, first with American Home Mortgage, and later with IndyMac Bank. Currently, the offer is only available to those that have new or refinanced home mortgage loans through these lenders, but it’s reasonable to expect the program to be expanded in the coming future.

Under the new American Express partnership called the Express Rewards Mortgage Program, partner lenders like IndyMac have agreed to accept American Express reward credit cards for mortgage payments. The arrangement is only available to eligible consumers taking out a new or refinancing an existing prime home loan through partner lenders. Borrowers must pay a one time fee of $395 to the lender at the time of closing, but depending on the American Express reward card you decide to use to make the monthly payment as well as the size of your monthly mortgage payments, the upfront cost can be recouped fairly rapidly, within 1-5 years, a relatively short time in typical mortgage years.

For mortgage loan owners who usually pay hundreds, sometimes thousands of dollars on their mortgages every month, just imagine how many reward points you can earn! Since the mortgage payment is typically the largest monthly cost for most people, being able to charge the payment to your card is a tremendous windfall in terms of earning cash back rebates. Let’s say your monthly mortgage obligation is $2,000 a month and you charge another monthly $1,000 for living expenses. By tacking the entire amount onto the American Express Blue Cash® Card for example (probably one of Amex’s most popular high rebate percentage card), you could easily earn a cash back rebate of more than $400 a year. The amount you can earn can be substantially even more if your mortgage or expenses are even higher. It works because with the Blue Cash Card, once you’ve charged $6,500, you get to earn the bonus rate of 1.5% back on further purchases (and as much as 5% back on any charges for groceries, gas, or drugs).

Comparing financial networth can be tricky since you aren’t always comparing apples to apples and oranges to oranges. Married individuals that combine the incomes and assets of both spouses will clearly have much higher networths and much lower expenses than single individuals.

With that in mind, here is some background information to help you know where I stand. I am currently in my late 20’s, not married, currently renting, and working a contract job that pays reasonably well. I graduated from law school a few years ago and am still trying to figure out exactly what is it that I want to do professionally. I took things easy after graduate school, choosing to enjoy life and neglected the importance of saving early. I did not start tracking my finances and focus on saving until the start of 2007 last year. All of my savings and investments were initiated one year ago on January 2007. Here is the summary of my 2007 financial progression and where I stand now.

Tracking My Financial Progress Using Networth IQ

Investment and Retirement

The bulk of my investments are in emerging market mutual funds, including the Fidelity South East Asia Fund (FSEAX), and in a few speculative stock positions, including Superconductor Technologies (scon). I know my investment approach is extremely aggressive, but I don’t mind taking on tremendous risk as I am investing for the long duration (25+ years). Despite the recent downturn in the stock market, my investment portfolio still gained 25%, primarily due to my fortunate timing earlier in the year as well as the continued growth of my target markets.

In early 2007 I opened and made my first Roth IRA contribution for 2006. I have yet to contribute for 2007 and 2008 but will certainly do so by the April 15 deadline. Although I am currently performing contract work, I do also get a small matching 401k plan through my employer. However, I didn’t fully take advantage of this in 2007. In 2008 I hope to contribute enough to get the maximum match.

Spending, Credit Cards, and Balance Transfer Arbitrage

Currently, I use a combination of reward credit cards to pay for everything - using a different credit card for different types of purchases to get the maximum reward benefit possible. I rarely lug around cash, although I do keep about $100 cash on my person for emergency use. In 2007, I racked up the equivalent of nearly $850 worth of credit card rewards and cash back that I have yet to redeem. Most are in the form of Citi Thank You Points that I will be converting to a credit balance soon. As for credit card debt, I have none because I always pay off my balances in full every month.

In 2008, despite lower yielding bank interest rates, I still plan on starting the 0% balance transfer credit card process, also known as the App-O-Rama. Despite it’s silly name, for those who are responsible with credit card usage and have good financial sense, it’s a good way to earn extra interest income by depositing the balance transfer amount into high yield savings account. I pulled my most recent credit report and checked my FICO credit score - it’s a very healthy 745 so I’m good to go.

Checking and Savings

My most actively used checking account is an E-Z Checking Account handled by Citibank that earns no interest. I keep the deposited balance very low as a result. Excess funds not needed immediately are transfered into an attached E-Savings Citibank account. Currently the yield is only 3.75% APY. In 2008 I have plan to chase better savings interest rates through online banks like E-trade Bank and Washington Mutual.

I also have plans to migrate my primary checking account into one that offers a reasonable interest rate without requiring too high of a minimum balance. Is there such a thing? I also plan on opening a business checking account for my side business one of these days. Currently, I can’t open a business account using my fictitious business name until my trade name application has been process - but it’s taking longer than expected.

Expenses

Most of my regular expenses is made up of my apartment rent and food. My rent is currently $1,425 for a one bedroom condo, an expense I gladly pay since it gets me away from the roach infested dump I used to live at (I’ll write more about my past scary housing experiences sometime). My commute to work is by Metro subway trains, so I don’t pay much in the way of gasoline and other transportation costs. Looking at my monthly expenditures, I notice that I eat out way too often. Luckily I use restaurant reward credit cards and basic frugality sense to lower costs. Being a bad cook and trying not to eat out so often is difficult. My solution is to make sure that I marry a girl one day who is an exceptional cook and loves to cook for her man. Hehe

Real Estate and Housing

I do not currently own a home, nor do I have any plans in the near future to subject myself to the mercy of the collapsing housing market. I am hoping that housing prices continue their plunge for several more years and shed at least 25% of their value before I will seriously consider buying. I am perfectly happy renting an apartment in the meantime and anticipate continued Fed rate cuts. I guess I am looking to time my entrance with bottomed-out housing prices and low interest rates.

