How to DO YOUR BANKING in General
Warning: DON’T use “internet banking” to pay your bills. The big secret of banks is that internet banking to pay your bills still involves a paper check—it’s just that THEY write and mail the paper check without telling you when or even whether they do it. If you use “internet banking” and notice they won’t let you make a payment because they say it’s “too early”, it’s because they WANT things to be tight. You want to keep it loose. Notice also that a lot of your billings now are coming in as due on a Sunday. Don’t wonder why. Just know that banks and credit card companies want that “tight moment” when you realize the bill won’t be posted on time and you get to pay a “late fee”. Huge money for them, especially if it also results in a hefty increase in your interest rate.
How to BALANCE YOUR BANK ACCOUNT
Use a PDA (Personal Digital Assistant) with some kind of spreadsheet program (Excel, say). ALSO, use another spreadsheet program on your computer. DON’T link them or copy or over-write one file with the other. Maintain BOTH files separately. Why? If you make a mistake on one file, especially in a formula, you will spot the results quickly when you compare the remaining balance on both files (which you should do every day or every other day, faithfully). On one (the most stable platform), keep your point by point information (call the bank at least once a week and use their phone management system to let you know when each charge and each check has cleared the account). Keep your running total on a daily basis, if at all possible. Use a “roll up” to the next dollar method (it keeps a little handy “fat” in your account if you make a mistake, or THEY make a mistake—it DOES happen). Some banks will use the “roll up” method and deposit the difference in a savings account for you. Take that option. It will come in very handy at one point or another, I really can promise you that the day will come (unless you have a multimillion dollar trust fund, and maybe even then).
Why go through all this? Because banks DO NOT WANT you to keep your account balanced. They get HUGE fees when you bounce checks or you (OR THEY) over-debit your account. Your only notice from a bank, if you don’t manage your account over the phone (or internet/e-mail, if you can safely do it that way), is a snail mail letter that you won’t get for at least a week (and by then you can have five hundred or a thousand dollars in overdraft fees easily). That’s a bite you probably can’t afford (or you wouldn’t be reading this in the first place). You really need to know that banks just LOVE that kind of easy (and, from their viewpoint) extra money, and what that cost does to your life really does not concern them at all. Really. From their viewpoint, if you laid down and died because of it, nothing would matter to them. In that case, they might even arrange to get all the money in your account one way or another. And they wouldn’t cry about it at all if that were to happen.
A quick note on “Overdraft Protection”: If your “Overdraft Protection” is a “credit line”, a lot of banks will hit you with an annual fee ($20 and up) if you don’t write a bad check or over-debit your account at least once in the year. That fee will come out of your account suddenly. KNOW THAT IT CAN HAPPEN.
How to HANDLE CREDIT CARD ACCOUNTS
Use a wall calendar for all of your bills. Note on the calendar when you expect the bill to show up in the mail as well as when they are due (along with the amounts due). Remember that your credit card billings are due whether you get a billing from them or NOT. A LOT of reputable companies can miss a mailout (or something can happen to your particular billing) and if you aren’t expecting the billing more than two weeks out, you can get in a real crunch very quickly and that can cause you to get hit with extra charges and increased interest rates VERY, VERY quickly. Stay way ahead of the game with a calendar.
Again, notice that many billings are now due on Sunday. But if they are not posted Friday, they are not going to be posted on Saturday or Sunday. So, if they are due Saturday or Sunday, CONSIDER them DUE on Friday! You snooze on this one and YOU lose. This can be where a glance at the calendar at the right moment can really save the rest of your future (unless a 29% interest rate really doesn’t matter to you).
Always pay at least double the monthly interest charge PLUS any amount you charged to the card that month if you possibly can. True, sometimes you can’t, but use double interest plus any charge you can clear immediately as a good guide, or you’ll pay on that card for near onto a half a century. How does the concept “credit slave” feel to you for the “rest of your life”?
Okay, so you’re doing okay and paying that credit card down real nicely and everything is going well. KEEP A GOOD EYE ON THAT “PAY TO” line in the billing. At some marker point (say $1000, $800, $500), a lot of credit card companies and department store accounts suddenly change the “pay to” line on you. If you don’t notice the change (or use internet banking, hey), they can legitimately shunt your check around until the payment ends up being “late”—late fee, increased interest rate). Sorry, that was YOUR responsibility, not theirs. It was on the billing statement. And they do it all the time.
If your account is sold, you should get a letter from the selling holder first. If you don’t get a letter from the selling holder first, start calling on the phone and sending out LETTERS. Phone calls don’t matter once collection agencies are involved, and that can happen very quickly (and very intentionally on their part).
