| PrintNumber | ErrorLocation | Error | Correction | DateAdded |
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| 098 | p iv | print line | not done yet | 2/15/2012 |
| 098 | p xvi | My parents are now aged 93 and 90. They were 19 and 16 in 1929 as the nation moved into the Great Depression. | My parents were 19 and 16 in 1929 as the nation moved into the Great Depression. | 2/20/2012 |
| 098 | p xvii | My parents marvel at the fact that they are still alive: survivors of depression, poverty, illness, raising four children, World Wars, and so much more. Through it all, they lived according to their values, took charge of their own well-being, were savvy consumers, avoided debt, and built good credit when they had it. They committed to a savings plan, communicated about money, chose housing wisely, planned for life transitions, prepared for disasters, and found help when they needed it. They have made it to their 90s as a happy and independent couple, soon to celebrate their 70th wedding anniversary! | My parents marveled at the fact that they survived depression, poverty, illness, raising four children, World Wars, and so much more. Through it all, they lived according to their values, took charge of their own well-being, were savvy consumers, avoided debt, and built good credit when they had it. They committed to a savings plan, communicated about money, chose housing wisely, planned for life transitions, prepared for disasters, and found help when they needed it. They made it to their 90s as a happy and independent couple and celebrated their 70th wedding anniversary! | 2/20/2012 |
| 098 | p xviii | A movement toward increased consumer financial literacy is gathering momentum across communities, schools and colleges, workplaces, faith-based organizations, financial companies, the media, and all levels of government. Its message is clear: The key to success in the twenty-first century is within everyone’s grasp if we embrace the concept of personal responsibility. To get ahead, we simply need to take charge of our own financial livelihoods. | movement toward increased consumer financial literacy is gathering momentum across communities, schools and colleges, workplaces, faith-based organizations, financial companies, the media, and all levels of government. Its message is clear: The key to success in the twenty-first century is within most people’s grasp if they embrace the concepts of personal responsibility and personal advocacy. To get ahead, even under difficult financial conditions, each of us must take charge of our own financial livelihoods. | 2/20/2012 |
| 098 | p xviii | Although consumers today have unprecedented access to financial resources through work, news sources, articles and books, seminars, and Internet offerings, there’s more to the equation than just information. There are other complexities. More than just receiving information, we also need to understand the general economy, the capital markets, the health care system, and the details in the contracts we sign. If you are confused, you are in good company. Even noted Harvard University law professor and consumer advocate, Elizabeth Warren, complained on national public television that she found it difficult to understand all the fine print in a typical credit card contract.1 | Although most individuals today have unprecedented access to financial resources through work, news sources, articles and books, seminars, and Internet offerings, there’s more to the equation than just information. There are other complexities. More than just receiving information, we also need to understand the general economy, the capital markets, the health care system, and the details in the contracts we sign. If you are confused, you are in good company. Even noted Harvard University law professor and consumer advocate, Elizabeth Warren, often complains publically that she finds it difficult to understand all the fine print in typical consumer credit transactions.1 | 2/20/2012 |
| 098 | p xviii | Typically, sponsors of financial education and published information believe that when people are given access to financial advice, they will automatically choose to be more prudent in their spending decisions. Financial information alone, it is thought, is enough to motivate people to plan ahead, save for emergencies, invest for future education costs and for retirement, and engage financial service professionals to help navigate the maze of investment choices. | Many sponsors of financial education and published information believe that when people are given access to financial advice, they will choose to be more prudent in their spending decisions. Financial information should be enough, to motivate people to plan ahead, save for emergencies, invest for future education and for retirement, and engage financial service professionals to help navigate the maze of investment choices. | 2/20/2012 |
| 098 | p xviii | Unfortunately, it isn’t that simple. Financial information alone—no matter how skillfully it is presented—often does not resonate with most people mainly because the information is so voluminous and the changes in society are coming at us so fast that it seems we will never process it all. | Unfortunately, it isn’t that simple. Financial information alone—no matter how skillfully it is presented—often does not resonate with most people mainly because the information is so voluminous and the changes in society are coming at us so fast that we can never process it all on our own. | 2/20/2012 |
| 098 | p xix | Their wisdom indicates that a body at rest will remain at rest until moved by an outside force. The law of motion applied to understanding financial issues and putting them in practice—saving for emergencies, education, home ownership, and retirement—suggests that if people do little to plan for these life events (that is, remain at rest), they will make little headway.2 Some outside force is necessary to provide the push to prepare for future financial security. | Their wisdom indicates that a body at rest will remain at rest until moved by an outside force. The law of motion applied to understanding financial issues and putting them into practice—saving for emergencies, education, home ownership, and retirement—suggests that if people do little to plan for these life events (that is, remain at rest), they will make little headway.2 Some outside force is necessary to provide the push most people need to prepare for future financial security. | 2/20/2012 |
| 098 | p xix | Unlike inert objects, however, we humans require some inner spark to generate the momentum that can propel us forward. In other words, the “outside force” of available financial information and education must be met by an “inner desire” to learn and to apply financial concepts. Partially due to how complicated we may think it is and how busy we are and partially due to our “buy now and pay later” culture, that spark may have been dampened. We may have fallen behind the curve of personal financial knowledge. | Unlike inert objects, however, we humans also require an inner spark to generate the momentum that can propel us forward. In other words, the “outside force” of available financial information and education must be met by our “inner desire” to learn and to apply financial concepts. Partially due to how complicated we may think it is and how busy we are and partially due to our “buy now and pay later” culture, that spark may have been dampened. We may have fallen behind the curve of personal financial knowledge, or we actually might have lost a job or even a home along the way. No matter how varied our reasons, if we lack that inner spark, there is simply no time left to become motivated to become educated about personal finances, to advocated for ourselves, and to take action now. |
