Finance2007   Finance for personal business

In this day and age, there really shouldn’t be any reason to make certain financial mistakes. Do a search of the internet and you will find that there are thousands of articles out there that warn you of the pitfalls of certain choices. Advice for living a financially stable life is everywhere. What are you waiting for?

Here are the most common mistakes that I’ve seen people make. I’ve even made a few of them myself. These are the financial mistakes that you can learn from. You’ve probably made a few of them yourself, they are very common.

Mistake #1: Using that little plastic card to get what you want.

We’ll just start off with the number one mistake out there. This is probably the most common mistake in the country. Almost every person in the US today has a credit card. It is almost like a right of passage when you turn eighteen. There are even people out there that aren’t eighteen yet that have them.

Credit card debt is the fastest way to ruin your finances. It is easy to acquire and difficult to pay off. The minimum balance doesn’t pay off enough of your outstanding balance to help you very much. You will be paying on your balances for decades. Even a $500 balance can take you over a decade to pay off if you simply make the minimum payment.

Add in the interest rate, which rarely goes down. If you miss a payment, you will really be paying the bank. Thirty percent interest is common on a credit card once a payment has been missed. And you only have to miss that payment by a day — which can happen in the mail or processing if you don’t plan ahead well enough.

Mistake #2: Buying more home than you can afford.

With the real estate market in the state it is today, many people are regretting their housing decisions. Adjustable rate mortgages are acceptable loan products for some people. But only if they can afford the maximum rate that the loan can hit if interest rates go up. Too many people only consider that introductory rate. They stretch and purchase as much as they can afford. Then, when rates go up and their rate adjusts, they can’t afford the payment. Add that to a slowing housing market, and you may have a foreclosure on your hands.

If you are going to buy a home, make sure that you purchase what you can afford. Take out a fixed-rate mortgage so that you know what your payments will be. If rates go drastically down in the next couple of years, you can always refinance. If rates go up, you are protected. Try to aim for a 15-year mortgage over a 30-year. It will save you hundreds of thousands in interest. But if you can’t do it, a 30-year fixed-rate mortgage is an acceptable loan choice for the purchase of a home.

Mistake #3: Not controlling your money.

Too many people live paycheck to paycheck. They have no savings. They have no retirement plan. They have nothing to back them up in the case of an emergency. They have no control over their money.

You have to take control of your finances if you want to retire someday. You have to learn how to budget, save, invest and spend. All it takes is a little time. And once you get in the habit, you will notice that your life has more control. You should say where your money goes, not lenders or creditors or anyone else.

Mistake #4: Not saving for retirement.

There are more seniors in the work place now than there were twenty years ago. And even more than there were fifty years ago. If you want to retire with enough money to live comfortably, you have to start putting something back today. Start an IRA. Contribute to your employer’s 401(k) plan. Figure out how much you need to invest and find a way to do it. This is your future. You don’t want to reach sixty and realize that you can’t afford to stop working. There is no guarantee that you will be able to draw social security or other forms of assistance then. What if you become ill and have to retire? What if you get hurt? Prepare for the future. Start saving for retirement today.

According to statistics from the National Council on Economic Education, only seven states require high school students to take a personal finance course while eight others require courses with personal finance content.

This was from a 2004 survey that also showed only nine states test personal finance knowledge. These numbers are beginning to change as the state of Missouri joins the fray and will require one-half unit of credit in personal finance instruction for graduation in 2010.

A 2004 national survey by the Jump$tart Coalition for Personal Financial Literacy measured 12th graders’ knowledge of basic personal finance. On average, students who participated in the survey answered correctly only 52.3 percent of the questions – an “F” in most high school classrooms.

Financial illiteracy isn’t a problem limited to students. Half of U.S. adults received a failing grade for their knowledge of basic economic concepts, according to the NCEE.

But there is hope in education. The National Endowment for Financial Education has confirmed that as few as 10 hours of classroom instruction can improve spending and saving habits.

Because financial literacy is fundamental to personal success and a benefit to society, American Century provides support for financial education.

