Nationwide it’s estimated that about one third of properties that are being foreclosed are not owner occupied. And, while some of those are second homes, many are rentals. It’s probably pretty safe to say that at between 25 and 30% of foreclosures are occupied by a renter. So about 750,000 renters were in foreclosed units last year.

What does foreclosure mean to the renter? If the bank forecloses on your landlord they take over the property. Their goal is to protect their financial interest. Sometimes that hurts the renter.

Historically, banks wanted the owner to vacate a foreclosed property. That meant the renter, too. So even renters who had leases were suddenly being thrown into the street. Without any legal recourse.

In May, 2009 the “Protecting Tenants at Foreclosure Act” became law. The main part of the law guaranteed that tennants could stay until their lease was up. Those on a month-to-month get 90 days.

Today, in part because of the law and in part because it’s bad business to chase away paying renters, banks are allowing more tenants to stay in foreclosed properties. Often they’ll use a management company. Some managers are more responsive to renter needs than others.

So what can a renter for protection? Unfortunately, even with the new law, their options are fairly limited.

It’s hard for a renter to determine if his current or potential landlord is in financial trouble. There is one website that can check an address for you. It’s not 100% certain. They only report what their records show. But, you’ll want to avoid any properties on their list.

In some counties, court records are available online. Checking your county’s website can be a real eye-opener. You can check your landlord by name (or by company name). Look for any pattern that shows financial problems. Make sure you look for liens and mortgages against the property you rent.

If the bank does notify you that your landlord is being foreclosed, contact the local housing agency. They’ll be in the best position to tell you which local, state and federal laws apply to your situation. Among other things you’ll need to know who should get your rent checks and who to call for a leaky faucet.

As a tenant you can sue the former landlord for lost deposits and rent. But the small claims process can take months. Plus you’re trying to get money from someone in foreclosure. The odds of getting your money back are pretty long.

The trickiest time for a renter is when the landlord expects to be foreclosed. Some will collect rent and make no effort to make their mortgage payment. They’ll also avoid doing any maintenance. This can go on for months. That’s why it’s a bad idea to prepay your rent in this economy. If you have next month’s rent available, better to put it into an insured savings account until the rent is due.

If you’re looking for a rental, beware of landlords who seem overly anxious to get you into their unit. Some are attempting to use renters’ first/last/deposit to keep themselves afloat financially. Reputable landlords will check your credit and references. Failure to do so could be a sign that they’re just after your deposit. Time to run!

Bottom line? It’s important for a renter to check out the landlord. The tools aren’t particularly good, but they can help you avoid some obvious problems. And, if you do find that your landlord is in foreclosure contact the bank and housing agencies to see what steps you need to take to protect yourself.

Keep on Stretching those Dollars!

Gary

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Beating Debt Alliance

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A quote from Warren Buffett (estimated worth = billion) was really to the point. “Most toys are just a pain in the neck.”

What can we learn from Mr. Buffett and his friends? That once you get beyond certain of life’s basic needs (food, shelter) many other possessions don’t add to our happiness. In fact, owning some things detracts from our lives. The trick for me (and, perhaps you, too) is to give this some thought before I make a purchase. The question that I like to ask is “will this purchase tie me to maintainence, upkeep, monthly payments (either to pay for the item, or for insurance or subscription fees to use the item) if I buy this thing?” If the answer is “yes” I need to closely look at it. Perhaps the best choice is to live like Warren Buffett and just walk away from the purchase.

What purchases have you avoided that turned out to be a blessing for your life? Or, on the other side of the coin, which purchases have you made that turned out to be a burden later? We’d love to
hear your story.

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Beating Debt Alliance

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Now, it doesn’t take a Rhodes scholar to see that’s dumb. Think about it. If I’m unique, what will make me happy should be slightly different than you. Just because I get the same house or car that you have I’m unlikely to be happy. Wouldn’t it make sense to spend time figuring out what would make me happy instead of working harder to buy what you have or something slightly bigger?

Instead it appears that people just assume that they will be happy if they have a little bigger house than their friends. So they enter a lifelong race to see who can buy the biggest, fastest, mostest stuff! Talk about a foolish way to waste your life!

So what can you do about it?

Start by asking yourself if you’ve recently made purchases to keep up with the Joneses. Here are some possibilities: toys (boats, entertainment systems, skis, etc), clothing (designer anything), bigger home, fancier car, more exotic vacation, biggest collection of ______, etc.

