The foreclosure rate in the United States seems to climb every month. Are you worried that you will be contributing to this statistic in the near future? Hopefully your answer is no. But if you can no longer make your mortgage payment you need to consider your options to avoid losing your home to the bank. (more…)

German supermarket chain Aldi looks like they are trying to take over the world, and it’s true that they’re not your ordinary supermarket chain. Ginger from Girls Just Wanna Have Funds tried out Aldi recently after hearing from so many people that they’re cheaper than regular supermarkets and figured that her bill for two weeks of groceries would be $75 at Aldi as compared to something like $350 at Safeway or Trader Joes.

Aldi does a few things differently to be able to offer much cheaper prices, some of which I like and some I don’t. For a start, they don’t waste money on making the shop look attractive or with extensive shelving - the products are pretty much offered in the pallets they arrived in, arranged on the floor and with little effort (or expense) needed for re-stocking. I like this - why spend my precious money making the supermarket look great when I’d rather get my groceries cheaper.

Their other strategy is to have a much smaller range of products. You often can’t choose the size of the product you want, or there is only one choice for a particular item. When I lived in Germany, the home of Aldi, I sometimes shopped there but too often realized I couldn’t actually purchase what I was looking for. Perhaps Aldi’s not the place to shop with a list, but if you’re happy to go in and buy whatever they’ve got available and create a menu out of that, then you’re likely to save a lot of money.

The September 15, 2008 bankruptcy filing by Lehman Brothers is the biggest in corporate history in terms of assets held.

Lehman’s slow collapse began as the mortgage market crisis unfolded in the summer of 2007, when its stock began a steady fall from a peak of $82 a share. Crushed by debt and losses tied to mortgage-backed securities, the 158-year-old investment bank entered into bankruptcy after Bank of America Corp. and Barclays plc., which were considered potential suitors for Lehman, walked out of the deal.

One day after the filing, Barclays said it would buy Lehman’s United States capital markets division for $1.75 billion, a bargain price. Nomura Holdings of Japan agreed to buy many of Lehman’s foreign assets. Lehman also said it would sell much of its money management business to Bain Capital and Hellman & Friedman for $2.15 billion.

Driven by mark-to-market adjustments stemming from write-downs on commercial and residential mortgage and real estate assets, Lehman had forecast a net loss of about $3.9 billion or $5.92 per share for the third quarter ended August 31, 2008, compared to a net loss of $2.8 billion for the second quarter of fiscal 2008 and net income of $887 million or $1.54 per share for the third quarter of fiscal 2007.

But while Lehman’s collapse may have been the biggest to date, it’s not the first company to file for bankruptcy protection after making unwise–or illegal–investments. Here’s a look at some earlier collapses. (more…)

Saving money on a monthly basis should be a big part of your personal finance success plan. While everybody knows that saving is important, most people never reach their potential in this area because they lack one essential trait: consistency. If you are not consistent with your saving you are never going to make as much progress as you could. (more…)

It seems that the annuity policies that were not popular during the 90s are now being seen as a good alternative for at least part of your savings to fund your retirement.

What is an annuity policy? Basically, you pay in a lump sum, and in exchange get an income either monthly, quarterly or annually, for either a set number of years or for the rest of your life. This payout might be fixed or it might be variable depending on portfolio performance - you can choose.

What are the advantages of an annuity policy? Security. You know how much you’ll get and for how long (possibly forever, and if you live to a particularly ripe old age, this is a real bonus). You can also add on particular options that you might find attractive - for example you could get a higher payment if you become disabled or need care. And for other additional fees you are also able to protect yourself against any negative investment performance.

And what are the downsides of an annuity policy? Some of the added extras can cost quite a bit, so do your calcuations carefully and decide if the payoff is worth the extra cost. And the obvious downside, although nobody wants to talk about it, is if you don’t live very long, you don’t get a very good deal.

Creating and sticking to a budget is an arduous task for many people, and one that puts them off saving money or paying off debt more quickly. That’s why I like the Wall Street Journal’s recent approach to not planning a budget but instead creating a spending plan. Some of the key tips to having a workable spending plan are:

• Start by calculating your fixed monthly costs - rent or mortgage payments, household bills, cell phone plans, transport costs like fuel or bus tickets, insurance and groceries. These are things that rarely change from month to month.
• Subtract this amount from your salary or other income, and the amount you’re left with is the amount that you actually have a real “choice” about spending, and it’s here where you need a good spending plan.
• Before each new month begins, make a list of the things you would like to buy with this money. Some might be more necessary than others, for example clothes to wear to work may have a higher priority than a new video game - try to list them in this order.
• Including “savings” as the top priority for this money, and aim to make it around 10% of your income if possible; if not, start lower and review this regularly to increase it.
• Then plan which of the other items on your list you will be able to afford this month. If unexpected expenses arise, try to find the money by deleting one of these items or postponing its purchase until the following month.

