Building Wealth - Cutting Costs

Just yesterday I suggest looking into refinancing your home while rates are down and I also stated another rate cut was on the way, to wait for it and jump on it when it came.  24 hours later here we are, the market took a 400 point dump when it opened, the Fed panicked and cut rates before the end of the month meeting just as I said they would.    This is not an I told you so post though just another nudge to get going with a refinance if you are paying to much in interest, if you can make a smart move to pay off consumer debt (credit card debt) or if you were stupid and got into an ARM that will soon expire.

Right now I am finding rates are low a 5.125% on a 30 year fixed and todays cut is not even factored in yet.  Odds are you can get something in the 4.75-5.2% range with any type of decent credit assuming you have some equity in your home.  I don’t think you will see a better time in the next few years or perhaps the next decade.  Is this the absolute bottom for rates?  Who knows but it won’t get much better, my advice is to act now.

Also don’t fall for all the advertisements.  The best source to refinance a loan is most often your existing lender.  No one wants to loose a good mortgage client right now.  Last time I did a refinance I got all fees waived by my existing lender.  Remember if you don’t ask they generally won’t tell,  learn and use the phrase “is that the best you can do?” often.

One of our chief goals here at CutThatBill is to help you find creative and cool ways to cut costs so when I was asked to look at a new website about heating and saving money on your costs I was happy to do it. The site is called DESA Online Outlet and they offer great prices on a variety of room heaters. A small room heater is often viewed as something that raises rather then lowers bills but that is not the case when used properly. Match the right heater with the right sized room and you can take the chill out of the room you are in most often and keep your overall thermostat setting lower.

Another cool option is using either ventless gas logs or vented gas logs into your fireplace. I prefer ventless because they provide far more efficient heating and still give you a lot of the feeling of a traditional wood fire. If you really want the look and feel of wood though vented logs will give you more of that. Either of them are more efficient and less costly then wood, (unless you cut your own). One more thing I really liked about DESA Online Outlet is they show you exactly how to cut your winter expenses by 15% rather then just claiming it to be the case.

So if you have a fire place that you don’t like dragging wood in for, would like to cut the cost of your heating or if you just have one room that is always to cold give these guys a visit and see if they have a deal on what you are looking for they certainly make my recommended sites list.

In an effort to stimulate the economy the congress and the president are working to provide an economic stimulus package. One big part will be sending most tax payers some of their tax money back, to the tune of from 300-800 dollars per taxpayer may be even as high as 1600 per household. You can read an article by newsday.com to get more specifics about it.

In any event I have mixed emotions about this. As a Libertarian I believe that all income tax is theft in the first place and I really can’t argue with the government giving back money they should have never taken in the first place. However, in this instance while not totally opposed (I just can’t oppose less tax no matter how it comes) I have sever very big concerns/issues with this plan.

• Right now everyone is worried about the 2008 election. So even Mr. and Mrs. raise taxes (Barak and Hillary) are behind this massive retroactive tax rebate. Make no mistake this is buying votes by both sides of the isle.

• True conservatives are always saying lower taxes are good for the economy and liberals always say that is wrong. Yet now that we are in deep shit everyone agrees cutting taxes makes the economy better? All this means is they all know all the time that low taxes are good and simply keep up the graduated income tax as a way to distract us all with “class warfare”.

• In most instances I don’t see cutting taxes as “spending” yet in this case it is pure reckless spending. Why? How? Simple, no one in congress is talking about cutting any expenditures to fund this rebate. In other words they are still going to spend all the money they were going to spend and GET THIS our country is OUT OF MONEY. So where will we get the billions to fund this rebate? Well the fed will fire up the presses and just print more money at least symbolically. Honestly though our government will borrow it from foreign governments and increase out debt. In other words you kids get to pay back you debt on your 800 bucks with interest and will have to do so with a dollar that is weaker in the world market every day.

• This package is a very short term fix. The whole theory is most people will “blow” their money and dump it in the economy and that will beef up spending for a bit and put more money into the economy and the rising tide will then float all boats. The theory is sound most people will blow it (instead of saving or paying on debt) and it will make it “better” but our “boat” has big holes in it. Make sense? This move won’t reduce US debt, reduce toxic consumer debt, fix the housing market or reduce our massive spending deficit.

So how could this plan actually work? You only have to change the spending equation on the side of the government to make it work very well. Check this way out,

1. Require the government to give back at least the money they plan to right now.
2. Require that they also cut 2 dollars in spending for every dollar returned to tax payers

That’s it! That would “stimulate the economy”! Our nation is not in trouble because our people spend to little, it is in trouble because the government takes too much of our money and then spends far more then even what they steal from us. Fix that problem, yes cut taxes but cut spending by 2 dollars for every dollar you refund to us.

With all the talk of a coming recession I am sitting down with my financial adviser this week and I am moving more of my money out of U.S. stocks and for that matter U.S. dollars. I am buying more gold, more silver and more foreign government bonds. Please understand that I tend to hold gold and silver more in “funds” then in hard metals. Though I do think there is a place to actually hold some bullion as well.

As I have been researching silver I came across an investors web site that specializes in metals called Monex Precious Metals, and they have a great page about silver. I encourage you to watch their video about silver as you will learn some pretty interesting silver facts.

One suggestion is that the video does not stream well. I advise you to click play, let it run a second, then click pause and let it pre load while you do something else. Come back to it in a few minutes and then watch it. Someone should get with Monex’s marketing department about using YouTube for their videos. I am 100% sure that bad steaming is costing them viewers.

Yes you read that right it is unconstitutional and in fact no one in the government can or will show you a law that says you have to pay it. Today I would like you to take just fifteen minutes of your life to review the video below. It is from a documentary called “From Freedom to Fascism”. Don’t go thinking this is some alarmist, tin foil hat wearing tripe. In fact I will send anyone a fifty dollar bill that can prove one thing stated in this video that isn’t true.