The majority of the networth of many people out there is due to the home equity they have in their homes. As I am not currently a homeowner, I do not have home equity to list as my asset. However, what I do have is flexibility in where I invest as I am not stuck with an unfavorable long term mortgage commitment.

Student Loans

My students loans are the primary drags on my overall networth, however they don’t hinder me financially at all. For someone who graduated from law school not too long ago, my $30,000 worth of student loans are very tame compared to the more than $100,000 that many law students frequently graduate with.

Fortunately, I was able to consolidate my student loans at a very low fixed interest rate in 2004. I was also able to take advantage of all Sallie Mae borrower benefits to further reduce my interest rate to a very low fixed 2.25%. My monthly payments are only $199, a piece of cake in the grand scheme of things. Because my student loan interest rate is so low, I have little incentive to pay it back quickly, and prefer to leave the amount in high yield savings to earn interest income.

Side Business

In my personal quest to one day stop trading hours for dollars, other than working my full time day job I also run a few other side ventures as well. They are growing but I plan to spend more time on them in the new year. I hope I can devote the needed time to keep them growing as they are quite time consuming - sometimes it feels like I’m working a second or even third job. But I am excited for the new year and hope 2008 will bring forth bigger and better things for everyone. I know it!

Conventional wisdom suggests that it is always better to buy a home than to rent. After all, when you rent you are given no tax breaks and you are not investing your rent payments into anything that will appreciate over time. I don’t disagree with the pro-buying sentiments, but I think during major housing recessions we need to rethink our strategy. Unlike stock market corrections and shifts, the real estate market trends are slow to act and slower yet to cycle through the changes. Like a sloth, the housing market inches slowly downwards and upwards and I think we’ve only yet begun to see the worst of the housing collapse.

Buying a home is usually a much better option in the long term compared to renting, but I think these are different times. I have every intention to buy a house in the future - just not at the present moment or for the next 2-3 years at least. My short term goal is to invest my funds in the stock market and continue to save. I currently lease a brand new condominium unit I discovered through Craigslist. Ever since college and graduate school I’ve been renting and I think it’s been a smart decision. I did not have the funds during my earlier college years to purchase a home, so I missed the housing boat. My best bet now is to enjoy my rental lifestyle for a few more years, and continue to grow my eventual down payment.

Aside From the Obvious Timing Reasons, There Are Many Benefits and Other Reasons Why Renting Now May Be Better Than Buying a Home:

1. Renting Allows You To Keep Your Housing Options Open - When you buy a home, due to capital gain exclusion requirements, you essentially have to make the home your primary residence for at least 2 out of 5 years to take advantage of capital gain tax breaks of up to $250,000 for singles and $500,000 for married couples. Because of this and the expensive transaction costs associated with selling a house, moving from one house to another isn’t easy. For those whose lives are in flux or for those who are single without a family yet, renting is a very attractive option because it affords a lot of flexibility and allows one to not be tied down to one geographic location. Being tied down limits your employment options and commits you to a certain area. Since graduate school, I’ve had unanticipated employment shifts and I’m thankful I chose to rent rather than buy, because it allowed me to continue moving closer to my changing work locations whenever my life events changed. Renting also allows you to experience living in different types of apartments and locations without long term commitment. I’ve enjoyed living in a wide array of places, moving from ghetto roach and rat-infested apartments as a student, to a relatively posh pad now as a working guy.
2. With Renting You Don’t Have To Worry About Upkeep - When you are renting and something breaks down, it’s the landlord’s job to call maintenance and fix it. Dishwasher broken? No problem, call the landlord. But when you own the home, it’s yours - it’s your castle and you’re responsible for it. If there’s an expensive appliance that needs fixing or replacing, it’s coming out of your own pockets.
   
3. Housing Is A Terribly Overpriced Investment Right Now - In the long, long term housing prices do tend to cycle upwards, but the real estate trend travels in slow speed, in contrast to the frequently short burst movement of the stock market. We are currently in a baby bear real estate market and my assessment is that this bear is still not full grown yet - translation: we have many more years to go before the housing market will plateau and head back up again. That’s my own assessment but I’m sure the NAR will disagree. Although housing should be viewed as your home first and foremost, I think one can’t overlook the fact that it is still an investment. As with all investments, I want to choose the best entry point and I don’t think this is the best time yet.
   
4. The Mortgage Interest Deduction Is Over-Hyped and Frequently Overrated - The mortgage interest deduction is one of the most popular tax loopholes used by taxpayers to reduce their tax burden. But for those who want to eagerly purchase a home to take advantage of this deduction, I hope they are motivated by more than just tax reasons alone. Those who want to hurry and buy a house to save money on taxes likely haven’t actually crunched the numbers. Depending on the buyer’s income, the deduction may or may not be all that beneficial since it greatly favors higher income families. Spending a lot of money in this depreciating real estate market to save a little bit of money is not necessarily the best move right now.
5. Renters Insurance Is A Lot Cheaper Than Homeowners Insurance - I personally don’t have renter’s insurance (danger is my middle name), but I do know that renter’s insurance is substantially cheaper than homeowner’s insurance. It varies greatly depending on your location, but to give a general comparison of the cost difference, renter’s insurance is generally about $100 a year, while homeowner’s insurance is generally about $500. Now if your home is located in a natural disaster prone area like hurricane friendly Florida, than the rates could be even higher than what I’ve indicated.

Owning a house is the ultimate American dream. I certainly haven’t given up on it but I’m just choosing to put it off until the right time. The moment will arrive eventually, just not right now - so I’ve chosen to rent in the meantime.