Does Government Intervention In The Housing Market Ever Turn Out Good?

Image via WikipediaWe are in an economic funk that just doesn't seem to want to go away. With a credit crisis caused by excessive debt secured by over priced property does it make sense to have tougher lending rules or looser ones?

It's going to take a while for real estate values to stabilize. At the same time the economy needs to recover. In time normal market forces will bring thing slowly back to normal. Responsible government spending and responsible private sector spending and saving habits will bring the economy back online. It's going to take some time for all this to happen. Patience is the key.

We are not a patient people. The politicians know this and fear the public will take their pain out on them. Which means they get the blame for the economy and get voted out. The politicians must do something and out of their bag of tricks they pull out an idea, the problem is the idea is usually going to make things worse.

Our friends in the U.K. are getting a plan, by the Prime Minister, to help first-time buyers of new homes to carrying part of the risk of their mortgage loan. They also propose subsidising the construction of 16,000 homes by giving £400 million of taxpayers’ money to property developers. Also they are working on a scheme under which billions of pounds of money in pension funds will be used to finance the construction of power stations, wind turbines and roads.

The Prime Minister, David Cameron says, "This strategy, will unlock the housing market, get Britain building again, and give many more people the satisfaction and security that comes with stepping over their own threshold.”

Propping up the housing market by lending money to people who couldn't currently get a mortgage loan on their own doesn't seem to make sense. But the mortgage guarantee, the first time such a scheme has been attempted in the UK, will result in lenders providing loans with significantly lower deposits than the 20 per cent or more that is typically demanded. This means taxpayers will be liable for losses when borrowers default and homes are repossessed.

On this side of the Atlantic the plan concerns many people. They see government trying to get people into homes they normally couldn't afford, the taxpayers who will be the ones to pay for it if all goes wrong, and the human tragedy of families encouraged to live beyond their means when all come crashing down.

The question is: Does Government Intervention In The Housing Market Ever Turn Out Good?

6 Money Mistakes The New Business Owner Makes

Image by _Davo_ via FlickrMany new business owners get so consumed by their new business venture that they make common personal finance mistakes that may crash their business. It can be not setting up proper tax I.D.'s, getting proper financing, or not keeping good financial records. The new entrepreneur is sometimes caught up to much in the product or service and not whats going on in the office.

1. Overspending for the Business.
The start-up cash that new businesses have can sometimes be wasted on useless things. Overspending on office rent or having to many employees can eat into your initial start-up money. Your buying an expensive office phone system, network or PCs can eat up cash fast. It's best to grow slowly and space out and budget these highly expensive office costs.

2. Get Professional help when needed.
To cut costs many new businessmen will avoid hiring an accountant or lawyer. An accounting or legal mistake early on can get you in hot water with the I.R.S. or set you up for a law suit later. Professional help can help keep you out of trouble. It's like a type of insurance.

3. Pay Yourself Along the Way.
Sure you want to save money and reinvest all profits back into your business. The new businessman usually makes the mistake of letting the company pay his expenses. If Uncle Sam sees you are paying personal expenses with company money, there could be trouble. The best thing to do is pay yourself a salary and keep your business and personal expenses separate. Also make sure to keep the salary at a manageable level. No big salary at the beginning. The company will need the money.

4. Set Up A Rainy Day Fund.
As in personal finance, a rainy day fund is very important. It's your cushion from trouble . So must your company have one to. It's easy to think it can never happen to you but when you think that it usually does. Having the cash on hand to weather any storm will make you a better decision maker because your prepared for the worst.

5. Keep your Business and Personal Assets Separate.
Borrowing money from people in your personal life is a bad idea. Using your personal assets as collateral for a loan is a really bad idea. You need to consider what would happen if your business failed. You would not only lose your business but creditors would come after your personal assets leaving you with nothing.

6. Using a Personal Credit Card For Business Expenses
This is the way most new business people get into trouble. Credit cards in your name used for business. Bad move, you are on the hook if things come crashing down. You can be personally sued for their repayment. Again, don't mix personal and business. Apply for credit cards on the companies credit rating or not at all.

Many start ups today need to concentrate on making money and taking care of the office at the same time. When you are new start up you are at your most vulnerable time you can't afford not to be careful.

High yield stocks aren't always the safest investments. Find the best dividend stocks for high return and capital appreciation.

