Home Ownership Is Calling My Name?

One of the thing that I am indeed saving up for is to purchase a place to call my own eventually, as most of us are and most of us did. Just today, the condo unit right across from my rental is doing an open house. Out of curiosity I stepped in to check it out. What I saw is a completely remodeled unit with new carpet, crowned ceiling, granite kitchen-top with extended length *drool*, custom-built cabinets *drool*, and also a renovated bathroom with granite top that matches the kitchen *DROOL*.

Just from looking at all those, I am extremely tempted to jump on the ship. However, my gut feeling tells me this is not the time yet for me, and I AM going to listen because the place is a small 1 bed room condo. Despite great location, I imagine the reselling will be difficult. I could rent it out later but another reason for me saying “not the time yet” is that I will stretch myself out too thin if I do buy now. On a side note, this arises a bit of jealousy inside me toward my similar-aged peers who are receiving help from their family. However, I am already doing my best and am moving along pretty well, so that feeling is quickly subdued :)

Besides stretching my finance too thin by buying now, there is also the market factor that tells me to be patient. First, the mortgage crisis will probably top out in the next or 2 years, so the housing price COULD adjust to my advantage. Second, there is still chance for the Fed to cut rate further after this initial cut, which can affect the mortage loan rate. We will just have to wait and see.

I will just keep chugging along like I do for awhile.

Federal Rate Cut And How It Affects Us

Today marks the second day after the Fed decides to cut the rate by half a point. And today, also marks the day after many weeks that my 401k gets out of the red. I know you are not supposed to have emotional swing with the market because if you do, you will lose many nights’ sleep and have numerous heart attakcs, but nonetheless, this is a bit exciting. Moving on.

In the news and especially lately, we hear people talking about the Fed. We also hear people talking about “the rate”. But what exactly are they?

The Fed
Fed stands for the Federal Reserve System that is the central banking system of the United States that has members ranging from goverment officials, regional banks, some private banks, economists and what have you. Slightly irrelevant. The important thins is that the current chairman of the Fed is Ben Bernanke and with the famous Alan Greenspan as the predecessor, so pay attention to them in the news if you care about the financial market.

“The Rate”
“The rate” stands for the federal funds rate, which is the interest rate banks charge each other. Banks are required to keep certain level of federal funds at the Federal Reserve. They want to keep their federal funds as small as possible because money in federal funds is just sitting there and does not make them MORE money. A bank with an excessive level of funds will charge another bank with a deficient level of fund to borrow money at “the rate”. Also, when the rate is low, banks can borrow more money to generate more business at a lower cost. You see how much the banks are affected by the rate. This is why the stock market is affected when the rate changes.

Now, how does that relate to us?
Because the federal funds rate affects the cost of the banks, it makes the interest rate on loans offered to consumers goes up or down (i.e. auto loan, credit cards…). This means the cost of the banks got partly transferred to us consumers, so the rate also affects the spending power of consumers. When consumers can spend more, all business will do well. When they can’t spend as much, business will grow slower or stop growing. This is another reason why the rate affects the stock market.

In short, rate increase leads to higher cost for business (bad news).
Rate decrease helps in stimulating business growth (good news).

These are my basic understanding of the fed and the rate and quickly explained.
As you can read, it is quite straight-forward.

However, there are many other factors and market conditions also involved. For example, too much growth will cause inflation to go up dramatically, which is bad for the long term. In that case, the rate will be increased to curb growth to allow sustainability of the economy. Additionally, as far as now is concerned, the rate cut may lead the people who made the mistakes that lead to the current credit/subprime crisis to overlook their flaws. Then history will repeat itself, with a worse occurrence possibly…

Hear what Greenspan explains some of this on Daily Show!

I enjoy how Jon Stewart rasied the critical questions with Greenspan about how the economy favors investing in the market , hedge funds, short bettings over work and simple savings and also the illusion of a free market.

Doing Hobbies and Simple Things to Save Money and Be Happy

I’ve talked about the concept “keeping it simple” in a few posts before. I want to re-iterate the power of the concept of simplicity, in terms of things we can do everyday.

First of all, I truly believe simplicity is where happiness lies in life.
Now, let’s think about basic things that ourselves love to do.

For me –
I like to listen to music. I like singing. I like playing the piano. I like playing basketball. I like having a good conversation or “quality-chililng-time” with friends. I like reading a good book. I like surfing the web and learning about what others think and more stuffs in general. I like taking a walk on a good day. On and on…

I have spoken about my own interests and hobbies, but I’m sure you have a list of your own. Usually, these are all very basic simple things. And when you look at these things, they may have some fundamental cost but on the long term, it costs a lot less compared to the incessant chasing of trends and purchasing of materials.

Instead of going to the mall, wasting time and money on impulse purchase (maybe to keep up with neighbors, people you know, or other “Jones”), you can develop your skills on these simple things, these interests, these hobbies. This will not only save you money on the long run (in most cases), but you will be happier and feel better about yourself because you are doing what you actually want to do. It’s double the benefits! Isn’t this so much more wonderful?

For myself I know I won’t be happier by spending money and time at the mall or going on crazy outtings with whoever, and instead, I can spend time listening to music, or reading a book with soothing background music, or practicing piano, or any of the other things I mentioned. What do you think I will do?

Make no mistake, I still enjoy outtings with good friends and great companies, but never do I do it to fit in or because I have nothing to do.

So make a list of things you are interested in doing or would like to make hobbies of. Every time you want to fill the void of your time by doing things that’ll make you splurge money for the sake of gaining an instantaneous pleasure only for splurging, refer to the list and do one of the things on the list instead.

Even if you don’t save money, you’ll be doing something that will benefit yourself mentally and maker you happier in the long run. Much better than buying random things for no good reason or that you’ll deem useless and dismiss quickly.

Playstation 3 and Blu-ray DVD

Last month, besides spending for the 2 trips, I also splurged on a set of Playstation 3 upon the price drop announced by Sony. This is after I buckled down to save for many months. It hurts me as much as my pocket, but I considered all these are worth it. We save in order to spend after all, with the key being controlled spending. Anyways…

So what happened was I jumped on the Circuit City deal that offered an extra controller plus 5 self-selected Blu-ray DVDs (from a limited collection), which quickly sold out on the same day when I checked at night :P Lucky!

That’s besides the point though.

Today, I finally received my first Blu-ray DVD, which is the awesomely choreographed 300 that I ordered from Amazon. My expectaion is high…

After my first Blu-ray experience, I have to say that Blu-ray does indeed provide crisper image and more details. I did not notice a big difference in sound. In addition, the load time from the root menu to the various features seems faster than regular DVDs.

However, I do have doubts whether the improvement that Blu-ray provides is really worth the extra bucks, especially if someone has to drop major bucks for a pure Blu-ray player. I’m talking about non-Playstation 3. I personally think the difference between DVDs with 1080p-upscale (on Playstation 3) and the Blu-ray is there but not significant enough to provide a motive to invest purely for a Blu-ray experience. Again, I’m talking about non-Playstation 3.

Au contraire, Blu-ray DVDs prices are dropping and so the actual value of Blu-ray DVD relative to its cost is also increasing. They are also becoming more popular, so Blu-ray seems to be the way to go eventually, if not now.

Yep, that’s my 2 cents.

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