2/20/2012 |
| 098 | p xix | The first thing to realize is that we all make money from the inside out! Once we see the possibilities and realize they are within our reach, then we can achieve them. With this in mind, you can change your behaviors and spending and savings patterns and can implement a new strategy that will transform your approach to finances. Your savvy in this critical area can improve the quality of your whole life. You can be more confident about who’s in charge of your financial well-being. | The first thing to realize is that we all make money from the inside out! Once we see the possibilities and realize they are within our reach, then we can achieve them. With this in mind, you can alter your thinking, change your spending and savings patterns and can implement a new strategy that will transform your approach to finances. Your savvy in this critical area can improve the quality of your whole life. You can be more confident about who’s in charge of your financial well-being. You are! | 2/20/2012 |
| 098 | p xix | Lois A. Vitt Karen L. Murrell Middleburg, VA Silver Spring, MD lvitt@isfs.org kmurrell@higherheightsconsulting.com |
Lois A. Vitt Karen L. Murrell Nellysford, VA Silver Spring, MD lvitt@isfs.org kmurrell@higherheightsconsulting.com |
2/20/2012 |
| 098 | p xx | We express our deep gratitude to Jim Boyd at Prentice Hall for his patient and insightful shepherding of this endeavor over the long haul. We very much appreciate the helpful comments of our peer reviewers, Russ Hall and Susan Squires, and the magic of the production team that transformed our words into print. Heartfelt thanks to Joyce Thomas and Jerry Travers, who can always be counted on to come up with great ideas and ways of expressing them. Many thanks to colleagues, Lynn Gerlach and Jeanne Harnois, for helping us translate our message from the theoretical to the timely and practical. And we thank Kyle Meyer and Karen McMahon for their helpful reviews of our manuscript. |
We express our deep gratitude to Jim Boyd at Prentice Hall for his patient and insightful shepherding of this endeavor over the long haul. We very much appreciate the helpful comments of our peer reviewers, Russ Hall and Susan Squires, and the magic of the production team that transformed our words into print. Heartfelt thanks to Joyce Thomas and Jerry Travers, who can always be counted on to come up with great ideas and ways of expressing them. Many thanks to colleagues, Lynn Gerlach and Jeanne Harnois, for helping us translate our message from the theoretical to the timely and practical. And we thank Kyle Meyer and Karen McMahon for their helpful reviews of our manuscript. |
2/20/2012 |
| 098 | p xxi | She is founding director of the Institute for Socio-Financial Studies in Middleburg, Virginia, where she directs research and consults about consumer financial education that works. She directed Personal Finance and the Rush to Competence: Financial Literacy Education in the U.S. for the Fannie Mae Foundation and Goodbye to Complacency: Financial Literacy Education in the U.S. 2000-2005 for the AARP. She is Editor-in-Chief of the two-volume Encyclopedia of Retirement and Finance. Her most recent publication is 10 Secrets to Successful Home Buying and Selling: Using Your Housing Psychology to Make Smarter Decisions. | She is founding director of the Institute for Socio-Financial Studies in Charlottesville, Virginia, where she directs research and consults about consumer financial education that works. She directed Personal Finance and the Rush to Competence: Financial Literacy Education in the U.S. for the Fannie Mae Foundation and Goodbye to Complacency: Financial Literacy Education in the U.S. 2000-2005. She is Editor-in-Chief of the two-volume Encyclopedia of Retirement and Finance. Her most recent publication is 10 Secrets to Successful Home Buying and Selling: Using Your Housing Psychology to Make Smarter Decisions, and she currently is at work on a sequel to help individuals make their best housing decisions in a tough economy. | 2/20/2012 |
| 098 | p 3 | • Bankruptcy reform now limits a family’s chances of starting over with a clean slate after a personal financial disaster. • Political leaders talk about doing away with your all-important mortgage interest deduction. • Politicians and lawmakers are proposing evermore “significant structural adjustments” to Social Security, Medicare, and Medicaid to deal with the nation’s mounting budget deficit.1 • The IRS is more aggressively auditing individuals.2 |
• Bankruptcy reform now limits a family’s chances of starting over with a clean slate after a personal financial disaster. Politicians and lawmakers are proposing evermore “significant structural adjustments” to Social Security, Medicare, and Medicaid to deal with the nation’s mounting budget deficit.1 • According to the Bureau of Labor Statistics, its broadest unemployment measure, including short-term discouraged, other marginally-attached workers, and those forced to work part-time is over 15%. In such a daunting environment, it is understandable that some people want to ignore the bigger picture. Others might claim that learning about financial management “is not their thing.” But it isn’t that easy; like it or not, we are already players in the financial game of life. |
2/20/2012 |
| 098 | p 181 | 3. Your investment portfolio. 4. Your home. |
3. Your home. 4. Your investment portfolio. |
2/22/2012 |
| 098 | p 181 | If you are in your prime and planning on early financial idependence, you could be working with a portfolio that is heavy in high earning (and perhaps very high risk) investment products. In other words, there is no generic blueprint about what your financial portfolio should look like. | If you are in your prime and planning on early financial independence, you could be working with a portfolio that is heavy in high earning (and perhaps very high risk) investment products. In other words, there is no blueprint about what your financial portfolio should look like. | 2/22/2012 |
| 098 | p 182 | If you have been a bank customer for a number of years, you may want to skip this section and go straight to Stocks, Bonds, and Mutual Funds, but if you are one of the millions of Americans who has only a checking account, (or no bank account at all) this section is for you. | If you have been a bank customer for a number of years, you may want to skip this section and go straight to Stocks, Bonds, Mutual Funds, and Exchange Traded Funds, but if you are one of the millions of Americans who has only a checking account, (or no bank account at all) this section is for you. | 2/22/2012 |
| 098 | p 184 | Stocks, Bonds, and Mutual Funds | Stocks, Bonds, Mutual Funds and other Investment Funds | 2/22/2012 |