Next, ask yourself what would really make you happy. Don’t think just in terms of stuff that you can buy. Maybe seeing birds in their natural setting would bring joy to your life. Or maybe you want to have time to spend reading under a towering oak tree. Let your mind roam free.

Once you decide what would make you happy, make a list of what you would have to do to make that happen. It might take time. Maybe money. Perhaps some help from your spouse. Begin to ask yourself if you can make it happen.

Then go for it! Don’t worry if you drive a 12 year old car that your friends kids you about. A new one will not make you happy. It’s not your goal! Pursue your goal. That’s what will make you happy!

What happens if you have a goal that’s way to big for your checkbook or physical abilities? Then think along the same lines but a little smaller. Too old to become an astronaut? Then start saving for a trip to the Kennedy Space Center. Can’t climb Mt. Everest? Spend time studying those who have through books and videos. Don’t be surprised if these smaller goals don’t bring you closer to your dream than you had imagined.

It’s surprisingly easy to get rid of ‘chronic dissatisfaction’. All you have to do is to decide that your name isn’t Jones and stop thinking about getting what other people want!

What do you think about keeping up with the Joneses? Please share your thoughts. I’d love to see your comments!

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Beating Debt Alliance

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That concept was reconfirmed when I studied economics in college. Naturally, being college, the theory had a fancy name. There it was called “opportunity cost”. In other words, if you spend the dollar today you gave up the opportunity to spend it later. Basically the same thing that my parents taught me.

So I started living by that. The theory was easy to apply. Before spending money it became a habit to think about whether I’d regret that purchase later when I wanted the money for something else.

After college came a job and greater responsibilities. The theory served me well. But, an extra ingredient caused a bit of a disruption. It came in the form of a little piece of plastic. You know where I’m going. Along with the gas cards I had kept during college in case my old car broke down, I acquired a couple of bank cards that could be used anywhere.

They promised that if I spent my money today and found something I really wanted tomorrow that I could have it, too. Instead of paying for it with cash, I could use my handy, dandy credit card. And, while that was true, my training allowed me to see the trap. By using the credit card tomorrow I would be giving up my choice for the thing I wanted the day after tomorrow. So there was still an opportunity cost.

The way that we fought that temptation was to agree that if we couldn’t pay the credit card bill off in full each month we’d cut up the card. We were able to keep that promise to ourselves. (I admit I don’t know what would have happened if one of us had gotten seriously ill or we both lost our jobs in those early years before we built up some savings. Quite possibly we would have run a balance. But I’m fairly sure that we would have limited our purchases to necessities. Fortunately we never had to face that crisis.)

A number of years have passed. I still think about opportunity costs when I spend money. But, I’ve learned something else about the theory. It needs an amendment. It is true that if I spend a dollar today I won’t have it to spend tomorrow. But, (here’s where the amendment comes in) if I don’t spent the dollar today, I’ll have more than a dollar to spend tomorrow.

It may take awhile before that dollar turns into two dollars, but if I keep it for more than a few days, I’ll earn at least some interest on it. And, thanks to the benefits of compound interest (read more on compound interest here) if I don’t spend that dollar for quite some time it can become many dollars.

Of course, the flip side is true, too. If I spend both today’s and tomorrow’s dollars using a credit card, I’ll have to pay them back plus the interest I owe. So I need to be very careful about using those convenient plastic cards.

What’s the bottom line? I like knowing that I have a couple of dollars in my pocket. It gives me a sense of security and also means that if I see something that I really want to buy I’ll have the dollar to make that happen.

Do you have a “dollar today, dollar tomorrow” story? I’d love to hear it. The best part of assembling FI each day is sharing the ideas we get from you!

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Beating Debt Alliance

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The below picture is a graph of the U.S. personal debt rate by quarter from 2007 to the most recent measure of Q2 2009.  Notice that personal debt grew till about the end of 2008 and then it starts to go negative.

These two graphs should look similar because personal debt is the biggest contributor to inflation.  Let’s think about that for a while.  What does inflation mean?

Inflation is a rise in the general level of prices of goods and services in an economy over a period of time. – Wikipedia

So, what kind of things would drive up prices?  Demand drives up prices.  If everyone wants a certain product, but the manufacturer can’t keep up with the demand than prices will go up due to the scarcity of that item.

So, what kind of things would drive up demand?  More money within the economy.  If the federal government starts printing more money and hands it out than everyone would demand more products, because they have more money.

