The Poverty Business

“The Poverty Business” is the title of an article from the May 21, 2007 issue of BusinessWeek. An excerpt from the article:

In 1989, households earning $30,000 or less a year paid an average annual interest rate on auto loans that was 16.8% higher than what households earning more than $90,000 a year paid. By 2004, the discrepancy had soared to 56.1%. Roughly the same happened with mortgage loans: a leap from 6.4% gap to one of 25.5%.

Does this help explain why the gap between the wealth and poor is expanding rapidly in the past years? Not only are these people making less, they also have to pay more. It’s a double whammy!

Another thing is, the poverty business, which includes service like pay-day loan, subprime mortgage, etc., use procedures and strategy that entice the poor or make use of their ignorance to use their service and then hit them with outrageous interest+fee (BlueHippo?). It is always my insistence that we are the results of our own action. Based on that principle, these people should educate themselves financially and know they are getting themselves into, otherwise, it’s their own fault. However at the same time, it’s also problematic that these business are exploiting these folks who are already making less. That’s just adding trouble to misery, kicking them when they’re down, and get them stuck in a vicious poverty cycle.

Who is responsible for this “poverty problem”? The business? Or the people themselves? What do you think?

Either way, this raises another point – there is a need in our society to better educate people on personal finance and raise their financial awareness.

Originally posted 2007-05-20 23:24:21. Republished by Blog Post Promoter

To Give is to Receive

Thanksgiving is just around the corner. So let me take the chance to touch on the subject of giving today.

People always say “giving is receiving”, “it’s better to give than to receive”, “to give is to receive”. But why? Don’t you hate it when people say it, and you just have to agree, even though it may not make too much sense to you. You don’t understand why, but you have to nod your head anyways. Well, I hate that, and seriously, I don’t know if it makes sense to them when they said it either. Perhaps they say it… just to say it. So annoying. So despicable. So stupid. I’m just kidding.

Now following, I will share what I think about “giving” and how exactly is “to give is to receive”.

First, I declare that a prerequisite to achieve the concept of “to give is to receive”. The prerequisite is the ability to accept complete responsibility for your own action.

All of you out there, all of us, the entirety of human beings need to come to the realization that of accepting full responsibility of actions and so, whatever you do is your own choice and you must be responsible for the consequences. Now translating that, every time you give, it needs to be a direct result of your choice and your choice only, not because of obligation, not because of guilt, not because of expected return, etc.

By making your own decision to give, you can reap the full benefits of giving. You give because you are free and able to do so. You give because you have compassion for your fellow human beings, be it family, friends, or complete strangers whom you give to. You can then feel fully satisfied of yourself because you made your own choice to give, to help others, and that sense of satisfaction and joy is NOT a selfish result. You are giving because you WANT to.

Selfish is what? Selfish is when you give to expect to be given in return. How often you see people around you who give love and expect love in return, and how many of those are healthy relationships? You give because you love that person and if that person loves you in return, that’s great. If they don’t, it’s unfortunate, but if you continue to give to further expect something in return, that is not only selfish, it is also a self-destructing behavior. This is why people who truly love are the independent ones who are capable to make each choice in their life while accepting full responsibility for their own actions.

Nor shall you give as a result of guilt or obligation because that will also lead to similar result, where you feel that you have been taken advantage of, or that the other person owes you. That will become burden, which can easily cause you to feel like a victim in the future.

“I help him this time, he should help me in return next time I ask for favor.” We probably have all thought that. We’re only humans. Well… don’t. Stop it. You helped your friend because you chose to and that you will be happy to have done it. That’s receiving right there.

It is okay to accept gift, free meal, or help later if the other person chooses to do so in return. Just don’t expect so, or you are setting yourself up for disappointment, and disappointment is definitely not a form of “receiving”.

In short, to give to rececive, you must make your own decision to give.

Give to be helpful for others.
Give base on a sense of genuine gratitude. (Thanksgiving!)
Give because of compassion.
Give because you want and choose to.