| 098 | p 187 | Many investors choose mutual funds to help them get started, and for good reason. A mutual fund is a portfolio of stocks, bonds, or other securities owned by numerous investors. Since mutual funds pool money from many different investors, they have millions of dollars to invest and can build a portfolio of hundreds of individual stocks, bonds, or other investments to achieve diversification. What this means is that the law of averages is in effect—if a particular stock goes down, there are other, better performing stocks that will mitigate that loss. Mutual funds are managed by professional fund managers who make the buying and selling decisions for all investments. | Many investors choose mutual funds or other investment funds to help them get started, and for good reason. An investment fund (including a mutual fund, exchange traded fund or index fund) is a portfolio of stocks, bonds, or other securities owned by numerous investors. Since investment funds funds pool money from many different investors, they have millions of dollars to invest and can build a portfolio of hundreds of individual stocks, bonds, or other investments to achieve diversification. What this means is that the law of averages is in effect—if a particular stock goes down, there are other, better performing stocks that will mitigate that loss. Investment funds are managed by professional fund managers who make the buying and selling decisions for all investments. | 2/22/2012 |
| 098 | p 187-188 | Most mutual funds are built around clear investment objectives. Some focus on only one particular industry such as health care or technology. Other funds are created to meet specific investment objectives such as safety of capital, high income, or growth. There are even funds designed to meet intrinsic social or environmental value objectives. For instance, “green” funds only invest in companies that are environmentally friendly. You can choose a mutual fund, then, that matches your specific values. Research and talk over your options with your financial advisors and carefully read through the prospectus before making an investment. A well-chosen mutual fund is often a smart way for anyone to begin investing, regardless of your Life Values Profile scores. | Most mutually owned funds are built around clear investment objectives. Some focus on only one particular industry such as health care or technology. Other funds are created to meet specific investment objectives such as safety of capital, high income, or growth. There are even funds designed to meet intrinsic social or environmental value objectives. For instance, “green” funds only invest in companies that are environmentally friendly. You can choose an investment fund, then, that matches your specific values. Research and talk over your options with your financial advisors and carefully read through the prospectus before making an investment. A well-chosen investment fund is often a smart way for anyone to begin investing, regardless of your Life Values Profile scores. | 2/22/2012 |
| 098 | p 188 | When you buy into a mutual fund, you buy a number of shares. Much as a stock share represents a percentage ownership in a corporation, a mutual fund share represents a percentage ownership in the entire fund. Many funds require initial investments of only $500. After your initial purchase, once you’ve become a shareholder, most will accept smaller amounts, allowing you to increase your investment. If you want to sell your shares, the fund is required to buy them back, making mutual funds easy to liquidate. | When you buy into an investment fund, you buy a number of shares. Much as a stock share represents a percentage ownership in a corporation, a mutual fund or other investment fund share represents a percentage ownership in the entire fund. Many funds require initial investments of only $500. After your initial purchase, once you’ve become a shareholder, most will accept smaller amounts, allowing you to increase your investment. If you want to sell your shares, the fund is required to buy them back, making most investment funds easy to liquidate. | 2/22/2012 |
| 098 | p 188 | Some mutual funds charge a fee when you purchase shares. This charge is called a “load.” Although loads vary greatly, a 5.75% load fee is not uncommon. That means if you had $1,000 to invest in a mutual fund that had a load of 5.75%, $57.50 would be deducted as a sales charge, leaving you with $942.50 to invest. Many funds do not charge an upfront sales fee. These are known as “no load” funds. Some funds have deferred loads, which means a fee will be deducted from your account if you redeem your shares before a specified period of time. | Some funds charge a fee when you purchase shares. This charge is called a “load.” Although loads vary greatly, a 5.75% load fee is not uncommon. That means, for example, if you had $1,000 to invest in a mutual fund that had a load of 5.75%, $57.50 would be deducted as a sales charge, leaving you with $942.50 to invest. Many funds do not charge an upfront sales fee. These are known as “no load” funds. Some funds have deferred loads, which means a fee will be deducted from your account if you redeem your shares before a specified period of time. | 2/22/2012 |
| 098 | p 188 | You may be tempted to think that the fee structure of a fund is tied in to how the fund performs, for example, pay more, get more. Not so. There is no evidence that load or deferred-load funds are better investments than no-load funds. But it is important to look at what the fee structure is, as the same concept applies to mutual funds as to stocks—repeated buying and selling of mutual fund shares can cause you to pay repeated fees (and tax on gains) that can sap your earnings potential. | You may be tempted to think that the fee structure of a fund is tied in to how the fund performs, for example, pay more, get more. Not so. There is no evidence that load or deferred-load funds are better investments than no-load funds. But it is important to look at what the fee structure is, as the same concept applies to all investment funds funds as to stocks—repeated buying and selling of fund shares can cause you to pay repeated fees (and tax on gains) that can sap your earnings potential. | 2/22/2012 |
| 098 | p 189 | Whether your plan is employee-sponsored (a 401(k)-type plan) or your own retirement account (one of several types of Individual Retirement Accounts), it will generally be based on stocks, bonds, mutual funds, or CDs. And, thanks to compound interest (which we discussed in Chapter 11, “Committing to a Savings Plan”), if you get an early start, you can significantly build up the assets in your account. Consider these eye-opening calculations: | Whether your plan is employee-sponsored (a 401(k)-type plan) or your own retirement account (one of several types of Individual Retirement Accounts), it will generally be based on stocks, bonds, mutual funds and/or other investment funds, or CDs. And, thanks to compound interest (which we discussed in Chapter 11, “Committing to a Savings Plan”), if you get an early start, you can significantly build up the assets in your account. Consider these eye-opening calculations: | 2/22/2012 |
| 098 | p 190 | Whether your only real estate transaction is buying your own home, or if you expand into real estate as part of your investment portfolio, real estate can be a rewarding and potentially fun venture. Buying a home—and maintaining it well—is one of the surest paths to building your assets. Unless you are an avowed renter, love the carefree lifestyle, have a financial plan, and are streadily accumulating alternative investments that will finance your retirement years, you owe it to yourself and your family to become a homeowner as soon as you possibly can. |
Buying your own home—and maintaining it well—can become a pathway to building assets over time. Unless you are an avowed renter, love the carefree lifestyle, follow a financial plan, and are accumulating alternative investments that will finance your retirement years, you owe it to yourself and your family to investigate whether home ownership is for you. As you make monthly payments, you increase the equity in your home and build wealth. It really is that simple, since home ownership is also forced savings. But like other investments, real estate does not always appreciate, and as the past few years have shown, the value of your home can nosedive and its recovery can take years. Over the long term, homes have appreciated an average of about 6% a year, and they provide tax advantages. Homeownership also has facilitated increased net worth, and if you own your home free of mortgage debt in later life, you will enjoy having the feeling of increased financial security. |