A note about those “non profit” companies that say they will get your credit card mess fixed by lowering your interest rates or even reducing the monthly payments: The first thing they will want from you is an account by account listing of who you owe money to and how much you owe to each of them, plus your monthly expenses. After they have that information, the first thing they may tell you is, “one of your accounts will not negotiate, and if one of your accounts will not negotiate, we cannot negotiate with any of them”. If one of your accounts is a credit union, they will not negotiate. End of story, you think? No. Those people have to make enough of their own money somehow (whether you pay them or not), and in all likelihood they have contracts with all of the credit companies wherein they are allowed to give them all of your information (and somewhere in the forms you signed before they would “help” you, you gave them permission to share that information) and then you will find all of your accounts suddenly closed. If you had any flexibility when you walked into their office, it is now all G-O-N-E. And say “goodbye” to whatever credit rating you HAD. You don’t have anything close to it now. Period.
How to BUY A HOUSE
Here are two main tips on how to buy a house, other than researching on the web like crazy, of course:
Tip One: Look for less than what you want when cruising the web. That is, if you want a three bedroom and a one and a half bath as a minimum, search for two bedrooms, one bath. Go and physically look at those houses. If you find one that is listed on the web as two bedroom one bath and has three bedrooms or more than one bath, you have just found a house that the cash investors probably don’t know exists, or may think is overvalued in the asking price. Information on the web is often based on county records, and county records can be wrong for a variety of reasons. But you have discovered a potential jem. Why? Because your competition right now, if you want to buy your own home, is the money-holding investor. Right now (December 2009) properties have become significantly under-appraised, and the big “cash-holding” investors have money to throw at “low appraisal” properties (a low appraisal means the bank will only loan the amount the house is appraised at, and you have to come up with the rest to meet your bid amount), so with the average buyer at 20% down plus another 20% above the appraised value immediately needed to buy with a bank home loan, you’re essentially at 40% down. You got that? We didn’t. But we stumbled into a jem. What we stumbled into, you may be able to specifically look for and find. Look for houses just outside the normal “commute zones”, too. That can make a huge difference even if, at first blush, those zones look a littler pricier to start. Our house was in an elevated price area, but we got it at a remarkably low overall price. Especially if you’re a veteran and can get a “no money down” loan, go for it.
Tip Two: Look for any Freddie Mac houses. During 2009, Freddie Mac dropped the price on its houses as long as the winning bid wasn’t more than 25% higher than the appraisal price of the house. We got a $24,000 drop in 2009 on a $124,000 house (final price $100,000). But you have to win the bid first, so go back to Tip One if you didn’t read that one real carefully or didn’t understand it on the first read. I can’t say anything about Fannie Mae or any other holders.
Warning: You are not going to get an appraisal inspection until you pony up $1000 or more when you are going into escrow, so you need to understand that the likely listed price may be based on a prior appraisal, and anything above the listed price that you bid up to may be what you have to come up with along with the regular 20% down payment. SO if you have to bid more than 25% above the list price, with Freddie Mac dropping up to 25%, it is absolutely sure that anything above 25% WILL need to be cash in addition to the down payment. And don’t ask for guarantees on this information from me. I can only give you the information I have right now. And I don’t know if there is any way of verifying that any of it is still 100% accurate. I can only say it was accurate in August 2009.
How to KEEP YOUR HOUSE AFTER YOU BUY IT
First of all, put your mortgage payment down as an automatic deduction from your bank account (with the same bank you borrowed the loan from) two or three days after your primary income deposit (make that automatic also if you can). Why? Banks are still selling their paper (even if they say they won’t) within a month or two--to at least one of their subsidiaries. That CHANGES EVERYTHING (address to mail payments and coupon books, at very least). And they are still not giving sufficient notice. If there is a problem, YOU have a REAL PROBLEM. YOU are on the hook, and your HOUSE is in the balance. With an automatic deduction with the same bank your loan is from, it’s the bank’s responsibility to make sure the money gets to the right place, not yours. You can make a phone call if you think there might be a problem, but they’re the ones who are really on the hook once they accept the automatic payment on their own loan. Plus you usually get benefits for doing it, of course (no checking account monthly fee and maybe a few points off the loan in the first place). A quick note on that checking account monthly fee that’s waived if you have an automatically paid home loan on that account: sometimes they take the money anyway. You have to catch them and call to get it back (they’ll say, “Oh, we don’t know why the waiver was dropped. We’ll reinstate it”). It could happen in the first month or two, so watch for it carefully.
Second of all, be absolutely sure to declare your