Freezing in NH

I’ve just subscribed to the “other” local paper to get the Help Wanted ads.  There are a lot of ads, but nothing that interesting.  That’s not too surprising.  It’s expensive to live here, more so recently because of the rising cost of heating oil and gas.  Things are spread out and you have to have a car because the bus runs once an hour 8am-6pm M-F.  So it’s hard to find people who can afford to make only $8 or $10 an hour.

And of course there are ads for delivery drivers for the newspaper itself.  They are paid a flat fee to deliver the papers before a certain cutoff time.  My parents live a few towns over (same paper) and their delivery driver was warning them that he was going to quit soon…he was paid a flat rate of something like $640/week to deliver in his own vehicle, and his gasoline spending on the route was up to $400/week.

Lots of ads for servers/waitresses, part time line cooks, housekeeping, 3rd shift hotel desk, etc.  Things that require a certain amount of self-discipline yet pay very poorly.  There are a few higher paying ads that require a fair amount of education or experience, e.g. machine operators, mechanics, nurses, but not much in the way of professional ads.  Nor is there much for folks that require some supervision.  No grocery baggers, assembly line workers, etc, those jobs are all full.

Most of the professional stuff is either on the website of the specific company or word-of-mouth.  I guess it makes some sort of sense.  The companies want either motivated people who search them out, or people with personal recommendations.  But they might be missing a whole segment of the population. 

A local bank has started advertising a high interest rate checking account.  It all sounds very good on the radio: 4.55% interest, no monthly fee, $50 to open.  But there are a couple of catches…which aren’t listed in the radio ad but are listed in the teeny-tiny print at the bottom of the postcard. 

The rate is only good for balances of 0-49,999 dollars, above that it’s 1%.  And then you have to “qualify” during each statement cycle.  The qualifications?  Get electronic statements, have an automatic deposit, and make at least 12 charges on your debit card.  Miss any one of those?  Interest is 0.10% for that statement.  Ouch.  That’s a lot of loose ends to keep track of, especially on an account that charges you $3 per check after the first three per month. 

If you had 10K to put in this account, you’d make an extra 150 a year above keeping it in HSBC Direct.  But you have to make 12 charges per month, how easy would it be to justify buying one more thing?  If you can keep your charges to your normal purchases, and you normally have a direct deposit and use your debit card a lot, this is a great account.  You could miss the 12 charges a couple times a year and still beat HSBC. 

But how long is the account likely to stay at 4.55%?  The woman in new accounts at the bank couldn’t give any promises (they never do) but did say they intended the interest rate to stay above the interest for the CDs.  I’m still thinking about it.  I use a rewards card for my purchases, so I need to figure out what I’ll lose in rewards (and holding my money an extra month) compared to what I’d gain in interest.   If I used a debit card all the time and had closer to that 50K limit, I’d be more likely to do it. 

I happened to read two articles back to back that gave me a new idea.  If you want to boycott Chinese items for any reason (Tibet & Olympics, balance of trade, your ex-inlaws came from there, etc) why not buy used?  Even if it was made in China, the person profiting from this transaction is the person you bought it from.  And that person is probably an American, and that money probably stays here in the US. 

If you are avoiding Chinese-made toys for your kids because of lead, this strategy won’t work, but hand-me-downs will save money anyway.   Yard sales, the local classifieds, freecycle, and secondhand stores can make this much easier.

Buying used is a good way to save money, or get something of higher quality for the same amount you’d pay for the cheap version new.  I like to buy things like cars, books and solid-wood furniture this way.  I’m a little less sure of buying upholstered furniture because it can carry smells and bugs.  That reminds me, I should do a post on books sometime soon, since they were formerly one of my big expenses and I’ve managed to cut the cost way down.

…Damned if they don’t.  I’ve seen a couple articles recently about banks capping home equity lines of credit.  I can see how people might be upset, especially if they have a tuition bill or tax bill they need to pay soon and had planned to use the line.  But banks have been accused of lending too much money, and now they’re reacting to the losses from that.  I suspect they don’t have the time and manpower to go through every HELOC on their books and evaluate each house in a reasonable time frame.  Much simpler to cut off everyone, and then re-evaluate folks when they complain.  If I were a shareholder I would completely approve.  No sense in wasting all that time, just evaluate the ones that want to use the line.

I saw an article in the NYTimes that said credit cards have reduced their direct mail.  This is a loss for folks who do a lot of 0% chasing and also I suppose for the Post Office, but a win for the rest of us.  I have opted out of unsolicited credit card offers (directions on how can be found here) but I still get a lot of junk from my existing companies.  A reduction in that will save me the gas I use when my recycling boxes get full.  For people still getting unsolicited offers, a reduction will reduce the chances of someone stealing one and applying in their name.  And for folks who have trouble with willpower, it will reduce the temptation.

Mintel found that fewer pieces had gone out in February, the last month for which figures were available, than in any month since April 2004.

There is day-to-day news that we’re bordering on recession, said Lisa Hronek, an analyst at Mintel. “They may be scaling back in response to their target audience just not being there any more, or not as willing to take on new debt.”

Also, they may just be getting picky, since I suspect that there will be a rise in bankruptcies to follow the rise in foreclosures.  People used to be able to pay off credit card debt with a home equity loan, but those are hard to get now and existing lines of credit are being capped by nervous lenders.