There’s not really too much good news out there about what house prices will do in 2009. Experts are predicting that the global economic crisis - which they’re saying is likely to include a recession for at least three quarters of the year - will further damage the real estate market and in some places, drive prices down even further.

Over the last two years, the average house price in the United States has already fallen by 20%. Some experts think that 2009 will see another drop of 20%; others say it’s likely to be “only” 15%; but one thing’s for sure, nobody’s predicting a big rise in house prices. Of course, it also depends on where you are. The scariest predictions for value falls during 2009 are places like Miami (could fall by 19%), Los Angeles and Washington (experts say the drop could be 17%), and New York and Boston (also double digit falls - around 14% and 12.5% respectively).

But there’s good news. Nearly everyone’s predicting a turn around in the market towards the end of 2009 and on into 2010, so unless you’re in a position where you have to sell your house in the next year, just sit tight. Values should start to rise again and that neverending economic cycle should kick most people back into a more promising financial position. Fingers crossed.

It’s sometimes hard enough for college-bound teenagers to choose a course that they’re interested in, without also having to consider the financial implications of their chosen field of study - will they end up with a job at the end of it, and will they earn enough to pay off their college debt? If you are a parent of a college-bound child and want your son or daughter to avoid the fate of being a highly qualified dishwasher, there are a few ways you can help them out:

• Help them get sufficient information on job prospects related to particular college courses while they’re making their decision. Technical fields like computing, health care and engineering offer degrees most related to future work and currently, most likely to have your child end up with a job. Obviously, a drama major will have a lot more trouble. Help your children understand the financial implications of their choice.
• Suggest that they study in two areas if they have a particular passion for something that is less likely to lead to a job. For example, take music courses as well as economics or computing; or do a dual degree with a practical back-up for a less practical choice. Success at college is much more likely if a student is studying something that they enjoy, so be careful not to push your child into something they’re really not interested in.
• Encourage them to get work experience in the area while they’re still at college. This is especially important for areas where graduate employment is less lucrative.

photo credit: steakpinball

Slumping property prices are not a problem exclusive to the United States at the moment, because over in Britain the Times is offering tips on selling your house in a downturn. Some of the most useful include the following:

• Select the real estate agent carefully, and ask at least three for their ideas on a selling strategy. Make sure they have detailed local knowledge of the real estate market.
• Know your local market well - they give the example of knowing what kind of prospective buyers there will be and deciding whether a third bedroom might be better displayed as a study than a bedroom.
• Be realistic about the price you can achieve in the current market; apparently setting a higher price and then reducing it drastically later is a bad strategy that makes the house look less valuable than it is.
• Make the house look most marketable by cleaning it well and giving it fresh paint wherever it’s needed - the cost of this (especially if you do it yourself) can be relatively low but can increase the value a lot.
• If you’re selling the house because you need more space, carefully consider whether you could extend your existing house instead.
• Be flexible about a purchaser’s requests - for example, if they want to move in especially quickly, it might be worthwhile for you to move out to rental accommodation while you find your next home.

Tales of people who’ve successfully dug their way out of credit card debt can be pretty useful for finding your own strategy for saving money and reducing debts. Zen Habits blogger Leo Babuta summarized his six steps for avoiding credit problems and while many of them are stuff we’ve heard before, there were a few new slants:

• The need to cut spending is clear, but look at lots of different areas in your life where you could do this. Not just the expensive coffees, but also think about things like clothing and furniture which might be non-essential
• Leo talks a lot about scaling back your lifestyle, which basically means avoiding a materialist and consumerist approach. For example, trade in a fuel-guzzling car for a smaller one, don’t upgrade your cell phone or TV or other gadgets just because something slightly better is available, and he even suggests moving to a smaller home where you’ll have less space and therefore need less belongings.
• Use cash. This might involve paying by credit card (if you’re buying online or if your credit card offers some useful reward system) but only buy something when you have the cash to back it up. You can nearly always wait for what you want until you have actually saved up the cash.

photo credit: Joel Bedford