2/22/2012 |
| 098 | p 190-191 | Build equity in your home and build wealth. It really is that simple. Homes appreciate over time an average of about 6% a year and provide tax advantages. Home ownership also facilitates increased net worth. Homeowners enjoy, on average, a much higher net wealth per household than those who rent. And if you own your home free of mortgage debt in later life, you will enjoy having the feeling of increased financial security. See Chapter 15, “Choosing Housing Wisely.” Point to Ponder According to a 2003 study by Harvard University’s Joint Center for Housing Studies, home ownership builds wealth. At the end of 2001, the median net wealth for homeowners was nearly $172,000, compared to a net worth of $4,810 for renters. Real estate investments are not limited to home ownership. Purchasing real estate purely as an investment can be an ideal way to complement your investment strategy. While real estate investing does require your time and attention, it can potentially offer you good returns on your investment. Kevin purchased his first home six years after graduating from college. He purchased a three-level, 80-year-old row house in the Bolton Hill district of Baltimore. He lived on the first floor and rented the other two levels to tenants. The rental income covered most of his mortgage, which freed up his income to invest in more real estate. Today, Kevin owns 12 rental properties, which provide him with a substantial source of income as well as an appreciating asset. |
You might decide to expand into rental real estate by purchasing a second home when prices are down, but like all other investments, the selection of the property and your market timing can be crucial. More important, buying and selling investment real estate is really a small business that involves management responsibilities, knowledge about locations, rental markets, maintenance and repairs, prospective liabilities, and persistent oversight. | 2/22/2012 |
| 098 | p 195 | Before you purchase individual stocks, bonds or even mutual funds, you need to determine your asset allocation strategy based on your ability to manage risk. | Before you purchase individual stocks, bonds, mutual funds or other investment funds, you need to determine your asset allocation strategy based on your ability to manage risk. | 2/22/2012 |
| 098 | p 201 | As you think about your financial support network, consider as well the relationship that shelters you—rain or shine. No other inanimate relationship is so important in life, and little else supports you psychologically and physically like the place you call “home.” | As you think about your financial support network, consider as well the relationship that shelters you—rain or shine. No other inanimate relationship is so important in life, and little else supports you both physically and psychologically like the place you call “home.” This remains true, despite the millions of homeowners who have lost the equity in their home due to the Great Recession of the past few years. If you have experienced (or are experiencing) financial hardship that impacts your housing situation, you understand better than most, the emotional upheaval that can accompany such loss. | 2/22/2012 |
| 098 | p 201 | No matter your stage of life—whether you are just starting out, raising a family, downsizing for retirement, or considering a reverse mortgage to help with cash flow in later life—your choice of where and how to live is a confluence of many factors. Your budget is an important consideration, but “home” also reflects and impacts your identity, values, career, lifestyle choices, and the needs and desires of those with whom you share your life. Whether or not you are engaged and feel “at home” or live someplace where you simply hang your hat, depends on the costs, comfort, attachments, and other intangible factors of where you live. | No matter your stage of life—whether you are just starting out, raising a family, downsizing for retirement, or considering a reverse mortgage to help with cash flow in later life—your choice of where and how to live is a confluence of many factors. Your budget is your basic consideration, but “home” also reflects and impacts your identity, values, career, lifestyle realities and choices, and the needs and desires of those with whom you share your life. Whether or not you are happy in your surroundings or live someplace where you simply hang your hat, depends on the costs, comfort, attachments, and other intangible factors of where you live. | 2/22/2012 |
| 098 | p 201 | Home is something you “provide” for yourself and others. It can bring you needed privacy, or it may be the place you want to spend your leisure time. It is where you feel secure, rest, and rise to meet the pressures of another day. In the best-case scenario, it is your sanctuary. When you see your housing needs in a more holistic way, you will realize that your housing decisions affect every facet of your life: | Home is something you “provide” for yourself and others. If all goes well, it is where you feel secure, rest, and rise to meet the pressures of another day. In the best-case scenario, it is your sanctuary. When you see your housing needs in a holistic way, you will realize that your housing decisions affect every facet of your life: | 2/22/2012 |
| 098 | p 202 | Making Housing Decisions Is Personal Home ownership is a central aspect of the “get ahead” ideal of the American Dream. This part of the Dream is particularly important because the whole concept of “home” is deeply rooted in our emotions as well as in our heads. Because home is also a personal resource as well as a place to live, a great location, or a secure investment, the best housing decisions engage your heart and head as well as your pocketbook. |
Housing Decisions are Central to Your Life Home ownership is central to the “get ahead” ideal of the American Dream. This part of the Dream is particularly important because, consciously or unconsciously, owning one’s home for most of us is is deeply rooted in our emotions as well as in American Culture. For years, research has shown that homeowners are happier, more content with their lives, more secure especially in later life, and more likely to participate in neighborhood and community affairs than renters. Home ownership has been found to be an unbeatable way to provide social stability, benefits for individuals and families and, by extension, broad societal benefits for communities and the nation. |
2/22/2012 |