A recent Pew Research survey says that Americans feel like they’re stuck and not moving forward. 

Americans feel stuck in their tracks. A majority of survey respondents say that in the past five years, they either haven’t moved forward in life (25%) or have fallen backwards (31%). This is the most downbeat short-term assessment of personal progress in nearly half a century of polling by the Pew Research Center and the Gallup organization.

I think the housing mess is contributing to this, as is recent inflation.  I suspect if you asked this question two years ago the answer would be different.  People view losses as such a negative thing, for example if your house was valued at 100K when you bought it, rose to 180K and then fell to 120K, you feel much worse than if your house started at 100K, went to 110K and then to 120K.  You end up at the same spot but it feels bad to have something and lose it. 

Personally I feel stuck, but that is due to choices I’ve made, not outside forces.  I chose to drop the hours I work, and stay with my job when my company was sold.  I’m not sure that dropping my hours was a bad thing, but the point of dropping them was to spend the time fixing up the house I bought, and I’m still not done doing that.  Staying with the company was not necessarily a bad choice at the beginning, but it became obvious a while ago that I should be leaving.  So right now I’m stagnant in job duties and wages.  Five years ago I was working full time and making more, though I was in a more expensive area, so net-worth wise I’m ahead now.  But there are changes I need to make, and I’ve been putting them off.   So today I’m getting back in the game, sending out resumes and such.  Hopefully I can find something more interesting than what I’m doing now.

Reason #573 To not buy an old house:  Getting new plumbing work inspected will end up costing you a zillion dollars in electrical work.

Recently I was reading an article in the NYTimes about the FHA and some of its woes.

The Bush administration and Democratic leaders in Congress are counting on the Federal Housing Administration to rescue hundreds of thousands of homeowners from foreclosure by helping them refinance from risky subprime loans to stable government-backed mortgages.

But the F.H.A., the government agency that insures home loans for many first-time, minority and lower-income buyers, is grappling with financial woes of its own.

The agency faces a deficit next (fiscal) year, due to the “seller financed down payment” program.

Under the program, a home seller arranges to cover the buyer’s down payment — using financial help from a nonprofit company — but typically adds that sum or more to the total cost of the house. The arrangement has been particularly attractive to financially struggling buyers and to owners in depressed housing markets, according to Congressional officials.

In 2000, such mortgages made up less than 2 percent of F.H.A.-insured loans, officials say. By 2007, statistics show, they accounted for 35 percent of F.H.A. loans.

Housing officials say these mortgages have foreclosure rates two to three times those of others, leaving the agency reeling from the losses.

If the program continues without any changes, Congressional officials say, the F.H.A. would face a $1.4 billion shortfall in fiscal 2009. This would mean that Congress — and American taxpayers — would have to subsidize the F.H.A. for the first time.

Sounds like this is not the best time to be dumping a bunch of new loans on the FHA, when it’s facing a 1.4 billion dollar shortfall next year.   The taxpayers are going to end up paying for the housing mess, either directly through taxes for things like the FHA, or indrectly due to letting mortgage businesses fail and the market (holding everyones 401ks) crash.

CNN Money’s #1 Issue is America’s Money.  How nice of them.  But it’s an American publication about money, so I guess it’s not that much of a surprise.  A recent article highlights what the declining economy might mean to you.  Personally I love the article mostly for the first picture, but the text is useful too.

The basic outline is that even if your job is safe, raises are smaller to non-exsistent and inflation is outpacing what raises people do get.  The Fed cutting rates to attempt to stave off a recession means that imported goods (and everything is made in China these days) are more expensive.

Some sectors are losing jobs, home prices are falling, Wall Street is going nuts (in a bad way), and everyone is putting off discretionary purchases.  So it looks like it’s going to get worse before it gets better.

So fatten up your emergency fund, work on that side-business or passive income, and hunker down to ride out the storm.

The current problem mostly seems to be folks getting into mortgages they don’t understand, especially the adjustable part.  The solution?  Make it more financially rewarding for lenders to make sure borrowers understand their mortgage, and less financially rewarding to hide the info.

Note: this is only a solution going forward, it doesn’t really help people who already have a mortgage.

We require schools to test kids to see if they’re learning.  Some states have exams for graduation.  The SATs test your readiness for college.  Now, none of these test are perfect, but they at least point people in the right direction.

So I’m proposing a test for borrowers.  At the closing, some impartial representative (the escrow person?) administers a quiz for the borrowers.  Each person on the loan must pass the test separately.  It will have a set of questions with multiple choice or yes/no answers.  I think multiple choice is better than fill-in since most people won’t know the exact answer but should know within a few dollars.

• What will your monthly payment be next month?
• …next year?
• …two years from now?
• Does your payment include taxes?
• If not, how much are they?
• How many years is your loan?
• What is the interest rate on your loan?
• Is your loan fixed or adjustable?
• If adjustable, when and by how much?
• Is it a balloon?
• If so, when and how much?

If the borrower can’t answer, the lender pays a fine and the house doesn’t close (so they don’t get their loan).  Mortgage brokers would also get penalized.  I think both the individual (the loan officer or mortgage broker) and the company should get fined.  So now it’s in their best interest to teach the borrowers all of these things, and repeat them until the borrowers really will remember them.