No one is saying you don’t have to pay income tax, this isn’t one of those scams it is simply telling you some facts about taxation, the new national ID card, how much power the government has and some other frightening truths. If you are a republican and tired of “Bush bashing” don’t sweat it when you start hearing about George Bush, just wait a few more seconds and you will hear the same things about Bill Clinton as well. After you watch the video I would love to hear your comments about it.

Right now all we seem to hear about in any economic news is the subprime meltdown and how it is responsible for everything. Now the sub prime meltdown is bad but it is also misunderstood in both cause and effect. Let’s look briefly at both sides

The Cause - Everyone wants to blame the lenders for this. To me they get say 20-40% of the blame at most, sure they were stupid and sure it is biting them in the ass right now, as it should but they are not the real ones to blame. Our nation is so fixated on passing the buck and not actually blaming the person who is guilty our grandparents may not recognize our nation if they were with us today.

So who should get the blame for taking rapidly accelerating ARMs, hybrid mortgage loans and borrowing to the absolute limits of their budgets? Doesn’t really take a genius to figure it out does it? The people that took out mortgages that were too high or had bad terms are to blame. That is your fellow Americans and or you yourself if you took out these loans. It is so ever loving easy to blame corporate America but in the end if you borrow money and can’t or don’t repay it the blame is on you, not the company that loaned you the money.

The Effect - The news about the subprime market makes me think of El Niño. Remember El Niño the weather pattern back in the 90s that we blamed for everything. To me that is the sub prime meltdown today. A stock goes down, blame the sub prime lenders. A company lays off workers blame the sub prime market. To many illegal aliens are crushing our educational and health care systems, blame it on the subprime market. Our nation has over spent and is in a 58 trillion dollar hole just for social security alone, blame it on….OK you get the point.

The reality is the subprime bust is bad, very bad but it is also being used as an excuse for other problems in the market. Even the lenders are probably more effected by toxic unsecured (credit card) debt then bad sub prime loans. Yet make no mistake lending institutions are going to loose an estimated 300-400 billion or more before the whole thing comes to an end. Some banks will get bought by other banks, some will flat out shut down and all and all this is going to be another reason for the coming recession or more accurately depression.

Yet when it hits don’t let the talking heads on the idiot box tell you it all because of the greedy sub prime lenders First they are taking a bath you would not believe right now and getting what they deserve, lost money and some going under. Next the real reason for our recession is the US Government is spending far more money then we have and has been for 35 years, the bills are coming due.

So what can you do about all this?

First I advise you to read my post from yesterday about the overall weakness in the economy and watch the video with Comptroller General David Walker to get some specific understanding of what our real problems are and to learn some ways you can protect your assets.

Second I recommend you visit MorCap Fund Advisors, LLC and read their excellent article on the subprime meltdown to better understand it and its’ impact our our economy.

If you have read much of this blog then you know I am a big supporter of both saving money and the second amendment. In fact I take it a step further as I actually consider it a “duty” for law abiding and sane adults in the United States to be trained on how to use and to own a firearm. In fact I rank it right up there with your duty to vote and exercise free speech.

The other thing I am of course huge on is saving money. Now let’s face it ammunition can be expensive to buy especially for some calibers and makes of gun. In order to be proficient you of course have to practice a lot. The other issue with practice is time, if you live out in the country and can set up a range in your back yard, great, for the rest of us though every practice session is a trip to the gun range. Again this is costly in both time and money.

For me a big part of the solution is high quality replica air guns. I have used such guns to keep in practice and as a great first step in training new people. Air Gun Depot is an excellent source for high quality air guns and you may want to visit their site and see what they have available. The beauty is today’s replica guns are great training aids for a variety of reason’s

• They by and large are the same size, weight and dimensions as actual firearms
• To a high degree they function very similar to the guns they represent
• You can fire them indoors with appropriate safety measures or in many back yards again with proper safety measures so you can practice more often
• They help you teach safety and at the same time are safer then a real fire arm in the hands of a new shooter
• They are very inexpensive to shoot so you can practice a great deal on trigger control etc.
• They don’t develop trigger jerking or flinching in new shooters

In short I think air guns (both airsoft and conventional) are great training aids worthy of use by all firearms enthusiasts. They let you have a lot of fun for very little cost and will make you a consistently better shooter at the same time.

I know a lot of adults that are doing what they can to teach kids about investing and saving money. The most common way is the good old fashioned piggy bank.  There is something to be said especially with younger children to putting some change in a piggy bank.  It is a good start but it is also quite limited.  With the good old pig you always can open him up and raid the savings and the savings lack any type of leverage.  You earn no interest and little Johnny’s or little Dorothy’s pennies end up worth less ever day, unless they are solid copper that is.

My view is it is important to have kids open their first bank account as soon as they are old enough to grasp the concept.  A Roth IRA with some monthly contributions should be set up by age 12 and money should be discussed from a positive outlook.  Don’t teach your children things like, “money is the root of all evil” as that is not the proverb anyway.

People that do well with money come from homes that discuss and value money.  Now of course you must teach ethics, family values and over all life lessons as well.  Your kids shouldn’t worry about money or believe it is the end all be all.  Yet they should understand it and its power, both good and bad and you should teach them the Building Wealth Philosophy as early as possible.

One of my favorite books for parents helping kids learn to invest is Rich Dad Poor Dad for Teens The Secrets About Money–That You Don’t Learn in School!  To me this book is an absolute must read.

One way or another make sure you are making things like money, avoiding toxic debt, savings and investing positive topics of discussion with your kids.  I am not saying your kiddos first words should be leverage and interest over mamma and dada but you get the point.