| 098 | p 202 | Nowhere is using your Life Values Profile more significant than in making housing choices. And when you align your financial behaviors to your Personal Values, you will make housing decisions that can be both financially rewarding and personally satisfying. The more you can distinguish your spending impulses from your values, set realistic goals, and think of your home holistically, the better your housing decisions and your future financial security is likely to be. Return to your Life Values Profile for a moment and review the Personal (P) part of your financial decisions. Then apply them specifically to your housing decisions and choices, past, present, or those you hope for in the future. | Nowhere is using your Life Values Profile more significant than in making housing choices. And when you align your financial behaviors to your Personal Values, you will make housing plans and ultimate decisions that can be both financially rewarding and personally satisfying. The more you can distinguish your spending impulses from your values, set realistic goals, and think of your home holistically, the better your housing decisions and your future financial security is likely to be. Return to your Life Values Profile for a moment and review the Personal (P) part of your financial decisions. Then apply them specifically to your housing goals and choices, past, present, or those you hope for in the future. | 2/22/2012 |
| 098 | p 203 | Just as you have been reflectively reading and pondering the ideas in this book, you should now take these important steps to consider how to understand and improve your housing decision-making. After all, it is probably the most expensive item in your budget and financial planning. 1. Reflect on your present home and how it connects you to your lifestyle, relationships, finances, work life, avocations, and ambitions. 2. Reflect on a prior housing decision: What factors led to the decision? How did you handle moving details? What emotions were involved? 3. Consider whether a previous move followed or preceded one of life’s major upsets. 4. Then evaluate, from the comfortable perspective of hindsight, whether you could have made a better decision under the circumstances.* |
Just as you have been reflectively reading and pondering the ideas in this book, you should now take these important steps to consider how to understand and improve your housing decision-making. After all, it is probably the most expensive item in your budget and financial planning. And even in the extreme case—if you have lost a job or even your home—these considerations will effect your next housing decision as you recover from adversity and the market improves. 1. Reflect on your present home and how it connects you to your lifestyle, relationships, finances, work life, avocations, and ambitions. 2. Reflect on a prior housing decision: What factors led to the decision? How did you handle moving details? What emotions were involved? 3. Consider whether a previous move followed or preceded one of life’s major upsets. 4. Then evaluate, from the perspective of hindsight, whether you could have made a better decision under the circumstances. |
2/22/2012 |
| 098 | p 203 | Being Open About Housing Values | Shared Housing Decisions | 2/22/2012 |
| 098 | p 204 | To make bad matters worse, they had to extract themselves from the financial arrangements they had made to buy the house together in the first place. | To make bad matters worse, they had to extract themselves from the financial arrangements they had made to buy the house together and both lost most of their savings in the process. | 2/22/2012 |
| 098 | p 204 | (For help in understanding how to make great housing decisions, read Ten Secrets to Successful Home Buying and Selling: Using Your Housing Psychology to Make Smarter Decisions, Lois A. Vitt, Ph.D., Prentice-Hall, 2004.) | (For help in understanding how to make great housing decisions, read Ten Secrets to Successful Housing Decisions: Discover your Housing Profile before you make a move! By Lois A. Vitt.) | 2/22/2012 |
| 098 | p 205 | Housing decisions, like all important financial decisions, have as much potential for strengthening and reinvigorating a relationship as they do for undermining it. Remind yourself and your partner that housing, more than any other financial decision, is about everything in your lives and is your greatest shared expense. | Housing decisions, like all important financial decisions, have as much potential for strengthening and reinvigorating a relationship as they do for undermining it. Remind yourself and your partner that housing, more than any other financial decision, is about everything in your lives and is your greatest shared expense. | 2/22/2012 |
| 098 | p 205 | Nearly 50 million of us will move this year, heading for college or career, starting married life, trading up or trading down, or finding a retirement home. Reasons vary, but a potential move for any reason can disrupt the equilibrium of all involved. Moving impacts all four of our Life Values: Personal, Social, Tangible, and Money. Even if you have been dreaming of the chance to move for a long time, when the time comes, the move itself can be an expensive process. | Until recently, nearly 50 million of us moved each year, heading for college or career, starting married life, trading up or trading down, or finding a retirement home. Reasons vary, but a potential move for any reason can disrupt the equilibrium of all involved. Moving impacts all four of our Life Values: Personal, Social, Tangible, and Money. Even if you have been dreaming of the chance to move for a long time, when the timing is right, the move itself can be an expensive and complicated process. | 2/27/2012 |
| 098 | p 205 | 2. Emergency decisions must be made as the flood water is rising. | 2. Emergency decisions must be made as the flood water is rising or if your luck is down and you are facing eviction. | 2/27/2012 |
| 098 | p 206 | To make the best decision, you need to consider the “triggers” that cause you to contemplate moving in the first place. Proceed carefully through each of the four deciding factors. It is important to address what is really at the heart of your housing dissatisfaction. | To make the best decision, you need to consider the “triggers” that cause you to want to move in the first place. Do not panic or act in haste during this exercise. Instead, proceed carefully through each of the four deciding factors, since it is important to address what is really at the heart of your housing situation or dissatisfaction. | 2/27/2012 |
| 098 | p 206 | Are you seeking real Personal change? If so, changing your environment might make a huge difference, but does that mean moving, remodeling, or perhaps modifying one small part of your environment? Is the underlying motive Social in nature, perhaps the inconvenience of a dependent parent across town or the desire to be a part of a community you can share with a number of your friends? Your inner desire for a housing change might be completely Tangible, focused on particular features of your home that might or might not be candidates for remodel or renovation. Ultimately, no matter what course of action those three factors (Personal, Social, Tangible) seem to indicate, you will have to conduct a thorough review of the Money factors in your life as well. | Are you seeking real Personal change? If so, changing your environment might make a huge difference, but does that mean moving, remodeling, or perhaps modifying one small part of your environment as an alternative to moving? Is the underlying motive Social in nature, perhaps the inconvenience of a dependent parent across town or the desire to be a part of a community you can share with a number of your friends? Your inner desire for a housing change might be completely Tangible, focused on particular features of your home that might or might not be candidates for remodeling or renovation. Ultimately, no matter what course of action those three factors (Personal, Social, Tangible) seem to indicate, you will have to conduct a thorough review of the Money factors in your life, which might be triggering the real need to move. | 2/27/2012 |