However, a more simple way to look at this, is the effects of credit cards and loans have on the economy and inflation.  If the banks give you a ,000 credit limit, you can now buy ,000 more products than what you would have bought without the debt.  Your new money creates new demand.  New demand creates higher prices, which is the definition of inflation.

Now let’s take this idea to a macroeconomic level.  If the whole economy sees how “easy” it is to buy more stuff with just a “low monthly payment” it creates more massive demand than the cash in our pockets would normally purchase.  Our personal decisions to take on more debt corporately create more inflation, which erodes our purchasing power.

So, going back to those graphs…

We now understand the connection between inflation and personal debt.  The graphs show until early 2009, Americans continued to take on more personal debt which inadvertently continued to raise inflation and erode our purchasing power.  However, after 2009, as we start paying off our debt, inflation went negative which increased our purchasing power.

So, there are a lot of economic reasons for and against inflation.  However, on a personal level, seeing that my own personal debt consumption helps erode society’s purchasing power, should we continue to go into more debt?

What about the poor?

What about those on the lower economic levels of our society who barely have enough money.  While we take out more loans to buy more stuff, we are eroding their ability to stay above rising price levels.  What did Jesus say about taking care of the poor?

So, let’s think about those issues and how personal debt affects us and society in general.  Hopefully, we can come to the conclusion that debt does not help society and that we should stay away from it.  Learn more about staying away from debt by using BDO’s Run Route on your financial marathon to beat debt.

BeatingDebt.org

–Teaching Debt Prevention–

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Beating Debt Alliance

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When we hear about the recovery to the economy, does the idea of a materialistic consumer come to mind?  If it doesn’t, it should.

Since we exist in a debt-driven economy, the only way our economy grows is when a large entity within the economy takes out loans.  The entity can be the government, businesses, or citizens.  In the past, citizens took the brunt of the loan acceptance, thereby increasing the growth of the money supply and GDP.

However, the newest fear is that citizens have finally seen through this cycle and are working to get out of it.  Americans have finally understood that their debt leads to their enslavement to personal debt and financial strife.  Some believe that the newly financially aware American makes better financial decisions and is more rational about his or her shopping.  One aspect that could dramatically slow down the recovery is if…

“Consumers become rational. Given the painful transformation of the U.S. economy, Americans ought to be saving like crazy and buying nothing they don’t need. Some are, but it’s not clear yet if Americans as a whole will save more over the long term or go back to spending nearly everything they have. The savings rate has crept up to about 5 percent, but that’s still lower than the long-term average and far lower than you might expect after a collapse like the one we’ve endured. If savings continue to go up—a prudent move for most households—consumer spending will come down, leaving a hole in the growth of our gross domestic product, with little else to fill it. So hopes for a vigorous rebound rest on spendthrift consumers being as materialistic as ever. Now there’s a strong foundation for success.” – Rick Newman

So, for us to recover and for us to continue growing economically as a nation, we must depend on the materialism of our citizens.  Is that beneficial to our nation?  Should we breed materialistic people?  Should we sacrifice many of our citizens to financial strife in order for only a few within the economy to experience growth?

We should brainstorm a new economic system that does not require debt and materialistic tendencies of our citizens in order for it to grow.  It should not depend on the baser aspects of our society, but rather on more productive and more rational aspects of our society.

Until we figure out that new economic system, we should stand up to those who are trying to convince us to take on more debt and to be more materialistic.  We should not sacrifice our freedom for the good of the economy.

BeatingDebt.org

–Teaching Debt Prevention–

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Beating Debt Alliance

Bloggers united to teach more people to stay away from debt.

Volunteer or Donate to Help Teach More People To Stay Away From Debt.

Just as the Pharaohs of Egypt once confined God’s people to slavery, today many Christians are severely limited in their serving Jesus fully because of a ‘new Pharaoh’, debt. Never in its entire history has America and her people been so completely entangled by debt. Pastor Steve looks at what the Bible says about borrowing and then God’s clearly prescribed method of freeing the Christian from the strangle hold of debt. – Ken Lewis

Pharaoh of Egypt ruled over God’s people.  Pharaoh limited their freedom.  He tasked them with duties that took the Hebrews away from worshiping their God.

Likewise, personal debt is ruling God’s people.  Debt limits their freedom.  It tasks them with duties that takes them away from worshiping their God through their family, friends, and strangers.

America is not listed in the Bible in the end times.  Is it because we loaned our freedom away to other masters?  By the time the end times come, is America a subservient country and not a world leader, as it is today?  The thought begs for consideration given the consumerism and personal debt that plagues America.