Book Review - Financial Fitness Forever: 5 Steps to More Money, Less Risk, and More Peace of Mind by Paul Merriman

The new book by Paul Merriman, "Financial Fitness Forever", explains everything you need to know to be a successful investor. This is the kind of book anyone can use and put to work. You can also give it to a new investor so they don't have to learn by trial and error like most of us do. They can get it right the first time. 

The book is laid out in 11 chapters with a data filled appendix at the back. As you go through the book, Merriman takes the mystery of investing and explains it in a easy laid back style. He gives freely the wealth of his 40+ years in the financial advising industry. Paul takes you by the hand like an old friend and walks you down the investing path. With many stories of actual investors experiences he is able to teach you something without you even realizing it.

Each chapter is a stepping stone to the next. Merriman explains how investing is made so much more harder because of human behavior. Investors then look to the media and the financial industry to guide us, but they let us down, too. He is not one to give opinion based on loosely assembled facts. No, he is a numbers guy. Everything he says, in the book, is based on careful academic research. He says we have listened to Wall Street to long and it's mostly benefited them. It's time to listen to "University Street" and not Wall Street.

Why does Merriman write this book? Basically he is a teacher and communicator. He has a passion for helping people get investing done right. With all his years of presenting financial seminars, teaching investors how to do it right, he has cut to the bone and found the best way to be successful in investing. In this book he has put pen to paper and shared his investing know-how. His "Ultimate Buy and Hold Strategy", found in the appendix of the book, is not called "Ultimate" out of boasting. It's called that because the strategy handles risk, asset allocation, human behavior, and portfolio expenses in the best way possible. The strategy sets up a plan that covers all bases so you are in a position to earn the highest return, be able to weather the down markets, and gives you the ability to sleep at night.

Paul Merriman's long career in helping people invest has given him the knowledge necessary to help you be successful in investing. He is the first to say it won't always be easy. But in this book, you will learn there is a better way. I highly recommend this book to anyone who wants to get investing right the first time. I wish I had this book 30 years ago when I first started to invest.


Click here to get the book Financial Fitness Forever: 5 Steps to More Money, Less Risk, and More Peace of Mind


Also find Paul Merriman at www.FundAdvice.com. Make sure you watch the online workshop.


Watch his YouTube Channel at for his latest financial lessons.


Paul Merriman will be on many PBS TV Stations in December. Click here for a schedule.

Seniors in Debt: Debt Consolidation for Older Adults

Image by Up Your Ego via FlickrThere are many debt relief programs available today, but few that focus on the needs of senior citizens with debt. There are many senior citizens, however, that need the services of debt relief programs or loan consolidation programs. For many older Americans, a consolidation loan can be an excellent way to reduce the monthly paperwork, time, and the money that is spent on debt. For many seniors living on a fixed income, being able to reduce the amount of money being spent on debt repayment is critical.

When a consumer takes out a consolidation loan, his or her preexisting loans are paid off and replaced with a new loan. Ideally, this new loan should have a lower interest rate and/or a longer payment term than all of the loans that a consumer has before consolidation. By doing this, a consumer should have lower payments every month. A senior who consolidates their debts will be able to take the money he or she saves every month and use it towards other expenses.

Of course, in order to save any money by getting a consolidation loan, the new loan should have a lower interest rate and/or a longer payment term than the old loan or loans. For most people trying to consolidate debts, it is very important to make sure that the interest rate on the loan is lower than that on all of the loans being consolidated so that the total amount paid on the loans is less. For an older person, however, it may be more important to simply lower the monthly payment on the loan.

For seniors living on a fixed income, debt repayment can take up a large part of the monthly budget. Since most seniors do not have the ability to earn extra income to pay off this debt, it may make more sense to look for a consolidation loan that lowers the amount paid towards the debt to as little as possible. By doing this, a senior living on a fixed income can free up some of their income that was previously going towards debt repayment.

This can be a good strategy for seniors who have overwhelming debts that they do not believe they can pay off in the near future. The drawback, however, is that in order to get a low monthly payment, the term of the loan must be longer. While many seniors may be put off by the idea of extending the life of their debt, it is important to keep in mind that the lower monthly payment is probably more important to someone who cannot increase his or her income.

Consolidation loans can be an important way for seniors to reduce their monthly expenses and free up money for other things. Be sure to carefully research this option if you are dealing with debt after retirement.