| 098 | p 206 | When deciding whether to move, remodel, redecorate, or find a different solution, a comparative housing cost analysis will help you focus on the financial consequences of the decision you are contemplating. Remember the three money questions from the Life Values discussion: | HOME LOCK OR FREEDOM TO MOVE? Home Lock means you believe you are unable to move, because the resale market is terrible and you cannot find a qualified buyer for your home. If you are in this position, waiting might be a good option, but finding a reliable tenant until your house can sell might be the better choice. When deciding whether to move, remodel, redecorate, or find a different solution such as renting to a tenant, a comparative housing cost analysis will help you focus on the financial consequences of the decision you are contemplating. Remember the three money questions from the Life Values discussion: |
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| 098 | p 207 | • Is this home appropriate for my financial reality? Do I really need a “manor home,” or will a townhouse work perfectly well? | • Is this home appropriate for my financial reality and/or the reality of the current marketplace? Do I really need a “manor home,” or will a townhouse work perfectly well? When it comes to the Money Factor, you must add a a cluster of other question to achieve your best housing choice. • Is my home value “under water?” Will I be able to make up the difference between a realistic selling price and my outstanding mortgage? Will I find a buyer who can qualify for a mortgage? Should I find a tenant and keep the home instead? |
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| 098 | p 207 | To compare the financial consequences of your contemplated actions, you need to establish a baseline, using your current housing situation. Consider the same costs for both your current housing situation and your chosen alternative (and a second alternative, if you have one in mind). In this analysis, it is important to capture all the associated expenses, not just a mortgage or rent payment. Briefly, these are the factors you should consider for current and possible future housing situations: | Then compare the financial consequences of your contemplated actions: establish a baseline, using your current housing situation. Consider the same costs for both your current housing situation and your chosen alternative (and a second alternative, if you have one in mind). In this analysis, it is important to capture all the associated expenses, including the amount of your available savings and the rent you can receive, not just the cost of a mortgage or rental payment you will make at your destination housing. Briefly, these are the factors you should consider for current and possible future housing situations: | 2/27/2012 |
| 098 | p 208 | Are you now contemplating a move? You will be more comfortable with your housing decision and sleep better if you make the decision process a conscious one. Try not to skip these important questions and then justify your housing decisions later. You can start by setting your housing priorities. Once you recognize the trigger(s) that are causing your housing discomfort, work patiently through all four deciding factors, paying particular attention to the Money factors. Then you should know whether you will be most successful moving, remodeling, redecorating, or looking for another alternative. | If you are now contemplating a move, you will be more comfortable with your housing decision and sleep better if you make the decision process a conscious one. Try not to skip these important questions and then justify your housing decisions later. You can start by setting your housing priorities. Once you recognize the trigger(s) that are causing your housing needs, work patiently through all four deciding factors, paying particular attention to the Money factors. Then you should know whether you will be making the most successful moving decision. Unless you are comfortable with your decision, start the exercise again until you gain confidence. Be patient with yourself and you will find the comfort of knowing you are making the best choice available. | 2/27/2012 |
| 098 | p 209 | If you have never been a homeowner, home ownership should definitely be your goal, either short-term or long-term. The American Dream aside, investment in real estate makes sense for everyone at some point. But timing is crucial. Buying a house just because it seems like a good idea or because analysts predict that the market is ripe could be a mistake if the time is not right for you. Accurately and objectively, take stock of your financial situation. Using the analysis just detailed in conjunction with your overall savings plan, determine how much “home” you can afford and meet with a mortgage lender to get a sense of the mortgage you can comfortably handle. | If you have never been a homeowner, home ownership can definitely be your goal, either short-term or long-term. The American Dream aside, investment in your own home makes sense for most people at some point if it is affordable. But timing is crucial. Buying a house just because it seems like a good idea or because analysts predict that the market is ripe could be a mistake if the time is not right for you. Accurately and objectively, take stock of your financial situation. Using the analysis just detailed in conjunction with your overall savings plan, determine how much “home” you can afford and meet with a mortgage lender to get a sense of the mortgage you can comfortably handle. | 2/27/2012 |
| 098 | p 209 | The next step is to look at your personal situation. If there is any instability in your life—if you are contemplating a career change, going through a relationship shift, or you are experiencing angst or friction in any area of your life, now might not be the right time to commit to a new home. New housing does not repair relationships; more often than not, it causes even more upheaval, and many housing decisions are better when there is stability in your personal affairs. There is one exception, of course, a move that will help you avoid instability in a living situation. |
The next step is to look at your personal situation. If there is any instability in your life—if you are contemplating a career change, going through a relationship shift, or you are experiencing angst or friction in any area of your life, now might not be the right time to commit to a new home. New housing does not repair relationships; more often than not, it causes even more upheaval, and many housing decisions are better when there is stability in your personal affairs. There is one exception: If you must move to avoid instability or danger in a living situation, do not wait. Move immediately and seek whatever professional help you need to remedy the situation. | 2/27/2012 |
| 098 | p 209 | If you are contemplating a second home or an investment property, however, you need a housing plan. While investment income, or a second home for pleasure now and retirement later makes a lot of sense for many people, such decisions should not be made lightly or in haste unless you have plenty of extra cash to rely on in case of a sudden change in your personal circumstances or a market downturn. | Paragraph deleted. | 2/27/2012 |
| 098 | p 210 | Sometimes renting can be your best option. This is the story that Carolyn and her husband shared with us: | Renting, permanently or temporarily, might be your best option. This is the story that Carolyn and her husband shared with us: | 2/27/2012 |