As Christians…

Let us rise up as leaders following the directions of the Bible, not for America’s sake, but for God’s reputation, to show off what God can do when God’s people throw off their task master and follow Him.  Let us not be ruled by our new Pharaoh, debt, but live under the rule of God Almighty.  Let us, as Christians, re-learn the lessons found in the Bible and live humbly, stay away from debt, and give generously.

I encourage you to watch the other 2 parts to this video series.  It is a great analysis of the history of American personal debt and economics from a Christian point of view.

Image by roblisameehan

BeatingDebt.org

–Teaching Debt Prevention–

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Beating Debt Alliance

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I was updating “Frugal News” for the website and looking at all the different news items. One from Consumer Reports said that the Tooth Fairy payouts were up 13%! Who knew? I didn’t. Of course, I’m not sure I needed to know either.

It turns out a dental group in Minnesota polled 1,500 adults. So just in case you were wondering whether the economy was having any effect on the price of baby teeth you can relax. According to the survey 86% said that the economy has no bearing on the Tooth Fairy.

Keep on Stretching those Dollars!

Gary

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Beating Debt Alliance

Bloggers united to convince more people to stay away from debt.

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In the past decade, many Christians felt that their self-worth was wrapped up in the following concepts:

Becoming Wealthy.

But Jesus said,

“But woe to you who are rich, for you have already received your comfort.” – Luke 6:24

Seeking wealth leads only to temporary comfort.

Establishing a comfortable life[style].

But Jesus said,

^“Woe to you who are well fed now, for you will go hungry.” – Luke 6:25

Seeking a life of ease will eventually lead to a life of hunger.

Seeking to be the most popular.

But Jesus said,

^“Woe to you when all men speak well of you, for that is how their fathers treated the false prophets.” – Luke 6:26

Seeking popularity leads to more problems.

If we want to be prosperous in this new economy and in this new decade, we should follow some of Jesus’ other teachings:

Live a humble life.

Jesus said,

“Blessed are you who are poor, for yours is the kingdom of God.” – Luke 6:20

Seek to live a humble life and maintain a humble lifestyle, and you will be blessed.

Live joyfully for Him.

^“Blessed are you when men hate you, when they exclude you and insult you and reject your name as evil, because of the Son of Man.

Rejoice in that day and leap for joy because great is your reward in heaven. For that is how their fathers treated the prophets.” Luke 6:22-23

Seek to live fully for Jesus, and you will be blessed.

The prior decade saw many Christians trusting in money and power to get ahead.  This decade, let us try to follow Jesus’ words of living humbly and joyfully for Him and see what kind of impact we have on this world.

BeatingDebt.org

–Convincing People To Stay Away From Debt–

Images by: nDevilTV & nonsogoodphotography

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Beating Debt Alliance

Bloggers united to convince more people to stay away from debt.

Volunteer or Donate to Help Convince More People To Stay Away From Debt.

You see that most of our economics is based on the assumption that you and I will try to get the most for our money. We might not always be successful. And, sometimes we’ll be misled or even cheated. But, overall we’ll generally get the best deal on any purchase and, if we’re selling, get the best price for our item. The assumption is believed to be true for both individuals and for companies. At least that’s what I learned in school.
The last few years I’ve become more aware that often people don’t do what’s best for them. Sometimes they spend (or save) irrationally. They make financial decisions that even they know aren’t in their best interest. But somehow they seem unable to do anything else.
If I look at my own financial decision making I like to think that I’m rational. Yes, sometimes I spend money when I shouldn’t. But, it’s not unconscious. I’m aware that a choice is being made to buy extra comfort, convenience, or… I’m also aware that sometimes I too reluctant to spend money. Buying used when new would better suit my needs.
Based on my email, I know that I’m not the only one making decisions like these. What I’m beginning to wonder is whether most of us are irrational in our financial decisions at least some of the time.
What’s your take on the question? Are people generally logical in their financial decisions? Are they a mixture of rational and irrational depending on what day of the week it is? Or could they even be largely illogical in choosing
their financial path?
I’d love to hear your thoughts on the subject. Who knows, maybe we’ll all learn something that can help us be more successful in managing our finances.

Keep on Stretching those Dollars!

Gary

This post originally appeared in “Financial Independence” - a free
daily look at what it takes to take control of your money. To subscribe click here. 

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Beating Debt Alliance

Bloggers united to convince more people to stay away from debt.

Volunteer or Donate to Help Convince More People To Stay Away From Debt.