Originally posted 2007-11-08 01:08:13. Republished by Blog Post Promoter

Partner/Rivalry on Quest of Personal Finance

Okay, I’ve been studying too long and want to take a break and scribble something on my blog. I have been reading many personal finance blogs lately, and I came across a post from Make Love, Not Debt:

A few weeks ago I was out having a few drinks with few coworkers during happy hour. One of my coworkers (CW1) noted that in a few weeks he will have been at the company for six months. Another coworker (CW2) remaked that he was then eligible to participate in the company retirement plan. Both of these coworkers are my age, maybe a little younger. The conversation went a little like this…

CW1: Hey, I’ll be at the company for six months in a few weeks!

CW2: Yeah dude, you’ll be eligible for our 401k. (but we have a SIMPLE IRA…or am I just being nitpicky?)

CW1: Yeah that’s cool.

Him: Yeah, I was thinking of rolling over my SIMPLE IRA to a Traditional IRA because I don’t like our investment options. I won’t be eligible to do that until May, though.

(blank stares)

CW2: Yeah, my boyfriend works at Morningstar, so he handles all of that stuff for me.

CW1: I don’t have a clue when it comes to that stuff.

CW2: Yeah. You guys watch Battlestar Galactica?

Sigh.

Although I haven’t begun my real professional career YET (being 2 months shy of graduation), I look around my peers, where a majority are older and/or full-time employees, and somehow I feel similar to the author here… Unfortunately I’ve heard more about young people not wanting to contribute to 401k because of how it reduces their paychecks, and NO young people who wants talk about personal finance and investment, etc around me.

As the title suggests, I would love to have a partner or even a rival to help push and/or encourage each other in learning these personal finance matters. But where can I find them? Makes sense? Oh well, it’s so late, I don’t care anymore.

That being said, I’ve been using a lot of excel for a class lately, and for fun I came up with a very rough, simplistic, interactive model to look at the growth of asset/net worth/whatever to put things in perspective a bit, with an initial asset that grows at a constant annual rate along w/ an annual contribution to the asset that grows by a separate constant amount. It actually makes future looks kind of hopeful. :P

excel_future.jpg

Feel free to download the excel file and play with it, modify it. It’d be great if someone comes up with something interesting or a much more realistic model and send it back to me :)

Alright, back to study, ciao.

Originally posted 2006-11-07 04:13:04. Republished by Blog Post Promoter

To help my cash flow, I refinanced

It’s either networth or cash flow when we measure and talk about the health of our personal finance and how to improve it.

In many cases, money is risked or sacrificed to generate more cash flow through buying some sort of investment to generate monthly pay out. Vice versa is also true when asset that generates cash flow is sold for a lum sum of cash.

I recently just closed on my refinance of my condo… thank god~! This one took longer than I thought. The background story is that I bought my place in 2008 with a 10% down payment when I got lucky in a small window where banks had loosened their lending requirement. That said, I was left to pay private mortgage insurance (PMI) as part of my mortgage. That’s a $200+ on top! Oh, what did I choose to put on myself… anyways, with the recent property price coming back up and mortgage rate down more than ever, I decided to refinance.

refinance_take_my_money

So in my case, I “sacrificed” many thousands to get myself that 20% equity to remove the PMI by going through refinance. That plus the 4% interest rate on a 30-year mortgage, I had reduced my monthly payment by more than $500. Although the “sacrificing” makes me feel sad, I think and feel that it is worth it because if I lose my current job, I have more options such as taking my time to find a job I want, doing a simpler job that means less pay, or even starting my own business. Less fixed cost to deal with is good.

A few other take away points from my refinance experience…

  1. Never expect to close with 30 days or on time because most cases… it won’t. It took me about 1.5 months for this refinance.
  2. For condo owner, know your HOA’s insurance coverage of your dwelling. Because if it already covers the reconstruction of the unit to original form, you won’t need to show prove of your OWN insurance coverage. Unfortunately, I had a young loan agent who is not familiar and that caused me some headaches with handling my home insurance coverage and potential higher premium that is not necessary.
  3. Pending sales DO NOT make direct comparables in the property price appraisal process. Only final sales do.

I was hoping my appraisal price to be higher so I can put less money down in the refinance process. Maybe if the market gets really hot next year, I can try again. BIG if. A man can feel greedy, right? Me think it’s ok as long as I don’t act too greedy.

At any rate, it’s hard for the mortgage rate to go much lower… and many real estate market has rebounded in price. That makes now a good refinance opportunity, especially if it does not cost you a lot relative to what you had saved.

Originally posted 2012-12-26 23:14:48. Republished by Blog Post Promoter

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