| 098 | p 211 | Linda and her husband sold a home under a “clean contract” with no contingencies or identifiable uncertainties of any kind. The sale was to an affable couple, and they celebrated with hugs all around at the closing. The outstanding loan balance that was paid off at settlement, however, was for a different property. That’s right. The mortgage company and the title company actually paid off the mortgage secured by an investment property the sellers also owned, not the property that was being sold. The mistake was discovered by the sellers two weeks later, when the next payment on the investment property also was applied to the wrong property. They immediately notified both the mortgage company and the title company. Neither company owned up to their mistake, however, despite many months and much correspondence. | Linda and her husband sold a home under a “clean contract” with no contingencies or identifiable uncertainties of any kind. The sale was to an affable couple, and they celebrated with hugs all around at the closing. The outstanding loan balance that was paid off at settlement, however, was for a different property. That’s right. The mortgage company and the title company actually paid off s mortgage secured by a different property the sellers also owned, not the property that was being sold. The mistake was discovered by the sellers two weeks later, when the next payment on the investment property also was applied to the wrong property. They immediately notified both the mortgage company and the title company. Neither company owned up to their mistake, however, despite many months and much correspondence. | 2/27/2012 |
| 098 | p 212 | If you are a homeowner, love your mortgage! It is a unique investment tool that helps you leverage a number of major financial transactions to improve your quality of life. You can buy many consumer goods—not just homes—on credit, but none of them will pay you back quite like your mortgage. That’s why it is important to manage your home equity as you build your financial security. You may elect to put it in a drawer and forget about it until you own your home outright, or you can maximize its financial potential, which may mean refinancing. | If you are a homeowner, learn about your mortgage! It is a unique investment tool that helps you leverage your home purchase initially and build equity over the long haul. You can buy many consumer goods—not just homes—on credit, but none of them will pay you back quite like your mortgage. That’s why it is important to manage your home equity as you build your financial security. You may elect to put it in a drawer and forget about it until you own your home outright, or you can maximize its financial potential by lowering your payment when interest rates are favorable, which may mean refinancing. | 2/27/2012 |
| 098 | p 212 | • A shorter-term loan lets you build home equity quickly. • Converting from adjustable-rate to fixed-rate allows for payment-size certainty. • A different adjustable rate than the original rate might offer you better features. • A cash-out refinancing can provide funds needed for home improvement or repairs or to jumpstart savings accounts for emergency or retirement. • Equity recovered from a refinancing might allow you to buy a second home or rental property.» |
• A lower interest rate can reduce your monthly payments. • A shorter-term loan lets you build home equity quickly. • Converting from adjustable-rate to fixed-rate allows for payment-size certainty. • A cash-out refinancing can provide funds needed for home improvement or repairs or to jumpstart savings accounts for emergency or retirement. |
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| 098 | p 213 | Of course, not all homeowners refinance for sound purposes. Using cashed-out equity to fund a lavish vacation or pay off credit card debts that will just re-occur is not a wise use of home equity. | Of course, not all homeowners refinance for sound purposes. Using cashed-out equity to fund a lavish vacation or pay off credit card debts that will re-occur is an unwise use of home equity. | 2/27/2012 |
| 098 | p 213 | Add text. | When you are ready to go to a lender, think of yourself as an interviewer. Have your questions ready, ask the same questions of each lender, and then ask for references. As you later compare the details from all the interviews, make sure you are comfortable in your (P) Personal Life Value decision areas (autonomy and control, feeling secure, personal and social identity, and “trusting your gut”) when you make the decision to refinance. Keep in mind that refinancing is exactly the same process as applying for an original mortgage, so you need to have an accurate picture of your financial status: income, expenses, assets, liabilities, balances, and terms. This is serious business; do not be tempted to impulse shop. WHAT TO DO IF YOU ARE UNDERWATER OR DELINQUENT If you are under water—you owe more on your mortgage than your home is worth—your only recourse might be to wait for an improved market to sell or refinance. On the other hand, you might have other options so you should call and discuss your situation with your present lender. Unfortunately, your choices could be limited for refinancing, since a new lender will not be eager to take on your current lender’s outstanding liability. Depending on your circumstances—are you delinquent in your payments, for instance?—you might be eligible for a special government-sponsored or bank-sponsored program. Don’t hesitate to ask your lender, explain your situation, and thoroughly investigate your options by seeking out a housing counselor, lawyer, or financial advisor. Since programs change, and new options are introduced frequently, do not limit your calls (visits, letters, emails, and other messages) to one time only. Revisit every few weeks to learn whether the lender’s policies have changed. |
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| 098 | p 217 | Your return might come in the form of cash flow, price appreciation, or both. | Your return might come in the form of cash flow, ultimate price appreciation, or both. | 2/27/2012 |
| 098 | p 218 | You have considered a variety of housing possibilities as significant parts of your total personal financial management plan. Now you deserve the really good news: There is a system in place to help with all of this, and it’s a good system, albeit complex, but it will make your life easier—if you learn to use it well. This system, which is really an alliance of financial and government institutions, big and small business, and nonprofit organizations, educates you, sets interest rates, reduces red tape, and can save you taxes. The system can intimidate, but an understanding of it can help you prevent costly housing mistakes and reap financial benefits. | You have considered a variety of housing possibilities as significant parts of your total personal financial management plan. Although you have learned that mortgage lenders can make mistakes, there are good mortgage and housing advisors to help you navigate the housing system. This system, which is really an alliance of financial and government institutions, big and small business, and nonprofit organizations, educates you, sets interest rates, and can save you taxes. The system can also be intimidating, but an understanding of it can help you prevent costly housing mistakes and even reap financial benefits. | 2/27/2012 |