In cooperation with a premier education consultant, the investment manager developed Tips for Kids and Tips for Life, curricula for use in the classroom. To date, these programs have been used by more than 3,000 educators in all 50 states. The free programs are delivered via the Internet to educators and are presented to education conferences to help users implement the programs in their schools.

American Century’s efforts to improve financial literacy extend beyond the Tips for Kids and Tips for Life programs. Free educational materials and tools are available on its Web site. And the information presented in American Century founder James E. Stowers’ “Yes You Can…” book series is designed to share the personal experiences and ideas that helped him become successful.

Educating today’s students on basic financial principles will pay dividends in the future because they are tomorrow’s social, political and economic leaders.

You have been accepted to college. Now, how are you going to pay for it?

For college-bound students and families, this is the moment of truth when they find out the amount of money being offered by a specific college. Each school will offer different award packages, which can include a combination of grants, scholarships, work study or student loans. Students and families should carefully read all of the information contained in the award letters and clearly understand the letters’ terms and conditions. Equally important, try not to panic if the amount of money awarded is not enough to cover college expenses.

“The financial aid award package is not the end of the road by any means,” says Martha Holler, spokesperson for Sallie Mae, the nation’s No. 1 paying-for-college company. “Never simply settle for a school based on cost alone. With roughly $143 billion in financial aid awarded last year, financial assistance is out there for students to attend their dream school.”

In addition to thoroughly reading each award letter received, students and families should ask themselves the following:

• What are the enrollment requirements for grants and scholarships?

• Are the awards for one year or all four years?

• Is the required GPA to maintain the awards realistic?

• If student employment is part of the financial aid package, what types of jobs are available and what rate of pay is typical?

“Above all, it is important for students to compare their award packages on an apples-to-apples basis,” says Holler. “While one letter may total a higher amount, it may be more heavily weighted with loans and not free money, like grants and scholarships.”

Holler adds that while most colleges rarely negotiate or match another school’s award package, they should be alerted if a family’s financial circumstances have changed. In that case, families should contact the financial office as quickly as possible for a reassessment.

A walk-through is an important step in a real estate transaction. To get the most out of it, make sure you understand the terms of the purchase contract.

Check Things the Contract Specifies

When you signed the contact to purchase your new home, certain elements and characteristics were specified. If the home does not match those elements on the walk-through, the contract will give you leveraging position. Consider the following:

If theres a hole in the wallboard caused by the leg of a table going through it when the seller was moving out, the house is not in substantially the same condition as when you wrote the contract and the wallboard was intact.

If you fill up that lovely, large Jacuzzi tub and the jets wont work, there is a problem with the working systems of the home. If you start the dishwasher, and it leaks before the cycle is finished, that appliance is not in normal working order. If all the surface burners on the stove wont light (if gas) or heat to red hot (if electric), ditto. If the heat or air conditioning wont come on, we have another problem with the working systems.

Allow yourself enough time to really pay attention and check on things. Usually an hour to an hour and a half is enough. Dont have a chip on your shoulder. Do be a good business person and systematically check.

If your contract calls for something you cant easily judge and it requires a third party to do it (such as the HVAC service mentioned above), you can request a copy of a paid bill at settlement. This is usually sufficient indication that the work has been done, and you know whom to call if there is a problem.

What If You Find a Problem?

Settlement may, or may not, be delayed if a problem is discovered. If its small and something you can easily fix, you may just want to ignore it. If it is something expensive and extensive, you probably dont want to ignore it. Many approaches are possible, but my inclination would be to go to the settlement table anyway and request that enough money be set aside in an escrow account held by a third party (not the buyer or the seller) to fix the problem. Id pad the amount a little to be sure theres enough. Those funds could then be used to complete the needed work and then the balance released to the seller.

If the seller is not willing to accept the idea of funds in escrow, Id request a delay of settlement until the work has been completed. The terms of such a delay need to be spelled out in an addendum to your contract.

Setting out to use walk-through to change the terms of a contract is not fair. However, if a walk-through shows that the terms of your contract have not been met, you need to figure out how to get things back on track and are behaving appropriately when you do so.

Most walk-throughs go smoothly. Lets hope yours is one of the smooth ones.