| 098 | p 219 | When you are ready to buy your next home, chances are very good that you will need to borrow money. In that case, you will pay interest, the fee charged for using someone else’s money. The “system” sets the interest rates. Today’s adjustable rates make payments more affordable in the early stages of homeownership. Use books and Web sites to sort out the difference between fixed-term, adjustable, and variable-rate mortgages. Before you commit to a mortgage, you will want to understand the interest rate and mortgage term as well as the intervals of your loan. There is much to learn about mortgages, and the “system” is prepared to help you learn it. The “system” does more than set interest rates; it reduces red tape and saves you taxes. The processes of buying, selling, and borrowing have been substantially streamlined over time. Credit reports and credit scores can now be obtained in seconds. Mortgage loan applications can be made via the Internet or telephone. With disclosure laws, professional ethics enforced within the real estate world, and stiff competition among mortgage lenders, every step is now made as easy and smooth as possible. Once you own a home, you benefit from the “system’s” offer of tax advantages, including the deductibility of your real estate taxes and mortgage interest and your ability to avoid tax on any exempted gain on your home when you sell it. The tax benefits and consequences of owning residential property should become a knowledge priority in your life. |
When you are ready to buy your next home, chances are very good that you will need to borrow money. The “system” sets interest rates and today’s rates make payments more affordable, but beware of getting into investment real estate unless you learn the business and remember if it sounds too good to be true, it’s because it is too good to be true. The processes of buying, selling, and borrowing have been streamlined over time, but credit is not always abundant, unless you have good credit and a track record of stable income and substantial savings. Credit is easing somewhat and lenders are eager to sell foreclosed homes. Mortgage loan applications can be made via the Internet or telephone. Although competition for the best properties exist, today can be a good time to buy if you take the time to understand exactly what you are doing and why. | 2/27/2012 |
| 098 | p 219 | We have provided a broad overview on the most substantial investment you will make in your lifetime. No matter where you find yourself along the spectrum of housing decisions—Buy or rent? Move or stay? Refinance or hold? Build or remodel?—every housing decision is complex, important, and multi-faceted. You can make the right decision, no matter what your individual circumstances, if you take a holistic approach and look at your home not just in a financial light, but as an expression of your Life Values. By creating a relationship with your home and considering it part of your support network, you will make housing choices that are enriching in ways too numerous to count, including finances, of course. | We have provided a broad overview on the most substantial investment you will make in your lifetime. No matter where you find yourself along the spectrum of housing decisions—Buy or rent? Move or stay? Refinance or hold? Build or remodel?—every housing decision is complex, important, and multi-faceted. You can make the right decision, no matter what your individual circumstances, if you take a holistic approach and look at your home not just in a financial light, but as an expression of your Life Values. By creating a relationship with your home and considering it part of your support network, you will make housing choices that are enriching both emotionally and financially. | 2/27/2012 |
| 098 | p 269 | Insert section | consumer financial protection bureau www.consumerfinance.gov The central mission of the new Consumer Financial Protection Bureau (CFPB) is to make markets for consumer financial products and services work for Americans—whether they are applying for a mortgage, choosing among credit cards, or using any numberof other consumer financial products. The consumer bureau is working to educate consumers, to enforce violations of consumer financial safety practices and to engage in related research. Watch for the array of consumer education programs that are going online at this website. |
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| 098 | p 270 | fannie mae foundation www.fanniemaefoundation.org The Fannie Mae Foundation creates affordable home ownership and housing opportunities through innovative partnerships and initiatives that build healthy, vibrant communities across the United States. The Foundation provides free, multilingual information on credit, borrowing basics, home ownership and getting a mortgage loan. |
fannie mae www.fanniemae.com Fannie Mae is a government-sonsored enterprise chartered by Congress to keep money flowing to mortgage lenders, to help strengthen the U.S. housing and mortgage markets, and to support affordable homeownership. It does not offer home loans directly to consumers. It buys or securitizes the mortgage loans originated by other mortgage lenders, but it does offer education and information about home ownership to consumers on its website. |
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| 098 | p 271 | Freddie Mac is a stockholder-owned corporation chartered by Congress in 1970 to create a continuous flow of funds to mortgage lenders in support of home ownership and rental housing. Freddie Mac provides information and tools on credit and home ownership. | Freddie Mac was chartered by Congress in 1970 to create a continuous flow of funds to mortgage lenders in support of home ownership and rental housing. Freddie Mac provides information and tools on credit and home ownership. | 2/28/2012 |
| 098 | p 274 | Established as the parent organization of the College for Financial Planning, NEFE provides financial-planning education to the general public and creates personal financial education projects and programs with leading national organizations. NEFE also created the High School Financial Planning Program (HSFPP) to increase the financial literacy of teenagers. NEFE maintains a clearinghouse of financial education curriculum, publications, and resources. The clearinghouse can be accessed at the NEFE Web site. | Established as the parent organization of the College for Financial Planning, NEFE provides outstanding financial-planning education to the general public and creates personal financial education projects and programs with leading national organizations. NEFE also created the High School Financial Planning Program (HSFPP) to increase the financial literacy of teenagers. NEFE maintains a clearinghouse of financial education curriculum, publications, and resources. The clearinghouse can be accessed at the NEFE Web site. See also Nefe’s Consumer Education site: smartaboutmoney.com | 2/28/2012 |
| 098 | p 275 | Insert section. | FINRA investor education foundation Saveandinvest.org This website offers investor and general consumer finance programs to all consumers. It has a special emphasis for older adults and its military financial education project delivers free, unbiased financial education tools and training to servicemembers, their spouses and on-base financial educators through a variety of programs, public awareness initiatives and other resources. A partner in the U.S. Department of Defense Financial Readiness Campaign, the project’s main goal is to help military families manager their money with confidence. |
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| 098 | p 277-292 | New appendix inserted | Done | 3/14/2012 |
| 098 | p 299-312 | New index because of numerous changes throughout the book | Done | 3/26/2012 |